Delhi High Court
Commissioner Of Income … vs Income Tax Settlement Commission & Anr. on 12 September, 2024
Author: Yashwant Varma
Bench: Yashwant Varma
$~14
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 12.09.2024
+ W.P.(C) 6560/2016
COMMISSIONER OF INCOME TAX
(CENTRAL)-III .....Petitioner
Through: Mr. Anurag Ojha, SSC with
Ms. Hemlata Rawat & Mr. V.K.
Saksena, Advs.
versus
DALIP KUMAR BANTHIYA .....Respondent
Through: Ms. Kavita Jha, Sr. Adv. with
Mr. Balwinder Singh Suri &
Mr. Vaibhav Kulkarni, Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE RAVINDER DUDEJA
JUDGMENT
YASHWANT VARMA, J. (Oral)
1. The Commissioner of Income Tax questions the validity of the
order passed by the Income Tax Settlement Commission 1 and is
aggrieved to the extent that the said order restricts the applicability of
interest under Section 234B of the Income Tax Act, 1961 2 on the
total income which came to be disclosed in the Statement of Facts3
up to the date of admission of that application under Section 245D(1).
The ITSC has essentially rested its decision with respect to the interest
liability bearing in mind the decision handed down by a Constitution
1
ITSC
2
Act
3
SOF
W.P.(C) 6560/2016 Page 1 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
Bench of the Supreme Court in Brij Lal and Others v.
Commissioner of Income Tax, Jalandhar 4. It is the correctness of
the view so taken by the ITSC which is sought to be assailed in the
present writ petition.
2. Before proceeding to analyse the submissions which were
addressed by Mr. Ojha, learned counsel appearing for the writ
petitioner, we deem it apposite to take note of the following facts. A
search and seizure under Section 132 was carried out at the business
and residential premises of the Radico Khaitan Group in which the
respondent-assessee was the Chief Financial Officer. During the
course of that search and seizure proceedings, according to the writ
petitioner, a number of incriminating documents were found alongside
a substantial amount of cash, jewellery and other valuables. Pursuant
to the said search, a notice under Section 153A is stated to have been
issued.
3. However, and before that assessment could be completed, the
respondent filed a settlement application under Section 245C(1)
before the ITSC. The aforesaid application was admitted on 08
February 2013. The income as declared in the SOF for Assessment
Years 5 2010-11 and 2011-12 was ultimately determined by the ITSC
in terms as contemplated under Section 245D(4). In terms of
paragraph 18 of the order impugned before us, the aspect of interest
under Section 234B was determined in the following terms:
“18. The applicant has requested for waiver of interest u/s 234A,
234B and 234C, interest u/s 234A, wherever applicable, is to be4
(2011) 1 SCC 1
5
AYW.P.(C) 6560/2016 Page 2 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
charged as per law. Interest if chargeable u/s 234B will be charged
up-to the date of 245D(1) order, as per decision of Hon’ble
Supreme Court in the case of Brij Lal & Ors. Vs. CIT [2010] 328
ITR 477 (S.C.) on the income computed in order u/s 245D(1) order.
Interest u/s 220(2), if applicable on the sustained demand
outstanding as on various dates is to be charged up to the date of
this order.”
4. Seeking to assail the view as taken by the ITSC it was the
contention of Mr. Ojha that it was incumbent upon the ITSC to have
called upon the respondent-assessee to pay interest on the income as
disclosed in the SOF up to the date when the ITSC finally determined
the settlement amount in terms contemplated under Section 245D(4).
According to learned counsel the liability to pay interest up to that
terminal date was one which clearly existed and stood embodied as a
statutory obligation by virtue of the provisions contained in Section
234B(4) as it stood at the relevant time and which required a payment
of interest up to the date when the ITSC makes a final order
determining the settlement amount.
5. Mr. Ojha drew our attention to the decision rendered by the
Supreme Court in Commissioner of Income Tax, Mumbai v.
Anjum M.H. Ghaswala and Others 6, which was primarily
concerned with the jurisdiction of an ITSC constituted under Section
245B to reduce or waive the interest chargeable while passing an order
for settlement under Section 245D(4) of the Act. Upon taking note of
the provisions of Chapter XIX-A and the powers conferred upon the
ITSC therein, the Court in Anjum Ghaswala identified the principal
issue before it being whether sub-section (6) to Section 245D
6
(2002) 1 SCC 633
W.P.(C) 6560/2016 Page 3 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
accorded the ITSC the power to waive or reduce the interest payable
under Sections 234A, 234B and 234C of the Act. This becomes
manifest from a reading of the initial passages of that decision which
are reproduced below:
“1. In these appeals the question that arises for our consideration is:
whether the Settlement Commission (for short “the Commission”)
constituted under Section 245-B of the Income Tax Act, 1961
(hereinafter referred to as “the Act”) has the jurisdiction to reduce
or waive the interest chargeable under Sections 234-A, 234-B and
234-C of the Act, while passing orders of settlement under Section
245-D(4) of the Act.
xxxx xxxx xxxx
15. The moot question, therefore, for our consideration is: does
subsection(6) which contemplates providing for the terms of
settlement of tax, penalty or interest empower the Commission, in
any manner, either to waive or reduce interest payable under
Section 234-A, 234-B or 234-C in any case that arises for
settlement before the Commission? If so, would this waiver of
interest be in accordance with the provisions of the Act as
mandated in subsection (4) of the Act?”
