18-month deadline for I-T settlement applications is mandatory: Allahabad HC

The Allahabad High Court has ruled that the 18-month period under Section 245D(4A)(iii) of the Income Tax Act for disposing of a settlement application is mandatory, not directory. It quashed an order of the Interim Board for Settlement passed after that time limit had expired.

The case involved M/s B.L. Agro Industries Limited, which filed a settlement application on 23 March 2021. The application was allotted to the Interim Board for Settlement-III, Delhi, and later transferred to the Chennai board on 13 June 2022. The Chennai board rejected the application on 30 October 2023, beyond the 18-month limit counted from the date the Delhi board first acted on it.

The bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary followed the Karnataka High Court's judgment in RNS Infrastructure Ltd., which held the deadline mandatory. The court said an order passed after 18 months is time-barred and a nullity. It quashed the October 2023 order and the subsequent rectification order, but clarified it did not decide whether the proceedings now abate under Section 245HA.