2016 (8) TMI 657 - HC - Income Tax

Power of the Commission to reopen its proceedings - Rectification application - whether the Settlement Commission could have entertained a miscellaneous petition at the behest of the Department for rectifying its orders dated 16.7.1998, 15.10.1998 and 16.7.1998, under Section 245D(4) of the Act - Held that - When the statute does not provide power of review with the authority and if it is done, it has to be termed as wholly without jurisdiction. 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 read 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 1.6.2011. 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. 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. Hence for all the above, order of the Settlement Commission is held to be unsustainable and it is accordingly quashed. Consequently, the orders dated 19.1.2005, 13.12.2004 and 19.1.2005 and order dated 14.7.2005, 4.2.2005, insofar as it relates to the computation of terminal date for charging the interest under Section 234B alone and the order passed by the Settlement Commission dated 8.8.2007 are quashed. After the above order was dictated, the learned Standing Counsel for the respondent Department submitted that if the order passed by the third respondent is quashed, then it would amount to setting aside the rate of interest as ordered by the Commission. The Revenue need not have any apprehension in this regard and this Court has held that the order passed by the Commission dated 16.7.1998,15.10.1998 and 16.7.1998 under Section 245D(4) has become final and the Department will be entitled to interest only as ordered by the commission.

Issues:
1. Scope and power of Settlement Commissioner under the Income Tax Act to rectify its orders.
2. Whether the Settlement Commission could entertain a miscellaneous petition from the Department for rectifying its orders under Section 245D(4) of the Act.
3. The power of the Settlement Commission to reopen its proceedings.
4. The legality of rectifying an earlier order by the Settlement Commission under Section 245D of the Income Tax Act, 1961.
5. The impact of subsequent legal developments on the review jurisdiction of the Settlement Commission.

Analysis:

Issue 1: Scope and power of Settlement Commissioner under the Income Tax Act to rectify its orders
The case involved multiple Writ Petitions arising from a common issue regarding the Settlement Commissioner's authority to rectify orders under the Income Tax Act. The Settlement Commission passed orders on miscellaneous petitions filed by the Department seeking rectification of earlier orders. The petitioners challenged these orders, leading to a series of Writ Petitions.

Issue 2: Entertaining a miscellaneous petition for rectification
The main issue was whether the Settlement Commission could entertain a miscellaneous petition from the Department for rectifying its orders under Section 245D(4) of the Act. The Department filed petitions after several years, citing errors in interest calculations based on subsequent Supreme Court judgments. The petitioners argued that the Commission had no jurisdiction to entertain the miscellaneous petition due to statutory limitations.

Issue 3: Power of the Settlement Commission to reopen proceedings
The Court analyzed the power of the Commission to reopen proceedings, emphasizing that the statute did not confer a power of review on the Commission. The Settlement Commission's authority was limited to rectifying mistakes apparent from the record, as per the provisions of Section 245D.

Issue 4: Legality of rectifying an earlier order
The legality of rectifying an earlier order by the Settlement Commission was questioned. The Court referred to a previous case where rectification by the Commission was deemed impermissible beyond its jurisdiction. The Commission's power to rectify orders was restricted to correcting mistakes that were apparent from the record.

Issue 5: Impact of subsequent legal developments
The Court clarified that subsequent legal developments, such as new judgments by the Supreme Court, could not be grounds for exercising review jurisdiction. The Settlement Commission's orders were held to be unsustainable and were subsequently quashed, emphasizing that subsequent legal developments could not be considered as errors apparent on the face of the record.

Overall, the Court ruled in favor of the petitioners, quashing the orders of the Settlement Commission and emphasizing the finality of orders passed under Section 245D(4) of the Act. The Department's apprehensions regarding interest calculations were addressed, and the Writ Petitions were allowed without costs.

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