6. Ultimately and while affirming the position that the ITSC does
not have the power to reduce or waive interest statutorily payable the
following pertinent observations came to be rendered:
“23. The Commission in the impugned order placed strong reliance
on the wording of Section 245-D(6) the language of which,
according to the Commission, empowers it to waive or reduce
statutory interest because of the reintroduction of the expression
“interest” in that sub-section. According to the findings of the
Commission, the inclusion of the expression “interest” clearly
indicates that the statute has permitted it to pass such orders as it
deems fit in regard to payment of interest when an order under sub-
section (4) of Section 245-D is made by it. This assumption of the
Commission proceeds on the hypothesis that sub-section (6) of
Section 245-D is a substantive provision. We are unable to agree
with this view of the Commission. The substantive provision in
regard to settlement in Chapter XIX-A, in our opinion, is sub-
section (4) of Section 245-D. It is under this provision of the Act
that the Commission will have to pass orders as it thinks fit on theW.P.(C) 6560/2016 Page 4 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
matters covered by the application. In our opinion, sub-section (6)
of Section 245-D is only procedural in nature. It provides for fixing
the terms by which the amount settled in sub-section (4) will have
to be paid. It is not a section which empowers the Commission
either to waive or reduce the interest. At the cost of repetition, we
must point out that apart from the fact that there is no specific
empowerment of waiver or reduction of tax in Chapter XIX-A, it is
also clear from the use of the expression “in accordance with the
provisions of this Act” found in sub-section (4) of Section 245-D,
the settlement will have to be in conformity with the Act and not
contrary to or in conflict with it. There is yet another factor to be
taken note of while interpreting sub-section (6) of Section 245-D.
The said sub-section also provides for terms of settlement in regard
to the tax. If the interpretation given by the Commission is to be
accepted, it would mean that under the provisions of Section 245-
D(6), the Commission also has the power of waiving or reducing
the tax payable on the income settled by the Commission. If this
position in law is presumed to be correct then the very purpose of
the settlement contemplated in Chapter XIX-A would defeat the
object of the principal Act itself. As held by the Commission itself,
Chapter XIX-A was included for the purpose of quick settlement of
the cases before it so that the tax due to the Revenue is collected at
the earliest. The object of Chapter XIX-A is not to give amnesty to
a tax-evader from paying the tax due. Hence, it would be
preposterous to hold that the Commission has been conferred with
the power of either reducing or waiving the tax due. We are aware
that the Commission in the impugned order has not gone to the
extent of holding that it has the power of either waiving or
reducing the tax payable but then that would be the logical
conclusion if we accept the interpretation given by the Commission
in regard to the expression “interest” in Section 245-D(6) of the
Act. A proper reading of sub-section (6) would show that all that it
contemplates is that while the Commission makes an order of
settlement under sub-section (4) it will also have to provide for the
terms under which the amount payable by way of tax, penalty or
interest shall be paid by the assessee. The expression “terms” used
in that sub-section does not refer to the power of the Commission
to waive or reduce tax, penalty or interest because quantification of
amount payable under each of those expressions is dealt with under
separate provisions of the Act like the payment of the tax is
governed by various provisions of the Act as defined in Section
2(43) of the Act while penalty is covered by Section 245-H and
interest under Sections 234-A, 234-B and 234-C of the Act.
Therefore, all that the expression “term” in Section 245-D(6)
means is that the Commission can stipulate the conditions of
payment like instalments, last date for payment etc. Beyond that, inW.P.(C) 6560/2016 Page 5 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
our opinion, sub-section (6) does not authorise the waiver or
reduction of tax, penalty or interest settled under sub-section (4) of
Section 245-D.
xxxx xxxx xxxx
29. Nextly, the Commission has elaborately discussed the object of
introduction of Chapter XIX-A in the Act, the history behind the
introduction and schematic rationalisation of the provisions of
Chapter XIX-A brought about through the Finance Act, 1987 to
hold that in exercising its power under Chapter XIX-A it has
almost an unbridled power to arrive at a settlement. This exercise
of purposive interpretation by looking into the object and scheme
of the Act and legislative intendment would arise, in our opinion, if
the language of the statute is either ambiguous or conflicting or
gives a meaning leading to absurdity. We do not find any such
problem in the provisions of the Act to which we have already
referred to. Sections 234-A, 234-B and 234-C in clear terms
impose a mandate to collect interest at the rates stipulated therein.
The expression “shall” used in the said section cannot by any
stretch of imagination be construed as “may”. There are sufficient
indications in the scheme of the Act to show that the expression
“shall” used in Sections 234-A, 234-B and 234-C is used by the
legislature deliberately and it has not left any scope for interpreting
the said expression as “may”. This is clear from the fact that prior
to the amendment brought about by the Finance Act, 1987, the
legislature in the corresponding section pertaining to imposition of
interest used the expression “may” thereby giving a discretion to
the authorities concerned to either reduce or waive the interest. The
change brought about by the amending Act (Finance Act, 1987) is
a clear indication of the fact that the intention of the legislature was
to make the collection of statutory interest mandatory. In this
connection, we may usefully refer to the judgment of this Court in
Jaywant S. Kulkarni v. Minochar Dosabhai Shroff wherein this
Court held that when the legislature changes the expression “may”
to “shall” by amendment of the statute, it is clear that it intended to
make the provision mandatory from the existing directory
provision. Therefore, the question of the Commission relying upon
external aids, for the purpose of interpretation like Wanchoo
Committee Report, Discussions of Select Committee of Parliament
and introduction of Chapter XIX-A in the Act, press release of the
Board dated 21-5-1996 etc. are purposeless because of the clear
and unambiguous language used in Sections 234-A, 234-B and
234-C and Sections 245-D(4) and (6). We notice that if only the
Commission were to follow the golden rule of interpretation by
giving the words of the statute their natural and ordinary meaning
without unnecessarily going into a forensic exercise of trying to
W.P.(C) 6560/2016 Page 6 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
find out the object of the introduction of Chapter XIX-A or Part F
of Chapter XVII, the Commission would not have fallen in error.
xxxx xxxx xxxx
35. For the reasons stated above, we hold that the Commission in
exercise of its power under Sections 245-D(4) and (6) does not
have the power to reduce or waive interest statutorily payable
under Sections 234-A, 234-B and 234-C except to the extent of
granting relief under the circulars issued by the Board under
Section 119 of the Act.”
7. We note that the issue of interest which would be payable on
the amount as disclosed in an application made under Section 245C(1)
appears to have constituted one of the central questions which stood
posed before the Constitution Bench in Brij Lal. This becomes
apparent from a reading of the first two paragraphs of the report and
where the Constitution Bench had formulated the principal issues to
be the following:
“S.H. KAPADIA, C.J.- Leave granted. Vide referral orders dated
14-12-2004 and 20-1-2005 the following questions have been
referred to the Constitution Bench of this Court:
(i) Whether Sections 234-A, 234-B and 234-C of the Income Tax
Act, 1961 (for short “the Act”) are at all applicable to the
proceedings of the Settlement Commission under Chapter XIX-A
of the Act?
