INCOME TAX SETTLEMENT COMMISSION PRINCIPAL BENCH

4TH FLOOR, LOK NAYAKI3HAVAN, KHAN MARKET NEW DELHI 110003

PROCEEDINPS QEFORE THE INCOME TAX SETTLEMENT COMMISSION

Settlement Application. Nos. 1. WB/Durgapur/2012-13152-1T

Date of filing of the Applications 13.05.2014

Name & Address of the applicants

5. Present for the Income Tax Department

7. Settlement Commission's Officers

8. Place o 9. Dates of Re

1 M/s G.M. Foods 43)1, Akthar Mansion, Dr. M.N. Saha Road Assansol, WestBengal-71 301

AAFFG23196G

Firm 2010-11 to 2012-13

1. Sh. SK. Tulsiyart Advocate 2. Sh. S.R. Wadbwa, Advadat a .- 3. Sh. Nirej Jain, CA' 4. Sh. Arlin Kutner Tandai, FDA 5, Sh. S.M. Surana,,FGA 6. Sh. Leena Rachn, FCA

1. Smt. Deepall Chandra, CIT(DR), Kolkata 2. Sh. L.C. Joshi, Range —(C)17, Asansol 3. Sh. R.K. Gupta, CIT (C)411, It Delhi 4 Sh. Arup Banclyopedhm, ITC-2(1),Asansol 5. Sit. Rajeshwar Yadav, CIT (OR), ItAtrnbai S. $h. Sanjiv Sattarwati('AivocaLSPertial COU

1. Sh. Perez Khan, DIT, ,Delta 2. Sit S.K. Singh,Secretary, ITSC, '140w pelhi 3 &h. Arun Kumer,..101T, ITSC,NewDelhi 4 Sh. K: L. fvlaheshwari, DIT, ITSC, Kofkata 5. Sh. Brajkishore Das, AddI.DIT, ITSC, Kolkata

Delhi/ Kolkata 17,07.2014, P4.08.2014 and 01.09.2014

2. Permanent Account

3. Status 4. Assessment years for which the

application for settlement is made

5. Present for the applicant

I)

10. Date of order (Ali Sections and Chapters refs

9S1 tint

12.112014 er are with reference to the Income Tax Act,

se specified.)

0

ORDER UNDER SECTION 246(6B) OF THE INCOME TAX ACT, 1961

The Chairman, Settlement CommiSsion, exercising power under section 245BMSAI of the Income TeXACt,

1961 ('the Act) constituted a Special Bench vide his order dated 8.7.2014 for disposal of the case under section

2450(613) of the Act in Miscellaneous Application (MA ) filed by M/s. G.M.Foods, Asansol ( the applicant) , on

13.5/014. The MA has been filed in respect of order u/s 2450(4) of the Act passed on 30.12.2013 on settlement

application filed by the applicant (S.A. No:- WB/Durgapur/2012-13/52/IT) The following questions of law arising In

this case were referred to the Special Bench:

"(a) Whether the Settlement Commission can direct levy of interest u/s 234B of the Act, while passing the order

u/s 2450(4) of the Act, in a case where no interest was chargeable as 2348 as per the total, income disciesed in

the settlement application 7

(b) Whether interest u/s 2348 of the Act is to be charged with reference to the total income disclosed in the

settlement application or with reference to the total income settled in the order passed u/s 245D(4) of the Act?

(c) Whether the Settlement Commission can direct in exercise of its powers u/s 2450(68), deletion of interest

charged u/s 2346 in the order u/s 2450(4), if interest u/s 2348 is chargeable with reference to the totat intOrne.

disclosed in the settlement application

(d) Whether the SettiernentComrnission can directin exercise of its.powers u/s 2,430(5B), levy of interest ti 3415

with reference to total income settled In the order u/s 2450(4), where Such Interest was either nottevied at tin the order u/s 2450(4) or levied with reference to the total income disclosed in the settlement application?

2 . Brief facts leadirr to MA

\.,./ A Settlement Application (SA.) was. Ned by the applicant u/s 245C(1) for assessment years 201041 to 2012 - 13 on 1932013 declaring aggregate additional income of Rs. 62.08 faiths. Order ufs 2450(4) was passed on 30.12.21113 by making aggretate addition of as MSG Wm in assessment years 2010-11 to 2012-13. Para 5: of the said order contains terms of settlement regarding determination of total income; waiver: of interest; immunity from penalty / prosecution and payment of taxes. The directions regarding waiver of interest are reproduced below:

"Regarding charging if waiver of interest, we hold that waiver of interest is not allowable nder the L 7". Act, The assessing officer (40) is directed...to keep in view the decision of fictalle Supreme Court in Civil APPeatiVo 515- 527 of 2004 dated 21.10.2010 in the case of &if tai & Others Vs Commissioner of Income-Tax kdandhar (328 n-ft 477) and charge interests as per law. a

(Para 9(ii) of order u/s 2450(4)

2.1 In pars: 9(iv), the Commission directed that applicant will make payment of tax and Interest due within 35 days from the date of receipt.of the order of the assessing officer.

2.2 The AO, in pursuance of directions of the Commission, on 15,1.2014 charged interest on the entire quantum of income settled by the Commission, including additions of Its 38.50 lakhs. The applicant filed a rectification application on 20.1.2014 before the AO, contendingr that interests u/s 234A, 2348, 2340 were not payable on additional income computed by the Commission. The AO vide letter dated 22-1-2014 informed the applicant that directions of Commission to the AO were to keep in view the decision of. Hon'tile Supreme Court in the case of Brij kal and charge interestsas per law. According to the AO, the-Supreme Court had , in the said order, held that terminal point for levyof interest u/s 234twcwld,-be-upto the date of order u/s 2450(1) and not upto the date of order u/s 2450(4) and as such there wes4vcritsfsigeiapParent from record in his orderdated. 15.1.20t4.

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2.3 The applicant filed another petition to AO on 10.4.2014 inviting attention to order dated 17.2.2014

passed by the Kolkata Bench of the Commission in the case of M/s Prime !spat Ltd in a Miscellaneous Application. In this order, relying on the decisions of KoMate Bench (in the case of Shri 13egraj Aggarwal (Mittel)); Prindpal

Bench, New Delhi (in the case of M/s Today Hotels Pvt Ltd) and Mumbal Bench (in the case of M/s RoIn India Ltd),

it was held by the Kolkata Bench that interest Ws 234A and 2348 shall be chargeable with reference to the income

originally returned (before AO) plus the additional income declared before the Commission u/s 245C, upto the

date of order u/s 2450(1). The applicant therefore again requested the AO to revise the demand as per order of

Commission uts 2450(4). The AO vide letter dated 2.5.2014 once again informed the applicant that interest was

rightly computed, in the light of , (a) decision in the case of Brij Lai (supra), which provided only the terminal point

for levy of interest upto date of order u/s 2450(1) and (b) keeping In view provisions of section 2343(4) of the:Act

which provided that where as a result of an order of Commission u/s 245D(4), the amount on which interest was

payable under subsection (1) or subsection (3) has been increased cr N(fitiree is the Lase may be, the interest shall

he increased or reduced accordingly.

2.4 Thereafter, the applicant filed the MA under consideration, praying for order directing the depaitme4t to calculate interest on the amount of total income excluding quantum of addition of 8S. 38.50 Iakh made by Commission it is also stategthat Orithsrsgessedtas 4a rejecting,applicants petitions u/s 154i werein cats ...Otis Jurisdiction as his duty is-merely to carry nut *actions of the Commission and-not to thrust -his views while giving effect to order passed u/s 2450(4). As per section 245F(2), the Commission has exclusive jurisdiction from the date

of filing of settlement application till the date of order passed u/s 2450(4). Further, by virtue of the provisions of

section 2451, the order of settlement is conclusive and cannot he reopened. Accordingly, the A.O. has no

Jurisdiction whatsoever to interfere in the directions contained in the order passed u/s 2450(4) and disregard the

express provisions of the Act. Also, the AO has no power to apply his wisdom which is contrary to theprovision% of

law. The CommistIon had vide pare 9(u) of Its order (reproduced above) clearly directed A.O. to calcSate interest as per law and as per directions of Hon d ble Supreme Court in the case of &di Lai .

3. Hearings cook place on 17.7.2014, 4.81014 and 1.9.2014. The applicant was represented by Shri S.K.

Tulsiyan Adv. and ShrfArun Kumar Todani CA. Shri S.R. Wadhwa Adv., Shri NirajJaln CA and Shri S.M. Surana Adv.

Joined the proceedings as interveners. The Department was represented by Shri Sanjeev Sabharwal Adv.( Special Counsel) and Shri R.K. Gupta, CIT(Ceniral) RI, Delhi in the company of CsIT (0.11.) Smt Deeper' Chandra and Shri Rajeshwar Yaday .

4. Before. taking up the arguments of both sides It would - be appropriate to note relevant statutory provisions and order of Apex Court in am Les case.

44 Relevant provisions of the Act ;

" 2348. (1) Subject ay the other provisions of this section, where, in any financial year, n,b assesses who IS liable to pay advance tax wider section 209 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section flats less -than ninety per cent of the assessed tax, the assesses shall be liable to pay simple interest at the rare of tone) per cent for every month or part of a month comprised in the period from the 1st day of April next fallowing such financial year [to the date of determination of total Income under sub-section (1) of section 143 land where q regular assessment Is made, to the date of such regular assessment an on amount]] equal to the assessed tax or, as the case may be, on the amount by which the advance taX , Paid os aforesaid falls short of the assessed tax,

[Explanation 1.—In this section, "assessed tax" means the tax- on the total income deterrnined under sub-section pi of section 143 and where o regular assessment is made, the tax on the total Income determined under such regular assessment as reduced by the amount of,—

(I) any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is token into account in computing such total income;

Explanation 2.—Where, in relation to an assessment year, an assessment is made for the first rime under section 147 (or section 15341, the assessment so made shall be regarded as a regular assessment for the purpases of this

section.

[Explanation 3.—In Explanation 1 and in sub-section (3) "tax on the total income determined under sub-section (1) of section 143"shall not include the additional income-tax, if any, payable under section 143.1

(2) Where, before the date of (determination of total income under sub-section (1) of section 143 or] completion of

a regular assessment, tax is paid by the assessee antler section 140A or otherwise,—

(i) interest shall be calculated in accordance with the foregoing provisions of this section up to the date on which

the tax is so paid, and reduced by the interest, if any, paid under section 1404 towards the interest

chargeable under this section;

(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so. paid together

with the advance tax paid falls short of the assessed tax.

(3) Where, as a result of an order of reassessment or recomputation under section 147 [or section 1534I, the amount on whith interest was payable tinder sub-section (1) is increased, the assessee shalt be liable to pay simple interest at the rate of fonaliser tent for every month or part"of meth compiles Jr, the Period commenting On the day following [the ciatttglitetertniektien aftataijaterne under sub-seotiatt 4.1 of section- 143 [and where.a reguintcssesemettt is mark as is. referred to in sub-section (1) Mowing the date of such regular assessmentif and ending on the date of the reassessment or recomputation under section 147 (or section 25341, on, the amount by which the tax on the total income determined an the basis of the reassessment or recomputation exceeds the tax on the total income determined (under sub-section (1) of section 243 or) on the basis of the regular assessment aforesaid.

Explanation.— [' *

(4) Where, as a result of an order under section 154 or section 155 or section 250orsection 2 $ 4 or section 260 or section 262 or section 263 or section 264 or on:order of the Settlement Commission under slit-Section (4) of section 2450, the amount on which interest was payable under sub-section (1) or sub-section (3) has been increased or reduced, as the case may be, the Interest shall be increased or reduced accordingly, and—

hi in a case where the Interest is Increased, the Assessing Officer shall serve an the assesses a notice of demand in the prescribed farm specifying the sum payable and such notice of demand shall be•deemed ta be a notice under section 156 and the provisions of this Act shall apply accordingly;

(ii) In a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

2454„ to this chapter; unless the tot tekt otherwise

[(b) "case" means any proceeding for assessment under this Act, of any person in respect of any assessment year or assessment years which may be , pending before an Assessing . Officer on the dote on which an application under sub-section (1) of section 245C is made.

24584. (SA) Notwithstanding anything contained to the foregaing °visions of this section;. the Chairman m .a r the disposal of any particular case, constitute a Sped& Bench more than three Members.

245C t(1) An assessee may at any stage of a case relatingti:O., e aiNipplication in such form and in such manner as ITICIV be prn1Cr. he," (17,1 (7 71 - Irony n :inn rf/L. .IC :find, ??C72: i,tit Been doclaseci

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before the [Assessing] Officer, the manner in which such income has been derived, the additional amount of income-taxpayabie on such income and such other particulars as may be prescribed, to the Settlement Commission

to have thernse settled oneany such application shalt be disposed of in the manner hereinafter provided

14) Far the purposes of sub-section (1) of this section [ 4" 17, the additional amount of income-tax payable In respect of the income disclosed in an application mode under sub-section (1) of this section shall be the amount calculated In accordance with the provisions of sub-sections (18) to (1D).

