2017 (8) TMI 614 - HC - Income Tax

Withdrawal of Waiver of interest u/s 234A & 234B - order by settlement commission - petitioners were aggrieved as they cannot be saddled with liability alone and the 1st respondent cannot be permitted to withdraw the concessions unilaterally - terminal date for charging of interest under Section 234B - rectification petition - Held that - In an identical circumstance, in the case of R. Vijayalakshmi V. Income Tax Settlement Commission 2016 (8) TMI 657 - MADRAS HIGH COURT answered the issue in favour of assessee wherein held that Sub-section (1) of Section 245(F) which states that Settlement Commission shall have all powers which are vested in Income Tax Authority under the Act cannot be read in isolation but it should be red in tandem with Section 245(I) and if it is done, then it is to be held that there is no power of review conferred on the Commission to reopen the proceedings. This position held the field till an amendment was inserted under Section 6(b) of Section 245D by Finance Act 2011 with effect from 01.06.2011. Even the said provision is not a power of review. But, the phraseology used by the legislation is rectification and such rectification can be done on any mistake apparent from the record. Therefore, such power exercisable under sub Section 6D of Section 245D can be exercised only to rectify a mistake and such mistake should be apparent from the record. Thus, even as per the amendment made by Finance Act, 2011, power of review is not conferred on the Settlement Commission. The order passed by the Settlement Commission rectifying its earlier order cannot be sustained and must perish. Even otherwise, it is an error within the jurisdiction of the Commission and it was not an error which went to the root of its jurisdiction and held that if at all revenue had to question the same, it should be by a writ of certiorari. Revenue while rectification/recalling of the order passed by the Commission, referred to a decision of Hindustan BulK Carrirs 2002 (12) TMI 10 - SUPREME Court with respect to the terminal date for charging of interest under Section 234B. Admittedly, these decisions were rendered by the Hon ble Supreme Court much after the final order was passed by the Commission under Section 245D(4). Rudimentary legal principle is that subsequent development of law cannot be a ground to exercise review jurisdiction and that cannot be taken into consideration as an error apparent on the face of the record. Hence, on that ground also, the Department should be non-suited

Summary

Issues involved:
Challenge to order of Income Tax Settlement Commission dated 19.02.2004; Validity of reopening proceedings after conclusion; Alteration of terminal date for charging interest based on subsequent Supreme Court decision.

Analysis:
The petitioners challenged the order passed by the Income Tax Settlement Commission dated 19.02.2004, which granted waiver of interest under Sections 234A & 234B for assessment years 1988-89 to 1992-93 and 1995-96. The petitioners paid a sum pursuant to the order. Subsequently, the Departmental representative sought a counter to a miscellaneous petition for varying the order. The petitioners contended that the Department cannot unilaterally withdraw concessions and misquoted a Supreme Court judgment. Despite contesting before the Settlement Commission, the impugned order was passed, reopening the earlier order, leading to the writ petition challenging the same.

In a similar case, the High Court considered the power of the Commission to reopen proceedings after conclusion and alter the terminal date for charging interest based on a subsequent Supreme Court decision. The Court held that the Commission lacked the power of review unless specifically conferred by statute. The power of rectification under Section 245D could only be exercised to rectify a mistake apparent from the record. The Court cited a case where the Commission's order rectifying an earlier decision was held unsustainable. It emphasized that subsequent legal developments cannot be a ground for review jurisdiction, leading to the quashing of the impugned order in the present case.

The Revenue did not dispute the legal principle from the above decision, which was followed in other cases as well. Applying this decision to the petitioners' case, the Court concluded that the impugned order was unsustainable. Consequently, the writ petition was allowed, and the impugned order was quashed, with no costs incurred.