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IN THE HIGH COURT OF CALCUTTA
Harish Tandon, J.
Union of India and another - Petitioners
Versus
Income Tax Settlement Commission Additional Bench and another - Respondents
W.P. No. 1154 of 2013
Decided On : 11-04-2014
SETTLEMENT COMMISSION - INTEREST CALCULATION - SECTION 245D(6B) - The Settlement Commission cannot invoke section 154 of the Income Tax Act, 1961 while exercising powers under section 245D(6B) to rectify mistakes apparent on the face of the record. The Settlement Commission's order, which invoked section 154 to compute interest contrary to the Supreme Court's decision in Brij Lal & Ors. v. CIT, Jalandhar, is illegal and unsustainable.
Fact of the Case:
The petitioner, the Income Tax Department, challenged an order passed by the Settlement Commission under section 154 and section 245D(6B) of the Income Tax Act, 1961. The private respondent had filed an application before the Settlement Commission seeking waiver of interest and other reliefs. The Settlement Commission allowed the application in part, but declined to waive the interest and directed the Assessing Officer to charge interest as per the Supreme Court's decision in Brij Lal & Ors. v. CIT, Jalandhar.
Finding of the Court:
The court held that the Settlement Commission acted beyond its jurisdiction by invoking section 154 of the Income Tax Act, 1961 while exercising powers under section 245D(6B) to rectify mistakes apparent on the face of the record. The court also held that the Settlement Commission's order, which invoked section 154 to compute interest contrary to the Supreme Court's decision in Brij Lal & Ors. v. CIT, Jalandhar, was illegal and unsustainable.
Issues: 1. Whether the Settlement Commission can invoke section 154 of the Income Tax Act, 1961 while exercising powers under section 245D(6B) to rectify mistakes apparent on the face of the record. 2. Whether the Settlement Commission's order, which invoked section 154 to compute interest contrary to the Supreme Court's decision in Brij Lal & Ors. v. CIT, Jalandhar, is legal and sustainable.
Ratio Decidendi: 1. The Settlement Commission is a quasi-judicial body and, unlike the Income-tax Appellate Tribunal, is not empowered to invoke section 154 of the Income Tax Act, 1961. 2. The Settlement Commission's order, which invoked section 154 to compute interest contrary to the Supreme Court's decision in Brij Lal & Ors. v. CIT, Jalandhar, was illegal and unsustainable because it exceeded the Settlement Commission's jurisdiction and violated the principle of finality of settlement proceedings.
Final Decision: The court quashed and set aside the impugned order of the Settlement Commission.
Harish Tandon, J.
This writ petition is filed at the instance of the Department challenging an order dated 30th August, 2012 passed by the Settlement Commission under section 154 and section 245D(6B) of the Income Tax Act, 1961. An application was made by the private respondent before the Settlement Commission under section 245C of the said Act pertaining to assessment years 2004-05 to 2011-12.
2. It is not in dispute that the application was entertained by the Settlement Commission and ultimately by an order dated 14th March, 2012 the Settlement Commission passed the following orders:
"44. Regarding the terms of settlement, the first term is relating to the determination of total income of the applicant. The applicant's total income is computed as above.
45. As regards the second term, the applicant prayed for waiver of interest chargeable under any section of the Income Tax Act, 1961. Such prayer of the applicant i.e., waiver of interest, is not allowed. The interest will have to be charged as per law by the Assessing Officer keeping the view the decision of the Hon'ble Supreme Court in Civil Appeal No. 516-527 of 2004 dated 21.10.2010 in the case of Brij Lal & Ors. v. CIT. Jalandhar (328 ITR 477).
46. Regarding granting of immunity from penalty and prosecution under various sections of the Income Tax Act. 1961, the same is granted so far as the same relates to issues dealt with in this order of settlement.
47. The fourth term is residual. The A.R. prayed that an amount of Rs. 15,00,000/- was seized from the applicant and had been kept in the custody of the Commissioner. The same may be adjusted against the tax liability and in this regard, suitable direction may be issued to the Assessing Officer. The A.O. will do the needful in this regard and the applicant will pay the balance tax in two equal monthly instalments. The A.O. will issue demand notice accordingly. However, interest for delayed payment of taxes is to be charged u/s. 245D(6A) of the I.T. Act at the time of last instalment of payment by the applicant."
3. The parties did not feel any difficulty in understanding the said order except the prayer portion. The Settlement Commission refused the prayer of the assessee/private respondent for waiver of the interest and allowed the interest to be charged by the Assessing Officer in the light of the decisions rendered in the case of Brij Lal & Ors. v. Commissioner of Income-Tax, Jalandhar; reported in (2010) 328 ITR 477 (SC). The matter went back to the Assessing Officer for the purpose of compliance of the directions made in the said order passed by the Settlement Commission for computation. The Assessing Officer charged the interest for the entire period which was not in conformity with the ratio laid down by the Supreme Court in the case of Brij Lal & Ors. (supra).
4. The petitioner filed an application before the Settlement Commission under section 245D(6B) for appropriate directions. The said provision provides for rectification of any mistake apparent on the face of the record by the Settlement Commission provided where the Settlement Commission feels that amendment is required to be effected in relation to the liability of the assessee. It would do so after giving an opportunity of hearing to the assessee as well as the Commissioner.
5. The main thrust of the argument advanced by' Md. Nizamuddin, learned Advocate appearing for the petitioner, is that the Settlement Commission has, in fact, acted as an Appellate Authority over the Assessing Officer which is not permissible under section 245D(6B) of the said Act. It is strenuously submitted though the rectification of the mistakes is permissible so far as the order of Settlement Commission is concerned which, by no stretch of imagination, be extended to an order passed by the Assessing Officer in compliance of the directions made by the Settlement Commission.
6. Lastly, it is submitted that the provisions relating to Settlement Commission is incorporated in Chapter X
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