DB) Where the income disclosed in the application relates to only one previous

If the applicant has not furnished o return in respect of the total income of that year, then, tax hall he

calculated on the income disclosed in the application as if such income were the total income;

(ii) V the applicant has furnished a return in respect of the total income of that year, tax shall be Sated on the

aggregate of the total Income returned and the income disclosed in the application as r Snckaggregate were the total income]

[(iC) The additional amount of income-tax payable in respect of the income disclosed in the application cclstUng to the previous year referred to in sub-Section (18)shclikbed —

(Win a.tase referred po eipatie4)0/that sub-seaion, theomottatel tax arkatated under that e

(b) in a case referred to in clause (ft) raf 'tat sub-aria/oh, the amount of tax calculated under at clause as reduced by the amount:of tat careuteited on the tato' Income returned for that year

(10) Where the income disclosed in the application relates to more than one previous year, the additional amount of income-tax payable in respect of the Income disclosed for each of the years shall frit be calculated in accordance with the provisions of sub-sections (18) and (IC) and the aggregate of the amount so arrived at in respect of each of the years for which the application has been made under sub:44ton (1) shall be the additional amount of kaarte-tax payable k respect of the income disclaSed in the apPlicaticex

2450. ((1) On receipt of an application under section 245C, the Settlement Commission shall, Within seven *Ts from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the applicant the Settlement Commission shaft within a period of fourteen days from the date of the application, by an order In writing, reject the application or allow: the application tobe proceeded with:

Provided that where no order has been passed within the aforesaid period by the Settlement Commission, the application shall:be deemed ta have been anowed to be proceeded with]

(4) After exarninoti of th records and ' the o of the (Principal Commissioner on Conurissioner, if any, received under—

(i) sub-section (28) or sub-section (3), or

(ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007,

and after giving an opportunity to the applicant and to the- le:rinelpakcoramissiorter or] Commissioner to be heard, either in person or through a cepre5anPntIve dbb, cb:tbbi-rscbi in 44,;c behoill coo ::fter emimlang such further bvidence ni ebrb, be piaceo before it or obtained by it, the Settlement Cacpall.5.51017 may, in accordance with the

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provisions of this Act, pass such order as it thinks, fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Principal Commissioner.or] Commissioner.

(44) TheSettlement Oomenission shah an order under sti b-se ctl on (4), —

((ill) in respect of on application made on or after the 1st day of June, 2010, within eighteen months from the end of the month in which the application was made.)

(6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of (tax, penalty or Interest), the manner In which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shalt also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresentation of facts,

((64) Where any tax payable in pursuance of an order under sub-section (4) is not paid by the assessee within thirty-five days of the receipt of a copy of the order by him, then, whether or not the Settlement COMSOSLOOMOS extended the time for payment of such tax or has allowed payment thereof by instalments, the assesseeSall be liable to pay simple interest at (one and one-fourth per cent for every month or port of a month) on the amount remaining unpaid from the date of expiry of the period of thirtyfive days aforesaid.)

1(68) The Settlement Commission may, at any time within a pedoel of six months from the date of the order, with a view to rectal/Mg any Mistake appareMfrom the record, amend any order passed by it under sub-section (4):

Provided that an amendment which has the effect of rnadifYing the liability of the applicant shall not be made under this sub-section unless the Setttentem ,Conitnission has given notice to the applicant and the (Prhscipal Commissioner ailCommissioner of its intention to do so and has allowed the applicant and the (Principal Commissioner or) Commissioner an opportunity of being heard.)

(7) Where a settlement becomes void as provided under sub-section (6), the proceedings with respect to the matters covered by the tenement shall be deemed to have been revived from the stage at which the OPPEC°11°°

was allowed to be proceeded with by the Secttement Commission and the income-tea outharity concerned) moYi notwithstundIng anything contained In any other provision of this Act; complete such proceedings at any time before the expiry of two years from the end al the financial year In which the settlement became void,

245F. (1) In addition to the powers conferred on the Settlement Commission under this Chapter, it hall nave Powers which ore vested in an income tax authority under cha Act,

(2) Where an.application made under section 24SC has been allowed to :be proceeded with:under section 2450, the Settlement Commission shah, until on order is passed under subsection (4) of section 2434 have subject to. the provisions of sub-section (3) of that section, exclusive jurisdiction'to. exercise the powers and perform the functions gran income-tax authority under this Actin relation to the erne

provided that where on application has been made under section 245C on or after the 1st day of June, 2007, the settiemenr Commission shall have such exclusive jurisdiction from the date:on which the application was made:

it

2454. Order of settlement to be concittsive.—Every order of settlement passed under sub-section (4) of section 2450 shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this. Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force."

4.2 Excerpts from decision of Bdj Lal:

"3. For the sake of convenience, after hearing learned counsel on both sides, we reframe the above questions:

(i)Whether section 234E applies to proceedings of.the SettlementCommission under Chapter XIX-A of the said Act?

answer to the above question is in the affirmative, what is the terminal point for levy of such interest - Whether such interest should be computed up to the date of the Order under section 2450(1) or up to the dote of the Order of the Commission under section 2450(4)?

(iii) Whether the Settlement Commission could reopen its concluded proceedings by invoking section 154 of the d Act so as to levy interest under section 2348, though it was not so done in the original proceedings?

IQ. Corning to Chapter XIX-A which deals:with Settlement of Cases, itmay be stated that-the word *case is dEEfned under section245,4(b), It is on exhaustive definition The`definition mikes* slept that an application' fist Settlement shall lie:only when any proceedings for assessment ar reassessment is pending or an appeal or revision ih connection with such assessment or reassessment is pending before the income-tax Authority. Under section 245C(1), such application for settlement will not be maintainable without full and true disclosure of the income by the applicant, the manner in which such undisclosed income was derived and that the applicant had furnished his return Of-income and that the;additional tax;payable an such income exceeds the specillegiamount. Thiswas the Position prior to.€inane Act 42007. #10WEVO4, section245CPAWateralla provides thatadaitionatomatung income-tax payable in raPeCtaftheltteattwchriasurshai be caudated itimccordance with thenisiantof section 245414 Under sub-section (10)f1heapplicant has furnishedhis return-inn:tact of his totacorneana no assessment is made, the tax:shall be calculated on the aggregate of the total income returned and the Income disclosed in the application as ;psych aggregate was the coral Income. The words "regular assessment' are not there in section 245C(113)00. However, under. ection 145C(10(b), it Is provided that the additional Cox calculated under section 245C(18)(11) shall be reduced by the aggregate of the tax deducted at source or tax paid in advance and the amount of tax paid under section 140A. The resultant amount rs the additional tax payable by the assosee. Thus, section 2450 Incorporates within it the groVisions of Chopteratalf), AMC and section 14(24 Of thetaitmay be noted that section 245418)(13), as if stead bare 1-6-198Z required income-tax arbecalculateckin the aggregate of the total inmate as assessed:plus the Income disclosed in the application as if such aggregate was the total income But after .1 6-1987 the tax is required to be worked out on the returned total income plus the income disclosed in the application as if the aggregate-is the total income. Under section 2450(24) the applicant is required to pay the additional amount of income-tax payable on the income,disclosed in the application within 35 days of the receipt of the copy of the order passed by the Statement Commission under section 2450(2)allowingSuch application to be proceeded with Under section 245D(2A) the applicontshall, within 35 days of the receipt glebe order undersectian 2450(2) allowing the application to be proceeded with pay the additional amount of income-tax payable on the Income disclosed. Under section 2450(4)on compliance of section 2450(24) and (2C) and on examination of relevant records and reports, the Settlement Commission may pass such orders as it thinks fit on the matters covered by the application and any other matter relating to the 'ecase referred to in the report of the Commissioner of income- tut !f one carefully analyses the provisions of section 2450(1) and 2450(4), one finds two distinct stages-one allowing the application to he proceededwith (or rejected) and the other of disposal of the application by appropriate orders being passed by_titelettiament Commission. In between the two stages, we hove provisions which real/ire the applicant to pay the tratichtnhaime-tax and interest. Even under section 2450() it

o.oe ' Ih 4), )4:1 0.1uLt 5Di .7; !mt.' , )ceechng5 With I c=z,fiect to the

)4 I

matters covered by the settlement shall be deemed to hove revived from the stoge at which the application was

allowed to be proceeded with by the Settlement Commission and the income-tax-authority MayaciMPieta the proceedings within the period mentionedtherein. Thus, section 2450(7) brings out the difference between section

2450(1) stage and section 2450(4) stage. Under section 2450(6), it is laid down that every order undersectlan

2450(4) shall provide for the Terms of Settlement including any demand by way of tax, penalty or interest. In the

case of CIT V. Domani Bros. (2003) 2591TR 475, a 3'-Judge Bench of this Court, while analyzing the scheme of

Chapter XIX-A, has held that section 2348, section 2450(2C) and section 2450(6A) operate in different fields. Section 2348 comes into operation when there is default in payment of advance tax whereas liability to pay interest

under section 2450(2C) arises when the additional amount of income-tax is not paid within time specified under

section 2450(24). Section 2450(6A), on the other hand, imposes liability to pay interest only when the totpayable in pursuance of an order of Settlement Commission under section 2450(4) is not made within the specified time. Consequently, section 2348, section 2450(20) and section 245D(6A) in Chapter XIX-A operate in different fields. To this extent we agree with the:view expressed in Demon Brothers's case (supra). Descriptively, it can be stated that assessment in law is different from assessment by way of settlement, if one reads section 2450(6) with section 245-

it becomes clear that every order of settlement passed under section 2450(4)shall be final and conclusive as to

the matters contained therein and that the same shall not be re -opened except in the case of raud and misrepresentation. Under section 245F(2) in addition to the powers conferred on the Settlement Commission under Chapter XIX-A, it shall also hove all the powers which ore vested In the Income-tax authority under the Act. In this connection. now ever, we need to keep in mind the difference between "procedure for assessment" under ChoPter XIV and "procedure far settlement" under Chapter XIX-A (see section 2450) Under section 245F(4), it is actrified that nothing In Chapter XIX-A shall affect the operation of any otter provision of the Act requiring the applicant to pay tax an the basis of self- assessment in relation to matters before theSettlement Commission. The flint to-be noted on the basis of the above analysis Is that several provisions of the Act like section 2404; furnishing 4f the return of income by the applicant as indicated in the proviso (a)to section 245C(1); provisions of the Act-4overning

liability and computation to pay additional income-tax as indicated by proviso (b) to section 24501); aggregation of total income inter aka in terms of section 143, 144 or 147 as indicated by section 2450(1 140); ogretiotiOF of total income as returned plus income disclosed In the application for settlement as indicated in section 24501150114; the deductions In section 245C(1C); Increase of Interest under section 215(3) pursuant to the:orders of the

Settlement Commission and the levy of interest under sections 2344(4) and 2348(4)0 bring Into Chapter XIX-A

various provisions of:the Act. Thus, when we rend the provistone of sections 2450 and 2450 one has keep in mind various above provisions of the Act and the cbnceptd of self assessment, assessment, regular assessment-and computation of toga income whin have been engraftedinChanter XIX-A.

(1)0thether sections 2344, 23415 and 234COre applicable to Chapter:XIX-A proceedings?

Our detailed analysis shows that though Chapter XIX-A is a self-contained Code; the procedure to he followed by the Settlement Commission under sections 245C and 245D in the matter of computation of undisclosed income; do

matter of computation of additional Income-tax payable on such income with interest thereon; the filing of settlement application indicating the amount of income returned in the return of income and the additional

income-tax payable on the undisclosed Income to he aggregated as total income_ shows thatChapter 10X-A indicates aggregation of Incomes 50 as to constitute total income which inclicates that the special procedure under

Chapter XIX.,A has inbuilt mechanism of computing total income which is nothing but assessment (computation of

total income). To elaborate, under section 245C(18), if the applicant has furnished a return in respect of his total income, tax shall be calculated on the aggregate of total Income returned and the income disclosed in the settlement application as if such aggregate were total income. Under the Act, tax is payable on the total incomeas

computed in accordance with the provisions of the Act Thus, section 143(3) provision is sought to be incorporated in section 245C. When Parliament uses the words "as if such aggregate would constitute total income", it presupposes that under the special procedure theaggregation of the returned income plus income disclosed would result in computation of totalIncome which is the basis for the levy of tax on the undisclosed income which is nothing but "assessment". Similarly, section 245C(10 provides for deductions from the total income computed in

terms of section 2450(18). Thus, the special procedure andersections 2450 and 2450 in Chapter XIX-A shows that a special type of c)moutotion of total income ,‘ engrafted In the said provisions which is nothing but assessment

gatan to kas r.itn-e dr .,vt halt 24gOtii sec92 Fa *ever, in mg: cornputr; (ion, age finds that ascii:31°ns dealing with

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regular assessment, self-assessment and levy and computation of interest for default in payment of advance tax, etc. are engrafted. (See sections 245C(18), 24511(1C), 2450(6), 245F(3) in addition to sections 215(3), 2344(4) and 2340(4)].

(11)Terminal point for the levy of interest- Whether interest is payable under Chapter XIX-A up to the dote of the order under section 2450(1) or up to the date of the order under section 2450(4)?