(ii) Whether the Settlement Commission can reopen its concluded
proceedings by having recourse to Section 154 of the Act so as to
levy interest under Sections 234-A, 234-B and 234-C of the Act,
though it was not so done in the original proceedings?
(iii) Whether in the absence of period of limitation prescribed for
making the order of the settlement, the relevant date for
determining the quantum of interest could be the date of the said
order?
2. For the sake of convenience, after hearing the learned counsel on
both sides, we reframe the above questions:
(I) Whether Section 234-B applies to proceedings of the Settlement
Commission under Chapter XIX-A of the said Act?
(II) If answer to the above question is in the affirmative, what is the
W.P.(C) 6560/2016 Page 7 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
terminal point for levy of such interest – whether such interest
should be computed up to the date of the order under Section 245-
D (1) or up to the date of the order of the Commission under
Section 245-D (4)?
(Ill) Whether the Settlement Commission could reopen its
concluded proceedings by invoking Section 154 of the said Act so
as to levy interest under Section 234-B, though it was not so done
in the original proceedings?”
8. After noticing the statutory provisions pertaining to the levy of
interest on income as well as the distinct scheme which imbues
Chapter XIX-A of the Act, the Supreme Court held as follows:
“(I) Whether Sections 234-A, 234-B and 234-C are applicable to
Chapter XIX-A proceedings?
25. Our detailed analysis shows that though Chapter XIX-A is a
self-contained code, the procedure to be followed by the Settlement
Commission under Sections 245-C and 245-D in the matter of
computation of undisclosed income; in the 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 be aggregated as
total income shows that Chapter XIX-A indicates aggregation of
incomes so as to constitute total income which indicates that the
special procedure under Chapter XIX-A has an in-built mechanism
of computing total income which is nothing but assessment
(computation of total income).
26. To elaborate, under Section 245-C(1-B), 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
income as computed in accordance with the provisions of the Act.
Thus, Section 143(3) provision is sought to be incorporated in
Section 245-C. When Parliament uses the words “as if such
aggregate would constitute total income”, it presupposes that under
the special procedure the aggregation of the returned income plus
income disclosed would result in computation of total income
which is the basis for the levy of tax on the undisclosed income
which is nothing but “assessment”. Similarly, Section 245-C(1-C)
provides for deductions from the total income computed in terms
of Section 245-C(1-B).
W.P.(C) 6560/2016 Page 8 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
27. Thus, the special procedure under Sections 245-C and 245-D in
Chapter XIX-A shows that a special type of computation of total
income is engrafted in the said provisions which is nothing but
assessment which takes place at Section 245-D(1) stage. However,
in that computation, one finds that provisions dealing with a
regular assessment, self-assessment and levy and computation of
interest for default in payment of advance tax, etc. are engrafted.
[See Sections 245-C(1-B), 245-C(1-C), 245-D(6), 245-F(3) in
addition to Sections 215(3), 234-A(4) and 234-B(4).]
(II) Terminal point for the levy of interest Whether interest is
payable under Chapter XIX-A up to the date of the order under
Section 245-D(1) or up to the date of the order under Section
245-D(4)?
28. In our view the answer to the above question lies in the
provisions of the proviso to Sections 245-C(1), 245-C(1-B) and
245-C(1-C), 245-D(4) and 245-F(3) which bring in the concepts of
returned income, self-assessment, aggregation of income returned
and income disclosed as if it is total income; levy of interest under
Section 215(3) read with Section 245-D(4); increase of interest
under Sections 234-A(4) and 234-B(4) read with Section 245-D(4)
as also Sections 140-A(1-A) and (1-B) read with Sections 234-A
and 234-B. For example, Section 140-A deals with self-assessment
which is different from regular assessment. Under Section 140-
A(1) where tax is payable on the basis of any return furnished by
the assessee [see proviso (a) to Section 245-C(1)], after taking into
account tax paid, the assessee shall be liable to pay such tax with
interest payable for default under Section 234-B in payment of
advance tax before furnishing the return.
29. This position is clarified by Sections 140-A(1-A) and (1-B)
under which inter alia interest payable for default in payment of
advance tax under Section 234-A shall be computed on the amount
of tax on the total income as declared in the return minus the
advance tax paid. Similarly, it is clarified vide sub-section (1-B) to
Section 140-A that interest payable under Section 234-B for default
in payment of advance tax shall be computed on an amount equal
to the assessed tax [same words are used in Section 234-B(1)] or
on the amount by which the advance tax falls short of the assessed
tax. However, what is “assessed tax” for the purposes of Section
140-A is explained by Explanation. It says that assessed tax will be
tax on the total income as declared in the return minus the amount
of tax deducted at source or collected at source in accordance with
the provisions of Chapter XVII (which covers Sections 207, 209
and 215 of the Act).
30. Now, Section 245-C(1) is voluntary disclosure by the assessee
W.P.(C) 6560/2016 Page 9 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
of his undisclosed income. Under Section 245-C(1), the assessee
has to mention in his settlement application the additional amount
of tax payable by him on such undisclosed income. Under proviso
(a), the application for settlement shall not be entertained till the
assessee has furnished the return of income which he was required
to file under the Act to the extent of his income. Under proviso (b).
the assessee has to declare the additional amount of tax payable.
Thus, the two provisos to Section 245-C(1) show that Chapter
XIX-A, which prescribes a special procedure for assessment by
settlement, contemplates a pre-assessment collection of tax.
31. With the filing of the settlement application and after such
application is allowed to be proceeded with under Section 245-
D(1), intimation under Section 143(1), regular assessment under
Sections 143(3)/144 and reassessment under Section 147 lose their
existence as under Sections 245-C(1-A) and (1-B) it is only the
income disclosed in the return of income before the AO alone
which survives for consideration by the Settlement Commission for
settling the amount of income which is not disclosed in the return.
