2004 (4) TMI 653 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Settlement Commission's order under Section 245D of the IT Act is conclusive and cannot be reopened.
2. Whether the Settlement Commission has the power to waive or reduce statutory interest under Sections 234A, 234B, and 234C of the IT Act.
3. Whether the Settlement Commission can rectify its order under Section 154 of the IT Act.

Issue-wise Detailed Analysis:

1. Conclusiveness of the Settlement Commission's Order:
The petitioners contended that an order made by the Settlement Commission under Section 245D of the IT Act is conclusive under Section 245-I and cannot be reopened in any proceedings under the Act or any other law. The court noted that Chapter XIX-A, which deals with the settlement of cases, is a complete code for settlement and includes provisions like Section 245D(6), 245E, and 245-I, which collectively indicate that the Settlement Commission's order is final and conclusive. The court emphasized that the Settlement Commission becomes functus officio after passing an order under Section 245D(4), meaning it has no further jurisdiction to reopen the case except in the manner provided in the chapter, such as in instances of fraud or misrepresentation.

2. Power to Waive or Reduce Statutory Interest:
The CIT had moved an application to rectify a mistake, arguing that the Settlement Commission does not have the power to waive or reduce statutory interest under Sections 234A, 234B, and 234C. The court referred to the Supreme Court's decision in CIT v. Anjum M.H. Ghaswala, which held that the Settlement Commission does not have the power to reduce or waive interest that is statutorily payable. The court reiterated that the Settlement Commission must act in conformity with the Act and cannot assume powers equivalent to the Board under Section 119 for granting such relief.

3. Rectification of Order under Section 154:
The Revenue argued that the Settlement Commission could rectify its order under Section 154 of the IT Act, as it has all the powers vested in IT authorities. However, the court clarified that the Settlement Commission's powers to act as an IT authority are limited to the period before making an order under Section 245D(4). After the order is made, the Settlement Commission loses jurisdiction to exercise such powers. The court also referenced the Division Bench decision in Sanjaybhai R. Patel's case, which assumed the Settlement Commission had the power to rectify under Section 154 but did not conclusively decide on it. The court concluded that the Settlement Commission could not invoke Section 154 to rectify its order, as it becomes functus officio after passing the order under Section 245D(4).

Conclusion:
The court quashed and set aside the orders made by the Settlement Commission under Section 154, emphasizing that the Settlement Commission's orders are final and conclusive and cannot be reopened except as provided in Chapter XIX-A. The court reiterated that the Settlement Commission does not have the power to waive or reduce statutory interest and cannot rectify its orders under Section 154 after becoming functus officio.