12. in our view the answer to the above question lies in the provisions of the proviso to sections 245C(1), 245C(18) and 245C(1C), 2450(4; and 245F(3) which bong in the concepts of returned income, self-assessmen t aggregation of income returned aria income disclosed as if it is total income; levy of interest under section 215(3) read with section 2450(4); increase of interest under sections 2344(4) and 2348(4) read with section 245D(4) us also section 1404(1.4) and (18) read with sections 234A and 2348. For eAomple, section 1404 deals with self-assessment which is different from regular assessment, Under section 1404(1) where tax is payable on the basis of any return furnished by the assessee [see- proviso (a) to section 24511(2)), after taking into account rex paid, the assesses shall be liable to pay such tax with interest payable fordefault under section 2348 in payment of advance tax before furnishing the return. This position is clarified by section 1404(1A) and (18) under which inter Cdia interest payable for default In payment of advanCetatindersection 234A shall be computed on the amount of tax on the total income as declared in the return minus theadvance tax:paid. Similarly, it is clarified vide sub-section (18) to section 1404 that interest payable under section 2346 far default-in payment of advance tax shall be computed on an amount equal to the assessecitax [same:words ore used In section 2345(1).) or on:the amount by which the advance tax falls short of the assessed tax. However; what is 'assessed tee for the purposes of section• 2404 is etuslained by Explanation . it says that assessed tax will be tax on the total income:as dedared in the return,minus the amount :of tax deducted at source or collected at source in accordance with the Provisions qf Chapter XVII (whicIscovers sections 207 209 and 215 of the Act). Now, section 245C(1) Is voluntary disclosure by the assessee of his undisclosed income. Under section 245C(1), the assessee has to mention in his settlement aoplication the additional amount of tax payable by him on such undisclosed income. Under proviso fat the application for settlement shall not be entertained till the assesses has furnished the return of income which he was required.to file anderthe Act to the extent of Ns income. Under proviso (b) the assessee. has to declare the additional amount of tax payable Thus, the two provisos to section 245C(2)ShoW that Chapter XIX-A, which prescribes a special procedure far assessment by settlement, contemplates a pre-assessment collection of tax With the filing of the settlement othilicadah and after such application is allowed to be proceeded with under section 2450(1), Intimaton under section 143(7), regular assessment under section 143(3)1144 and reassessment under section/AUlose their existence

as under section C(1A) and fliti It isonly the Interne disclosed in the return of income before the AsSeraing Officer alone which st irvivesfor cOnskiemtion by the Settlement'Cammisstan for setting the amount of Income which is not disclosed in the return.. Linder section ,2454441(0), If the applicant has,furnished a return in respect of the total income, whether at pat petessineat is madam purstrance.of the recur n. the addition& amount of Income-tax payable in respect of the total income &Seised shall be on the aggregate of the total income returned and the income disclosed In his application for settlement as if such aggregate was his total income. This Is pre-assessment collection of tax. Such pre-assessment is based an the estimation of the current income and tax thereon by the applicant himself Now, when the Settlement Commission accepts the Voluntary (Disclosure vide the application-for settlement section 2348(2) steps in, it is important to remember that the assessee is liable to.pay advance tag he commits default in payment to the extent of the undiselosed income but he offers to pay additional income-tox then interest:has to be calculated in accordance with sections 207 208 and 2348(2) up to the date Pll which such taxis paid. This is not the interest which assessee has to pay after assessment under section 2450(4). Under section 245C(119) and (1C) the additional amount of Income- tax payable on the undisclosed income shall be on the total income as calculated under section 245c(18). On computation of total income under section 24511(18) and (IC); interest follows such computation. It is important to note that interest fellows. computation of total Income. Once such computation takes place under section 24511(18) then section 2348(2) applies. The said sub-section deals with the situation where before determination of total income under section 143(1) or 143(3) tax is paid under section 140A or otherwise interest shall be calculated in accordance with section 2348(1) up to the date on which tor is so ha1 intact _,-. • • tn t 2.:5C Q 'L. 'fl 24_,C; Li deal!, onto rornPuzoOon of :otol

9

Income. There is one more way of looking at the Act. Chapter XIX-A refers to procedure of settlement {gee section 245011)]. As stated above, section 2450(1) provides for -expeditious recovery of tax by way of pre-assessment collection. Interest on default in payment of advance tax comes under sections 2344, 2348,234C, which fall In Chapter XVI( which deals with collection and recovery of tax. It isimportont to note that Interest follows computation of additional payment of income-tax under section 2454(1B) and (1C). This is Prow sections 2344 2348 and 234C get engrafted into Chapter )0X-A at the stage of section 2450(1). As stated, till the Settlement Commission decides to admit the case under section 2450(1) the proceedings under the normal provisions remain

open. But, once the Commission admits the case after being satisfied that the disclosure is full and true then the proceedings commence with the Settlement Commission. In the meantime, applicant has to pay the additional

amount of tax with interest without which the application for settlement would not be maintainable. Thus, Interest under section 2348 would be payable up to the stage of section 2450(1). Our view Is supported by the amendment made by Finance Act of 2007 with effect from 1-6-2007 in which interest is required to be paid or maintainability of the Application for Settlement.

13. The question Is - what happens in cases where 90 per cent of the assessed tax Is paid but on the basis of the Commission's order under section 2450(4) the advance tax paia turns out to be less than 90 per cent of the

assessed tax as defined in the Explanation to section 2348(1)?

14. As held here/relieve, under section 245C(1) read with section 245C{18)(11) and section 245C(1C)fb), the additional amount of income tax payable is to be calculated on the aggregate of total income returned and the

income disclosed in the settlement application as if such aggregate is the total income. Thus, the schemeof the said sections is based an computation of total income and in that sense we have stated that such application for settlement is akin to a return of income. The said provision deals:with 'total income". Thus, as stated above, sections 2344, B and C ore applicable up to the stage of section 2450(1) order passed by the Settlement Commission. However, Parliament has not extended the provisions and the liability to pay interest beyond the date of application for settlement. This is the position even after Finance Act of 2007. Once this position is taken, section 1404 is attracted. When an assessee has paid interest under sections 2344,'8 and C self-assessment ander section 1404, which is similar to the scheme of section 2454(1), and once'the Settlement Commission admits the application for settlement, one finds that even under section 1404(18) interest payable under section 2348 has to be computed on an amount equal to the assessed tax as defined in the Explanation to mean tax on the;total Income as declared is the return. Under sub-section (18) to section 1404 interest payable under section 2348 can abate computed on an amount by which the advance tax paid falls short of the assessed taxies defined hi the Explanation thereto. Thus, there is no provision under Chapter X1X-4 or even under section 1404 (dealing with selftauessment) to charge interest beyond the date of application for settlement after the same is admitted by the Commission under section 2450(2) moreover, as stated above, under the Act, there is a difference between assessment in law (regular assessment or assessment under section 143(1)) and assessment by settlement under Chapter XIX.A. The order under section 2450(4) is not an order of regular assessment. It is neither on order under section 143(1)or

143(3) or 144. Under sections 139 to 15B, the proem of assessment involves the filing of the return under section 139 or under section 142; by the Assessing Officer under:sections 142 and 143 and making of the order of

assessment by the A tr-SSitaa Officer under section 2`43(3) or under section 244 and issuing of notice of demand under section 156 on the basis of the assessment atdee Theymaking of the order of assessment is an integral port of the process of assessment. No such steps are required to be folipvved In the case of proceedings under ChapterM-

A. The said Chapter contemplates the taxability determined with respect to undisclosed income only by the process of settlement/arbitration. Thus, the nature of the orders under sections 143(1), 143(3) and 144 is different from the orders of the Settlement Commission under section 2450{4). Even in CIT v. Anjum M .H. Ghaswala (20011 252 ITR 1 1 there is no finding by this Court that the order of Settlement Commission undersection 2450(4)is an order of assessment under section 143{3) or under section 144. In Anfuni M.N. Ghaswala's case (supra) the only question decided by this Court is that the interest unaer section 234B is mandatory in nature and that Settlement Commission, therefore, hod no authority to.waive it. Further, as stated above, the jurisdiction of the Assessing .

Officer is not fettered merely because the applicant has filed the Settlement Application. The Act does not contemplate stay of the proceedings during that period, i.e., when the Settlement Commission is deciding whether to proceed or reject the settlement application. The jurisdiction of the Settlement Commission to proceed contnle es ,j71(.? ;JO 5.C1 If - ( 1, ; Jil :to .c:Ing an api)1C=7C;oel for sealement

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the applicant is not allowed to withdraw it [see section 245C(3)]. Once the case stands admitted, the Settlement Commission shall have exclusive jurisdiction to exercise the Powers of:the Income-tax Authority. The order of

Settlement Commission under section 2450(4) shall be final and conclusive under section 245-1 subject to• two qualifications under which it con be recalled, viz., fraud and misrepresentation but even here it Is important to note

that under section 2450(7) where the settlement becomes void an account of fraud. and misrePresentatiOn the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the

stage at which the application was allowed to be proceeded with by the Settlement Commission. This further supports our view that there are two distinct stages under Chapter XIX-A and that the Legislature has not

contemplated the levy of Interest between order under section 2450(1)stoge and section 2450(4) stage. Thus, interest under section 2348 will be chargeable till the order of the Settlement Commission under section 2450(1), I. e , admission of the case. Lastly, the expression "interest" in section 245(6A) fastens the liability to pay interest only when the tax payable In purstance of an order under section 2450(4) is not paid within the specified time and which levy is different from liability to pay interest under section 2343 or under section 2450(2C). [See - Damani BrOS.'S case (supra) at page 485/.

(81)Whether the Settlement Commission can re-open its concluded proceedings by having recourse to section. 154 of the Act so as to levy interest under section 23-18. if it was not done in the original proceedings?

15. As stated, proceedings before . Settlement Commission are similar to arbitration proceedings. It contemplates assessment by settlement and not by way of regular assessment or assessment unuer section 143(1) or under section 143(3) or under section 144 of the Act% in that sense, it is a Code by itself it does not begin with theffingale the return but by filing the applicabonforsettlement 4s:toted 1144(e) in der the Act, procedure forossessment falls in Chapter xiv (in whIchlection454Ells)which Is different from procedure :far settlement In Chapter XI)&A in which sections 245C and 24512fap. Orovision for levy *interest for default in payment of advance taxunderSection 234B falls in Chapter MI (section F) which deals with collection and tetovery of tax which as stated above`Is incidental to the liability to pay advance tax under section 207 (which is also in Chapter XVII) and to the computation of total income in the manner indicated under Chapter Xik -A vide section 245a16) and 245C(1C) read with the provisos to section 245C(1) on the additional income-tax payable:on the undisclosed income. Further, if one examines the proviSlonS of section 245C(18) and 245C(1C1 One finds that various situations are taken into account while computing the additional amount of tax payable, viz., if the applicant has =tilled his returns, tre he has filed but orders of assessment are not passed or if the proceedings are pending for reassessment tinder-section 147 (again in Chapter Xitl or by way of appeal or revision in connection with such reasseSsatertt and the applicant has not famished his return oftotal income in which case tax has to be calcutated on the aggregate-af total income as assessed in the earlier proceedings for assessment under section 143of under section 144 or under section 147 (see section 245C(20)]. The point to be noted is that in computation of additional income-tax payable by the assessee, there is no mention of section 154. On the contrary, under section 245-I the onferof the Settlement Commission is made final and conclusive on matters mentlonedin the application for settlement except in the two cases of fraud and misrepresentation in which case the matter could be reopened by way of review orrecalt Like 1TAT, the Settlement Commission is a quest-Judicial body. Linder section 254(2), the /TAT is given the power to rectify but no such power is given to the Settlement Commission. Thus, we hold that Settlement Commission cannot reopen its concluded proceedings by Invoking: section 154 of the Act. Lastly, one must keep in mind the difference between reViewfrecati of the order and rectification under section 154. The Schedule of Chapter XIX-A does not contemplate invocation of section 254 otherwise there would be no /Malty to the assessment by settlement which is differ-re-n*0m cakessMentunderthapiet X7Ywherathere Inn appeal, revision, eta Settlement of liebility and nordetermlnation efliabffityls the object of ChapterXIX-A Even otherwise, invocation a/section 154 an facts of this batch of cases is not justified, in this botch of eases, the situation which prevailed when the Settlement Commission waived or reduced interest chargeable under sections 234A and 2348 was shot a debate was on as to whether the Settlement Commission has the power to reduce or waive interest it is only after Anjum Ghaswalces case (supra) that the low got settled that the nature and the character of the interest was compensatory and mandatory and that the Commission had no such power. But even in AnjuM A4.14. Ghaswola's case (supra) the question as to whether such Interreerarse .mllon 2348 should run up to the order undersection 2450(1) or up to the date of the order under stalan'23e4)zwisnot decided. M fact, that was the reason for the Orders of Reference to the Constitution Beni:n*40i Court1/44aiders dated 14 - 12 - 2C01 and 20 - 1 - 2005. There "s

one more reason for this Reference. In the case of OT v. Hindustan Bulk Carriers [20031259 ITR 4491 a 3-Judge

Bench of this Court, by majority, held that where, upon the Order of the Settlement Commission under section 2450(4), there arises a deficit in the payment of advance tax under section 208, the end point or the terminus of the

period for which interest has to be paid under section 2348 on the deficit is the:date on which the Settlement

Commission passes the order under section 2450(4). Thls decision was delivered on 17-22-2002 after the judgment

of this Court in Anjum M.N. Ghaswala's case (supra). On the:same day, the same Bench in the case of Dornani Bros.

(supra) held that interest charged under section 2348 becomes payable on the income disclosed In the return and the income disclosed before the Settlement Commission; that such interest is chargeable till the Commission acts in

terms of section 2450(1) and that after theSettlement Commissionollows he application for settlement to be proceeded with there will.be no further charge of interest under section 2348. Thus, even on the question of terminus there was lot of controversy and in the circumstances, we are of the view that invocation of section 154

(hold to he inapplicable to Chapter XIX-A proceedings) amour be justified

Conclusions

16. (1) Sections 234A, 2348 and 234C ore applicable to the proceedings of the Settlement. Cornmissron under

Chapter XIX-A of the Act to the extent indicated hereinabove.

(21Consequent upon conclusion (11, the terminal point for the levy of interest under section 234!3 would be Up to

the date of the order under section 2450(1)and not up to the date of they Order of Settlement under section 2452(4).

(3) The Settlement Commission cannot reopen its concluded proceedings by invoking section 154 of the Atha as to levy Interest under section 2348, particularly, in view of section 245-1.

17. Accordingly, Reference to the Constitution Bench vide orders dated 14-22-2004 and 20 pas stands duly answered and the matters oreaccording& disposed of."

5. Shrl 5.1(.1111slyan, the learnedCounsel for the applicant made the following submissions in support of the petition dated 13.0510141

(a) The Commission is the final adjudicator , and its proceedings under Chapter XIX A, culminate in an order t1/5.245D(4), which must provide the terms of settlement including demand by way of tax, penalty or interest and manner of -payment of such demand etc., as per provisions of Section 2450(6). This section further provides that every order 1J/5.2450(4) shall lay down the terms to make the settlement effective. The order u/5.2450(4) dated 5042.2013 did not provide for demand by way of interest and hence suffered from a mistake of law inasmuch as it was incomplete and not in conformity with provisions of Section 2450(6). The duty to determine tax, interest and penalty in its order is that of the Commission. The directions given by the Commission to AD:to calculate lax and interest as per Wm' Is only an extension of its order it/S.24613(4} and if AD committed a mistake imcarrying out the mandate of Commission, such mistake was rectifiable u/s.2450(&h) of the Act and not other wise. Section 24513(Se) brought on statute book with effect from 1.6,2011 provides for rectification of order u/s.2450(4) with a view to rectifying any mistake apparent from record.

