2016 (7) TMI 1505 - HC - Income Tax

Challenge of order of settlement commission - Condonation of delay - Partially Waiver of interest chargeable u/s. 234A 234B and 234C granted by the Settlement Commission in original order - Rectification filed - Rectification of above order was allowed by commission - Assessee challenged before High Court - High Court held that no rectification is permissible in view of decision of Supreme Court in case of Brij Lal and ors 2010 (10) TMI 8 - SUPREME COURT - department thereupon filed the present petitions challenging original order - HELD THAT - Settlement Commission having accepted substantially the application of the rectification filed by the department in the year 2002 the department had no cause or grievance against the rectified order of the Settlement Commission. Once the Settlement Commission accepted the rectification prayer of the department there was no order adverse to the department which could have been challenged. It was only by virtue of the High Court judgement dated 03.03.2014 that such order of the rectification came to be set aside thereby reviving the original unrectified order of the Settlement Commission dated 11.08.2000. The very right of the department to challenge the order of Settlement Commission therefore arose after 03.03.2014 by virtue of the judgement of the High Court. Till then the department had no cause to feel aggrieved by the order of Settlement Commission. If there was no order adverse to the department the department could not have challenged the same. Soon after the High Court passed the said order dated 03.03.2014 the department filed the present petitions. Looked from such angle we do not find any delay or laches on part of the department in moving these petitions. Delay if any is duly explained. Had the department delayed filing these petitions after the High Court reversed the rectification order of the Settlement Commission by the judgement dated 03.03.2014 we would have certainly considered the opposition of the assessees. We must clarify that to the extent the Settlement Commission in the order of rectification had turned down the prayers of the department such issue cannot be re-agitated in the present petitions. In other words the department not having challenged the order dated 11.10.2002 by which the rectification application of the department came to be partially disallowed it cannot now reopen the same question after long gap of time in the present petitions taking cue from the observations made by the High Court in the said judgement dated 03.03.2014. Under the circumstances we direct modification of the order of Settlement Commission dated 11.08.2000 by reversing the waiver of interest in terms of Settlement Commission s directions contained in its order dated 11.10.2002. We adopt the same directions for modification of the Settlement Commission s original order dated 11.08.2000. It is undisputed position that as held by the Supreme Court in case of Brij Lal and ors vs. Commissioner of Income Tax 2010 (10) TMI 8 - SUPREME COURT the Settlement Commission could have charged interest only upto the stage of passing order under Section 245D(1) of the Act. If the Settlement Commission had directed levy of such interest post the stage of Section 245D(1) in its order dated 11.08.2000 we clarify that beyond the said stage no interest shall be collected from the assesses.

Summary

Issues:
Challenge to Settlement Commission's order of waiver of interest; Power of Settlement Commission to waive interest; Rectification application by department; Jurisdiction of Settlement Commission for rectification; Delay in filing petitions challenging the order; Validity of rectification by Settlement Commission; Applicability of Supreme Court judgments on interest waiver.

Analysis:

1. The petitioner, an Income Tax Officer, challenged the Settlement Commission's order dated 11.08.2000 granting waiver of interest on tax payable by the assessee. Both the department and the assessee filed rectification applications disputing the interest waiver. The Settlement Commission partially allowed the department's application and rejected the assessee's request for further waiver. The Commission cited the Supreme Court judgment in Commissioner of Income Tax v. Anjum M.H. Ghaswala and ors, stating that waiver of interest was circumscribed by CBDT's notification dated 23.05.1996.

2. The assessees challenged the Commission's order through petitions, arguing that the Settlement Commission had no power of rectification based on the Supreme Court ruling in Brij Lal and ors vs. Commissioner of Income Tax. The High Court allowed the petitions, setting aside the Commission's rectification order and leaving the Revenue to pursue remedies against the original Settlement Commission order.

3. The department subsequently filed petitions challenging the original Settlement Commission order dated 11.08.2000 regarding the waiver of interest. The Court acknowledged the improper waiver of interest in the original order, citing the judgments in Anjum M.H. Ghaswala and Brij Lal cases. The department's delay in filing the petitions was contested by the respondent, but the Court found no delay as the department acted promptly after the High Court's judgment in 2014.

4. The Court clarified that the department had no cause for grievance against the rectified order until the High Court's judgment in 2014, which led to the filing of the present petitions. It was emphasized that the Settlement Commission could only levy interest up to the stage of passing the order under Section 245D(1) of the Income Tax Act, as per the Brij Lal case. The Court directed the modification of the original order to reverse the interest waiver and ensure interest collection only as permitted by the Supreme Court rulings.

5. In conclusion, the petitions were disposed of by adopting the directions for modification of the Settlement Commission's original order and clarifying the guidelines for interest levy post the specified stage under Section 245D(1) as determined by the Supreme Court.