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TMI Blog2017 (7) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 1961 (hereinafter referred to as "IT Act") is effective prospectively from 01.06.2015 only and shall accordingly by applicable to the applications filed under Section 245C(1) after this date and to further hold that the interest under Section 234B of the IT Act in cases of application filed under Section 245C(1) prior to 01.06.2015 will be charged on additional income tax declared in such applications upto the order under Section 245D(1) of the IT Act in accordance with the decision of the Hon'ble Supreme Court in the case of Brij Lal and Others vs. Commissioner of Income Tax reported in 328 ITR 477 (SC) and not on additional income tax determined in the order under Section 245D(4) and to direct the respondent No.1 to accept the interest computed and accordingly paid by the petitioners in their applications filed under Section 245C(1) of the IT Act. Special Civil Application Nos.7112/2017 to 7124/2017 [3.0] Special Civil Application Nos.7112/2017 to 7124/2017 have been preferred by the respective petitioners for an appropriate writ, direction and order to quash and set aside the impugned order dated 24.08.2016 (AnnexureA) passed by the Income Tax Settlement Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the respective applications the respective applicants disclosed additional income assessment yearwise, the particulars of which are as under: Sr. No Name of Applicants Assessment Years (Rs. in lakhs) 200809 200910 201011 201112 201213 201314 201415 Total 1 Girish S. Shah 62.00 206.17 278.39 654.97 312.75 130.10 325.00 1,647.64 2 Girishchandra J. Patel 62.00 132.37 154.40 416.87 322.07 91.20 3.25 1,181.18 3 Ravikant Thakkar 5.40 10.21 28.99 106.72 49.58 24.99 1.10 227.01 4 Navdurga Developers 48.63 270.49 91.35 0.50 0.50 411.48 5 Shivam Associates 20.22 20.40 64.07 80.20 64.30 61.36 0.25 310.83 6 Taksh Realty 103.75 140.01 2.27 0.30 0.30 246.63 7 Nirman Associates 12.08 49.14 30.34 48.76 52.85 11.52 204.72 8 Gajkeval Developers 22.02 40.73 12.99 26.51 20.27 122.55 9 Trimurti Associates 0.15 0.20 89.59 8.28 2.80 7.45 0.25 108.73 10 Parijat Corp 0.20 0.25 38.76 19.49 24.59 7.96 3.57 94.83 11 Apple Dev 0.10 0.15 63.12 3.98 0.66 68.02 12 Taksh Creations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional 1% of total on money - Rs. 2,13,11,602/- [5.2] The applicants prayed that the immunity may be granted to them, its partners and officers from all penalty and prosecution under the IT Act. The applicants also prayed that time upto 31.12.2016 may be granted to make payment of further sum due as per order under Section 245D(4). That thereafter considering the above and the applications made on behalf of the applicants, the Settlement Commission passed the final order under Section 245D(4) as under: "11. Decision We have carefully considered the issues put forth in PCIT Rule 9 report, Applicant's rejoinder and oral arguments from both sides. We find that the applicants in true spirit of settlement has accepted further additional income of Rs. 1,83,381/ in the case of Shri Girish S. Shah, on account of rectifying the error in adopting the sale consideration in the purchase of the aforesaid land, a sum of Rs. 3,26,91,128/ on account of revision of onmoney and on account of additional 1% of total on money - Rs. 2,13,11,602/ which shall be brought to tax as per the workings enclosed to the letter dated 10.08.2016. In aggregate, the further additional incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addl. DIT (Inv.) Income Tax Settlement Commission, 4th Floor, Lok Nayak Bhawan, Khan Market, New Delhi - 110 003 has circulated Central Board of Direct Taxes letter F.No.299/78/2015IT (Inv.III/623 dated 18.04.2016 addressed to the Chairman, Income Tax Settlement Commission, New Delhi. In this letter, it is interalia stated that there is no ambiguity in so far as applicability of the provisions of Sec.234B(2A) is concerned and that the amendment of the provisions of Sec.234B was made subsequent to judgment of the Apex Court in the case of Brijlal and Calcutta High Court in the case of G.M. Foods. It is further stated since the applicability of the new provision came into force from 01.06.2015, it shall be applicable to the cases pending with the ITSC as on 01.06.2015 as well. We have given our careful consideration and are in agreement with the above stated position of law. Therefore, with due respect to the judgment of the Hon'ble Apex Court in the case of Brijlal vs. CIT (2010) 328 ITR 477 (SC) and judgment of the Hon'ble Calcutta High Court in G.M. Foods (2015) taxmann.com 16 (Cal.), the interest under Section 234B shall be charged after taking into consideration the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 234B and 234C of the IT Act, however considering the provisions of Section 234B(2A) of the IT Act and the amendment of the provision of Section 234B of the IT Act, which came into force with effect from 01.06.2015, the Settlement Commission passed an order to charge the interest under Section 234B of the IT Act after taking into consideration the provisions of Section 234B(2A) also. [5.4] Feeling aggrieved and dissatisfied with the impugned order passed by the learned Settlement Commission insofar as charging the interest under Section 234B while taking consideration the subsection (2A) of section 234B of the IT Act and charging the interest on the additional amount of income tax determined under Section 245D(4) of the IT Act, the petitioners have preferred the present Special Civil Applications for the aforesaid reliefs. [6.0] Shri S.N. Soparkar, learned Senior Advocate has appeared on behalf of the respective petitioners and Shri