.04 An order u/s.245D(4) is different from appellate orders (passed by CiTtAil FIAT/ High Court/ Supreme I Court) Inasmuch as In the case of appellate orders, order u/s.143(3) is the base order. When the AO gives effect to such appellate orders, the hue order is that of AO u/5.143{3}. In the case of order of Settlement Commission there ) is no such base order by AO The applicant approaches Commission when proceedings are pending before AC' Th Commission adjudicates/settles the case after which AO has no locus standi or power to pass any order.

(Cf Orders of settlement passed under section 2450(4) were conclusive as to the matters stated therein a per section 2454 of the Act. So the AG could not pass any order u/5.154 in respect of matters covered by ord dated 30 122013.

(d) Coming to Question No.(a) posed before the Special Bench, it was submitted that no cfirectfiers5 for

charging of interest can be made where as per law, interest was not chargeable on total income disclosed in the

settlement application. Reference was made to the decisions of Supreme Court M the case of lyotendrasinghg Vs.

S.I.Tripathl 201 ITR 611 SC and Union of India 'Vs Ind Swift Laboratories Ltd 263 ELT No.3 SC In the former

decision, it was held by the Apex Court that the scope:of enquiry in judicial review was limited only to considering whether order of the Commission compiled with statutory provisions of Chapter XIXA of the Act In the later

decision, it has been held by Apex Court that the order - of the Commission could only be interfered with when it

was contrary to or in ignorance of statutory provisions. Power of judicial review does not extend to a decision on

facts or on interpretation of documents. As such, where no interest was chargeable u/s.2348 as per law, on total

income disclosed in the settlement application, charging of interest in such a case would be against the statutory

mandate and also aforesaid decisions of the Supreme Court.

( 0) Corning to Question No.lb) as to whether interest u/5,2348 is to he charmed with reference to total income disclosed in settlement application or with reference to total income settled as per order under section

2450(4), reference was made to the decision of Supreme Court in the case of Brij Lat. It has been submitted that this decision was given by a five JudgeConstitutional Bend,. The Id. AR tool us through pages 501 to 506 of Brij Lai decision reported at 328 ITR 477 (reproduced above In pan 4.2) to highlight that the said procedure u/s,245C and

2 450 shows that a special type of computation of total income is engrafted in the said provisions which is nothing but assessment which took place at section 2450(1) stage. It has beenfurther submittedthat assessment stops

with the filing of settlement applicatibn u/s245C(1). After an order u/s 2t30(1) is passed, it is assessrheht settlement. When the Commission accepts:the S.A.. section 2340(2) stepSin.The Id AR submitted thattbe Neale Supreme Court was seixed of this Issue-when it raised-the question happens in cases where 90 pet cent of

theist-cued tax is paid but on the basis of the Commissfon'i order under section 2450(4) the advance tax paid

turns out to be less than 90 per cent of the assessed tax as defined In the Explanation to section 2348(1)?" it has been further submitted that after holding that sections 234A, 2346 and 234C are applicable up to the stage of

section 2450(1), the Supreme Court observed that "However, Parliament has not extended the provisions and the

liability to pay interest beyond the date of application for settlement. This is the position even after the Finance Act or 1007. Once this position is taken, section 140A is attracted. When an assessee has paid interest Utter sections 234A, 2349 and 2340 In self-assessment under section 140A which is similar to -the- scheme of section 2450(1), and once the Settlement CommfsslOts admits the eiseileatien fur settlement,one finds that .eilen under

section 140A(1g) interest payable under section 234ghasto be computed on an amount, actual to the assessed tax

as defined In the Explanation to mean tax on the total Income as declared in the returm tinder sub-section(10) to sacdon 140A, Interest payable under section 2348 can also be computed on an amount bywhich the advance tax paid fails short of the assessed tag as defined in the Explanation thereto, Thus, there is no provision under Chapter XIX-A or even under section 140A (denting with self assessment) to charge interest beyond the date of application

for settlement after the same is admitted by the Commission under section 2450(11.". The AO was duty bound to

Meow directions of the Commission and since proceedings 'before the Commission ufs.24Si. were judicial proceedings the Commission should invoke the Dower of cantemptin MA proceedings the A015 functous officio. He Is only a collector of tax determined by the Commission. Charging of interest In the manner done by him in the present:case was beyond his purviewAccordingly it was submitted that the issue whether interest was chargeable

on i ncome as per 2450( 4 ) or as per section 2450(1) already stood answered by Supreme Court in aril tars case.

(h) Regarding. Question Islo.(c) it was submitted that the Commission s can direct deletion of interest charged u/s.2340, if the same is inconsistent with the view of Supreme Court. under Article 141 of the Constitutton of India, the judgment of Apex Court is the law of land and binding on all Courts of Law. Since the COMMISS104 ,a5 a

quasi judicial authority, It also came under the purview of such law. Any direction given in conflict with the judgment of Supreme Court would amount to mistake apparent from record and would be liable for rectification

is/S.2450(6B). From a plain reading of section 2450(6) it is dear that order under section 2450(41 shall mandator* provide amount of demand by way of tax, penalty or interest The order passed u/s.24519(4) on 30.12.2013 tacked

this statutory requirement, it was incomplete and defective to that extent and required remedial action ufs.2450(69). Thee AO had no authority to pass an order supplementing order 45.2450(4) without vetting of the same by the Bench. The Commission was duty bound to specify the demand of tax, penalty or interest in the order

745Df4i . itself.

Coming to Question No.lii), it was submitted that since interest u/s.2348 is not leviable ore the, income settled but on Income offered, In view of judgment in the case of Brij Lel ,there was no question of the Commission

directing' levy of interest u/s.2450(41.

6. Shn S.R.Wadhwa, Advocate, attending the present proceedings as an intervener made the.following

submissions:

(a) The constitution of the Special Bench under section 245BA(5A) for disposal of the case u/s.243 (85 ) was valid since a case can be said to have been disposed only when all actions in connection with the S.A. are complete.

(b) The MA filed in the present case was valid in the eyes of law. As per order u/s.2450(4) dated 30.12.2013 the Commission had directed charging of interest i n accordance with the decision In the case of Brij Lai, The AO eassec order giving effect to Commission's order on 15.1.2014 and rejected the two rectification applications

filed by the applicant , on 22.1.2014 and 2.5.2014, The present MA dated 13.05 2014 was in time. The Commission

had delegated its duty to the AO and the stage of Section 2430(4) would be complete only when the AO communicated the demand of tax, interest and penalty to the applicant.

(c) Our attention was drawn to para 13 of order in the case of BM) Lai where it was observed "thus as stated above , seetior, 234A, 2348 and 234C are applicable up to the stage of section 2450(1) order passed by the Commission. However, Parliament has not extended the provisions and the liability to pay interest beyond date of application for settlement"

(c) The decision of the Apex Court in Brij Les ease was binding and the same could not be,questkOnedoeeo if one did not agree with the correctness of the decision. Reference was made to the decision oftetpreme Coen] In

the case of Union of India Vs Kamlakshi Finance Corporation dated 24.09.1991 ( reported at AIR 1992 SC 711) where SLP filed by the department (in relation to strictures passed against the departmental officer holding that principles of Judicial discipline required that orders of higher appellate authorities should be followed unreservedly by subordinate authorities) was dismissed..

(e) Reference was made tothe decision of Delhi High Court dated 21.2413 reported at 3604TR 447 where

was held that on the ground of non fulfillment cif the condition of 'full and true disclosure" S.A. could be rejected

even at 2450(4) stage. So the charging of interest 1411,2348 should be up to 2450(1) stage and not on t determined Ws-2450(4).

7. She Neeial Jim, CA who also attended t he present proceedings as an intervener made the following submissions:

(a) Chapter /MA of the Act was a code by itself. As per the decision of Brij. Lai, section. 34B was engrafted in

this Chapter up to 2450(1). So provisions of 2348 would apply up to 2450(1) stage and since 2348(4) was part o section 2348, the same also stood engrafted up to 2450(1) stage.

8. Shri S.M. Surana, Advocate and intervener representing the case of 8hanwartal Bald (applicant in S.A. No

W8/X0e/Central..111/2011-12/47/1T Made the submission that

(i) If we were to look into chapter XIX A, there Is no specific mention of section 2348 in any. Of tn. the chapter except that.an assesee has to pay tax alongwith interest before filing appikation for se ttit the order u/s 2450(41, the Commission has to provide for demand by way of tax, interest and penalty inift

there is no mention of chapter XIX A in section 2348 except in section 2348(4). However 2348(4) was no

independent section for charging of interest. It provided that if a result of order u/s 2450(4), the amount on

interest was payable under subsection (1) or (3) has been increased or reduced, as the case maybe, the inter shall be increased or reduced accor erlinele,y. Therefore, it would be amply clear that to invoke the Provisions section 2343(4), interest should have been charged earlier ti/s 2348(1) or 2348(3), so that it could be increased reduced.

case of department made submissions a

(k). Tax cannot be charged unless clearly provided by the language of charging section, If the words of a taxing statue fall then so must the tax. 'Causus OmiSU5S' cannot be supplied by the courts.

(Hi). As far as maintainability of the miscellaneous application is concerned it was Submitted that the application should not be considered a petition u/s 154. As per section 2450(6), the. Commission is to provide the demand by way of tax, Interest penalty:etc. This couldnot be left to the AO. While admitting the application, the Commission itself examined tax payment, then the demand for final tax, interest and penalty couldnot be left to AO, The MA was not a petitiOri for rectification of order of settlement commission but was a petition for examining the calculadon made by AO since such calculation of demand of tax, Interest and penalty was to be.tione by the Commission. Therefore when there was a calculation mistake, it had to be looked into by the Commission and not by the AO as caiculation was that of the Commission and not of the AO

9. As against the above ,Shri Sarijeev Sabharwal, Special counsel appearing for the department made the kilo mg submissions.

(a) Tice order dated 8.07.2014 constituting the Sdeciai Bench (.0.24519(5A) was incorrect since such a Bench could be constituted only for "disposal of any particular case" The 'case' was defined ufs.245A(b) and it stood

disposed after order ufs.2450(4) was passed. it was his argument therefore that any such Special Bench could be constituted-only before 1450(4 stage and not after order had already:been passed.

(b) Since order u/s.2450(4) was dated 30 112013 and section 2450(68) provided a time limit of six months from the date of the order ,which had already expired, no order could be passed by the Commission now. There was no provision In the statute to extend such limitation.

•

(t) After the. AO had rejected the rectification the only remedy euallabi he applicant was by way of filing appeal before CITtAL against the larder of the AO.

On merits there was no error apparent on face of record which could be rectified u/s.245 o(66).

(e) Interest uA.2343 was mandatory and with the Commission having no authority to waive it. (Supreme '

Court decision In the case of Anjum Ghaswela), revenue was entitled to be compensated on amount of income finally determined by the Commission vis.Z450(41, If such Interest was to be restricted on amount of income as per section 2450(11, the revenue would net get conirpenSated.

(f) it the interpretation s as claimed by the applicant, was to be adopted, section 2348(4) would become redund ant a rid:otiose.

(a) Even as an Arbitrator, the Commission was bound to prow for "Pendell I rest" on dues of the applicant between 24S0(14 and 2450(4) stage.

10. Shri (1_1(. Gupta, CIT(C fill, New Delhi, also repress/ following lines.

10,1 Tel nical Oblections

a) A combined reading of section 2458A j5A), 245A(b), 245E12) and 2451 would show that the exclusive jurisdiction of Commission over a case was from the date of Thing of application to the date when order u/s.2450(4) was passed With the passing of order u/s 2450(4), the case attained finality and the same could not be reopened in any proceedings, Hence, t as no case pending for disposal for which a Special Bench could be constituted. Pander-IC at be treated as a 'case' Thus the constitution of Special Reach was not maintrene

15

b) Without prejudice, It was not :clear from MA whether tt was a request for rectification u/s.2450(68) of so,

limitation for passing order u/s,24$0(eB) was already over) or merely seeking.clarification (if so, there was no legal provision for seeking such clarification and cannot be considered to be a 'case).

c) There was no error apparent from record in the orders u/s.154 passed by A.O. and the remedy for applicant lay in appeal and not with the Commission. On similar facts, Kolkata High Court in W.P. No.1154 of 2013 dated 11.04.2014 had quashed order of Settlement Commissein, Kcilkata Bench in the case of Begrai Agarwal holding that the Commission had no jurisdiction to sit in judgment over order passed'by A: Q.. giving effect to order Li/5.2450(0 The correct, course before applicant would be to file application u/s.154 and if such application was rejected, an appeal maybe filed before appropriate appellate authorities.

d; Furthermore, the questions framed did not arise out of MA. Also , issue raised in R.No.,(h) W45 subjudice

before Delhi High Court in Today Hotel Group and propriety demanded , the Special Bench should not consider the same

ej The questions framed were high, / aribm

10.2 Submissions on merits. a) Interest u/s.2340 was mandatory ( as held by Supreme Court in Anjum Ghaswala 252 ITR 1)

compensatory and not penal'in natureAas heid by Supreme Court in Pratitha Processors and Central

Provinces-Ale 1597 SC In) b} Charge of interest begins witkeeto, Med incomeiS.140A read with Sec.2345) and undergoes change

up and deem with increase aricideerease of income (assessed tax). c) There was a distinction between liability to pay interest and Its quantification. Liability to interest is

always there at any stage of assessment. 1n fact levy of interest is automatic, no discretion Is contemplated or vested in the taxing authority and failure to pay tax alongwith return automatically attracts penal interest and no opportunity is required to be given before levy (Kerala H.£. 2411TR 753 incase-of It Ramelingair).

d) Only the quantum of interest varies and may be nil at some stages depending on the shorefall compared to assessed tax. If theShortfall at route Store is less than 10% it would not mean that liability to interest Itself has ceased. So evert if no interest was Paitstala op returned Income, interest is chargeable if it becomes due In Sec.143(1), or 143(3), or by subsequent orders.

