9911796707
TMI Blog2024 (9) TMI 1629X X X X Extracts X X X X X X X X Extracts X X X X ..... that the same is admitted for further consideration. The amount which the applicant may ultimately be called upon to pay could hypothetically be more than that which may be disclosed in the SOF. This is by virtue of the exercise and inquiry which the ITSC is enabled to undertake in terms of sub-sections (3) and (4) thereof. It is only upon the conclusion of that inquiry that the ITSC proceeds to fame a formal order in terms contemplated under sub-section (4)(a) and frame consequential directions in accordance with sub-section (6). As in the case of Brij Lal [ 2010 (10) TMI 8 - SUPREME COURT] makes a clear distinction between the admission of an application under Section 245D (1) and the determinative exercise which the ITSC ultimately takes under Section 245D (4). It has in unequivocal terms observed that the interest liability flowing from Section 234 B cannot go or travel beyond the date of admission of the application under Section 245D (1). We are, therefore, of the firm opinion that the ITSC clearly committed no error in restricting the interest liability to the date of admission of the application. We find no merit in the challenge which stands mounted. The writ petition fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A, wherever applicable, is to be charged as per law. Interest if chargeable u/s 234B will be charged up-to the date of 245D (1) order, as per decision of Hon ble Supreme Court in the case of Brij Lal Ors. Vs. CIT [2010] 328 ITR 477 (S.C.) on the income computed in order u/s 245D (1) order. Interest u/s 220(2), if applicable on the sustained demand outstanding as on various dates is to be charged up to the date of this order. 4. Seeking to assail the view as taken by the ITSC it was the contention of Mr. Ojha that it was incumbent upon the ITSC to have called upon the respondent-assessee to pay interest on the income as disclosed in the SOF up to the date when the ITSC finally determined the settlement amount in terms contemplated under Section 245D (4). According to learned counsel the liability to pay interest up to that terminal date was one which clearly existed and stood embodied as a statutory obligation by virtue of the provisions contained in Section 234B (4) as it stood at the relevant time and which required a payment of interest up to the date when the ITSC makes a final order determining the settlement amount. 5. Mr. Ojha drew our attention to the decision rendered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This assumption of the Commission proceeds on the hypothesis that sub-section (6) of Section 245-D is a substantive provision. We are unable to agree with this view of the Commission. The substantive provision in regard to settlement in Chapter XIX-A, in our opinion, is sub-section (4) of Section 245-D. It is under this provision of the Act that the Commission will have to pass orders as it thinks fit on the matters covered by the application. In our opinion, sub-section (6) of Section 245-D is only procedural in nature. It provides for fixing the terms by which the amount settled in sub-section (4) will have to be paid. It is not a section which empowers the Commission either to waive or reduce the interest. At the cost of repetition, we must point out that apart from the fact that there is no specific empowerment of waiver or reduction of tax in Chapter XIX-A, it is also clear from the use of the expression in accordance with the provisions of this Act found in sub-section (4) of Section 245-D, the settlement will have to be in conformity with the Act and not contrary to or in conflict with it. There is yet another factor to be taken note of while interpreting sub-section (6) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commission has elaborately discussed the object of introduction of Chapter XIX-A in the Act, the history behind the introduction and schematic rationalisation of the provisions of Chapter XIX-A brought about through the Finance Act, 1987 to hold that in exercising its power under Chapter XIX-A it has almost an unbridled power to arrive at a settlement. This exercise of purposive interpretation by looking into the object and scheme of the Act and legislative intendment would arise, in our opinion, if the language of the statute is either ambiguous or conflicting or gives a meaning leading to absurdity. We do not find any such problem in the provisions of the Act to which we have already referred to. Sections 234-A, 234-B and 234-C in clear terms impose a mandate to collect interest at the rates stipulated therein. The expression shall used in the said section cannot by any stretch of imagination be construed as may . There are sufficient indications in the scheme of the Act to show that the expression shall used in Sections 234-A, 234-B and 234-C is used by the legislature deliberately and it has not left any scope for interpreting the said expression as may . This is clear from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rral orders dated 14-12-2004 and 20-1-2005 the following questions have been referred to the Constitution Bench of this Court: (i) Whether Sections 234-A, 234-B and 234-C of the Income Tax Act, 1961 (for short the Act ) are at all applicable to the proceedings of the Settlement Commission under Chapter XIX-A of the Act? (ii) Whether the Settlement Commission can reopen its concluded proceedings by having recourse to Section 154 of the Act so as to levy interest under Sections 234-A, 234-B and 234-C of the Act, though it was not so done in the original proceedings? (iii) Whether in the absence of period of limitation prescribed for making the order of the settlement, the relevant date for determining the quantum of interest could be the date of the said order? 2. For the sake of convenience, after hearing the learned counsel on both sides, we reframe the above questions: (I) Whether Section 234-B applies to proceedings of the Settlement Commission under Chapter XIX-A of the said Act? (II) If answer to the above question is in the affirmative, what is the terminal point for levy of such interest - whether such interest should be computed up to the date of the order under Section 245- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of total income is engrafted in the said provisions which is nothing but assessment which takes place at Section 245-D (1) stage. However, in that computation, one finds that provisions dealing with a regular assessment, self-assessment and levy and computation of interest for default in payment of advance tax, etc. are engrafted. [See Sections 245-C (1-B), 245-C(1-C), 245-D (6), 245-F(3) in addition to Sections 215(3), 234-A(4) and 234-B(4).] (II) Terminal point for the levy of interest Whether interest is payable under Chapter XIX-A up to the date of the order under Section 245-D (1) or up to the date of the order under Section 245-D (4)? 