M.R. Bhatt, learned Senior Advocate has appeared on behalf of the Revenue. [7.0] Shri Soparkar, learned Counsel appearing on behalf of the petitioners has vehemently submitted that the impugned order/s passed by the learned Settlement Commission in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest, the quantum of income tax on which and period for which, interest is to be calculated. This computation mechanism is to be applied "where an application under subsection 1 of section 245C for any assessment year has been made." When such computation mechanism was not provided earlier, it clearly indicates that this new computation mechanism would be applicable prospectively and cannot be applied on applications which have been made prior to 1st June 2015." [7.2] It is submitted that despite the above, however considering the office memorandum dated 20.03.2016 issued by the CBDT in which it was mentioned that amendment shall be applicable to the pending applications before the Settlement Commission pending as on 01.06.2015, the learned Settlement Commission has passed the impugned order making the provision of section 234B(2A) applicable retrospectively, which is not permissible. [7.3] It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that the provision of section 234B(2A) shall not have retrospective effect and shall have the effect only with respect to the applications filed after 01.06.2015 and shall not be applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers (Supra). [7.6] It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that there is no explanation attached or introduced in section 234B(2A), like that which was inserted in section 234D by the Finance Act, 2012 with retrospective effect from 01.06.2003, clarifying that subsection (2A) will also be applicable to pending cases of settlement. [7.7] It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that as such in the memorandum to the clauses issued at the time of introduction of subsection (2A) clearly stated that there was no provision to levy interest under Section 234B on additional income tax declared in the application filed under Section 245C(1). It is submitted that therefore it is for the first time with effect from 01.06.2015 that such levy of interest has been introduced. It is submitted that therefore an altogether new levy cannot be made effective retrospectively. It is submitted that a vested right has accrued in favour of the petitioners when they had filed applications prior to 01.06.2015 which can only be taken by way of effecting retrospective amendment. [7.8] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present petitions and grant the reliefs as prayed for. 1. Brij Lal and Others vs. Commissioner of Income Tax 328 ITR 477 (SC) 2. J.K. Synthetics Limited vs. Commercial Taxes Officer (1994) 4 SCC 276 3. Tata Teleservices vs. Union of India (2016) 66 Taxmann.com 157 (Gujarat) 4. Commissioner of Income Tax vs. Smt. Sushma Saxena (1997) 223 ITR 395 (P&H) 5. Commissioner of Income Tax vs. Ram Kumar Agarwalla & Ors. (1980) 122 ITR 322 (Calcutta) 6. Star Television News Ltd. vs. Union of India (2009) 317 ITR 66 (Bombay) [8.0] All these petitions are vehemently opposed by Shri Manish Bhatt, learned Counsel appearing on behalf of the Revenue. [8.1] It is vehemently submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that the impugned order/s passed by the learned Settlement Commission directing to levy interest under Section 234B applying the provisions of section 234B(2A) and to levy the interest upto the order under Section 245D(4) is absolutely just and proper and in accordance with law and the provision of statute and considering the office memorandum / circular issued by the CBDT dated 28.03.2016. [8.2] It is further submitted by Shri Bhatt, learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been, as contended by the assessee, subsection (2A) of section 234B of the IT Act would be worded as "necessary application under subsection (1) of section 245C for any assessment year has been made on or after 01.06.2015, the assessee shall be liable to pay simple interest...". It is submitted that as per the settled proposition of law the provision of the Statute is required to be read as it is and neither any word can be added nor can be removed from the Statute. It is submitted that if the contention of the assessee is accepted, in that case, it would really amount to adding words which is not permissible. [8.5] It is further submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that the impugned decision of the Settlement Commission cannot be said to be in teeth of and/or contrary to the decision of the Hon'ble Supreme Court in the case of Brij Lal and Others (Supra) as sought to be contended on behalf of the petitioners. It is submitted that as such considering some of the observations made by the Hon'ble Supreme Court in the case of Brij Lal and Others (Supra), the legislature thought it fit to clarify the position that in respect of the regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence of the amount disclosed at the time of making application under Section 245C(1) of the IT Act and the amount determined while passing the order under Section 245D(4), under Section 234B of the IT Act after taking into consideration, the provisions of section 234B(2A) or not? [9.1] It is the case on behalf of the petitioners that as section 234B(2A) was enacted and came into force with effect from 01.06.2015, the same shall not be applicable retrospectively and shall not be applicable to the applications under Section 245C(1) of the IT Act, filed before 01.06.2015. It is also the case on behalf of the petitioners that as Clause (a) of subsection (2A) of section 234B imposes the