e) As held, in the case of ESN Lao S A Is akin to return of income. So even If Interest Is not payeble o

income as per settlement application, it becomes payable u/s.23eii if shortfee increases as per ord u/s.245D(4

f) For Invoktng section 234144), it is not necessary that interest was actually payable u/s.2340(1) ■

liability is always there 4RdiriCreaSe could he from zero quantum This view is$4.4pleofted by tleelsio

in cases of Athat Traits (332 118 572(Bombeer1), Sahitya Mudrenalaya (312 ITR'115 (Gui,j) an Hindtestan -BLOW Cartier 259 1TR MB (SC)). So a.so,(a) Is to be answered: in the affirmative.

g) in respect of alloe(§}, interest u/s.2341 being compensatory and not penal, an interpretation w

he made to give effect to legislative Intent as apparent horn scheme of At h) Applicant's contention that Interest was cnargeable only on income as per order under sect

2450(1) was based on incorrect Interpretation of judgment in case of Bre Lal. It was explained Supreme Court in the case c4 Sun Engineering 130 rrn 297, that the ratio of a Judgment should interpreted in the context In which judgment waadelivered. The issue before iten'Iale Court in Brij Lars case was °ray the terminal point upto which Interest u/s.23413 is to be charge.d learned DR also took us through the decision of Supreme Court In detail (reproduced at pa•2 above) to state that nowhere in this case had the Horeble Supreme Court head that the vent 1 on which interest is to be charged should be as per order u/s/450(1). The discussion and obse in the judgment have to be read in the context of questions framed and under considerat. by

Horaile Supreme Court in Brij Lars case. i) The Mar-Valle Supreme Court in Brij tars case has held that provisions of section 2346 are app. c e to

proceedings under Chapter XIXA of the Act Accordlegjy S.2345(4) is also applicable. In fact Lai

decision reconfirms at various places in the order, application of section 2348(4) to settl ent

proceedings if the interpretation as canvassed by applicant is accepted, section 2345(4) auk

it

become. redundant or otiose. An intereretation that renders any legal provisions redundant is not a

correct interpretation. D Section 2450(6) refers to 'tax, penalty and interest.. As interest on Income in S.A. Including

undisclosed income, is already paid before filing of application, the word 'Interest' would become

meaningless if interest u/s.2343 was not to be varied in view of changes In income as per order

uls.2450(4).. k) There was nonspecific interest chargeable In chapter RCA of the Act, except that u/s.2.45.0(6A), which

IS parallel to interest u/s.220(2) for delay in payment of demand beyond 35 days of order

u/s.2450(4). Therefore the reference of interest in section 2450(6) was to interest chargeable under

sections 2344,234 .8, 2340 etc. with reference to income finally settled u/s.2450(4).

I) There could be cases where income settled by the Commission u/s.2450(4) in a particular year is less

than the income disclosed in settlement application. In such cases interest chargeable u/s.2348 is to

be reduced in view or section 23413(4) as the quantum on which interest is chargeable gets reduced.

Certain specific instances of such a situation have been furnished at page 12 of Departmental. Paper

book dated 04.08.2014. m) Similar to section 2346(4), section 244A(3) relating to grant of interest on refund, provides for

increase or reduction of interest payable if amount of refund undergoes change in pursuance to order

u/s 2450(4) Like in (I) above if the interpretation as canvassed by applicant Is accepted, section

244A(3) would also become redundant or otiose n) The interpretation of provisions as sought by applicant would be discriminatory as an assessee

declaring correct income in settlement application would end up psylng more interest. than an

unscrupulous assesses depiarint a Ow .suin and leaving It to the athriession to increase the

income to correct levels such an interpretation Will place a.. premium on dishonesty and Will

encourage assessaS net to disclose true and full income in their settlement applications. Thus

tileo.(b) Is le be answered by holding that interest els.234B is to be charged with reference to total income settled in the order u/s :2450(4).

o) Regarding Calkins (c) and cl) it was submitted that section 2450(68) dealt with only 'mistakes

apparent from record' and in view of controversy underlying'the issue both the questions have to he

answered in the negative.

11. Countering the arguments advanced on behalf of the Department, Shri 5.e. Tulslyart submitted as below:-

a) The impugned order u/s.2450(4) was incomplete inasmuch as mandatory provision of section245D(6) had

not been complied with. The Commission had delegated Its bounden duty (of specifying demand Of tax and

Interest) to the AO, contrary to section 2450(6). Without prejudice to this argument, the order of the Commission could not be termed as complete till effect thereof was given by the A.Q. by determining tax and interact. The Patna High Court in the case :at Or Rat*-Kumar Aithaucy (2131 (TR $81) has:held that:period of 35 days for purpose of Interest u/S.2450(6A) has to be counted from the date:of actual calculation and service of demand

notice on applicant and not frortIthe dere of order oftheComrcdssion.

b) The A.O. could not thrust his own views while giving effect to the• order 45.2450(4). He is duty bound to

obey directions of theCommission and follow the Apex Court's judgment in the case of Brij :Lai, on the chatglng of interests: Three different Benches (Kaltata, New Delhi and Murtha') of the Commission comprising of 7 different

Members have unanimously concluded that no interest is chargeable on additions made at 2450(4) stage, since

after 2450(1) stage assessment proceedings come to an end and arbitration proceedings start and pertaining to

which there is no provision of charging of any interest.

c) From an analysis of judgment in the case of Brij Lai. from pages 501 to 506 at 8 ITR the following points

are noteworthy:

Interest chargeable under sections/I re all related with 'assessment.

•

17

ii

Filing of settlement application under section 245C(1) after paying the tax due on returned income and Income disclosed in the settlement application (which is akin to revising of return) amounts to 'self

assessment' like section 140A.

The 'assessment' proceeding ceases with passing of an order under section 2450(1) of the Act. Thereafter,

intimation under seafOnre.4341). regular assessment under section 143(3)/144 and reassessment tinder section 147 lose their existence as under section 245C(1A) and (10) It is only the income disclosed in the

return of income before the Assessing Officer alone which survives for consideration by the Settlement

Commission for settling the amount of income which is not disclosed in the return.

When the Settlement Commission accepts the voluntary disclosure, vide the application for settlement,

section 2340(2)steps in. Since there is no mention of section 234B(2) in sub-section (4) of section 2343,

the increased liability of interest u/5.2343(4) is not applicable in respect of the additions made by the

Bench at 245D(4) stage.

[here is a difference between assessment in law (regular assessment or assessment under section 143(1))

and assessment by settlement under Chapter XIX-A. The order under section 2450(4), is not an order of

regular assessment. it is neither an order under section 143(1) or 143(3) or 144. Under sections 139 to

158 (Chapter XIV of the Act), the process of assessment involves the filing of the return under. section 139

or under section 1424 inquiry by the Assessing Officer under sections 142 and 143 and making of the order of assessment by the Assessing Officer under section 143(3) or under section 144 and Issuing of

notice of demand under section 156 on the basis of the assessment order. The making of the order of

assessment is an integratpart of the proceeS of assessment No such steps are required to be folloWed in

the case:of proceedings underChapter

Even in CIT v. Actium Kle. GhaSWale [20Q11 252 1111 1 there is no finding by the APtlf COM/ that the order

of the Settlement CoMmission Under Seaton 2451)(4) IS AP Older of assessment under section 143131 or

under sealon 144.

The proceedings after 245D(1) stage pertains to 'arbitration' proceedings and not 'regular assessment'

proceedings. The Parliament has not provided in the statute For charging of. Interest u/s.234A,2343 and

234C beyond the stage of 'assessment'

Hence, interest IS not chargeable an the amount of addition made by the Commission) by which the

income disclosed inthe senterneat application is.disturbeclay the Commission at 2450(4) stage,

d. Section 23413(4) was inserted w.e.f. 1,04,1919 and no amendment has been effected since then. As such,

the section reflects the corresponding position prior to 1,00.2E107 when the S.A. could also be flied in case where

assessment was completed but appeal was pending before the appellate authority. The Apex Court in. Brij tai's

case has at page 503 observed

"On computation of total income under sections 245C(' A) and (1C), interest follows such computation of

total income. Oncestgh computation tam place under section 24SC(1B) then section 2348(1applles",

It is noteworthy, therefore that. Ape( Court has clearly observed that after the stage of 245C(1B), section

2343(2) (and not 2348(4)) applies.

e. An MA arises on facts relating to a particular case and the matter that needs attention on account of

various reasons including rectification proceedings u/s.24513(611) or corrective action u/s,2451)(6). Though

Chairman of the Commission was empowered to constitute a Special Bench u/s.245BA (SA) of the Act read with

Rule 13 of ITSC (Procedure) Rules, 1997 for disposal of a particular case, yet the constitution of a 5 member

Special Bench to review unanimous view of 7 different Membess-ofliew Delhi, Kolkata and Mumbai Benches in 4

different cases (Begraj Aga rwal, Todays Hotel Group, Potts inclialtd and Prime )spat Ltd) was Imreriper .

18

f. The action of A.O. giving effect to or der u/s.2450(4) is not valid in ter ms of unambiguous provisions of

section 2450(6). As such the order u/s. 2450(4) Is still Incomplete and an order u/s.2450(68) can be Passed amending the order u/s.2450(4), Since the A.O. was acting as subordinate to the Commission without having;any

independent jurisdiction in the matter and having failed to follow directions of the Commission in letter and spirit, the only option of remedy left with, applicant was moving the matter with the Commission who held exclusive jurisdiction u/s.245F(2). Appellate authorities have no jurisdictions over such cases. The Commission u/s.Z45F(2) was assuming the powers of an Income tax authority which has been specified In section 116 that includes an

appellate authority. As such, there is no ambiguity on this account,

On departmental contention that question of chargeability of interest and additions made by the

Commission was not an issue before iion'bie Supreme Court in Brij Lal's case, it is submitted that issue was a

rainiest matter of observations of Apex Court, as stated supra. It consisted of 'obiter The judgment of

Supreme court Ricans not only the ratio of a particular judgment but also its Dieter dictum, Such &alter dictum is

also binding on all courts in India.

12. After hearing the respective submissions carefully, we first consider the technical objections raised on

behalf of the department. It has been submitted by the departments Special Counsel and Shri R.K. Gupta, CIT(C)

that the Commission has exclusive 'jurisdiction over a case from the date of filing of application to the date of

passing of the order Ws 2450(4). As:proceedings u/s 2450(4) in the present case have been concluded, there was no matter pending before the Commission to constitute .aa case", which could be referred to a Special aenc

constituted for disposing the. Miscellaneous Application before us, we note that every order tr/s245014),js mandatonly required to provide, for terms of settlement In view of the word "shair used In.section`2450(6). Such terms of settlement would necessarily, include &ROOM Of interest. An orders like the order dated aaazzota that does not determine amount payable by way of interest in our view is not a completeorder. Unless this omission is corrected, by providing for otaddrit for payment by way of interest, the order would, not be complete and the

settlement Cannot alsCebe complete and therefore, final. A case can be said to have been disposed of only when all

actions in connection veldt the S.A. to , make thegettlement effective ore completed of *OM the stetutong time limit provided u/s 2450RAHliii and subject to Om provisions of section 2450E80. We theteftlire.i'domet

agree with the contention of the Department that in the present ease'efter the passing of the order Ws,2450(4),

the case attained a finality and the Commission had become fumes officio .After passing order Ws 2.450(4) the Commission is statutorily hound to act, as per the provisions of chapter XIX-A in the hallowing situations.

(1) if there is a mistake apparent from record in the order u/s 2450(41 the Commission is bound to rectify - the same, as per Section 2450(68). (ii) if subsequent to the passing of order tits 2450(4) ,'it. is found that the order has taeari obtained by, fraud. or

misrepresentation of facts, a duty is cast on the Commission tp declare the Settlement void, as perthe provision

of Section 2450(7) .

11.1 We now consider the scope of rectification u/s 2450(68),,what is el mistake apparent from record and wh as contended by Department time limit for passing order ujs 2450(68) has expired in the piesent case? (I) Scope of Rectification u/s 2450(68)

The relevant provisions of sub.section (SP) of Section 2450 inserted w, 16.2011 have already been reproduced at pare 4,1 above. A plain reading of section 24511(68l revitalsthat within the period of six months from the date of passing of the 2450(4), the Coa1itnssictt could rectify its order passed u/s 2450(4) if a: mistake has crept in such order and further if such mistake is apparent from record. It is important to note the Intention of the legi5lature in enacting, the Proviso to sub-section (68) of Section 2430, where it is provided that the liability of the applicant can be modified, while making rectification u/s 2450(68), of course such modification of the liability should fall within

the realm of a mistake apparent from record. The phrase 'effect of modifying the liability' clearly Indicates the Commission has;the power to both increase or . However, before modifying the liability, the due procedure of affording an opportunity of 'yen to both the applicant and the crr. As per

r Section 2451 every order of lisp conclusive. Further, as per the provisions of

Section 2450(6) e'VE:1`, Col del p.d,sed 2450(4) shall provide fur terms of >et:Jet -nen; i chnling -.Any demand by

way ul tax, penalty and interest. A conjoint and nal rnoniot4 reading of the -provision of Section 245.01044°F1 Section 2451, reveals the basic prtrielpievizi, the terms ot settlement includingthe liability of tax-Dint -treat as-,penalty

as determined in the 2450(4) order remains final and conclusive but the sametouldsbe a Mended if falls tinder

the purview of mistake apparent from record.

(R) What is mistake apparent from record?

