2016 (8) TMI 1375 - HC - Income Tax

Settlement of case - levy of interest u/s 234A and 234B - Held that - the observation of the Settlement Commission by extending terminal date upto 25.02.2000 calls for interference. Accordingly, the Writ Petitions are allowed to that extent and the terminal date as fixed by the Commission in its original order dated 25.02.2004 is confirmed

Issues involved:
1. Authority of Settlement Commission to waive or reduce statutory interest under Sections 234-A, 234-B, and 234-C.
2. Applicability of circulars issued by the Central Board under Section 119 of the Income Tax Act, 1961.
3. Power of the Settlement Commission to reopen proceedings and rectify orders under Section 245D.
4. Consideration of subsequent legal developments for review jurisdiction.
5. Setting aside the rate of interest ordered by the Commission.

Issue 1: Authority of Settlement Commission to waive or reduce statutory interest:
The High Court considered the authority of the Settlement Commission to waive or reduce statutory interest under Sections 234-A, 234-B, and 234-C. Referring to relevant legal precedents, the Court highlighted that the Settlement Commission does not possess the power to reduce or waive statutory interest except within the limits of relief granted under CBDT circulars. The Court allowed the appeals and remanded the matter back to the Settlement Commission to examine the applicability of specific circulars issued by the Central Board and determine the relief the respondents may be entitled to.

Issue 2: Applicability of circulars issued by the Central Board:
The Court analyzed the circulars issued by the Central Board under Section 119 of the Income Tax Act, 1961, to ascertain their relevance to the case. It was observed that the Settlement Commission should consider whether the respondents are entitled to benefits under the circulars. The Court directed the Commission to examine the applicability of the circulars to the facts of the appeals and determine the relief the respondents might receive.

Issue 3: Power of the Settlement Commission to reopen proceedings and rectify orders:
The Court examined the power of the Settlement Commission to reopen proceedings and rectify orders under Section 245D. It emphasized that the Commission does not have the inherent power of review and can only rectify mistakes apparent from the record. The Court cited relevant legal provisions and held that even after an amendment, the power of review is not conferred on the Settlement Commission. The Court referred to a case where the Commission's order rectifying an earlier decision was deemed unsustainable, emphasizing that subsequent legal developments cannot be a basis for review jurisdiction.

Issue 4: Consideration of subsequent legal developments for review jurisdiction:
The Court reiterated the principle that subsequent legal developments cannot be a ground for exercising review jurisdiction. It emphasized that such developments cannot be considered as errors apparent on the face of the record. The Court held that the Department should not be allowed to rely on subsequent legal decisions to challenge the Commission's orders. Consequently, the Court quashed the Commission's orders related to the computation of the terminal date for charging interest under Section 234B.

Issue 5: Setting aside the rate of interest ordered by the Commission:
The Court addressed the concern raised by the Revenue regarding setting aside the rate of interest as ordered by the Commission. It clarified that the Department would be entitled to interest only as ordered by the Commission in its final order. The Court allowed the writ petitions to the extent of confirming the terminal date fixed by the Commission in its original order, thereby interfering with the Commission's extension of the terminal date. No costs were awarded in this regard.

This detailed analysis of the judgment from the Madras High Court covers the various issues involved and the Court's comprehensive legal reasoning for each issue.

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