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TMI Blog2008 (3) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission"). 2. The following reliefs have been prayed for: "22. The petitioners, therefore, pray: A. that this hon'ble court be pleased to issue an appropriate writ, direction or order under articles 226 and 227 of the Constitution of India quashing and setting aside the order of the Special Bench of the Settlement Commission dated March 28, 1995, to the extent it holds that the petitioners are liable for interest under section 234B(1) read with sub-section (4) of the Income-tax Act for the assessment years 1989-90 and 1990-91 in cases where no interest was as such leviable under section 234B(1) and quashing the consequential directions for levy of such interest given by the Additional Bench, Bombay, of the Settlement Commission by its order dated September 11, 1995. B. that this hon'ble court be pleased to issue an appropriate writ, direction or order under articles 226 and 227 of the Constitution of India quashing the order of the Additional Bench, Bombay, of the Settlement Commission to the extent it holds that the second and third respondents are not bound to adjust Rs. 11 lakhs being the seized amount in March, 1990, against the advance tax dues of petitioners Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of powers under section 245D(1) of the Act. On February 26, 1993, the Commission passed final order under section 245D(4) read with section 245E of the Act. Vide orders made between 26 th and 28 th July, 1993, the Assessing Officer (AO) raised various demands giving effect to the consolidated order of the Commission dated February 26, 1993. On September 14, 1993, the petitioners moved the Commission seeking rectification/modification/clarification of the order dated February 26, 1993, in relation to the aforesaid two issues along with other issues. 5. In relation to the first issue, namely, whether interest was chargeable under section 234B of the Act, the Bench referred the matter to a Larger Bench. Ultimately, on March 28, 1995, the Larger Bench passed an order holding that interest was leviable under section 234B of the Act even in a case where the conditions stipulated by the provisions of sub-section (1) of section 234B of the Act were not fulfilled. The Commission, for recording such a finding, relied upon the provisions of sub-section (4) of section 234B of the Act by stating that when sub-section (4) of section 234B of the Act uses the phrase "increased or reduced" t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... varied by way of increase or reduction, but the said provision does not permit levy for the first time and, therefore, the Commission cannot derive any powers to levy interest in the absence of stipulated conditions under sub-section (1) of section 234B of the Act being satisfied. In support of the submissions made, reliance has been placed on the Calcutta High Court decision in the case of CIT v. Haripada Khatua [1998] 230 ITR 560 as well as the apex court decision in the case of Modi Industries Ltd. v. CIT [1995] 216 ITR 759. Reliance was also placed on the apex court decision in the case of CIT v. Anjum M. H. Ghaswala [2001] 252 ITR 1, to submit that the apex court has recorded an opinion that the Commission does not have powers to waive interest but converse therefrom cannot be deduced to mean that the Commission has powers to fasten a liability to pay interest if no liability exists. In other words, liability to pay interest cannot arise for the first time by virtue of the order made by the Commission. 7. On behalf of the respondent, Mr. B. B. Naik, learned senior standing counsel for the Revenue, submitted that in the case of CIT v. Hindustan Bulk Carriers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of concealed income. Section 245F dealing with powers and procedure of the Settlement Commission provides that in addition to the powers conferred on the Settlement Commission under Chapter XIX-A, it has all the powers which are vested in the income-tax authority under the Act. Sub-section (2) is of vital importance and provides that where an application made under section 245C has been allowed to be proceeded with under section 245D, the Commission shall, until an order is passed under sub-section (4) of section 245D, subject to the provisions of sub-section (3) of that section have exclusive jurisdiction to exercise the powers and perform the functions of the income-tax authority under the Act in relation to the case. In essence, the Commission assumes jurisdiction to deal with the matter after it decides to proceed with the application and continues to have the jurisdiction till it makes an order under section 245D. As noted by the Constitution Bench in Anjum's case [2001] 252 ITR 1 (SC), section 245D(4) is the charging section and sub-section (6) prescribes the modalities to be adopted to give effect to the order. It has to be noted that the language used in section 245D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest is without any basis. To sum up, the inevitable conclusion is that interest has to be charged for the period beginning from the first day of April next following the relevant financial year up to the date of the Commission's order at the rate applicable, on interest chargeable under section 234B, when an order under section 245D(4) is passed, followed by quantification under section 245D(6)." 9. Therefore, it becomes more than abundantly clear that while passing an order under section 245D(4) of the Act the Commission exercises powers of an income-tax authority as provided under section 245F of the Act and the Commission cannot be precluded from fastening liability to pay interest for that portion of income forming part of the total income as determined by the Commission which was not earlier disclosed before the Assessing Officer, even if no interest could have become leviable if originally disclosed income is considered in isolation by operation of section 234B(1) of the Act. 10. Hence, the petitioners cannot succeed on the first issue. The impugned order of the Commission dated March 28, 1995, is not required to be interfered with, but for different reasons as rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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