The Income Tax Settlement Commission cannot waive or reduce statutory interest under Sections 234A, 234B, and 234C, which is mandatory as per the Income Tax Act.

JUDGMENT

YASHWANT VARMA, J. (Oral)

1. The Commissioner of Income Tax questions the validity of the order passed by the Income Tax Settlement Commission, ITSC and is aggrieved to the extent that the said order restricts the applicability of interest under Section 234B of the Income Tax Act, 1961 , Act on the total income which came to be disclosed in the Statement of Facts, SOF up to the date of admission of that application under Section 245D(1). The ITSC has essentially rested its decision with respect to the interest liability bearing in mind the decision handed down by a Constitution Bench of the Supreme Court in Brij Lal and Others v. Commissioner of Income Tax, Jalandhar, (2011) 1 SCC 1 . It is the correctness of the view so taken by the ITSC which is sought to be assailed in the present writ petition.

2. Before proceeding to analyse the submissions which were addressed by Mr. Ojha, learned counsel appearing for the writ petitioner, we deem it apposite to take note of the following facts. A search and seizure under Section 132 was carried out at the business and residential premises of the Radico Khaitan Group in which the respondent-assessee was the Chief Financial Officer. During the course of that search and seizure proceedings, according to the writ petitioner, a number of incriminating documents were found alongside a substantial amount of cash, jewellery and other valuables. Pursuant to the said search, a notice under Section 153A is stated to have been issued.

3. However, and before that assessment could be completed, the respondent filed a settlement application under Section 245C(1) before the ITSC. The aforesaid application was admitted on 08 February 2013. The income as declared in the SOF for Assessment Years, AY2010-11 and 2011-12 was ultimately determined by the ITSC in terms as contemplated under Section 245D(4). In terms of paragraph 18 of the order impugned before us, the aspect of interest under Section 234B was determined in the following terms:

“18. The applicant has requested for waiver of interest u/s 234A, 234B and 234C, interest u/s 234A, wherever applicable, is to be charged as per law. Interest if chargeable u/s 234B will be charged up-to the date of 245D(1) order, as per decision of Hon’ble Supreme Court in the case of Brij Lal & Ors. Vs. CIT [2010] 328 ITR 477 (S.C.) on the income computed in order u/s 245D(1) order. Interest u/s 220(2), if applicable on the sustained demand outstanding as on various dates is to be charged up to the date of this order.”

4. Seeking to assail the view as taken by the ITSC it was the contention of Mr. Ojha that it was incumbent upon the ITSC to have called upon the respondent-assessee to pay interest on the income as disclosed in the SOF up to the date when the ITSC finally determined the settlement amount in terms contemplated under Section 245D(4). According to learned counsel the liability to pay interest up to that terminal date was one which clearly existed and stood embodied as a statutory obligation by virtue of the provisions contained in Section 234B(4) as it stood at the relevant time and which required a payment of interest up to the date when the ITSC makes a final order determining the settlement amount.

5. Mr. Ojha drew our attention to the decision rendered by the Supreme Court in Commissioner of Income Tax, Mumbai v. Anjum M.H. Ghaswala and Others, (2002) 1 SCC 633 which was primarily concerned with the jurisdiction of an ITSC constituted under Section 245B to reduce or waive the interest chargeable while passing an order for settlement under Section 245D(4) of the Act. Upon taking note of the provisions of Chapter XIX-A and the powers conferred upon the ITSC therein, the Court in Anjum Ghaswala identified the principal issue before it being whether sub-section (6) to Section 245D accorded the ITSC the power to waive or reduce the interest payable under Sections 234A, 234B and 234C of the Act. This becomes manifest from a reading of the initial