32. Under Section 245-C(1-B)(ii), if the applicant has furnished a
return in respect of the total income, whether or not assessment is
made in pursuance of the return, the additional amount of income
tax payable in respect of the total income disclosed 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 on 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 234-B(2) steps in. It is important to
remember that the assessee is liable to pay advance tax, he
commits default in payment to the extent of the undisclosed
income but he offers to pay additional income tax then interest has
to be calculated in accordance with Sections 207, 208 and 234-B(2)
up to the date on which such tax is paid. This is not the interest
which the assessee has to pay after assessment under Section 245-
D(4).
33. Under Sections 245-C(1-B) and (1-C) the additional amount of
income tax payable on the undisclosed income shall be on the total
income as calculated under Section 245-C(1-B). On computation of
total income under Sections 245-C(1-B) and (1-C), interest follows
such computation. It is important to note that interest follows
computation of total income. Once such computation takes place
under Section 245-C(1-B) then Section 234-B(2) applies. The said
sub-section deals with the situation where before determination of
the total income under Section 143(1) or Section 143(3) tax is paid
W.P.(C) 6560/2016 Page 10 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
under Section 140-A or otherwise interest shall be calculated in
accordance with Section 234-B(1) up to the date on which tax is so
paid. In that sense an application under Section 245-C(l) is a return.
Section 245-C(l) deals with computation of total income.
34. There is one more way of looking at the Act. Chapter XIX-A
refers to the procedure of settlement [see Section 245-D(1)]. As
stated above, Section 245-D(1) provides for expeditious recovery
of tax by way of pre-assessment collection. Interest on default in
payment of advance tax comes under Sections 234-A, 234-B, 234-
C, which fall in Chapter XVII which deals with collection and
recovery of tax. It is important to note that interest follows
computation of additional payment of income tax under Sections
245-C(1-B) and (1-C). This is how Sections 234-A, 234-B and
234-C get engrafted into Chapter XIX-A at the stage of Section
245-D(1).
35. As stated, till the Settlement Commission decides to admit the
case under Section 245-D(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, the 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 234-B would be
payable up to the stage of Section 245-D(1). Our view is supported
by the amendment made by the Finance Act of 2007 w.e.f. 1-6-
2007 in which interest is required to be paid for maintainability of
the application for settlement.
36. The question is what happens in cases where 90% of the
assessed tax is paid but on the basis of the Commission’s order
under Section 245-D(4) the advance tax paid turns out to be less
than 90% of the assessed tax as defined in the Explanation to
Section 234-B(1)?
37. As held hereinabove, under Section 245-C(1) read with Section
245-C(1-B)(ii) and Section 245-C(1-C)(b), 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
scheme of the said sections is based on 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 234-A, B and
C are applicable up to the stage of Section 245-D(1) order passed
by the Settlement Commission. However, Parliament has not
extended the provisions and the liability to pay interest beyond the
W.P.(C) 6560/2016 Page 11 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
date of application for settlement. This is the position even after the
Finance Act of 2007.
38. Once this position is taken, Section 140-A is attracted. When
an assessee has paid interest under Sections 234-A, B and C in self-
assessment under Section 140-A, which is similar to the scheme of
Section 245-C(1), and once the Settlement Commission admits the
application for settlement, one finds that even under Section 140-
A(1-B) interest payable under Section 234-B 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 in the
return. Under sub-section (1-B) to Section 140-A interest payable
under Section 234-B can also be computed on an amount by which
the advance tax paid falls short of the assessed tax as defined in the
Explanation thereto. Thus, there is no provision under Chapter
XIX-A or even under Section 140-A (dealing with self-assessment)
to charge interest beyond the date of application for settlement
after the same is admitted by the Commission under Section 245-
D(1).
39. 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 245-D(4) is not an order of
regular assessment. It is neither an order under Section 143(1) or
Section 143(3) or Section 144. Under Sections 139 to 158, the
process of assessment involves the filing of the return under
Section 139 or under Section 142; inquiry by AO under Sections
142 and 143 and making of the order of assessment by AO 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 integral part of the
process of assessment. No such steps are required to be followed in
the case of proceedings under Chapter XIX-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 245-D(4).
40. Even in CIT v. Anjum M.H. Ghaswala there is no finding by
this Court that the order of the Settlement Commission under
Section 245-D(4) is an order of assessment under Section 143(3) or
under Section 144. In Ghaswala case the only question decided by
this Court is that the interest under Section 234-B is mandatory in
nature and that the Settlement Commission, therefore, had no
authority to waive it.
W.P.(C) 6560/2016 Page 12 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
41. Further, as stated above, the jurisdiction of AO 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 commences only after an order
is passed under Section 245-D(1). That, after making an
application for settlement the applicant is not allowed to withdraw
it [see Section 245-C(3)]. Once the case stands admitted, the
Settlement Commission shall have exclusive jurisdiction to
exercise the powers of the Income Tax Authority.
42. The order of the Settlement Commission under Section 245-
D(4) shall be final and conclusive under Section 245-1 subject to
two qualifications under which it can be recalled viz. fraud and
misrepresentation but even here it is important to note that under
Section 245-D(7) where the settlement becomes void on 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 245-D(1) stage and Section
245-D(4) stage. Thus, interest under Section 234-B will be
chargeable till the order of the Settlement Commission under
Section 245-D(1) i.e. admission of the case.
43. Lastly, the expression “interest” in Section 245-D(6-A) fastens
the liability to pay interest only when the tax payable in pursuance
of an order under Section 245-D(4) is not paid within the specified
time and which levy is different from liability to pay interest under
Section 234-B or under Section 245-D(2-C).”
9. As would become evident from the aforesaid extracts of the
opinion handed down by the Constitution Bench, it found that the
liability of interest would be governed firstly by the provisions of
Section 245C(1) and which speaks of aggregation of the income
which may be disclosed in a return submitted in ordinary course and
the declarations that may be made by virtue of an application of
settlement made in terms thereof. The Supreme Court has explained
the scheme of Section 245C(1) as thus dealing with the aggregation of
W.P.(C) 6560/2016 Page 13 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
the amounts as disclosed in the application for settlement together
with that disclosed in the Return of Income to constitute total income.
