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TMI Blog1992 (2) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ring on the above subject was fixed before the Special Bench at Bombay. A Special Bench of the Settlement Commission was constituted, vide Notification No. 1/43/Tech/90/SC, dated October 22, 1991, read with Notification No. 1/45/Tech/90/SC, dated December 3, 1991, to examine legal issues arising from the amendments made to Chapter XIXA of the Income-tax Act, 196 1, and corresponding provisions of the Wealth-tax Act, 1957, by the Finance Act (No. 2), 1991. Vide Notification dated December 20, 1991, the Chairman, Settlement Commission, directed that, in order to determine the scope of the statutory powers of the Income-tax Settlement Commission regarding reduction and waiver of interest under sections 234A, 234B and 234C of the Income-tax Act, 1961, and to minimise litigations arising therefrom, this issue shall be heard by the Special Bench as constituted above in the case of the applicant as well. Our order below is the result of deliberations before the Special Bench at Bombay in the course of which, inter alia, the issue formulated in the case of the applicant was considered. For the applicant, Shri Niraj Jain, FCA, argued the case while the Department was represented by Shri J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settlement including tax, penalty or interest ... [section 245D(6)]. but, in doing so, it has to take into account the fact that the settlement should be effective. Thus, a basic requirement is to settle cases and determine the tax, penalty and interest payable by the applicant. His argument was that if the interest chargeable under section 234A, 234B and 234C was mandatory and could not be waived, the word "interest" brought into section 245D(6) by the Finance Act, 1987, with effect from June 1, 1987, would not have been retained after the amendment of the Act by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989 (sic). He then pointed out to "Notes on Clauses of Finance Bill, 1990". In the Memorandum Explaining the Provisions of the Finance Bill (page 344), it has been stated that in terms of section 119(2)(a), the Government proposed to give the Board the powers to relax the rigours of section 234A and 234B (later, with effect from April 1, 1991, section 234C as well). Clearly ,therefore, the intention of the Government was that, in the case of hardship, some authority should have the powers to reduce or waive the interest chargeable for furnishing the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot do so . . . Similarly, if, under section 234B, the Central Board of Direct Taxes could waive or reduce interest chargeable for default in payment of advance tax in respect of a "class of cases" in which the money seized by the Department in the course of search and seizure operations under section 132 was lying with the Department (for which reason the assessees concerned were not in a position to pay the advance tax due from them) and this power was not available to the Settlement Commission, it would also lead to justice being denied by the Commission to such class of cases. This surely could not be the intention of the Legislature, the Settlement Commission having been set up to mitigate the hardship caused to certain class of assessees, namely, those who wanted to come clean should not be any worse off than a run-of-the-mill class of cases which approached the Department. Opening the case for the Department, Shri Jetley said that what the Commission had to consider was whether, within the four corners of the law as it stood, it had the powers of the Central Board of Direct Taxes for waiving or reducing interest in individual cases brought before it for settlement. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As against this, section 119(2)(a) which referred to the powers of the Central Board of Direct Taxes were exercisable in respect of "class of cases" and "class of incomes" and these could be in the form of instructions to subordinate authorities. In this connection, Shri Jha referred to the decisions of the courts cited at K. P. Varghese v. ITO [1981] 131 ITR 597 (SC) and Khoday Industries P. Ltd. v. CIT [1987] 163 ITR 646 (Kar). The courts had held that marginal notes can indicate the purpose for which a particular piece of legislation had been made. According to him, the marginal note for section 119 was "instructions to subordinate authorities" and, therefore, this section was not available for any income-tax authority issuing instructions to itself. He then cited CWT v. Yuvraj Amrinder Singh [1985] 156 ITR 525 ; [1985] 4 SCC 608, for the proposition that objectives and purposes must be looked into to interpret the section. The object of section 119 was to issue orders, instructions and directions to other income-tax authorities as may be deemed fit for the proper administration of the Act and that too with regard to the generality of cases/assessees coming within the parameters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... negative on account of the special circumstances or reasons applicable to him alone as a result of which he could be treated as a class by himself. It is to be noted that, as against this, section 119(2) talks of instructions, etc., being issued to subordinate authorities in any "class of cases" or "class of incomes" which in effect means that a single individual is excluded even if he is a class by himself. Again, reference to a Karnataka High Court's decision in the case of Khoday Industries Pvt. Ltd. v. CIT [1987] 163 ITR 646 for arguing that the marginal note indicates the purpose for which a section has been incorporated in the Act begs the issue before the court. The court's observation was that the heading of the section generally gives a clue to the understanding of the section though it cannot control the plain language of the section. In that case, the heading of section 80J of the Income-tax Act, 1961, expressly used the term "newly established" before the term "industrial undertaking" in respect of which detailed provisions were made for special deduction for a specified period. The court observed that, even if the terms "newly established" did not occur in the body of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Commission has the authority to regulate its own procedure and the procedure of Benches of the Commission in all matters arising out of the exercise of its powers or discharge of its functions but this has to be subject to the provisions of Chapter XIXA. This Chapter, in clear terms, provides for settlement of "a case" or "the case" in respect of "an application" which has been allowed to be proceeded with. Thus, the intention of the Legislature, as we understand it, was to vest the Settlement Commission with powers to first dispose of the applications submitted by an assessee and, after the application was admitted, to settle the case before it for which purpose, up to the time the order under section 245D(4) was passed, the Commission had all the powers of an income-tax authority. That being the position, it is difficult to appreciate the arguments submitted on behalf of the applicant that section 245F(7) read with section 119(2)(a) gave to the Settlement Commission the powers to issue orders, instructions or directions in respect of any "class of incomes" or "class of cases" whether to itself or to other income-tax authorities. We do appreciate the arguments of learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the word "interest" in section 245D(6) by itself cannot lead to any inference, one way or another, in regard to the power to waive or reduce interest for and from the assessment year 1989-90. The above is the position of law as it currently stands. It is not for us to recommend that the Legislature should have given to the Settlement Commission the same administrative powers for issue of instructions to subordinate authorities for the proper administration of the Income-tax Act as are available to the Central Board of Direct Taxes. Suffice it to say that, presently, for reasons mentioned above, there is no scope for the Commission to exercise its statutory powers to reduce or waive interest chargeable under sections 234A, 234B and 234C for the assessment year 1989-90 and onwards except in those cases which fall within the 'class of cases" or "class of incomes" covered under the instructions, directions, etc., issued by the Central Board of Direct Taxes. Having regard to the aforesaid discussion, the Principal Bench of the Settlement Commission at Delhi may pass an appropriate order to dispose of the request of the applicant, Shri Ashwani Kumar Aggarwal, for waiver of interest ..... 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