28. In our view the answer to the above question lies in the provisions of the proviso to Sections 245-C (1), 245-C (1-B) and 245-C(1-C), 245-D (4) and 245-F(3) which bring in the concepts of returned income, self-assessment, aggregation of income returned and income disclosed as if it is total income; levy of interest under Section 215(3) read with Section 245-D (4); increase of interest under Sections 234-A(4) and 234-B(4) read with Section 245-D (4) as also Sections 140-A (1-A) and (1-B) read with Sections 234-A and 234-B. For ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only the income disclosed in the return of income before the AO alone which survives for consideration by the Settlement Commission for settling the amount of income which is not disclosed in the return. 32. Under Section 245-C (1-B)(ii), if the applicant has furnished a return in respect of the total income, whether or not assessment is made in pursuance of the return, the additional amount of income tax payable in respect of the total income disclosed shall be on the aggregate of the total income returned and the income disclosed in his application for settlement as if such aggregate was his total income. This is pre-assessment collection of tax. Such pre-assessment is based on the estimation of the current income and tax thereon by the applicant himself. Now, when the Settlement Commission accepts the voluntary disclosure vide the application for settlement, Section 234-B (2) steps in. It is important to remember that the assessee is liable to pay advance tax, he commits default in payment to the extent of the undisclosed income but he offers to pay additional income tax then interest has to be calculated in accordance with Sections 207, 208 and 234-B (2) up to the date on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cases where 90% of the assessed tax is paid but on the basis of the Commission's order under Section 245-D (4) the advance tax paid turns out to be less than 90% of the assessed tax as defined in the Explanation to Section 234-B (1)? 37. As held hereinabove, under Section 245-C (1) read with Section 245-C (1-B) (ii) and Section 245-C (1-C) (b), the additional amount of income tax payable is to be calculated on the aggregate of total income returned and the income disclosed in the settlement application as if such aggregate is the total income. Thus, the scheme of the said sections is based on computation of total income and in that sense we have stated that such application for settlement is akin to a return of income. The said provision deals with total income . Thus, as stated above, Sections 234-A, B and C are applicable up to the stage of Section 245-D (1) order passed by the Settlement Commission. However, Parliament has not extended the provisions and the liability to pay interest beyond the date of application for settlement. This is the position even after the Finance Act of 2007. 38. Once this position is taken, Section 140-A is attracted. When an assessee has paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Settlement Commission, therefore, had no authority to waive it. 41. Further, as stated above, the jurisdiction of AO is not fettered merely because the applicant has filed the settlement application. The Act does not contemplate stay of the proceedings during that period i.e. when the Settlement Commission is deciding whether to proceed or reject the settlement application. The jurisdiction of the Settlement Commission to proceed commences only after an order is passed under Section 245-D (1). That, after making an application for settlement the applicant is not allowed to withdraw it [see Section 245-C(3)]. Once the case stands admitted, the Settlement Commission shall have exclusive jurisdiction to exercise the powers of the Income Tax Authority. 42. The order of the Settlement Commission under Section 245-D(4) shall be final and conclusive under Section 245-1 subject to two qualifications under which it can be recalled viz. fraud and misrepresentation but even here it is important to note that under Section 245-D(7) where the settlement becomes void on account of fraud and misrepresentation the proceedings with respect to the matters covered by the settlement shall be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has drawn our attention to Section 234B as it stood at the relevant time to submit that interest under that provision was concerned solely with the Return of Income as ordinarily filed and that reference to proceedings before the ITSC were only found in sub-section (4) as it existed. Learned senior counsel submitted that sub-section (4) of Section 234B stood confined to the amount of interest that would have been leviable by virtue of sub-sections (1) and (3) of Section 234B and clearly did not control the computation of interest liability for the purposes of Section 245C (1). 12. Our attention was drawn by Ms. Jha also to the significant amendments which have come to be introduced by virtue of Finance Act, 2015 with effect from 01 June 2015 and which now make additional provisions with respect to interest and the liability that would arise by virtue of an application being made under Section 245C (1). According to learned senior counsel once the assessee had made an application under Section 245C (1) and declared the amount at which it sought the settlement of all disputes, interest on that amount as declared and disclosed would cease to run once that application came to be admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g interest on that additional amount. Accordingly, it is proposed to insert a new subsection (2A) so as to provide that where an application under sub-section (1) of section 245C for any assessment year has been made, 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 making such application, on the additional amount of income-tax referred to in that sub-section. Further, where as a result of an order of the Settlement Commission under sub-section (4) of section 245D for any assessment year, the amount of total income disclosed in the application under sub-section (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 sub-section (1) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid in a specified territory outside India referred to in that section; (iv) any deduction, from the Indian income tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) any tax credit allowed to be set off in accordance with the provisions of section 115-JAA [or section 115-JD].] Explanation 2. Where, in relation to an assessment year, an assessment is made for the first