2012 (4) TMI 337 - AT - Income Tax

Order of settlement commission - interest u/s 245D(4) and 245D(6) - held that - As is evident from the aforesaid procedure laid down u/s 245D of the Act, once the application is admitted, the assessee is required to pay the additional demand on the basis of income disclosed in the application within 35 days of the order of the Commission u/s 245D(1) and in case the demand is not paid within the time allowed interest at prescribed rate is chargeable under 245D(2C). There is no material before us nor there is anything to suggest that in the order of the Settlement Commission that the assessee did not comply with aforesaid order u/s 245D(1) of the Act. Similarly, when the Settlement Commission passes final order under section 245D(4) of the Act, the tax payable in pursuance of such an order is required to be paid by the assessee within 35 days of the receipt of copy of the order and for failure to do so, the assessee is liable to pay interest at the prescribed rate under section 245D(6A). Thus the interest payable under sections 245D(2C) and 245D(6) are in different contexts and are levied independently. Thus, the determination of income by the Settlement Commission is necessarily with reference to the income disclosed in the application filed under the said section in the prescribed form. Moreover, in terms of provisions of sec.245I of the Act, every order of settlement passed under sub-section (4) of section 245D is conclusive as to the matters stated therein and no matter covered by such order, save as otherwise provided in the Chapter XIXA, can be reopened in any proceeding under this Act or under any other law for the time being in force. - Decided in favor of assessee.

Issues Involved:

1. Deletion of interest charged by the Assessing Officer under Section 245D(2C) of the Income-tax Act, 1961.
2. Determination of undisclosed income by the Settlement Commission and its acceptance.
3. Charging of interest under Section 158BFA of the Income-tax Act, 1961.

Detailed Analysis:

1. Deletion of Interest Charged under Section 245D(2C):

The primary issue revolves around whether the revised offer of additional income by the appellants during the Settlement Commission proceedings can be considered a revision of the original application under Section 245C(1). The Assessing Officer (AO) charged interest under Section 245D(2C), arguing that the appellants revised their original application, thus defaulting on the additional tax payable from the date specified in Section 245D(2A). However, the appellants contended that there was no revision of the original application; instead, the additional income offer during the proceedings was a result of detailed hearings and was aimed at settling all disputable issues.

The CIT(A) concluded that the process of settlement, which includes detailed submissions and arguments, often results in an additional income offer by the applicant. This offer is not a revision of the original application but a part of the settlement process. The CIT(A) emphasized that there is no provision in Chapter XIX-A of the Act for revising an application once admitted under Section 245D(1). Consequently, the CIT(A) held that the undisclosed income settled by the Settlement Commission was due to its order under Section 245D(4), and any interest on this income should be charged under Section 245D(6A) and not under Section 245D(2C).

The Tribunal upheld the CIT(A)'s decision, noting that the determination of income by the Settlement Commission is based on the original application and the subsequent proceedings. The Tribunal also referenced the Supreme Court's ruling in Ajmera Housing Corporation v. CIT, which stated that there is no provision for revising an application under Section 245C(1). Therefore, the Tribunal dismissed the Revenue's appeal on this ground.

2. Determination of Undisclosed Income by the Settlement Commission:

The Settlement Commission's order under Section 245D(4) accepted the revised offer of additional income made by the appellants. The Commission determined the undisclosed income based on a 6% net profit rate on the unaccounted turnover, which was considered fair and reasonable. The Commission also accepted the appellants' offer of Rs. 20 lakhs as seed money for generating the unaccounted turnover, rejecting the CIT's estimation of 10% of the total turnover as unexplained investment.

The Tribunal agreed with the CIT(A)'s finding that the undisclosed income settled by the Settlement Commission was due to its order under Section 245D(4). The Tribunal emphasized that the Settlement Commission's determination of income is conclusive as per Section 245I, and any interest on this income should be charged under Section 245D(6A).

3. Charging of Interest under Section 158BFA:

The AO charged interest under Section 158BFA for the alleged default of late filing of the block return. The Settlement Commission, in its order, directed the AO to charge interest under Section 158BFA, as it is mandatory and cannot be waived. The CIT(A) upheld this direction, noting the mandatory nature of the provision.

The Tribunal found no reason to interfere with the CIT(A)'s decision on this ground, as the Settlement Commission's direction to charge interest under Section 158BFA was clear and mandatory.

Conclusion:

The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s decisions on all grounds. The Tribunal emphasized that the Settlement Commission's determination of income and the related interest charges are conclusive and must be adhered to as per the provisions of the Income-tax Act. The Tribunal also referenced relevant legal precedents to support its findings.

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