2020 (9) TMI 734 - HC - Income Tax

Income Tax Settlement Commission order - rejecting the prayer for waiver of interest levied under Section 234B of the Act and further ordered that the interest u/s. 234B shall be charged up to the date of order u/s.245D(4) - HELD THAT - The order passed on the Settlement Applications filed by the assessee is dated 07.01.2000. The second order of ITSC was passed on 19.02.2004. After those orders passed by ITSC on the issue in question, concerning the assessee, in the year 2010, the Honourable Supreme Court had an occasion to deal with the said issue in the case of Brij Lal Others Vs. CIT, Jalandhar 2010 (10) TMI 8 - SUPREME COURT Another Constitution Bench also dealt with the issue and rendered its decision of CIT Vs. Anjum M.H.Ghaswala 2001 (10) TMI 4 - SUPREME COURT held that the Settlement Commission cannot re-open its concluded proceedings by invoking Section 154 of the Act so as to levy interest under Section 234B in view of Section 245I. The terminal point for the levy of interest under Section 234B would be up to the date of the order under section 245 D (1) and not up to the date of the Order of Settlement under Section 245D(4). Sections 234A, 234B and 234C are applicable to the proceedings of the Settlement Commission under Chapter XIX-A of the Act to a certain extent. Even after the above said decision of the Constitution Bench of the Honourable Supreme Court in the case of Brij Lal Other 2010 (10) TMI 8 - SUPREME COURT in the case of Kakadia Builders (P.) Ltd. 2019 (3) TMI 402 - SUPREME COURT by decision had an occasion to deal with the issue which is similar to the case on hand, wherein, the Supreme Court held that the Settlement Commission's order was already held bad in law on the ground that it was passed under Section 154 of the Act, the same was neither in existence for any purpose nor it could be relied upon by the High Court much less for making it a part of their order for issuing a writ. In such circumstances, following the said decision, the subsequent order passed by the Settlement Commissioner rectifying its order insofar as it pertained to waiver of interest, based on the subsequent legal position on the issue, was remanded back to the Settlement Commission. Writ Appeal is liable to be allowed

Summary

Issues Involved:
1. Legality of the Income Tax Settlement Commission's (ITSC) order dated 19.02.2004 rejecting the waiver of interest under Section 234B.
2. Authority of the ITSC to reopen and rectify its earlier order dated 07.01.2000.
3. Applicability of Supreme Court decisions on the waiver of interest under Section 234B.

Comprehensive, Issue-wise Detailed Analysis:

1. Legality of the ITSC's Order Dated 19.02.2004:
The ITSC passed an order on 19.02.2004 rejecting the waiver of interest levied under Section 234B and directed that interest should be charged up to the date of the order under Section 245D(4). This decision was based on subsequent Supreme Court rulings, specifically CIT Vs. Hindustan Bulk Carriers (2003) 259 ITR 449 (SC) and CIT Vs. Demani Brothers (2003) 259 ITR 475 (SC), which clarified that interest under Section 234B should be charged from the 1st day of April following the relevant financial year up to the date of the ITSC order under Section 245D(4).

2. Authority of the ITSC to Reopen and Rectify Its Earlier Order:
The respondents (Partnership Firm) challenged the ITSC’s authority to reopen its earlier order dated 07.01.2000. The ITSC had initially granted a waiver of interest, which was later contested by the Revenue Department through two Miscellaneous Petitions filed on 18.03.2002 and 24.07.2003. The ITSC reconsidered its earlier decision in light of the Supreme Court's rulings and rectified the order, stating that the waiver granted was a mistake. The ITSC's action was based on the argument that the initial waiver did not consider the CBDT Circulars and subsequent Supreme Court decisions.

3. Applicability of Supreme Court Decisions:
The learned Single Judge initially set aside the ITSC’s order dated 19.02.2004, following the precedent set by the Supreme Court in Brij Lal & Others Vs. Commissioner of Income Tax, Jalandhar [CDJ 2010 SC 968], which held that the Settlement Commission could not reopen its concluded proceedings to levy interest under Section 234B. However, the Division Bench of the High Court later referred to the Supreme Court's decision in Kakadia Builders (P). Ltd., Vs. Income Tax Officer Ward 1(3) [2019] 103 taxmann.com 53 (SC), which remanded a similar issue back to the Settlement Commission for reconsideration in light of the settled law.

Judgment:
The Division Bench allowed the Writ Appeal, setting aside the learned Single Judge's order dated 02.08.2017. The matter was remitted back to the ITSC to decide the issue of waiver of interest afresh, considering the Supreme Court's decisions in CIT Vs. Anjum M.H.Ghaswala and Brij Lal Vs. CIT. The ITSC was directed to provide an opportunity to the parties concerned and re-evaluate the waiver of interest under Section 234B based on the clarified legal position.

Conclusion:
The High Court's Division Bench emphasized the need to align the ITSC's decisions with the Supreme Court's rulings, ensuring that interest under Section 234B is charged correctly up to the date of the order under Section 245D(4). The case was remanded back to the ITSC for reconsideration, reflecting the evolving legal interpretations and the necessity for consistent application of tax laws.