2019 (11) TMI 601 - HC - Income Tax

Income Tax Settlement Commission (ITSC) power to invoke Section 154 dealing with rectification of mistakes - HELD THAT - In the light of the categoric pronouncement of the Supreme Court in Brij Lal 2010 (10) TMI 8 - SUPREME COURT , the question of applicability of section 154 to proceedings before the Settlement Commission except if it had been resorted to in the original proceedings, stands settled against the Revenue.

Summary

Issues:
Challenge to the jurisdiction of the Income Tax Settlement Commission (ITSC) to invoke Section 154 of the Income Tax Act, 1961.

Analysis:
The petitioner challenged an ITSC order, contending that the Commission lacked the power to invoke Section 154 for rectification of mistakes, thus claiming the order was jurisdictionally deficient. The trajectory of the matter involved a previous Supreme Court order in appeals questioning the Settlement Commission's authority to waive or reduce statutory interest. The Supreme Court remanded the matter back to the Settlement Commission for re-examination based on certain circulars. Subsequently, the Settlement Commission passed an order in response to miscellaneous applications regarding interest levies, which was challenged on the grounds of jurisdictional overreach.

The Settlement Commission's jurisdiction to reopen concluded proceedings using Section 154 was deliberated by a Division Bench of the Supreme Court in the case of Brij Lal. The Bench clarified that Settlement Commission proceedings resemble arbitration, distinct from regular tax assessments. The Settlement Commission operates under Chapter XIX-A, separate from the assessment procedures under Chapter XIV. The Bench emphasized that the Settlement Commission lacks the power to reopen concluded proceedings through Section 154, as its orders are considered final and conclusive, akin to ITAT's quasi-judicial status. The Bench highlighted the difference between review/recall and rectification under Section 154, asserting that the invocation of Section 154 in Settlement Commission proceedings would undermine the finality of settlements. The judgment underscored that the Settlement Commission's role is to settle liabilities, not determine them, emphasizing that Section 154 cannot be invoked in these circumstances.

In light of the Supreme Court's definitive ruling in Brij Lal, the application of Section 154 to Settlement Commission proceedings, except in cases where it was utilized in the original proceedings, was conclusively settled against the Revenue. Consequently, the Writ Petitions challenging the Settlement Commission's order were allowed, with no costs imposed.