10. It had also taken into consideration the statutory liability which
stood placed upon the applicant to ensure that the amount of tax
liability which would arise by virtue of a declaration made in such an
application being duly deposited for the purposes of its
maintainability. It thus came to conclude that Chapter XIX-A
envisages two distinct stages, with the first being the submission of an
application under Section 245C(1) and which upon due consideration
would have ultimately come to be admitted by the ITSC in light of
Section 245D(1) and the second being the order of determination
which may be framed by the ITSC in accordance with Section
245D(4). It had on a conspectus of the statutory provisions come to
hold specifically that the interest under Section 234B would be
payable only up to the stage of Section 245D(1).
11. Ms. Jha, learned senior counsel appearing for the respondent-
assessee, has drawn our attention to Section 234B as it stood at the
relevant time to submit that interest under that provision was
concerned solely with the Return of Income as ordinarily filed and that
reference to proceedings before the ITSC were only found in sub-
section (4) as it existed. Learned senior counsel submitted that sub-
section (4) of Section 234B stood confined to the amount of interest
that would have been leviable by virtue of sub-sections (1) and (3) of
Section 234B and clearly did not control the computation of interest
liability for the purposes of Section 245C(1).
12. Our attention was drawn by Ms. Jha also to the significant
W.P.(C) 6560/2016 Page 14 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
amendments which have come to be introduced by virtue of Finance
Act, 2015 with effect from 01 June 2015 and which now make
additional provisions with respect to interest and the liability that
would arise by virtue of an application being made under Section
245C(1). According to learned senior counsel once the assessee had
made an application under Section 245C(1) and declared the amount
at which it sought the settlement of all disputes, interest on that
amount as declared and disclosed would cease to run once that
application came to be admitted under Section 245D(1). Ms. Jha
commends for our consideration the significant and pertinent
observations rendered by the Constitution Bench in Brij Lal in this
respect.
13. Dealing with the amendments which came to be introduced in
Section 234B and which saw the introduction of sub-section (2A), Ms.
Jha also drew our attention to the Memorandum which explained the
provisions of the Finance Bill, 2015 and which while dealing with the
proposed amendments to 234B had observed as follows:
“Interest for defaults in payment of advance tax in case of re-
assessment and where additional income is disclosed before the
Settlement Commission under section 245C.
The existing provisions contained in clause (3) of section 234B of
the Income-tax Act provides that where the total income is
increased on reassessment under section 147 or section 153A the
assessee shall be liable for interest at the rate of 1 per cent on the
amount of the increase in total income for the period commencing
from date of determination of total income under sub-section (1) of
section 143 or on regular assessment and ending on the date of
reassessment under section 147 or section 153A.
Interest is charged under section 234B on the principle that the
amount of tax determined on the total income determined under
section 143(1) or on assessment or reassessment or total income
declared in a settlement application was the tax payer’s trueW.P.(C) 6560/2016 Page 15 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
liability right from the beginning and it was with reference to that
amount the advance tax should have been paid within the
prescribed due date.
Accordingly, it is proposed to amend clause (3) of section 234B of
the Income-tax Act to provide that the period for which the interest
is to be computed will begin from the 1st day of April next
following the financial year and end on the date of determination
total income under section 147 or section 153A.
The existing provision contained in sub-section (4), inter alia,
provide that where on an order of the Settlement Commission
under sub-section (4) of section 245D, the amount on which
interest was payable under sub-section (1) or sub-section (3) is
increased or reduced, the interest shall be increased or reduced
accordingly. However, in case an application is filed before the
Settlement Commission under section 245C declaring an additional
amount of income-tax, there is no specific provision in section
234B for charging interest on that additional amount.
Accordingly, it is proposed to insert a new subsection (2A) so as to
provide that where an application under sub-section (1) of section
245C for any assessment year has been made, the assessee shall be
liable to pay simple interest at the rate of one per cent for every
month or part of a month comprised in the period commencing on
the 1st day of April of such assessment year and ending on the date
of making such application, on the additional amount of income-
tax referred to in that sub-section. Further, where as a result of an
order of the Settlement Commission under sub-section (4) of
section 245D for any assessment year, the amount of total income
disclosed in the application under sub-section (1) of section 245C
is increased, the assessee shall be liable to pay simple interest at the
rate of one per cent for every month or part of a month comprised
in the period commencing on the 1st day of April of such
assessment year and ending on the date of such order, on the
amount by which the tax on the total income determined on the
basis of such order exceeds the tax on the total income disclosed in
the application filed under sub-section (1) of section 245C.
These amendments will take effect from 1st day of June, 2015.”
14. Ms. Jha laid emphasis on the Memorandum itself
acknowledging the absence of a provision enabling the levy of interest
on the amount as determined by the ITSC in excess of that disclosed
in the application and interest thereon running up to the passing of the
W.P.(C) 6560/2016 Page 16 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
final order determining the amount of settlement. According to
learned counsel, the aforesaid acknowledgement reinforces the stand
of the respondent-assessee that the interest on the amount as disclosed
in the Section 245C(1) application would run only up to the date when
the same comes to be admitted by the ITSC.
15. For the purposes of evaluating the rival submissions which were
addressed, we deem it apposite to extract Section 234B as it presently
stands hereunder:
“Interest for defaults in payment of advance tax.
234B. (1) Subject to the other provisions of this section, where, in
any financial year, an assessee who is liable to pay advance tax
under section 208 has failed 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, the assessee shall be
liable to pay 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 [to the date of
determination of total income under sub-section (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.
[Explanation 1.–In this section, “assessed tax” means the tax on
the total income determined under sub-section (1) of section 143
and where a 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 taken
into account in computing such total income;
[(i-a) any relief of tax allowed under Section 89;]
(ii) any relief of tax allowed under section 90 on account of
tax paid in a country outside India;
(iii) any relief of tax allowed under section 90A on account
of tax paid in a specified territory outside India referred to
in that section;
W.P.(C) 6560/2016 Page 17 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
(iv) any deduction, from the Indian income tax payable,
allowed under section 91, on account of tax paid in a
country outside India; and
(v) any tax credit allowed to be set off in accordance with
the provisions of section 115-JAA [or section 115-JD].]
