1. Search and seizure operation — Settlement applications under Chapter XIXA, Income Tax Act — Dispute regarding waiver of interest under Sections 234A, 234B, and 234C. (Para 5 , 6 , 7 )
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2019 Supreme(SC) 242
SUPREME COURT OF INDIA
ABHAY MANOHAR SAPRE, DINESH MAHESHWARI, JJ.
Kakadia Builders Pvt. Ltd. & Anr. – Appellant(s)
VERSUS
Income Tax Officer Ward 1(3) & Anr. – Respondent(s)
CIVIL APPEAL Nos.2491-2492 OF 2019 (Arising out of S.L.P.(C) Nos.21139-21140 of 2017)
Decided On : 05-03-2019
Important Points
IMPORTANT POINTS
Settlement Commission has no power to pass order u/s 154, Income Tax Act, 1861.
Settlement Commission has no power to pass order u/s 154, Income Tax Act, 1861.
Subject
Taxation Law - Settlement Commission
Act Referred
Headnote
(a) Income Tax Act, 1961 – Sections 234-A, 234-B and 234-C r/w Section 245-D – Waiver of interest chargeable u/s 234-A, 234-B and 234-C – Settlement Commission passing an order before (2002) 1 SCC 633 and (2011) 1 SCC 1 – Subsequently while matter was pending in High Court, modifying its order – High Court deciding the matter on merits – Held, High Court instead of deciding the matter on merits ought to set aside the impugned order and remand the matter to Settlement Commission. (Para 22)
(2002) 1 SCC 633; (2011) 1 SCC 1 – Relied upon
(b) Administration of justice – Judicial propriety – High Court setting aside order of Settlement Commission in first round of litigation – In subsequent round adopting the same order of Settlement Commission and making it a part of its judgment – Held, without jurisdiction. (Para 23)
(c) Income Tax Act, 1961 – Sections 234-A, 234-B and 234-C r/w Section 154 – Statutory interest chargeable u/s 234-A, 234-B and 234-C – Settlement Commission cannot waive it u/s 154. (Para 24)
Facts of the case:
On 19.01.1994, a search and seizure operation was carried out in the premises of the appellants (assessee) and assessment proceedings were initiated. During the pendency of the proceedings the appellants filed the settlement applications before the Settlement Commission and offered to settle their tax matter.
The Settlement Commission made certain additions and waived interest chargeable.
The High Court allowed the petitions (SCAs) filed by appellants and set aside the order passed by the Settlement Commission and granted liberty to the Revenue to follow the remedies as may be available to them against the order passed by the Settlement Commission.
The High Court though observed that the petitions are disposed of yet in substance allowed the petitions (SCAs) and modified the order of the Settlement Commission as regards waiver of interest.
Finding of the Court:
Impugned judgment is without jurisdiction.
Result: Appeals allowed.
Legal Category Hierarchy
Table of Contents
2. Whether the High Court was justified in modifying the Settlement Commission's order by adopting directions from a previously set-aside rectification order. (Para 13 )
3. The High Court committed a jurisdictional error by adopting a rectification order it had already set aside, as a set-aside order is non-existent in law. (Para 21 , 22 , 23 , 24 , 25 )
4. A court cannot modify an order by adopting directions from a previously set-aside order, as such an order ceases to exist for any legal purpose. (Para 25 )
5. Appeals allowed — High Court order and Settlement Commission's order regarding interest waiver set aside — Matter remanded to Settlement Commission for fresh decision. (Para 26 , 27 , 28 )
6. Does the Settlement Commission have the power to waive interest under Sections 234A, 234B, and 234C of the Income Tax Act?
The Commission does not have the power to reduce or waive statutorily payable interest under Sections 234-A, 234-B, and 234-C, except to the extent of granting relief under circulars issued by the Board under Section 119 of the Act. (Para 17 )
7. Can the Settlement Commission invoke Section 154 of the Income Tax Act to reopen concluded proceedings to levy interest?
No, the Settlement Commission cannot reopen its concluded proceedings by invoking Section 154 of the Act so as to levy interest under Section 234-B, particularly in view of Section 245I. (Para 19 )
8. What is the terminal point for the levy of interest under Section 234-B in proceedings before the Settlement Commission?
