2004 (9) TMI 80 - HC - Income Tax

Settlement commission granting waiver of interest rectification of mistake - it was contended on behalf of the Revenue that the said orders need rectification in view of the decision of the apex court rendered in the case of Hindustan Bulk Carriers. By this judgment the apex court reversing the earlier decision of the same court rendered in the case of Gulraj Engineering Construction Co. wherein it is held that the Settlement Commission has no jurisdiction to waive interest Now question is whether the Supreme Court pronouncement can be applicable retrospectively in the cases which have been decided already - I think one cannot take advantage of the subsequent pronouncement of a superior court in a closed and settled matter particularly in the matter decided and settled four years back in the guise of rectification - I hold there was no ground nor does it warrant for exercising jurisdiction under section 154

Summary

Issues Involved:
1. Jurisdiction of a two-member Bench to recall an order passed by a three-member Bench.
2. Legitimacy of rectification under section 154 read with section 245F of the Income-tax Act based on the Supreme Court's decision in CIT v. Hindustan Bulk Carriers.

Issue-wise Detailed Analysis:

1. Jurisdiction of a two-member Bench to recall an order passed by a three-member Bench:
The primary issue was whether a subsequent Bench consisting of two members had the jurisdiction to recall a previous order passed by a three-member Bench. The petitioner argued that the Bench should have been constituted by three members as per section 245BA(2) of the Income-tax Act, and the application for rectification should have been placed before the same Bench whose order was sought to be rectified. The petitioner cited section 245BA(5) and rule 12 of the Income-tax Settlement Commission (Procedure) Rules, 1997, which allow a two-member Bench only under specific circumstances, none of which were demonstrated in this case.

The respondent contended that a Bench could be formed by two members or three members or more, as per section 245BA(2). The court, however, found that the constitution of the Bench must include a presiding member and at least two other members, as stipulated in section 245BA(2). The court held that the formation of a Bench with fewer than three members is permissible only under exceptional circumstances mentioned in section 245BA(5), such as absence, illness, or vacancy. In this case, no such exceptional circumstances were present, making the formation of the two-member Bench unlawful. The court concluded that the impugned order was passed by an incompetent authority having no jurisdiction.

2. Legitimacy of rectification under section 154 read with section 245F based on the Supreme Court's decision in CIT v. Hindustan Bulk Carriers:
The second issue was whether the application for rectification under section 154 read with section 245F should have been entertained and allowed based on the Supreme Court's decision in CIT v. Hindustan Bulk Carriers. The petitioner argued that mistakes rectifiable under section 154 must be obvious and patent, not requiring further elucidation or argument. The subsequent decision of the Supreme Court, though having the force of law, cannot be applied retrospectively to settled matters.

The respondent argued that the Supreme Court's decision has a retrospective effect unless explicitly stated otherwise. The court examined section 154, which allows rectification of any mistake apparent from the record. The court found that the previous order of the Settlement Commission was based on the then-prevailing legal position and did not contain any apparent mistake. The court held that the subsequent Supreme Court decision could not be used to retrospectively alter settled matters. The court concluded that the impugned order was not sustainable on this ground either.

Conclusion:
The court held that the two-member Bench lacked jurisdiction to recall the order passed by the three-member Bench, and the rectification application under section 154 read with section 245F was not justified based on the subsequent Supreme Court decision. The impugned orders were set aside, and the matter was resolved by the court to avoid further delay.