Explanation 2.–Where, in relation to an assessment year, an
assessment is made for the first time under section 147 [or section
153A], the assessment so made shall be regarded as a regular
assessment for the purposes of this section.
[Explanation 3.–In Explanation 1 and in sub-section (3),–
(i) “tax on total income as determined under sub-section (1)
of section 143” shall not include the additional income-tax,
if any, payable under section 140-B or section 143; and
(ii) tax on the total income determined under such regular
assessment shall not include the additional income-tax
payable under section 140-B.]
(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 under 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 140A 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.
[(2-A)(a) where an application under sub-section (1) of section
245-C for any assessment year has been made, the assessee shall be
liable to pay simple interest at the rate of one per cent for every
month or part of a month comprised in the period commencing on
the 1st day of April of such assessment year and ending on the date
of making such application, on the additional amount of income tax
referred to in that sub-section;
(b) where as a result of an order of the Settlement Commission
under sub-section (4) of section 245-D for any assessment year, the
amount of total income disclosed in the application under sub-
section (1) of section 245-C is increased, the assessee shall be
liable to pay simple interest at the rate of one per cent for every
month or part of a month comprised in the period commencing on
the 1st day of April of such assessment year and ending on the date
W.P.(C) 6560/2016 Page 18 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
of such order, on the amount by which the tax on the total income
determined on the basis of such order exceeds the tax on the total
income disclosed in the application filed under sub-section (1) of
section 245-C;
(c) where, as a result of an order under sub-section (6-B) of section
245-D, the amount on which interest was payable under clause (b)
has been increased or reduced, as the case may be, the interest shall
be increased or reduced accordingly.]
[(3) Where, as a result of an order of reassessment or
recomputation under section 147 or section 153-A, the amount on
which interest was payable in respect of shortfall in payment of
advance tax for any financial year under sub-section (1) is
increased, the assessee shall be liable to pay simple interest at the
rate of one per cent for every month or part of a month comprised
in the period commencing on the 1st day of April next following
such financial year and ending on the date of the reassessment or
re-computation under section 147 or section 153-A, on the amount
by which the tax on the total income determined on the basis of the
reassessment or re-computation exceeds the tax on the total income
determined under sub-section (1) of section 143 or on the basis of
the regular assessment as referred to in sub-section (1), as the case
may be.]
(4) Where, as a result of an order under section 154 or section 155
or section 250 or section 254 or section 260 or section 262 or
section 263 or section 264 [* * *], 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–
(i) in a case where the interest is increased, the Assessing
Officer shall serve on the assessee a notice of demand in the
prescribed form specifying the sum payable and such notice
of demand shall be deemed to 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.
(5) The provisions of this section shall apply in respect of
assessments for the assessment year commencing on the 1st day of
April, 1989 and subsequent assessment years.”
16. A reading of that provision would indicate that it principally
governs the issue of liability to pay interest in cases of default in
payment of advance tax as per the time frames stipulated in the statute.
W.P.(C) 6560/2016 Page 19 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
Section 234B(4) prior to the deletion of the phrase “or an order of the
Settlement Commission under sub-section (4) of Section 245D” by
Finance Act, 2015 had contemplated interest being payable under sub-
sections (1) and (3) and on the variation that may occur by virtue of an
order of the ITSC.
17. However, as we read sub-section (4) it becomes apparent that it
stands confined to the computation of interest which would have been
leviable by virtue of sub-sections (1) and (3) of Section 234B and was
clearly not concerned with the computation of interest for purposes of
an application referable to Section 245C(1) being entertained.
18. An applicant desirous of seeking closure of disputes and
settlement was obliged to move an application in terms of Section
245C(1). That provision is extracted hereinbelow:
“Application for settlement of cases.
245C. (1) An assessee may, at any stage of a case relating to him,
make an application in such form and in such manner as may be
prescribed, and containing a full and true disclosure of his income
which has not been disclosed before the [Assessing] Officer, the
manner in which such income has been derived, the additional
amount of income tax payable on such income and such other
particulars as may be prescribed, to the Settlement Commission to
have the case settled and any such application shall be disposed of
in the manner hereinafter provided:”
19. Originally and prior to its amendment by Finance Act, 2010 the
First Proviso to Section 245C(1) read as follows:
“Provided that no such application shall be made unless,-
(i) the additional amount of income-tax payable on the income
disclosed in the application exceeds three lakh rupees; and
(ii) such tax and the interest thereon, which would have been paid
under the provisions of this Act had the income disclosed in the
application been declared in the return of income before theW.P.(C) 6560/2016 Page 20 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
Assessing Officer on the date of application, has been paid on or
before the date of making the application and the proof of such
payment is attached with the application.”
20. Post the amendments introduced in terms of Finance Act, 2010
that Proviso presently reads as under:
“Provided that no such application shall be made unless,-
(i) in a case where proceedings for assessment or
reassessment for any of the assessment years referred to in
clause (b) of sub-section (1) of (b) of sub-section (1) of
section 153A or clause (b) of sub-section (1) of section
153B in case of a person referred to in section 153A or
section 153C have been initiated, the additional amount of
income-tax payable on the income disclosed in the
application exceeds fifty lakh rupees,
[(i-a) in a case where–
(A) the applicant is related to the person referred to in
clause (i) who has filed an application (hereafter in
this sub-section referred to as “specified person”); and
(B) the proceedings for assessment or re-assessment
for any of the assessment years referred to in clause
(b) of sub-section (1) of section 153A or clause (b) of
sub-section (1) of section 153-B in case of the
applicant, being a person referred to in section 153A
or section 153C, have been initiated,
the additional amount of income-tax payable on the income
disclosed in the application exceeds ten lakh rupees,]
(ii) in any other case, the additional amount of income-tax
payable on the income disclosed in the application exceeds
ten lakh rupees, and such tax and the interest thereon, which
would have been paid under the provisions of this Act had
the income disclosed in the application been declared in the
return of income before the Assessing Officer on the date of
application, has been paid on or before the date of making
the application and the proof of such payment is attached
with the application.]”
