JUDGMENT :

Arijit Pasayat, J.

The basic issue involved in this appeal is whether the Settlement Commission (hereinafter referred to as 'the Com-mission') gets a complete role in total substitution of other authorities under the Income Tax Act, 1961 (in short 'the Act') and if so, for what purpose and to what extent. When this appeal was placed before a Bench of two learned Judges, it was considered appropriate to list the appeal before a larger bench than merely bench of two Judges.

2. That is how the matter was placed before us.

3. Factual backdrop in nutshell is as follows :

4. Respondent-Damani Brothers (hereinafter referred to as the 'assessee') filed an application for settlement before the Mumbai Bench of the Commission. Chairman of the Commission exercising power under Section 245 (BA) (5A) of the Act constituted a Special Bench vide order dated 18-9-1998 for adjudicating following three issues.

"1. Was the Special Bench of the Settlement Commission right in holding in the case Om Metals and Mineral Put. Ltd. (193 ITR 57 ITSC) that the assessment order passed by the assessing officer before the admission of the settlement application subsisted and recovery proceedings continued, even after the admission of the said application, especially after the Judgment of the Supreme Court in the case of Commissioner Income Tax v. Express Newspaper Ltd. (206 ITR 443) ?

2. If the answer to question No. 1 is in the affirmative would it be correct to say that once the Settlement Commission determines a liability of the applicant for tax, penalty and interest under Section 245D (4), the orders of the lower authorities would automatically stand set aside and consequently there will be no liability under Section 220(2) of the Act.?

3. If the answer to question No. 1 is in the affirmative, or not the question No. 2 in the negative, has the Settlement Commission powers to waive interest u/S 220(2) of the Act.?"

5. The Special Bench by majority view in its judgment dated 15-4-1999 came to hold that the orders of the lower authorities are not automatically set aside by the Commission's order under Section 245D (4); but are modified to give effect to such order. By the theory of merger, the liability of interest under Section 220(2) if any, will be up to the date of the order under Section 245D (1). Thereafter, there will be no liability for interest under Section 220(2); the Commission has power to waive or reduce interest under Section 220(2) of the Act. The Vice Chairman did not agree with a reply to question No. 3 and held that recovery proceedings based on the order of the assessments passed before the date of filing an application under Section 245C can be continued even after the admission of the application and where the assessment order is passed after the date of filing an application under Section 245C, the question of liability of interest under Section 220 (2) does not arise.

6. Civil Appeal has been filed raising the following questions :

"I. Whether the Settlement Commission is empowered to waive or reduce the interest u/S 234-A read with Section 220(2) of the Income Tax Act while exercising its jurisdiction under Section 245-D(4) of the said Act?

II. Whether the Assessment Order passed by the Assessing Officer prior to the admission of Settlement Application under Section 245-C of the Act, will subsist and the recovery proceedings will continue or not? On this issue, the petitioner is relying on the decision, reported in 206 ITR 443 (SC.); Commissioner Income Tax v. Express Newspaper Ltd.

III. Whether after determination of liability by the Settlement Commission, the orders of the lower authorities under the Act would automatically stand set aside?"

7. Stand of the revenue as highlighted is that the Commission's approach is not correct and is not sustainable. Reference is made to the Constitution Bench decision of this Court in Commissioner of Income Tax v. Anjum M. H. Ghaswala and Ors. ITR). Reference was made to various provisions of Chap