An order u/s 2450(4) once made is final and canoot be -.disturbed except in the ways specified tinder the A5t4 The

argument to e,stablish it, can be said to be cm arrocapParent on the face:cif therrecoestn corrected while.exercising certiorcutjurisdiction. An error cannot be said to be apparenfoh thefati record .if one has to travel beyond the record to see whether the Judgment is correct or not, An error apparent on the face of the record means an error which strikes on mere looking and'does not need long drawn out process of reasoning on, points where there may conceivably'be two opinions Such error should not require any extraneous matter to show its incorrectness. To put lt differently, it should be so-monlfest and clear that no Court wooed permit it to remain on record. If the view accepted by the-Court-in the original judgment is one of the possible views, the case cannot be said to be covered by on error apparent on the face of the record—Patel Norshl Thaltershi & Ors vs. Prodyumonsinghil Arfunsinghli (1971) 3 scc 844, Hari Vishnu Komoth vs. Syed Ahmad !shape (1955) .1 SCR 2104, Satyannrayan Loverninarayan He'gde & Qrs. vs. NIallikarPan Ohavonappci Promote 096015CP 890 and Syed Yokoob vs. K.S. Radhaknishnon & Ors. (1.964)5 SCR 64 relied on.

Morn 37)" In Satyanarayan i,aernftiaray,an klegcle & Ors. vs. Mallikarlun fihavanappa Tirumale (1960) 1 SCftsso, the

Monible supreme Court Stated es to what cannot be said to be an error apparent on the face of the record. The Court has observed as under:-

"An error which has to be established by a long drawn process of reasoning an points where there , may conceivably be two opinions can hardly be said to be on error apparent on the face of the record. As the above discussion of the rival contentions show the alleged error in the present case-isfar from self evident and if it can be established, it has to be established by lengthy and complicated arguments. We do not think such an error can be cured by a writ of certiorari according to the rule governing the powers of the superior Court to issue such a writ".

These decisions of the Apex Court, though in different points of unit_ capture the legal essence of the requirements of what can and what cannot be rectified.

finality of a 2450(4) order is implitittri Ofif srbibefoe'etthey ef gixa, relating ita the lettlettient -of order of the Commission iS subject to rectifieation when it oupd ,to he .suffeting frOM OtlatOkb apparent from record. &glaring and obvious MISOkRe -Of 4./Wcan, ettartectedtamder tberinatkany Order passed on a.dehatable poittt of-lake nannathe cottected me to -rOatiffeettan PPOce which depends on its discovery on abort:ate argurnents or questions of feet Of laW cannot lbechidd to be representing mistake apparent from record. Rectification must he of a mistake wItith is a mistake In the.tight of law that is in force at the time of passing the original order which is sought to be rectified.

in the case of ACT Vs. Suarashtra & Kutch Stock Exchange 3054TR 227, the Horfble Supr.erne Court has on

the issue of error apparent on the face of record, stated as under:-

"A patent, manifest and self-evident error which does hOt require elaborate discalan

To recapitulate, a patent, manifest and self-evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be

corrected. An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the face of the record means an error which strikes on mere looking and does not need long- drawn-out process of reasoning on points where there may conceivably be two opinions. Such error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear thernt.wsould permit it to remain on record. lf the view

Icce;,lec. Lourt ■ ,, cne „r ,,aignient Is one cr the pcsf,,ele news, the case cannot be said to be covered

by an error apparent on the face of the record."

The order u/s 2450(4) dtd 30.12.2013 , in our view did not follow the mandate of section2450(6) to

provide for demand by way of interest and thus suffered from a „patent mistake of law We are of the VieW that

while deciding,the MA , the Commission would neither be reviewing nor altering the order Wc2450(4) peeled on

30.12.2013 but would only be appending the calculation of payment PaYahle by the 4Pitelsent brY account of interest, based on statutory provisions. We are thus of the view that such a mistake constituted si'mifitake

apparent from records which is rectifiable u/s 2450(68).

(iii) "Whether the time limit for passing order u/s 2450(68) has expired?

In this case the order u/s 2450(4) has been passed by the Commission on 30.12.2013. As per section 2450(68), the Commission has to amend the order u/s 2450(4) order within a perlostof 6 montho Thus. the limitation date in the present ease wouldbe 3046,1914.. &is noted :the appOoaro Mad-MA on 3:3.5: 2014, Ler within the 6 months time limit. The issue which matrices consiaramtiOn irk What should be the fate Of the tettlikatjen

application filed by the applicant before the expiry of the limitattosetteriod but which has ootteendeoldeay,She Commission within the prescribed time limit ?

A similar tssue came bdore the consideration of the Horible Supreme Court in the case of Sege Ayyanar

Spinning & Weaving Mills Ltd. Vs CIT(2008) 301 1111434 (SC), white dealing the rectification of the orders.passed by the Appellate Tribunal u/s 254(2) of the 17. Act 1961. It is to be noted the drovisions of Section 2S4(2) and Section 2450(68) are similar, as both deal with the rectification of mistakes apparent from record and both have prescribed rime limitation. While elaborating the provisions of Section 254(2), the Hon'ble Supreme court has held as under:-

" ----Analysing the above provisions, we are of the view that s 254(2) is in two parts. Under the first

part, the Tribunal may, at any time, within four years from the date of the order, rest* any mistake

apparent from the record and amend any order passed by it under sub-s. (1). Under the second part,of s. 254(2) reference is to the amendment of the order passed by the Tribunal under sub-s. (1) when the

mistake is brought to Its notice by the ossessee or the Afl. Therefore, in short the first part of s. 25412)

refers to suo mow exercise of the power of rectification by the Tribunal whereas the second pan refers to rectification and amendment an on application being mode by the AO or the assessee pointing out the

mistake apparent from the record. In this case we are concerned with the second part of s. 254(4 As stated above, application far rectification was made within four yews. Application was well within four years. it is the Tribunal which took Its own time ta dispose of the application. Therefore, in the circumstances, the High Court had erred In holding that the application could not have been entertained by the Tribunal beyond four years, 1 in this connection, our attention;is also invited tothe judgment of the Rajasthan High Court in the case of norshvardhan chemicals I (metals Ltd vs. Union of India & Ant (2002) 177 07? MD 7$ • (2002)256 rm 767 (Raj) wherein an identical controversy arose for determination and the view taken by that Court was as follows ;

"Once the ossessee has moven the application within four years from the dote of appeal, the Tribunal cannot reject that application on the wound that four years In Ve :i7;;;. , etl. which includes the period of pendency of the opPlicatum before the traria& it the ,sssessee has moved the application within four yews from the date of the watt the Tribunal is bound to decide the application on the merits and not On the ground of limitation. Sec. 254(2) of the IT Act, 1961, lays down that the Tribunal may at any time within four years from the date of the order rectify the mistake apparent from the record but that does not mean that if the application is moved within the period allowed, i.e., four years, and remains pending before the Tribunal, after the expiry of four years the Tribunal can reject the application on the ground of limitation."

8. We ore in agreement with the view expressed by the Rajasthan High Court in the case of Harshvardhan Chemicals and Minerals Ltd. (supra) ........C. ‘ Tr '-'-. 1/4 9 For the aforestated reasons, we s :cLendetge2ropt Court d judgment of the High Cou and restore Tax n Case (Appeal) No 2 of 2004 on the leotthe MeleesRig Court for fresh decision on the merits of the matter as Indicated hereinobove. A/ aitilenti . Xill l 7 7 Ctitt:17 c expressly kept open. We express no opinion

21

on tat meals of the crest whetner rectification application wcs at all 1111.11n1wila bit Of not cad whether the

judgment in the case of Apollo Tyres (supra). was or was not applicable to the facts of this ease. That question will hove to be gone into by the High Court in the above Tax Case (Appeal) No. 2 of 2004?

in view of the above judgment of the Apex Court it is dear that once the application for rectification is

moved within the period of 6 months, the Commission is legally bound to pass an order u/s. 2450(60 on merits,

even if the prescribed time limit of 6 months has expired. The expiry of time limitation is not because of the

reasons, which can be attributed to the applicant.

12.2 We also note that CBOT had issued a circular No. 73 dated 7.1.1972 dealing with cases where an

assessee had made a valid application u/s 154 of the Act within the statutory tinie limit but the SameWas - not disposed off within the time specified Ws 154(7). As:per the circular, atIT had orderecithat such appiicationean

be disposed by the authority even after the expiry of statutory time limit on merits in acconiancit With

law.Reference is also made to the decision of Bombay High Court in the case of Ca Vs Income Tax Settlement

Commission [38 Taxmann 115). The Hon'ble High Court in pare 11 of the said order has, relying on the: decision of

Apex Court In the case of Catholic Syrian Bank Ltd 343 ITR 270 held that circulars issued by CBOT which are

beneficial to the assessee must be applied. It is further observed in the said order that though the Commission

may not be specified as income-tax authority u/s 116 of the ACE, yet the Revenue cannot' urge a view Contrary to

circular of CBOT.

We are therefore of the view that principles of natural iustice'requite-the MA to be decided on merits and not rejected on technicalgrounds& limitation.

12.3 The next objection taken by the Department is that the Commission had no jurisdiction to sit in Judgement

over the order passed by the AO giving effect to order u/s 2450(4). Reliance was placed on the decision of Kolkata

High Court dated 11.04.2014 in Writ Petition No. 115 of 2014. We have gone through this decision of Kolkarta High .

Court .At page 6 of the order (Applicant's paper book:dated 16,7.2014 —page29) it is noted by the Court. nfltepOint in this writ petition is whether the application filed by the assessee .1 private respondent is in foot, intended far clarification of the order passed by the Settlement Commission under Section 2450(4) of the said Act or is an application challenging the order of the Assessing Officer for computing the interest in terms of the order passed by the Settlement Commission." The High Court has further noted that the order passed was u/s 154 read with

section 2450(613) and clearly-the Commission had no power to invoke section 154 of the Act. The High Court has also reproduced from the order of Settlement Commission "We came to the conclusion that the order dated 26.04.2012 passed by the A.O. while giving effect to the order of Settlement Commission suffers from the mistake apparent from record • . Accordingly the High Court has held that chapter XIXA being a self contained code, the

Commission was required to travel within the periphery thereof and no powers u/s 154 could be invoked by the commission.

From the above discussion it is apparent that the present case is clearly distinguishable from the case before Kolkata High Court.. The Commission in that case having noted a mistake in the order of AO (and not of Commission) sought to rectify it and that too u/s 154. In the present case there is a mistake of law apparent from the records In the order u/s 2450(4) dated 3041.2013 which the Commission is competent to rectify u/s 2450(68).

12.4 ShrO S•K TulSiyan Advocate on behalf of the applicant has also raised two obiections - Firstly that the ISSUE whether interest u/s 2343 was to be charged on income computed u/s 2450(4), had already been considered by three different Benches comprising of seven different Members , who had unanimously decided that no interest is chargeable on additions made at 2450(4) stage. The constitution of a five Member Special Bench was not in order. Secondly, It was also stated that the issue (Q.No. b) was sub -judice before Delhi High Court in a Writ Petition tiled by the Department in the case of Today Hotel Private Ltd.

We have considered both the objections.Regarding the first objection we note that the provisions of section 74584041 provide for constitution of a Special Bench consisting of more than three Members. The Chairman of the Commission can constitute a Special Bench either on a reference from any Bench, or even suo moto, in appropriate cases and where there are germane grounds. Such exercise is an administrative power and has to be exercised for bona fide and good reason, In this case, th9.,Spigel fklittl was constituted with a view to having certainty and unanimity on the issues raised in questions (al to : (4) of -past 1 above. Each of the decisions of

22

to and discuss Ute nature oft

db Belt „es ti.t2 COIIIINS510/1 referred by 9hri Iulsiyan . is a decision of a three Member Bench. We are of

the considered view that constitutican of the present five MemberSpeciai Bench to consider the issues referred , is

In order. in solar AS the second crlajeetion is concerned we note that Mete is no olirectiUdgMent of anYbiliharludIclatfOront

on the issues before us. Neither party has obtained any stay from any higher judicial authOdty, restrain ing the Special Bench from considering these issues. It fs noted that wbsitislsincling on the Commission arethisiodtroiel decisions of the Hon/tile High court and Hon ible Supreme Court under Ankle 141 of the COnstltutlen elf 'Mae However, both the applicant and the Revenue have failed to show that any of the High Cowls or the fionlake Supreme Court have conclusively decided the issues before us.

Coming to the merits of the case , I o id be instr oh 2348 , as considered In AmriouS decisions as a .o.

levy.

13.1 Provisions of section 2348 contained in Chapter rill of the. Act relating to "Collection and Recovery. of Tax" are applicable to ch....enter XIXA relating to "Settlement of Cases" ( pare 11 of Brij Lars deCiskm )

13.2 Interest chargeable Ws 2346 for default in payment of advance taxis:

a} Mandatory and SettfelnentCoMplissiim has no power to waive such Interest.(Anjurn Ghasw 252 ITR1

13) compensatory and not penal immature (Pratibha Processors Vs UOI, AIR:1997 5C 138; Ce Manganese Ore Co Ltd 160 ITR 461 SC) and

c) such levy is automatic requiring no opportunity of being heard ee (CT Vs ft: alingair 241 1TR 753 Ice)

13.3 We note that the provisions of sections 234A. 2340 and 234C were inserted by Direct Tax Laws (Amendme

Act,1987 w.a f. 1-4-1989 . Circular No.549 dated 31-104989 explained provisions of these sections as -,below:,

10.2. With a view to simplify the cdaresaid provisions and OW 1411, remove the discretion of the assessing authorities, which had led to litigation and consequent gelay in realisation of dues, the Amending Act, 1987, has substituted the above provisions by a simple scheme of payment af mandatory interest for defaults mentioned therein. The provisions relating to charge of mandatory interest are contained in the new sections 2944, 2348 and 234C inserted by the Amending Act, 2987. The mandatory interest chargeable under these sections ore not

appealable

10.3. Charge of mandatory interest for narrfiling or late filing of the return of income (new section 234A).— The provisions of the new section 234n Insured by the Amending Act, 15147, which hove replaced the ola provisions of sections 139(8), 140A(3) and 271(1)(n) me us follows :--

(iv) Sub-section (4) provides for automatic revision of the amount of interest where the amount of tax Is varied as a result of an order of rectification, appeal, revision or settlement mentioned in the sub-section.