21. The Proviso prior to 2010 as well as the provision as it stands
presently on the statute book clearly establish that the applicant was
liable to pay tax and interest on the entire amount of total income as
W.P.(C) 6560/2016 Page 21 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
disclosed in an application under Section 245C(1), and that, by way of
a fiction being extended to the entire tax liability which it would have
been ordinarily liable to pay under the provisions of the Act. The
fusion of the income which may have been ordinarily declared
together with that which came to be disclosed in the application for
settlement becomes apparent from the Proviso using the expression
“…….had the income disclosed in the application been declared in
the Return of Income before the Assessing Officer on the date of
application………”.
22. The statute placed a positive and unerring obligation upon the
applicant to ensure that the entire amount of tax along with interest in
accordance with the disclosures made in the application had been paid
on or before the date of submission alone. The Proviso further
required proof of such payment being attached with the said
application. The entire amount of taxable liability computed upon the
total or aggregate income as disclosed in that application was thus
liable to be discharged prior to the application being submitted itself.
This necessarily would have entailed not only the computation of tax
payable on the total income as disclosed in that application as also the
payment of interest that would have otherwise been attracted in terms
of Section 234A, Section 234B and other cognate provisions in the
statute.
23. The application once made is thereafter liable to be placed
before the ITSC and which would then follow the procedure as
prescribed in Section 245D. That provision reads as under:
“Procedure on receipt of an application under section 245C.
W.P.(C) 6560/2016 Page 22 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
245D. [(1) On receipt of an application under section 245C, the
Settlement Commission shall, within seven days 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 shall, within a period of fourteen days from the date
of the application, by an order in writing, reject the application or
allow the application to be proceeded with:
Provided that where no order has been passed within the aforesaid
period by the Settlement Commission, the application shall be
deemed to have been allowed to be proceeded with.]
(1-A) [Omitted by the Finance (No. 2) Act, 1991, w.e.f. 27-9-
1991.]
(2) A copy of every order under sub-section (1) shall be sent to the
applicant and to the [Principal Commissioner or Commissioner].
[(2A) Where an application was made under section 245C before
the 1st day of June, 2007, but an order under the provisions of sub-
section (1) of this section, as they stood immediately before their
amendment by the Finance Act, 2007, has not been made before
the 1st day of June, 2007, such application shall be deemed to have
been allowed to be proceeded with if the additional tax on the
income disclosed in such application and the interest thereon is
paid on or before the 31st day of July, 2007.
Explanation.–In respect of the application referred to in this sub-
section, the 31st day of July, 2007 shall be deemed to be the date of
the order of rejection or allowing the application to be proceeded
with under sub-section (1).
(2B) The Settlement Commission shall,–
(i) in respect of an application which is allowed to be
proceeded with under sub-section (1), within thirty days
from the date on which the application was made; or
(ii) in respect of an application referred to in sub-section
(2A) which is deemed to have been allowed to be proceeded
with under that sub-section, on or before the 7th day of
August, 2007,
call for a report from the [Principal Commissioner or
Commissioner], and the [Principal Commissioner or
Commissioner] shall furnish the report within a period of thirty
days of the receipt of communication from the Settlement
Commission.
(2C) Where a report of the [Principal Commissioner or
Commissioner] called for under sub-section (2B) has been
W.P.(C) 6560/2016 Page 23 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
furnished within the period specified therein, the Settlement
Commission may, on the basis of the report and within a period of
fifteen days of the receipt of the report, by an order in writing,
declare the application in question as invalid, and shall send the
copy of such order to the applicant and the [Principal
Commissioner or Commissioner]:
Provided that an application shall not be declared invalid unless an
opportunity has been given to the applicant of being heard:
Provided further that where the [Principal Commissioner or
Commissioner] has not furnished the report within the aforesaid
period, the Settlement Commission shall proceed further in the
matter without the report of the [Principal Commissioner or
Commissioner]:
[Provided also that where in respect of an application, an order,
which was required to be passed under this sub-section on or
before the 31st day of January, 2021, has not been passed on or
before the 31st day of January, 2021, such application shall
deemed to be valid.]
(2D) Where an application was made under sub-section (1) of
section 245C before the 1st day of June, 2007 and an order under
the provisions of sub-section (1) of this section, as they stood
immediately before their amendment by the Finance Act, 2007,
allowing the application to have been proceeded with, has been
passed before the 1st day of June, 2007, but an order under the
provisions of sub-section (4), as they stood immediately before
their amendment by the Finance Act, 2007, was not passed before
the 1st day of June, 2007, such application shall not be allowed to
be further proceeded with unless the additional tax on the income
disclosed in such application and the interest thereon, is,
notwithstanding any extension of time already granted by the
Settlement Commission, paid on or before the 31st day of July,
2007.]
[(3) The Settlement Commission, in respect of–
(i) an application which has not been declared invalid under
subsection (2C); or
(ii) an application referred to in sub-section (2D) which has
been allowed to be further proceeded with under that sub-
section, may call for the records from the [Principal
Commissioner or Commissioner] and after examination of
such records, if the Settlement Commission is of the
opinion that any further enquiry or investigation in the
matter is necessary, it may direct the [Principal
Commissioner or Commissioner] to make or cause to be
W.P.(C) 6560/2016 Page 24 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
made such further enquiry or investigation and furnish a
report on the matters covered by the application and any
other matter relating to the case, and the [Principal
Commissioner or Commissioner] shall furnish the report
within a period of ninety days of the receipt of
communication from the Settlement Commission:
Provided that where the [Principal Commissioner or
Commissioner] does not furnish the report within the aforesaid
period, the Settlement Commission may proceed to pass an order
under subsection (4) without such report.
(4) After examination of the records and the report of the [Principal
Commissioner or Commissioner], if any, received under–
(i) sub-section (2B) 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
[Principal Commissioner or Commissioner] to be heard, either in
person or through a representative duly authorised in this behalf,
and after examining such further evidence as may be placed before
it or obtained by it, the Settlement Commission may, in accordance
with the 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].
(4A) The Settlement Commission shall pass an order under sub-
section (4),–
(i) in respect of an application referred to in sub-section
(2A) or sub-section (2D), on or before the 31st day of
March, 2008;
(ii) in respect of an application made on or after the 1st day
of June, 2007 [but before the 1st day of June, 2010], within
twelve months from the end of the month in which the
application was made.]