liability of interest for the interegnum period i.e. for the period between the application under Section 245C(1) and the order under Section 245D(4) of the IT Act and provides for computation maximum by way of providing rate of interest and the quantum of income tax and the period for which the interest is to be calculated, the same shall not be made applicable retrospectively. It is also the case on behalf of the petitioners relying upon the decision of the Hon'ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the provisions of section 234B(2A) of the IT Act. [10.0] Having heard learned Counsel appearing for respective parties and on thoughtful consideration of the issue for the reaosns stated hereinbelow, we are of the opinion that the learned Settlement Commission is absolutely justified in directing to compute the interest under Section 234B of the IT Act after considering the provisions of section 234B(2A) of the IT Act. [10.1] At the outset it is required to be noted that as such while submitting the application under Section 245C(1) of the IT Act, a duty is cast upon the concerned applicant to make the disclosure truly and correctly. At the time of making application under Section 245 and at the stage of the proceedings before the Settlement Commission under Section 245C(1) of the IT Act, an applicant is required to make the true and correct disclosure and is required to pay the tax liability on such disclosure with interest upto the application under Section 245C(1) of the IT Act. However, thereafter, when the Settlement Commission passes an order under Sections 245D(1) and 245D(4) of the IT Act and it is found that there is a difference in the disclosure made at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht into Statute. Sections 234B and 234B(2A) of the IT Act reads as under: "234B.Interest for defaults in payment of advance tax. (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub section (1) of section 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. Explanation 1In this section, "assessed tax" means the tax on the total income determined under sub section (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 245D for any assessment year, the amount of total income disclosed in the application under subsection (1) of section 245C is increased, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the 1st day of April of such assessment year and ending on the date of such order, on the amount by which the tax on the total income determined on the basis of such order exceeds the tax on the total income disclosed in the application filed under subsection (1) of section 245C; (c) where, as a result of an order under subsection (6B) of section 245D, the amount on which interest was payable under clause (b) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly;" [10.3] Levy of interest / computation of interest shall arise only at the stage of order under Section 245D(4) of the IT Act and when the actual amount is determined, after following due procedure under Section 245 of the IT Act. Therefore, the relevant date would be the date on which the Settlement Commission passes the order under Section 245D(4) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount determined by the Settlement Commission which exceeds the disclosure under Section 245C(1) of the IT Act. [10.4] At this stage it is required to be noted that under Section 234B(2A) of the IT Act, the interest has been bifurcated into two parts i.e. (1) upto the stage of section 245C(1) application and (2) in the event of any additional determination of income of the disclosure under section 245(1) of the IT Act. As observed hereinabove, if the submission on behalf of the petitioners is accepted, in that case, despite section 234B of the IT Act which is held to be mandatory, there shall not be any interest liability upon the application on the additional amount determined by the Settlement Commission which exceeds disclosure under Section 245C(1) of the IT Act. It cannot be the intention of the legislature not to charge the interest on the additional amount determined by the Settlement Commission which exceeds disclosure under Section 245C(1) of the IT Act. As observed hereinabove and it cannot be disputed that while approaching the Settlement Commission, he has to make true and correct disclosure. The eventuality such as happened in the present petitions has arisen only whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. One of the question before the Hon'ble Supreme Court was whether the Settlement Commission is empowered to waive or reduce the interest under Section 234A read with Section 220(2) of the IT Act while exercising its jurisdiction under Section 245D(4) of the IT Act? After considering the entire scheme and the procedure to be followed by the Settlement Commission under Section 245 more particularly while passing the order under Section 245D, the Hon'ble Supreme Court has observed and held in para 9 as under: "9. The conclusions in Anjum's case (supra) can be summed up as follows. (1) Commission in exercise of its power under Section 245D(4) and (6), does not have the power to reduce or waive interest statutorily payable under Sections 234A, 234B and 234C, except to the extent of granting relief under the Circulars by Notification dated 23rd May, 1996 issued by the Board under Section 119 of the Act. While exercising the power derived under the Circulars of the Board, the Commission does not act as a subordinate to the Board but will be enforcing the relaxed provisions of the circulars for the benefit of the assessee in the process of settlement. (2) Interest due under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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