2015 (2) TMI 855 - HC - Income Tax

Levy of interest under section 234B - terminal point for the levy of interest - Whether would be up to the date of the order u/s 245D 1 or up to the date of the order of settlement u/s 245D 4 ? - tribunal went to the extent of saying that the judgment in Brij Lal 2010 (10) TMI 8 - SUPREME COURT was obiter dicta Held that - In our opinion to term the decision of the Supreme Court as obiter dicta and deciding not to follow it was gross misdemeanor on the part of the Commission. The order of the Special Bench of the Commission and that of the additional Bench, Kolkata Are quashed and set aside.The Settlement Commission (Income Tax Wealth Tax), Additional Bench, Kolkata is directed to pass an appropriate order on the basis of this order following Brij Lal reported in SUPRA wherein held the terminal point for the levy of interest under section 234B would be up to the date of the order under section 245D 1 and not up to the date of the order of settlement under section 245D 4 - Decided in favour of assessee.

Issues:
1. Setting aside the order of the Income Tax Settlement Commission Principal Bench.
2. Gross error and breach of judicial discipline by the Commission.
3. Interpretation and application of the judgment in Brij Lal & Ors. vs. Commissioner of Income Tax.
4. Consideration of the judgment in Commissioner of Income Tax vs. Anjum M. H. Ghaswala.
5. Rejection of the judgment in Brij Lal by the Commission.
6. Application of obiter dicta in legal judgments.
7. Quashing of the orders by the Special Bench and Additional Bench, Kolkata.
8. Direction for passing an appropriate order based on the judgment in Brij Lal.

Analysis:
1. The High Court set aside the order of the Income Tax Settlement Commission Principal Bench dated 12th November, 2014, along with the consequential order passed by the Additional Bench in Kolkata on 30th December, 2014. The proceeding was under section 245 [6B] of the Income Tax Act, 1961. The Court found that the Commission had committed a serious error and a gross breach of judicial discipline.

2. The Court criticized the Commission for terming the judgment of the Supreme Court in Brij Lal as obiter dicta and deciding not to follow it. The Supreme Court had clearly decided on the levy of interest under section 234B and section 245D[1], setting the terminal point for such interest. The Court emphasized that the observations of the Supreme Court were not obiter dicta, and the Commission's decision not to follow it was a gross misdemeanor.

3. The Commission's reliance on the case of Commissioner of Income Tax vs. Anjum M. H. Ghaswala was rebuked by the Court. The Commission dismissed the relevance of Brij Lal based on Ghaswala, which the Court found unacceptable. The Court highlighted the importance of following Supreme Court judgments and the binding nature of even obiter dicta as established by previous legal precedents.

4. The Court referred to the principle that even obiter dictum of the Supreme Court should be accepted as binding, emphasizing the importance of maintaining a certain standard under the law. Any deviation from established legal standards could lead to unpredictability and inconsistency in decisions. The Court emphasized the need for adherence to legal precedents and the certainty they provide in legal interpretations.

5. The Court quashed the orders of the Special Bench and Additional Bench in Kolkata, directing the Settlement Commission to pass an appropriate order based on the judgment in Brij Lal within six weeks. The Court allowed the writ application to the extent of the order issued, emphasizing the importance of following established legal principles and judgments in tax matters.

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