The terminal point for the levy of interest under Section 234-B is the date of the order under Section 245-D(1), and not the date of the final order of settlement under Section 245-D(4). (Para 19 )
9. Can a court rely upon or adopt an order that has been previously set aside by the court itself?
No, once an order is held bad in law and set aside, it is neither in existence for any purpose nor can it be relied upon or incorporated into a subsequent order. (Para 25 )
JUDGMENT
Abhay Manohar Sapre, J.
1. Leave granted.
2. These appeals are directed against the final judgment and order dated 28.07.2016 passed by the High Court of Gujarat at Ahmedabad in SCA Nos.7814 & 7820 of 2014 whereby the High Court disposed of the petitions(SCAs) filed by the respondents.
3. In order to appreciate the issue involved in these appeals, it is necessary to set out a few relevant facts infra.
4. The appellants herein are the respondents (assessee) and the respondents (Revenue) herein are the petitioners in the petitions(SCAs) before the High Court out of which these appeals arise.
5. The appellant in S.L.P. No.21139/2017 is a Private Limited Company and the appellant in SLP No.21140/2017 is the promoter Director of the said Company. On 19.01.1994, a search and seizure operation was carried out in the premises of the appellants (assessee) under the Income Tax Act, 1961 (hereinafter referred to as “the Act” ).
6. During pendency of the assessment proceedings, which were initiated for determination of the tax liability as a result of search and seizure operation, the appellants on 12.03.1996 and 03.09.1996 filed the settlement applications before the Settlement Commission and offered to settle their tax matter in accordance with the procedure provided under Chapter XIXA of the Act.
7. On 11.08.2000, the Settlement Commission passed an order under Section 245D(4) of the Act. By the said order, the Settlement Commission made certain additions and waived interest chargeable under Sections 234A, 234 B and 234C of the Act.
8. The appellants (assessee) felt aggrieved and filed rectification applications before the Settlement Commission on 29.12.2000 for amending its order dated 11.08.2000. The Revenue (Commissioner of Income Tax) also felt aggrieved by the order dated 11.08.2000 and filed a rectification application under Section 154 of the Act before the Settlement Commission on 26.07.2002.
9. By order dated 11.10.2002, the Settlement Commission dismissed the applications filed by the appellants(assessee) and partly allowed the application filed by the respondents(Revenue) rectifying its order dated 11.08.2000 insofar as it pertained to waiver of interest, which was granted to the appellants (assessee). The appellants(assessee) felt aggrieved by the order dated 11.10.2002 passed by the Settlement Commission and filed two separate petitions (SCA Nos.15097 and 15101 of 2004) in the High Court of Gujarat.
10. The High Court, by order dated 03.03.2014 allowed the petitions(SCAs) and set aside the order dated 11.10.2002 passed by the Settlement Commission and granted liberty to the Revenue to follow the remedies as may be available to them against the order passed by the Settlement Commission dated 11.08.2000.
11. The Revenue, therefore, felt aggrieved and filed two petitions (SCA Nos.7814 of 2014 and 7820 of 2014) against the order dated 11.08.2000 questioning its legality. The High Court though in concluding paragraph observed that the petitions are disposed of yet in substance allowed the petitions(SCAs) and modified the order dated 11.08.2000 of the Settlement Commission by passing the following directions in paragraph 13 which reads as under:
“Under the circumstances, we direct modification of the order of Settlement Commission dated 11.08.2000 by reversing the waiver of interest in terms of Settlement Commission’s directions contained in its order dated 11.10.2002. In other words, we adopt the same directions for modification of the Settlement Commissioner’s original order dated 11.08.2000.”
12. It is against this order, the appellants(assessee) felt aggrieved and have filed the present appeals by way of special leave in this Court.
13. So, the short question which arises for consideration in these appeals, is whether the High Court was justified in allowing the petitions (SCAs) and thereby was justified in modifying the order dated 11.08.2000 passed by the Settlement Commission.
14. Heard Mr. R.P. Bhatt, learned seni
