1992 (2) TMI 82 - HC - Income Tax

Issues Involved:
1. Powers of the Settlement Commission to waive or reduce interest under sections 234A, 234B, and 234C of the Income-tax Act, 1961.
2. Interpretation of section 119(2)(a) regarding the Central Board of Direct Taxes' powers.
3. Applicability of instructions issued by the Central Board of Direct Taxes to the Settlement Commission.
4. Procedural aspects under section 245F(7) of the Income-tax Act.

Detailed Analysis:

1. Powers of the Settlement Commission to waive or reduce interest under sections 234A, 234B, and 234C:

The applicant contended that the Settlement Commission had the power to waive or reduce chargeable interest under sections 234A, 234B, and 234C from the assessment year 1989-90 onwards. The argument was based on the premise that the Settlement Commission, under section 245F(1), possesses all the powers of an income-tax authority, including those of the Central Board of Direct Taxes (CBDT) under section 119(2)(a). The applicant emphasized that the purpose of the Settlement Commission is to effectively settle cases, which includes determining tax, penalty, and interest payable.

The Department countered that the powers of the CBDT under section 119 are administrative and can only be exercised by issuing instructions to subordinate authorities, not to appellate authorities like the Settlement Commission. The Department argued that the Settlement Commission's powers are quasi-judicial and limited to settling individual cases, not issuing general instructions.

2. Interpretation of section 119(2)(a) regarding the Central Board of Direct Taxes' powers:

Section 119(2)(a) allows the CBDT to issue general or special orders for the relaxation of specific provisions, including sections 234A, 234B, and 234C, for proper and efficient management of assessment and collection of revenue. The applicant argued that since the CBDT is an income-tax authority under section 116, the Settlement Commission, which has all the powers of an income-tax authority under section 245F, can also exercise these powers.

The Department maintained that the CBDT's powers under section 119(2)(a) are specific to issuing instructions to subordinate authorities and do not extend to the Settlement Commission. The Department cited judicial precedents to argue that the powers to waive or reduce interest under sections 234A, 234B, and 234C are specifically vested in the CBDT and not transferable to the Settlement Commission.

3. Applicability of instructions issued by the Central Board of Direct Taxes to the Settlement Commission:

The applicant argued that instructions issued by the CBDT under section 119(2)(a) should apply to the Settlement Commission, especially in cases where the applicant falls within the "class of incomes" or "class of cases" covered by such instructions. The applicant cited cases where the CBDT had issued instructions for the waiver of penalties and argued that similar instructions should apply to the Settlement Commission.

The Department contended that the Settlement Commission's jurisdiction is limited to the case before it and does not extend to issuing general instructions. The Department emphasized that the Settlement Commission's role is to settle individual cases, not to manage the overall administration of the Act, which is the CBDT's mandate.

4. Procedural aspects under section 245F(7) of the Income-tax Act:

Section 245F(7) allows the Settlement Commission to regulate its own procedure, subject to the provisions of Chapter XIXA. The applicant argued that this provision gives the Settlement Commission the authority to issue instructions for the waiver or reduction of interest under sections 234A, 234B, and 234C.

The Department argued that section 245F(7) is limited to procedural matters and does not extend to the substantive powers of issuing instructions for waiver or reduction of interest. The Department maintained that the Settlement Commission's powers are confined to settling the case before it and do not include administrative functions like those of the CBDT.

Conclusion:

The judgment concluded that the Settlement Commission does not have the statutory powers to reduce or waive interest under sections 234A, 234B, and 234C for the assessment year 1989-90 and onwards, except in cases falling within the "class of cases" or "class of incomes" covered by instructions issued by the CBDT. The Principal Bench of the Settlement Commission at Delhi was directed to dispose of the applicant's request for waiver of interest in accordance with this interpretation.

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