2003 (4) TMI 64 - HC - Income Tax

Rectification within the meaning of section 154 - petitioners have prayed for cancellation of orders allowing an application under section 154 thereby withdrawing the waiver of interest under sections 234A 234B and 234C of the Act which was earlier allowed by the original order under section 245D(4) of the Act. By the orders impugned direction for charging interest under sections 234A 234B and 234C of the Act has been given. - I thus set aside the orders impugned

Summary

Issues:
Cancellation of orders allowing waiver of interest under sections 234A, 234B, and 234C of the Income-tax Act, 1961.

Detailed Analysis:

1. Background and Facts: The petitioners filed settlement applications for tax liabilities, which were accepted by respondent No. 1 on November 27, 1997, with a waiver of interest under various sections. The Commissioner of Income-tax later filed an application for rectification based on a Supreme Court judgment, leading to objections from the petitioners.

2. Contentions of the Petitioners: The petitioners raised several submissions challenging the rectification orders. They argued that the waiver of interest was not based on inherent power, questioned the timing of the rectification application concerning the Supreme Court judgment, and emphasized the need to consider circulars authorizing interest waiver before rectification.

3. Respondent's Arguments: The respondent contended that the Settlement Commission's decision to waive interest was based on satisfaction with the petitioners' conduct, not on any notification. They argued that rectification based on a subsequent Supreme Court decision is permissible within the scope of section 154 of the Act.

4. Scope of Section 154 of the Act: The court analyzed the scope of section 154, emphasizing that rectification should be limited to obvious and patent mistakes on the record. Detailed investigation may be necessary to understand the intention behind relief granted, especially when considering subsequent legal developments.

5. Judgment: The court held that the cases did not fall within the narrow limit of section 154, as there was no apparent mistake justifying rectification. The unsettled nature of the Supreme Court judgment at the time of the rectification application further supported setting aside the rectification orders and restoring the original orders dated November 27, 1997.

6. Legal Precedents: The court referred to legal precedents to support its decision, highlighting the distinction between rectification based on subsequent legal developments and the need for settled law to justify such rectification.

7. Conclusion: The court allowed the writ applications, setting aside the rectification orders and restoring the original orders, with no order as to costs.

This detailed analysis covers the background, arguments presented by both parties, the court's interpretation of the law, and the final judgment in the case involving the cancellation of orders allowing waiver of interest under specific sections of the Income-tax Act, 1961.