23

:0.6 Choi oe ci mondatery interest of non-payment or underpayment of advance tax (new section 2348).--

The of the n, w section 234E loser:ea by the Arne namc, Act, 9? 7, which once replaced the old provisions

of sections 215 and 217, are as under

(iv)Sub-sectiont(4) and .13) contain provishens similar to those of the corresponding sub-section ofsectiOn 234A (refer pare 10.3 ante) relating tosevision of the amount of interest and the applicability of the provisions of the section from the ossentnent year 13,83410`amOrirds"

13.4 Despite such legislative clarity, there continued to be different views on the powers of the Settlement Commission regarding the charging of Interest under section 2344.23413 and 2340- The Apex Court. Ina cast.of

CIT vs. Anjum Ghaswala in 252 ITR 1 specifically dealt with the:issue whether the Settletnent Coronation had the power to reduce or waive interest. The relevant portion of the decision is reproduced

" -.30. it is then contended that if it is to be construed that the Commission has no power of waiver orreduWo2.of interest, then the entire purpose of Chapter XIX-A would be defeated since a person making on applicayon to the Commission would not be in any way better off than pursuing his remedy otherwise Provided in the Act. Wthare

unable to accept this argument advanced on behalf of the respondents because the persons who appealed, the Commission under Chapter MX-8 ore admittedly the persons who had not declared their true Incomes to the

income-tax authorities as required under the Act. Insane of this default, section 245C comes to the`old Of such ossessees by providing a way out of the statutory implications of their default. The object of the Legislature In introducing this section is ta see that the protracted proceedings before the authorities or In Coins are-avolded by resorting to settlement of cases. in this process, on assessee cannot expect any reduction in amounts statutorily payable under the Act

/L:5. rot_ t

pnd wherever interest ts dueander the mond,* the said interest also in the sedteMent. °

nr23464 234 e

(emphasis supplied)

These findings of Apex Court continue to be the law of land and have not been overruled in Brij tattease.

Subsequently, the Apex Court rendered two more decisions on the powers of the Settlement Commission as regards levy of interest and waiver under different provisions of the Act.. ( CIT vs. Hindustan Bulk Carriers 259 ITS

449 (SC) and OT vs. Damao' Brothers 259 ITR 475.) In both these cases, the limitations placed on the Settlement

Commission in the matter of waiver of Interest ;its 234A, Z348 and 234C by the dectsiOn in CIT vs. Anium Ghaswala

252 ITR 1 have been endorsed. The ratio deddentg in the ease of Actium Ghaswaia was reiterated in these cases:by the Apex Court, The reference to the provisions that were intended for a definitive purpose, arid the legislative Intent has thus been given effect to by the Apex Court

13.a ttrii tel's rate

a) Question No. 2 rein:moo by the Apex Court in this case was "what is the terminal point for levy of such interest

- Whether such interest should he computed up to the date of the Order under section 2450(1) or up to the date

of the Order of the. Commission under section 2450141?" This the issue whether levy of interest is as per income

determined tuts 2450(1) or 2450(4) was not before Supreme Court

b) The word "assessment" can be used to cover the whole procedure to ascertain tax liability and the machinery for enforcement.(para 8 at p.497 of ITR)

ci While analyzing statutory provisions in para 10 it is mentioned '' that several provisions of the Act like section 140A increase of interest under section 215(3) pursuant-to-thearders of the Settlement Commission and the

24

levy of Interest under sections 234A(4) and 234E(4) all Ls Ica into Chapter XIX-A various prowls ions of the Act".

(pare 10 at p.500 of ITS)

While discussing whether sections 44/2340/234C apply to Chapter XIXA it is observed by-Supreme CO "Chapter XIX-A indicates aggregation of incomes so as to cotiStitqte total income which indicates that the special procedure under Chapter XIX-A has inbuilt mechanism of cornlauting total income whith is nothing butasSessment (comPUtation of total income' It Is also noted in the some pan "Thus, the special -procedure -under sections 24%C and 2450 In Chapter Xdfdt shows that a spatial type. of aimputation of total income is engrafted in the Old provisions which Is nothing but assessment which , teats place at section 245p(1) stage. How t computation, tine rfnds that 'pratvislona-Slaellfig With a -sePiat assamen selfelMentge, computation of Interact for default in Pagthent of advance tax, itact Oa Stegiltfted Pen section •

5c(1c), 24513(51 2451(31 in additiont sections ntn(ak, matt) ond 2348(4)1" .(para 11 at Mai of IV

a) Coming to the question raised in para 13

" The question is what happens in cases where 90 per cent of the-asse§sedtax is paid buton the Commission's-order uncles section 2450(4) the advance tax paid turns out ta.*Inleastha of the as tax as de,finediri the exialanationto section 2343(1)?"

and answer given by Apex Court in pare 14 that

" Thus, the scheme of the said sections is based on computation of total income and in that sense we that such application for settlement is aidn to a return of income. The said provision deals with "to ea . Thus, ahstateti above, sections 234A, 8 and-Care applicable up to Meaner/sof section 245(a) order passed 4Y the Settlement Commission, HOWave, Periheinent hoc fled Sanded the provisions and theiiability to pay interest - beyond'the date of application torsentemenr (paral3atpififiebring,

bath the question and answer have to be read in the context of question for derision before Supreme Court ,which related to terminal point for levy of Interest and >not on quantum on which Interest is to be charged.

13.6 Analysis of Section 2348

a) Sub section(i) of Section 2348 Is subject to other provisions of Section 23411.

It first rises the liability for levy of interest on en assessee"wriu is l iable to pay advance tax under section 208

(but) has tailed to pay such tax or, where the advance tax paid by Such assessee under the provisions of section

210 is less than ninety per cent of the assessed tax ' Then it provides for the quantum of , such Interest as "simple interest at the rate of [one) per cent for every month or part of a month comprised in the period from the 1st day

of April next following such financial year Ito the date:of determination of total income under subsection (1) of section 143 (and where a regular assessment is made, to the date of such regular assessment, on an amount)] equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax."

The rate of interest being fixed by stelo uafiftlin of. Interest is,thtri -Mependent on "amount" and the "time period° . Assessed tax changes with eVery stage of assessment Le. -1:40Ajleirtassessment), 143(1)(proCessing), regular assessment orders (143(3)(144/147),

caloaats

25

eLtior, r 2 of Section 234 L' Pi L , ‘It ,, mn,l. of calculation of iiitu trri Or IL &Ling balance of shortage in

tax edit) in accordance with the foregoingprovisions of this section up to theAate op which the taX1e4014441”... thereafter, interest shall be calculated at theate aforesaid onthe amount by which the taxso paid together with the advance tax paid falls short of the assessed-tax"

The mention of words "in accordance with the foregoing provislo of this section " dearly implies ihah5ectlo 2348(2) is always to be read in conjunctions Section 23413(1).

it is noted that the interest u/s 2348(1) Is to be calculated till the date of deterinthation of testa u/s 143(1) and where regular assessment is made, not) the date of the regular assesSeterit. Secti't envisages a situation where an asseS,See makes.a Payrnern 140A,, before an order ehalbeertida 143(3). Time Section 2,34842) after envisaging such.ealbstionfilgefghecmanner burgleitittft 2348(1) Is to be modified. The:Prtiattirana OfSeedonaSr4/3M(flaateathat in 8 sitisatiOn Where y 140A has been made, the Intent-St is to be calculated u/s 2348(3) uptythe date on WhiCb)payeIrt.bis 14Q made. As per provisions of SeiStion agniagn)rfrom thedate of payment u/s 140A till thedateof naas ..*-OrdelP 143(1) or u/s 2On), as Me ease makbe, 11W Interest is tabacOMPtAkd a ,vighteedatnatinti Wheeefe tthe unit of tax paid u/s 144)A has been taken into consideration. Thus,settion 2348(4 provides for charging of interet Ali

reducing balance method. It provides for credit to be given for what is paid u/s 140A duringthe intetim period and further provides that no further Interest is to be charged . 0/s 2346(1) on the amount which has been paid tits 1404

The tion'bie Supreme Court has in the case of Brij Lai stated that when the Settienlent Cf317104111011

accepts the voluntary disclosure, vide the application of settlement Section 2348(2) steps In Duringthe course of the hearing, the AA has stressed that since Section 234812) basetepped in the_provIsions containettitt Section 2348(4) doesn't apply. These assertions made by Learned A.R. ate contrary to what has been stlideelin the ere of arijlai by the tionible Supreme Court. The Apex Court in the case of Brij lal has decided only the issue ofthe terminal point of levy of interest u/s 2348 as to be the date of the order u/s 2430(1), 6urther; in Para 11,. the Hon'hie Supreme Court has held that it is nothingv but assessment, which is taking place at the Section 2450(11 stage. There is no dispute about the Intl& point from which the Interest u/s 23413 Is to be charged. Thus, as per Mead) lalls judgment the Hortbie Supreme Court has held that the Interest u/s 2348 Is to be charged =from the 1' day of the Assessment Year till•the date of the order passed by the. Settlement Commision u/s 24513(4 Now, while filing the settlementapplication, the Applicant is making payment of taxes u/s 140A, which is befarethe date of order u/s 24513(1), Which have been treated as arse nett by the Hon iale Swarm Court Netritelig, the interest u/s 2348 he to be ytleulated on a reducing Waseca method, If any (segment nes been Made In the Interim. it is In this context, that the Horrible-Supreme Court has stated that when the ConunitSidit accePtS the disclosure made in the settlement application Section 2348(2) steps In The Horeble Supreme Courthos no where stated in the judgment that the provisions of Section 23413(4) are not applicable to settlement proceedings.

c) Subsection (3) of Section 23413 is applicable for calculation of interest in the cases of reassessment and re computation tits 147 or Section 153A. It is to be noted that the Interest u/s 2348(1) and 2348(3) operate for different time periods and the amount is only the increased amount, as per the reassessment or recoMp‘itation• Thus, the Sectiion 2346(1) and 2348(3) operate in totally different fields.

d) the heart and soul of the present issue lies in the provisions of section 2348(4). Section 2348(4) is applicable to all cases, where 2340(1) or 2340(3) is applicable and there is a change in the amount on which the interest was calculated under these sub-sections. It is to be noted that the figure of

'assessed tax' is a dynamic one and changes at various stages of the proceedings, under different

provisions of the Act. This being so, section 2348(4) only enables the substitution of the new`figure in place of the old figure as a result of the various statutory proceedings under the Act. If the said amount has increased as a result of a proceeding under the Act, the burden of interest is also going

to increase, as the calculation of interest is I" rincipal amount and the increased

amount is payable u/s 2348(4)0). Similarly .44:1tPalt4inotint decreases as a result of a

proceeding under the Act, the liability of interest is beano to go down and the excess interest pain is to be refunded, as per the.provisions of Section 234 13(4)01).

e) The Learned A.R. has also challenged the aPelicabIlity of Section 2 0(4) on the ground that in the Brij s case, the order u/s 2454(4) ties bombard -not to be an assessment it Is abseMt.5b In para 14, the tionible Supreme,cotut has held thatthe order u/s 2450(4) is neither:JO orcleOtriadir

143 ( 1) or 143(3)/ 144.. We are However not in agreement with the YieWS of the &L thetteetien 2348(4) is not applicable to the Settlement proceedings, because of the reabansstetedlearainefter.

f) Section 2348(4) operates as a result of the order u/s 354 or section:155 or section 250 or section 254 or section 260 or section 262 Of S80404263 or section 264 or settlementorder uh2445,4141.4elate be noted that none of the other orders u/s 154 or , seeder% 155 or section 256 or sectiork254,or section 260 or section 262 or section 263 or seeder 264 can be called as assessment order* or regider assessment orders by any stretch of Imagination, but still section' 2343(4) operates as a result-of .

them. The Flon'hlegupromecOurt in the Briflal ls case has held in Pam 14 as under:.

—The making ofthapriler of assessment is an in the proce.ss of ottess nt: No such steps we requfreato be follawstaai the alai pinakakkag -A. The Odd clinger contemplates the kaxabikty. deteaukozeik with respell to .t; ut/SCicised Income oftiV by the , poses4- -of settlementitetitretfddi Thus, the native of the &Maunder ss. g43(2), 1430) and 144 is dffereattrani the orders:of the Settlement Commission under s. ------ ---"

g) It is to be noted that the legislature has not ,mandated that for the operation of the provisions of Section 2348(4) as a result of the 2450(4) order, it has to be an assessment In fact the chargeability of interest on the basis of regular assessment and reassessment / recoMputation has alteat been considered in Section 2348(1) and 23443(3) respectively. Section 2343(4) takes care of the situation wherein the quantum on which interest is calculated vanes as a result of the various orders pasad under the Act The consequential effect further requires that where the assessed tax increases or decreases, the Interest burden also should Increase and decrease accordingly. This proposition has also been Stated clearly by the Montle SupremeCoot in Brii tai's case in pare 12 that the charging of interest follows the computation of Income. If the income Increases or decreases as par the statutory orders under the Act, the interest cOmputation which follows should also he accordingly adjusted.

h) Another reason, for the application of the Section 2340(1) arises from the fact that Hontle Supreme Coot in linj Lars case has held that Section 2348(4)is engrafted in the provisions -of Chapter XIX A It is also stated that when the Commission accept_ the disclosure made in the settlement application

,Section 2348(2) steps in It has already been elaborated above that section 2348(2)15 nothing but

en avtaasion of section 2340(1), and makes Similar calculation in cas.e of payment made u/s 140A.

9 it is also rioted that In some cases the income settled by the Commission u/s 2450(4) for a particular assessment year can be less than the Incomer as per the order u/s 2450(1) i.e. income disclosed in the settlement application, for various reasons. For example, the Commision may hold that a particular item of income belongs to a different assessment year. There may be cases where the Commission May hold in a particular assessment year that a particular expense is of capital nature

and disallows it Naturally in the later years. depreqlon is allowable . In all such cases, where as a result of order u/s 2450(4) the income clarreasesi. tax payable also decreases and further Interest chargeable also has to he aceodii4y rekted'.e(1~th applicant's proposition is accepted that.

