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13. Settlement of cases —
Settlement Commission — S. 234B applies to the proceedings of the Settlement
Commission — The terminal point for levy of such interest is the date of the
order u/s.245D(1) — The Settlement Commission cannot reopen its concluded
proceedings by invoking S. 154 so as to levy interest u/s.234B, though it was
not done in the original proceedings.
[Brij Lal & Ors. v. CIT,
(2010) 328 ITR 477 (SC)]
Vide referral orders dated
14-12-2004 and 20-1-2005 certain questions were referred to the Constitution
Bench of the Supreme Court and accordingly a Constitution Bench consisting of
five Judges was constituted to consider the same.
After hearing both the
sides, the Supreme Court reframed the questions for the sake of convenience as
under :
(i) Whether S. 234B
applies to the proceedings of the Settlement Commission under chapter XIXA of
the Act ?
(ii) If the answer to the
above question is in affirmative, what is the terminal point for levy of such
interest — Whether such interest should be computed up to the date of the
order u/s.245D(1) or up to the date of the order of the Commission u/s.245D(4)
?
(iii) Whether the
Settlement Commission could reopen its concluded proceedings by involving S.
154 of the said Act so as to levy interest u/s.234B, though it was not so done
in the original proceedings ?
The Supreme Court held that
in the special procedure to be followed by the Settlement Commission u/s.245C
and u/s.245D, the returned income plus income disclosed would result in
computation of total income which is the basis of levy of tax on the undisclosed
income, which is nothing but ‘assessment’ which takes place at S. 245D(1) stage.
In that computation, one finds that the provisions dealing with a regular
assessment, self-assessment and levy and computation of interest for default in
payment of advance tax, etc. are engrafted [S. 245C(1B), S. 245C(1C), S.
245D(6), S. 245F(3) in addition to S. 215(3), S. 234A(4), and S. 234B(4)].
The Supreme Court further
held that till the Settlement Commission decides to admit the case u/s. 245D(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 is not maintainable. Thus, interest u/s. 234B would be payable
up to the stage of S. 245D(1).
The Supreme Court also
considered as to what happens in the cases where 90% of the assessed tax is paid
but on the basis of the Commission’s order u/s.245D(4) and the advance tax paid
turns out to be less than 90% of the assessed tax as defined in the Explanation
to S. 234B(1). The Supreme Court held that there were two distinct stages under
chapter XIX-A and the Legislature has not contemplated the levy of interest
between the order u/s.245D(1) stage and S. 245D(4) stage. The interest u/s.234B
will be chargeable till the order of the Settlement Commission u/s. 245D(1);
i.e., admission of the case. The expression ‘interest’ in S. 245(6A) fastens the
liability to pay interest only when the tax payable in pursuance of an order
u/s.245D(4) is not paid within the specified time and which levy is different
from liability to pay interest u/s.234B or u/s.245D(2C).
The Supreme Court further
held that u/s.245-I, the order of the Settlement Commission is made final and
conclusive on matters mentioned in the application for settlement except in the
two reopened cases of fraud and misrepresentation in which case the matter could
be by way of review or recall. Like the Income-tax Appellate Tribunal, the
Settlement Commission is a quasi-judicial body. U/s.254(2), the Income-tax
Appellate Tribunal is given the power to rectify, but no such power is given to
the Settlement Commission. The Supreme Court therefore held that the Settlement
Commission cannot reopen its concluded proceedings by invoking S. 154 of the
Act. The Supreme Court further held that even otherwise, invocation of S. 154 on
the facts of the cases was not justified as there was lot of controversy as to
whether the Settlement Commission had power to reduce or waive interest and also
on the question of terminus.
