2024 (8) TMI 757 - HC - Income Tax

Rectification u/s 154 of an order of the Settlement Commission - levy interest u/s 234B, as not done in the original proceedings - HELD THAT - Issue should be decided adverse to the Department and in favour of the petitioner by virtue of a judgment in the case of Brij Lal 2010 (10) TMI 8 - SUPREME COURT as held in computation of additional income tax payable by the assessee, there is no mention of section 154. On the contrary, under section 245I the order of the Settlement Commission is made final and conclusive on matters mentioned in the application for settlement except in the two cases of fraud and misrepresentation in which case the matter could be re- opened by way of review or recall. Like ITAT, the Settlement Commission is a quasi-judicial body. Under section 254(2), the ITAT is given the power to rectify but no such power is given to the Settlement Commission. Thus, we hold that Settlement Commission cannot reopen its concluded proceedings by invoking section 154 of the Act. Interest charged u/s 234B becomes payable on the income disclosed in the return and the income disclosed before the Settlement Commission; that, such interest is chargeable till the Commission acts in terms of section 245D(1) and that after the Settlement Commission allows the application for settlement to be proceeded with there will be no further charge of interest u/s 234B. Thus, even on the question of terminus there was lot of controversy and in the circumstances, we are of the view that invocation of section 154 (held to be inapplicable to Chapter XIX-A proceedings) cannot be justified - WP allowed. WP allowed.

Summary

Issues:
Jurisdiction of Assessing Officer for rectification under Section 154 of an order of the Settlement Commission.

Analysis:
The judgment addresses the issue of whether the Settlement Commission can re-open its concluded proceedings through Section 154 of the Income Tax Act to levy interest under section 234B, especially if it was not done in the original proceedings. The court emphasizes that the Settlement Commission's proceedings are akin to arbitration proceedings, distinct from regular assessments under different sections of the Act. It notes that the Settlement Commission operates under Chapter XIX-A, while the provisions for interest under section 234B fall under Chapter XVII. The court highlights that the Settlement Commission, being a quasi-judicial body like ITAT, lacks the power to rectify under Section 154, as granted to ITAT under section 254(2). The judgment underscores that the finality of the Settlement Commission's order is crucial, except in cases of fraud or misrepresentation. It clarifies that the Settlement Commission's objective is to settle liabilities, not determine them, contrasting it with assessments under Chapter XIV. The court also delves into the controversy surrounding the terminus of interest under section 234B, citing previous judgments for context.

The court concludes that the Settlement Commission cannot reopen concluded proceedings using Section 154, as it would undermine the finality of settlements under Chapter XIX-A. The judgment quashes the impugned order dated 20.11.2003 and rules in favor of the petitioner, aligning with the precedent set in the case of Brij Lal and Others v. Commissioner of Income Tax [(2010) 328 ITR 477]. The decision highlights the distinct nature of Settlement Commission proceedings and the limitations on its authority to rectify orders, emphasizing the importance of maintaining the settlement's integrity and finality.