4 lit,

\s 27

there cannot be any r,cre .ase in the wthrest t 23:[,( `, as c, res„lt, cf tncrease the total income determined uis 2450441 then the natural corollaryzis that.the interest already charged 44*2341100 the income determined at ;4soca) stage cannot betlecreased, though the total Income !!sper the order usts 2450(4) has datreisled, This,WOOld create an anomalous situations not intapdagkjagit(e legislature. in such cases, the Interest chargeable u/5.2348 dearly would have to be re41 tl'in view of sub-sec (4) of Section 2348, as the quantum on which interest is chargeable gets reduced.

j) Thus :they rion'ble Supreme Court in Brij Lai's case has held that section 2450(4) provisions are engrafted in the Settlement Procedure , After order as 2450(4) is passed: and if fshas an effect of either Increasing or reducing the amount an which IntszestfrsPayStie uls2341WW. correspondingly the interest charged shouldhe Increased Orweduced as per geetlioh t agree with submissions. of Shri g GuptaPepartmental ,Roffemkrit4tivA .00 got' 2346(4),it is not necessary thatintesest was actually payable, Ws 2543(3) as balky-and increase can also be from zero quanturit Therefore ,even if interest is notPaVaiel as per S.A. (basaule there was no shortfall in assessed taxl,in view of section 243411( payable If shortfall Increases as,per order this 2450(4),

14. We would now r ro e rules, Metals to Interpretation of lodgments and Hs,rmvnIoz Interpcetabons.A f Statutes in the contort of arguments shadtand Issues athend.

143 Shri SAC Tulsiyan, Adv. for the applicant and-Shri S.R.1Aradhwe, Adv. a i an obiter of the Agee Court must apply, andseifoodly that judicial dir.Cligme u ru of India required the einenrationS of the Apex Cowl In the case of Aril ial,be binding on all courts of law.

14.2Article 141 of the Constitution of India states as under:-

brretted Mist *sty, of the Constitution , w of the land and

"141 Law declared by Supreme Court to be binding on all courts The law declared by the Supreme cSwt shall be binding on all courts within the territory of I ndia."

14.3 What is binding is the ratio of the decision and not any finding on facts, or the opinion of Lira Court-on-any question which was not required tebe deeded- in a particular casthine law that wet be binding underakrtiele would eatend only to the observations stn'the points raised and decided by the Court in a cvse. Therefore, as a matter of practice, a Court does not make any pronouncement on the points not directly raised for Its decision In other words, it is the principle underlying a decision that is binding. While applying the decision In a later cast,

therefore, the later Court should try to ascertain the true principle laid down by the previous decision, In the context of the questions involved In that case from which the decision takes its colour.To ascertain Its landing nature, a judgment must be read as a whole and the observations from the judgment have tp be considered in the light of the question before the;court A decision is available ac a precedent only If it decides a question of law :A

later Court would not be bound by those reasons or Propositions which were not necessary for deciding the ia“). Conversely, thr later Court (.411110t unnecessarily expand the scope and authority of the precedent.

In other words, a Judgement cannot be construed as an Act of Parliament. It must be read in the context of the

questions that arose for consideration in the case and not as embracing all aspects of every question relating to

the subject or laying down principles of universal application. In the absence of parity of situation or circum-

stances, the reasoning of one decision cannot he applied in another case.We do not agree that an °biter by the

Apex purr, must always be binding. Where an obiter dicta is in conflict with another decision of Apex Court, the

ratio should be followed in preference to the obiter dicta( Ind°, — Burma Petroleum Co. Ltd Vs CIT , 1361TR 251;

Sirsa Industries Vs CIT 1711 iTR 437 We have already outlined the ratio in the case of Anjurn Ghaswala that

charging of interest is mandatory,which the Apex Court has consistently followed.

The following passage from the judgment d', tiaraja raja Madhav Rao.livap Rao Scindia Bahadur

Vs. Union of India AIR 1971 SC 530 is worth notinip-

,

28

"it is not rrcper t,,fectura n wore, C clause or a Sentence occurring in a judgment divorced from Its context, as containing a full orposition of the low on a question wile not even fall to be answered in that judgment,"

In the case of GT VS Sun Engineering Works(9) reported in 198 ITP 297 (1992j, the ffon shie SUPtem Court has.held as under:-

"It is neither dogro to pick out 47 word or o sentence from the judgmeqpf it* Cocci. divorced from the g9moX . pf tkie ;question Under consideration and treat it to be ilia complete IOW" declared by thIS Court 7* judgment must be read Os a whole and the observations from thejudgieent have to be considered in the light of the questions which were before this Court. A decision ofthis Ceiurt. takes its colour from the qoestions involved in the case in which it is tendered and, while obebinfthe decision to a later case, the Courts must coraby try to ascertain the true PringiAllltakil$1***.* the decision of this Court and not TO pick act words Ortentences.fitom,ebe*Womeet, ' of the questions under consideration-by this Court, tatibbeaeleheirtiaeonhVbe

The question raised in Brij tars case.related only to the terminal point for levy of interesto/s 2 observations of Apex Court have to be read in the context of:question, being decided.Where the obi conflict with another decision of the Supreme. Court, theratto should be followed in preference to the fa If interest was not to:computed on the basis of the income determined: by the Commission 2450f4ftWOOld place an applicant to the Commission in:a privileged position quo an essessett; Who files tris4eturnsojineotttetauiy and regularly before the department. For this reason too, We are not in-agreement-with the learned.,ga ands** interveners Thus, we are tattle Vieveinat deCiSiOnof iltrUlal is incorretgly being reliedupon asanatithOffini. contend that interest u/32348 IS letd b ahle on income as per order 24SDflj, as the ratio of the: Case meat iandalui• terminal point of charging of interest under section 2545,

14.4 Interpretation -of St

es.

in our view it will be an entirely wrong interpretation of the vadota rinWittOtIS of the Act, if it Werefitskic tti the total income determined in the order passed tuts 2450(4) will have no impact on the 'interest payable 4th. applicant. Income as per order u/s 2450(4) not only Impacts the interest chargeable as per Section 2344(4) 2348(4)or 2340(2) but the interest refundable also gets modified u/s 244A(3). Not only this th 'eprovisions relating to charging of interest u/s 220 (2) are also impacted with the income determination u/s 2450 KU If the . interpretation sought by the applicant were to be adopted, it would render all these ProylgtOnS Of the-Act WhiCh refer to modification 6f intereSt liability as a result of order uis 20064) asredundant orotialewhichStalddheiref be the intention of the l_egIslature.

thus, a harmonious reading of the provisions of Chapter XIX-A is required with the various other provisions of the Act rela ring to the normal assessment procedure The intention of the Legislature is unambiguous and clear from the phrase "Where as a result of ------ an order of the Settlement COMMISSI011 under sub-section (4) of sect/on 2450„." appearing in the various provisions relating to charging/grant of interest. The presence of

this phrase in sections 2344(4), 2345(4),2540(2), 2444(5) & first proviso to Section 220(2) dealing with the charging/grant of interest and coupled with the use of the word 'shall be Increased or reduced accordingly' clearly indicates that the intention of the legislature is to mandatorily charge/grant Interest as per these provisions.

In a situation when on simultaneous application conflict arises amongst the different provisions of a statute, the principle of harmonious construction needs to be applied.The judicial view is that every provision of a statute has sortie reason of enactment, so the Courts while inter tingmust try to avoid a conflict between the provisions

of Statute. It may be possible that different sections May appear to -mean contrary to each other or contradicting each other. Under such circumstances, an attempt ,should he rnadeld.reconcile the provisions of the.Aetand give

effect to both provisions in a harmonious manner.

29

soPrci* Court. e question did

in CIT vs. Hindustan Oulk Carriers 259 ITR 449(SC), the Hon"ble Supreme . Court has dealt in a detailed

manner as to how the provisions of statute are to he interpreted. The .1-ion'ble Apex Court has SucCitiairstetedthe principle of harmonious construction, while interpreting the provisions of Section 2348 & 234001 and has observed as under:-

"..harmonising venous mavisions of the legislative ;Me is letroduting Chap positiamis iirdtsputdbte that the end end,paintQf the t4e2linus has to be the dote an which passes an Order under sb z4$p.(3.w.Anit 4ffie InterPretedOn Wattle leatC4V, atinertrerait-ossessee who has aOnceoledlodoene is *ken at a more advantage-gas Peskier, WS -CHeit ape who-flax deviated his income truly hndfairly.ifywayafillustration it would heseen that aperson who hasdiedesed rupees ten lakhs as income and paid advance tax correctly is in a way deprived Use of the OMOOdtesold as advance tax for the period during which an assessee who has not disclosed the correct income and hos disclosed rupees two lokhs before the AO and subsequently goes before the Commission riisciberggiugees eight takes makes use of the amount which was required to be paid as advance tax, it is fgr thkriedfgaltdo not paying the correct advance tax that Interest under S. 13419 is. tevied and has to be till,thedaaer under S. 24504).

15. A construction which reduces the statute to a futility has to be avoided. A statute or any enacting provision therein must be so construed as to make it effective and operative on the principle expressed In maxim litres mows valeot Citi0111 pereot i.e., a liberal construction should be put upon written instruments, so cs to uphold them, if Possible, and carry into effect the intention of the parties. (See Broom's Legal Maxims (10th Edition), P. 361, Crates on Statutes (7th Edition) p. 95 and Maxwell on Statutes path

Edition) p 221.)

16 A statute is designed to be workable and the interpretation thereof by a Court should' he to secure that abject unless crucial omission or dear direction makes that end unattainable (See Whitney VS. IRC (1926) AC 37 p. 52 referred to in CIT vs 5. Tejo Singh AIR 1959 SC 352, Oursahol Salacity& CIT Alit 1963-5C 10621.

17. Me Courts will have to reject that construction which will defeat the plain intention of the legislature even though there may he some inextrattiude In the language used (See Salmon vs OunCOMhd(18861 AC 627 p. 634 (PC), Curtis vs. Stavin (1889)22 CBO 513 referred tox in. S. Teja Singh's case (supra)!

If the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation we should avoid a construction which would reduce the legislation to futilitY, and should rather accept the bolder construction, based on the view that Parliament would legislate only for the purpose of bringing about on effective result. !See Noires vs Doncaster Amalgamated Collieries (1940) 3 All ER 540 (CL) referred re fn Pye vs, Minister for Lands Jo( NSW (1954) 3 All ER 514 (PC)). The principles Indurated in the said cases were reiterated by this court in Mohan Kumar Singhoma vs. Onion of mum AIR 1!)92 SC

19. The statute must be recta us n whole ono one provision of the A cct should be construed with reference

to other provisions in the same Act so as to make a consistent enactment of the whale statute.

20. The Court must ascertain the intention of the legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare clause with other parts of the low and the setting in which the clause to be interpreted occurs. gee R.S. Raghunath vs. State of Karnataka & Anr. AIR 1992 SC MI. Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between two differen provisions of the same statute. It is the duty of the Court to avoid a head on dash betwe e some Act (See Sultana Begum vs. Prem Charm Join AIR 1997 SC 1006E

11 V )ittieViil is pr...:24/sic to do so it fill:S:be (AMC to cui,Lirtia' provisions which appearo coat/lc:so

that they harmonise It should not be lightly assumed that Porliament had given with [one,,andifyhac it

rook away with the other.

The provisions of One section of the Statute cannot be used to defeat those of another union it Is

impossible to effect reconciliation between them- Thus, a construction that redwaTmeetha..00101006',a 'useless lumber' or 'dead letter' is not a harmonised construction. TO harmonise Is not to destroy. Por time

reasons we are not in agreement with the contentions raised by Swami ,Advocate.

15. in the light of above discussion ,we proceed to decide the questions referred to us:-

a. No. tails accordInglyensweredin affirmative.

Q. No 04 We hold that inteteSt'lanaB Is be allargee-WilA reference to tatallaciPmesetthedVsnt44 of

the Act.

CIAO. (e) is not applicable: in view of antwertoCt.hloa)Above

Q No. id) If no interest t./s.2340 has been levied in the order u/s. 245D(4), then, keeping in View the fact that

interest u/s.2348 is mandatory, the Commission can direct levy of such interest u/s.2411)(6B) Strndady,intetest 4s. 23413 can be levied by exercising powers uts.2450(613), where there was no civet finding byebe tannagon as to the amount on which interestwas to be charged-or where haticata-44W904041144r -. as per Supreme Court decision in the case-of 8 rij itali-440weSesiSlasia the cosimaiislOtilkaalleirP interest should be charged on the income shown in the Settlement application, lettiOn 24,5 be

invoked to rectify the order passed u/s,2450{4).

16. Having referred to the aforesaid discussion, the Kolkata tench of the Settlement Commission may pass an appropriaterder to dispose of the request of the applicant in respect of his application S.A.f No.

WS/Durgapur/2012-13/52/IT).

Sd/- Sd/- Stir 5d/- SCV-

R.K.Shah) (a/LiChillrapli (5 Aiello) (0.0asgupta) (A,P.Scotenai

Member Member Member Vice Chairman Chairman

31

'61 dated :)2,--/11/2014

32

•

End. No.S.A, No. WB/Durdapur/2012-1 3/52-IT

M/s G.M. Foods 43/1, Akthar Mansion, Dr. M.N. Saha Road Assansol, West Bengal-7 0

2. The Commissioner of income T Assansol West Bengal-713301.

3. The Commissioner of Income Tax (DR), Income Tax Settlement Commission, Addl. Bench, Koikata, West Bulge!

4. The Director of incOmeTax (Investigation), Income Tax SettlernenlebninliSsioni Addl., Bench, Kolkata, West Bengal

5. The Joint Director of Income Tax (Investigation); income Tax Settlement Commission, Addl. Bench, Kolkata, West Bengal

6. The Assessing Officer, no Ward-2(1), Assansol, West Bengal-713301.

7. The Secretary, Income Tax Settlement Commission, Addl. Bench, Kolkata, West Bengal

8. Guard File

(Anita Kumar) Joint DIT(Inv.)

Income Tax Settlement Commission New Delhi.