time under section 147 [or section 153A], the assessment so made shall be regarded as a regular assessment for the purposes of this section. [Explanation 3. In Explanation 1 and in sub-section (3), (i) tax on total income as determined under sub-section (1) of section 143 shall not include the additional income-tax, if any, payable under section 140-B or section 143; and (ii) tax on the total income determined under such regular assessment shall not include the additional income-tax payable under section 140-B.] (2) Where, before the date of [determination of total income under sub-section (1) of section 143 or] completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise, (i) interest shall be calculated in accordance with the foregoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income determined under sub-section (1) of section 143 or on the basis of the regular assessment as referred to in sub-section (1), as the case may be.] (4) Where, as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 [* * *], the amount on which interest was payable under sub-section (1) or sub-section (3) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and (i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly; (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. (5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years. 16. A reading of that provision would indicate that it principally governs the issue of liability to pay inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment years referred to in clause (b) of sub-section (1) of (b) of sub-section (1) of section 153A or clause (b) of sub-section (1) of section 153B in case of a person referred to in section 153A or section 153C have been initiated, the additional amount of income-tax payable on the income disclosed in the application exceeds fifty lakh rupees, [(i-a) in a case where (A) the applicant is related to the person referred to in clause (i) who has filed an application (hereafter in this sub-section referred to as specified person ); and (B) the proceedings for assessment or re-assessment for any of the assessment years referred to in clause (b) of sub-section (1) of section 153A or clause (b) of sub-section (1) of section 153-B in case of the applicant, being a person referred to in section 153A or section 153C, have been initiated, the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees,] (ii) in any other case, the additional amount of income-tax payable on the income disclosed in the application exceeds ten lakh rupees, and such tax and the interest thereon, which would have been paid under the provisions of this Act h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant, the Settlement Commission shall , within a period of fourteen days from the date of the application, by an order in writing, reject the application or allow the application to be proceeded with: Provided that where no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with.] (1-A) [Omitted by the Finance (No. 2) Act, 1991, w.e.f. 27-9-1991.] (2) A copy of every order under sub-section (1) shall be sent to the applicant and to the [Principal Commissioner or Commissioner]. [(2A) Where an application was made under section 245C before the 1st day of June, 2007, but an order under the provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, has not been made before the 1st day of June, 2007, such application shall be deemed to have been allowed to be proceeded with if the additional tax on the income disclosed in such application and the interest thereon is paid on or before the 31st day of July, 2007. Explanation . In respect of the application referred to in this sub-section, the 31st day of July, 2007 shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007.] [(3) The Settlement Commission, in respect of (i) an application which has not been declared invalid under subsection (2C); or (ii) an application referred to in sub-section (2D) which has been allowed to be further proceeded with under that sub-section, may call for the records from the [Principal Commissioner or Commissioner] and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the [Principal Commissioner or Commissioner] to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case, and the [Principal Commissioner or Commissioner] shall furnish the report within a period of ninety days of the receipt of communication from the Settlement Commission: Provided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (6A) Where any tax payable in pursuance of an order under sub-section (4) is not paid by the assessee within thirty-five days of the receipt of a copy of the order by him, then whether or not the Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by instalments, the assessee shall be liable to pay simple interest at [one and one-fourth per cent for every month or part of a month] on the amount remaining unpaid from the date of expiry of the period of thirty-five days aforesaid.] [(6B) The Settlement Commission may, with a view to rectifying any mistake apparent from the record, amend any order passed [***] under sub-section (4) (a) at any time within a period of six months from the end of the month in which the order was passed; or (b) at any time within the period of six months from the end of the month in which an application for rectification has been made by the Principal Commissioner or the Commissioner or the applicant, as the case may be: Provided that no application for rectification shall be made by the Principal Commissioner or the Commissioner or the applicant after the expiry of six months from the end of the month in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10) On and from the 1st day of February, 2021, the provisions of sub-sections (6A) and (7) shall have effect as if for the words Settlement Commission , the words Settlement Commission or Interim Board of Settlement had been substituted. (11) The Central Government may by notification in the Official Gazette, make a scheme, for the purposes of settlement in respect of pending applications by the Interim Board, so as to impart greater efficiency, transparency and accountability by (a) eliminating the interface between the Interim Board and the assessee in the course of proceedings to the extent technologically feasible; (b) optimising utilisation of the resources through economies of scale and functional specialisation; (c) introducing a mechanism with dynamic jurisdiction. (12) The Central Government may, for the purposes of giving effect to the scheme made under sub-section (11), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the said notification: Provided that no such direction shall be issued after the 31st day of March, 2023. (13) Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