[(iii) in respect of an 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.]
[(5) Subject to the provisions of section 245BA, the materials
brought on record before the Settlement Commission shall be
considered by the Members of the Bench concerned before passing
any order under sub-section (4) and, in relation to the passing of
such order, the provisions of section 245BD shall apply.]W.P.(C) 6560/2016 Page 25 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
(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 shall 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.
(6A) 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 Commission has extended the time for payment of such
tax or has allowed payment thereof by instalments, the assessee
shall be liable to pay simple interest at [one and one-fourth per cent
for every month or part of a month] on the amount remaining
unpaid from the date of expiry of the period of thirty-five days
aforesaid.]
[(6B) The Settlement Commission may, with a view to rectifying
any mistake apparent from the record, amend any order passed
[***] under sub-section (4)–
(a) at any time within a period of six months from the end
of the month in which the order was passed; or
(b) at any time within the period of six months from the end
of the month in which an application for rectification has
been made by the Principal Commissioner or the
Commissioner or the applicant, as the case may be:
Provided that no application for rectification shall be made by the
Principal Commissioner or the Commissioner or the applicant after
the expiry of six months from the end of the month in which an
order under sub-section (4) is passed by the Settlement
Commission:
Provided further that an amendment which has the effect of
modifying the liability of the applicant shall not be made under this
sub-section unless the Settlement Commission has given notice to
the applicant and the Principal Commissioner or Commissioner 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 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 and the income tax authority concerned,
may, notwithstanding anything contained in any other provision of
W.P.(C) 6560/2016 Page 26 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
this Act, complete such proceedings at any time before the expiry
of two years from the end of the financial year in which the
settlement became void.
(8) For the removal of doubts, it is hereby declared that nothing
contained in section 153 shall apply to any order passed under
subsection (4) or to any order of assessment, reassessment or
recomputation required to be made by the [Assessing] Officer in
pursuance of any directions contained in such order passed by the
Settlement Commission [and nothing contained in the proviso to
sub-section (1) of section 186 shall apply to the pursuance of any
such directions as aforesaid.]]
[(9) On and from the 1st day of February, 2021, the provisions of
sub-sections (1), (2), (2-B), (2-C), (3), (4), (4-A), (5), (6) and (6-B)
shall apply to pending applications allotted to Interim Board with
the following modifications, namely:–
(i) for the words “Settlement Commission”, wherever they
occur, the words “Interim Board” shall be substituted;
(ii) for the word “Bench”, the words “Interim Board” shall
be substituted;
(iii) for the purposes of this section, the date referred to in
sub-section (2) of section 245-M shall be deemed to be date
on which the application was made under section 245-C and
received by the Interim Board;
[(iv) where the time-limit for amending any order or filing
of rectification application under sub-section (6-B) expires
on or after the 1st day of February, 2021, but before the 1st
day of February, 2022, such time-limit shall be extended to
the 30th day of September, 2023.]
(10) On and from the 1st day of February, 2021, the provisions of
sub-sections (6A) and (7) shall have effect as if for the words
“Settlement Commission”, the words “Settlement Commission or
Interim Board of Settlement” had been substituted.
(11) The Central Government may by notification in the Official
Gazette, make a scheme, for the purposes of settlement in respect
of pending applications by the Interim Board, so as to impart
greater efficiency, transparency and accountability by–
(a) eliminating the interface between the Interim Board and
the assessee in the course of proceedings to the extent
technologically feasible;
(b) optimising utilisation of the resources through
economies of scale and functional specialisation;
W.P.(C) 6560/2016 Page 27 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
(c) introducing a mechanism with dynamic jurisdiction.
(12) The Central Government may, for the purposes of giving
effect to the scheme made under sub-section (11), by notification in
the Official Gazette, direct that any of the provisions of this Act
shall not apply or shall apply with such exceptions, modifications
and adaptations as may be specified in the said notification:
Provided that no such direction shall be issued after the 31st day
of March, 2023.
(13) Every notification issued under sub-section (11) and sub-
section (12) shall, as soon as may be after the notification is issued,
be laid before each House of Parliament.]”
24. As a sine qua non for the consideration of the application, the
ITSC must firstly be satisfied that the applicant has made a full and
true disclosure with respect to all details pertaining to income and the
amount at which a settlement is prayed to be entered. This becomes
apparent from Section 245D(1) enabling the ITSC to issue a notice to
the applicant to explain why the application so made be allowed to be
proceeded with. The ITSC is further enabled to call for reports and
records from the Principal Commissioner with respect to the
disclosures as made in such an application. It is only after the ITSC is
convinced that a full, true and candid disclosure has been made by the
applicant, that the same is admitted for further consideration. The
amount which the applicant may ultimately be called upon to pay
could hypothetically be more than that which may be disclosed in the
SOF. This is by virtue of the exercise and inquiry which the ITSC is
enabled to undertake in terms of sub-sections (3) and (4) thereof. It is
only upon the conclusion of that inquiry that the ITSC proceeds to
fame a formal order in terms contemplated under sub-section (4)(a)
and frame consequential directions in accordance with sub-section (6).
25. Brij Lal makes a clear distinction between the admission of an
W.P.(C) 6560/2016 Page 28 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29
application under Section 245D(1) and the determinative exercise
which the ITSC ultimately takes under Section 245D(4). It has in
unequivocal terms observed that the interest liability flowing from
Section 234 B cannot go or travel beyond the date of admission of the
application under Section 245D(1). We are, therefore, of the firm
opinion that the ITSC clearly committed no error in restricting the
interest liability to the date of admission of the application.
26. In view of the aforesaid, we find no merit in the challenge
which stands mounted. The writ petition fails and shall stand
dismissed.
YASHWANT VARMA, J.
RAVINDER DUDEJA, J.
SEPTEMBER 12, 2024/kk
W.P.(C) 6560/2016 Page 29 of 29
Signature Not Verified
Digitally Signed
By:KAMLESH KUMAR
Signing Date:26.09.2024
15:48:29