2004 (7) TMI 79 - HC - Income Tax

Scope of section 154 - subsequent decision of the Supreme Court - In impugned order single judge had found that rectification sought for in this case by the Department does not come within the narrow scope and ambit of section 154 - power of the Settlement Commission in waiving interest under sections 234A 234B and 234C - The appeal fails and is hereby dismissed. The order of the learned single judge is hereby affirmed. The order of rectification impugned in the writ petition is hereby set aside and quashed.

Issues Involved:
1. Scope and applicability of Section 154 of the Income-tax Act, 1961.
2. Power of the Settlement Commission to waive interest under Sections 234A, 234B, and 234C.
3. Jurisdiction of the Settlement Commission to rectify errors under Section 154.
4. Impact of subsequent Supreme Court decisions on rectification proceedings.

Detailed Analysis:

Scope and Applicability of Section 154 of the Income-tax Act, 1961:
The court emphasized that Section 154 allows rectification only if there is a "mistake apparent on the face of the record." This means the mistake must be glaring, obvious, and patent, requiring no investigation into facts or determination of law. The court cited the case of T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 (SC) to underline that rectification under Section 154 is limited to non-debatable points.

Power of the Settlement Commission to Waive Interest Under Sections 234A, 234B, and 234C:
The Settlement Commission had waived interest under Sections 234A, 234B, and 234C in its order dated November 27, 1997. The Department sought rectification based on the Supreme Court decision in CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1 (SC), which held that the Settlement Commission has no power to waive interest except as provided under the circulars issued by the Board. However, the court noted that the original waiver was based on the then-prevailing decision in Ashwani Kumar Aggarwal, In re [1992] 195 ITR 861 (ITSC) [SB], which allowed such waivers.

Jurisdiction of the Settlement Commission to Rectify Errors Under Section 154:
The court analyzed whether the Settlement Commission could rectify its order under Section 154 despite the finality clause in Section 245-I. It concluded that Section 245F(1) grants the Settlement Commission powers akin to those of an income-tax authority, including rectification under Section 154. However, this power is limited and cannot be exercised once the order under Section 245D(4) becomes final and conclusive, except in extremely limited circumstances.

Impact of Subsequent Supreme Court Decisions on Rectification Proceedings:
The court addressed whether a subsequent Supreme Court decision could form the basis for rectification. The Department argued that the principle settled by the Supreme Court in Ghaswala [2001] 252 ITR 1 (SC) should allow for rectification. However, the court found that the decision in Ghaswala did not retrospectively invalidate the Settlement Commission's waiver, as the waiver was based on the legal position at the time. The court also noted that the rectification application was based on assumptions and presumptions rather than an apparent mistake.

Conclusion:
The court concluded that the rectification sought by the Department did not fall within the narrow scope of Section 154. The decision of the learned single judge to set aside the rectification order was affirmed. The court held that the Settlement Commission's power to rectify under Section 154 is limited and does not extend to reviewing final orders under Section 245D(4). The appeal was dismissed, and the rectification order was quashed.

Order:
The appeal is dismissed, and the order of the learned single judge is affirmed. The rectification order is set aside and quashed. No order as to costs.

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