2004-VIL-336-GUJ-DT
Equivalent Citation: [2004] 267 ITR 129, 187 CTR 583, 135 TAXMANN 210
GUJARAT HIGH COURT
Date: 15.01.2004
AOP OF SANJAYBHAI R. PATEL AND OTHERS
Vs
ASSESSING OFFICER/ASSISTANT COMMISSIONER OF INCOME-TAX.
BENCH
Judge(s) : A. R. DAVE., K. A. PUJ.
JUDGMENT
The judgment of the court was delivered by
K.A. PUJ J.-Since a common issue is involved in all these petitions, the same are being disposed of by this common judgment.
The petitioners have filed these petitions under article 226 of the Constitution of India challenging the orders passed by the Settlement Commission, respondent No.2 herein, on March 20,2003, under section 154 of the Income-tax Act, 1961, withdrawing the reduction or waiver of interest granted by the Settlement Commission under sections 234A, 234B and 234C of the Act, while passing the orders under section 245D(4) of the Act on March 31,1999.
The brief facts giving rise to the present petitions are as under:
The petitioners have approached the Settlement Commission for settlement of their cases in accordance with the provisions of Chapter XIX-A of the Income-tax Act (hereinafter referred to as the" Act"). The Settlement Commission had passed orders on March 31,1999, under section 245D(4) in respect of each of the petitioners, inter alia, waiving and/or reducing interest under sections 234A, 234B and 234C of the Act in accordance with the state of law at the relevant point of time. After a period of a little less than four years, the petitioners received notices dated February 21,2003, from the Settlement Commission stating that in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1, the orders passed on March 31,1999, required rectification and the petitioners were asked to file their objections latest by March 7,2003, and to attend the hearing on March 11, 2003. Since the time granted was very short, the petitioners have asked for further time to file their reply and hence, the Settlement Commission had issued another notice dated March 7,2003, for rectification of the order dated March 31,1999. The petitioners have filed their reply on March 8,2003, stating, inter alia, that the Settlement Commission has no power to rectify its order under section 154 of the Act as it is not an "income-tax authority" referred to in section 116 of the Act. The Settlement Commission after having considered the said reply had passed orders on March 20,2003, withdrawing the reduction or waiver of interest granted by it vide its order dated March 31,1999.
It is these orders of the Settlement Commission passed under section 154 of the Act which are under challenge in the present group of petitions.
Mr. J.P. Shah, the learned advocate for the petitioners, in all these petitions, submitted that the Settlement Commission does not have any power to rectify its order under section 154 of the Act in as much as such power is vested in an income-tax authority referred to in section 116 of the Act. He has further submitted that the Settlement Commission is not an income-tax authority referred to in section 116 of the Act. Over and above this contention, he has also submitted that the past debatibility of the issue does not disappear because of a later decision of the Hon'ble Supreme Court. In support of his submission, he relied on the decision of the Calcutta High Court in the case of Jiyajeerao Cotton Mills Ltd. v. ITO [1981] 130 ITR 710. Prior to the decision of the Hon'ble Supreme Court in Ghaswala's case [2001] 252 ITR 1, the law was understood to the effect that the Settlement Commission has the power to waive or reduce interest under sections 234A, 234B and 234C and in any case, the position of law prior to the Supreme Court decision was that whether such power was there or not was debatable and hence such debatable issue cannot be made the subject-matter of proceedings under section 154 of the Act.
Mr. Shah has further submitted that the very foundation of passing the order under section 154 by the Settlement Commission is erroneous as the Hon'ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1 has held that the Settlement Commission has power to waive or reduce interest under sections 234A, 234B and 234C of the Act. In this connection, he has invited our attention to the penultimate para of the said judgment wherein the Hon'ble Supreme Court has taken the view that the Settlement Commission has no power to issue circulars. However, if the assessee is entitled to the benefit granted under the circular, the Settlement Commission has power to grant that benefit by reducing or waiving interest under sections 234A, 234B and 234C of the Act, under the circulars issued by the Board under section 119 of the Act.
Mr. Shah has further submitted that under the Act, no specific power is given to the Settlement Commission to rectify orders passed under section 245D(4) of the Act by invoking the provisions of section 154 of the Act. In the absence of such powers, the action taken by the Settlement Commission while passing the impugned order is absolutely without jurisdiction and deserves to be quashed and set aside. In this connection, he relied on the decision of the Privy Council in the case of CIT v. Khemchand Ramdas [1938] 6 ITR 414 wherein it is held that once a final assessment is arrived at, it cannot be reopened except in the circumstances detailed in sections 34 and 35 of the Act and within the time limit by these sections. Section 34 of the old Act, i.e., Act of 1922, deals with reopening of assessment whereas section 35 of the said Act deals with rectification of mistake.
Mr. Shah has further submitted that the decision of the Privy Council in the case of CIT v. Khemchand Ramdas [1938] 6 ITR 414 was considered by this court in the case of Mandal Ginning and Pressing Co. Ltd. v. CIT [1973] 90 ITR 332 and it was held that "when an order of rectification is passed under section 35(1) it undoubtedly rectifies the assessment under section 23 and is a part of the procedure for ascertainment and imposition of tax liability. But the enhanced tax liability which results owes its validity to the exercise of power under section 35(1) and not to the exercise of power under section 23. There is no mandate that when the Income-tax Officer rectifies an assessment under section 35(1) he must follow the procedure laid down in sections 22 and 23 as laid down in section 34, nor is there any fiction created by the statute that when an assessment is rectified in exercise of the power conferred under section 35(1), the rectified assessment shall be deemed to be an assessment under section 23 or shall be treated as an assessment under section 23." Based on these observations, Mr. Shah has submitted that the order passed by the Settlement Commission under section 154 of the Act cannot be treated as the order passed by it under section 245D(4) of the Act.
Mr. Shah has further submitted that section 245F(1) of the Act does not include the power to rectify the order passed by the Settlement Commission under section 245D(4) of the Act. In this connection, he invited our attention to the decision of the Hon'ble Supreme Court in the case of CIT v. Paharpur Cooling Towers (P.) Ltd. [1996] 219 ITR 618 wherein while dealing with the contention raised on behalf of the assessee that sub-section (1) of section 245F confers the powers of an income-tax authority upon the Settlement Commission including the power to reopen assessments as contemplated by section 147, the Hon'ble Supreme Court has held that: "we do not know whether the power under section 147 can also be claimed by the Commission. But assuming it can, the said power has to be exercised in accordance with the provisions contained in sections 147 to 150 including sections 148 and 149. Admittedly, they were not complied with in this case." According to Mr. Shah, even the Hon'ble Supreme Court was of the view that it is not certain as to whether the Settlement Commission has got the power to reopen the assessment under section 147 of the Act and hence, it cannot be said that by virtue of section 245F(1) of the Act, the Settlement Commission has got the power to rectify the order under section 154 of the Act.
Mr. Shah has further submitted that the order passed by the Settlement Commission under section 245D(4) is final and conclusive. Such finality is intended to be given by the Legislature and it has been made clear in section 245-I of the Act which lays down that every order of the Settlement Commission passed under section 245D(4) shall be conclusive as to the matters stated therein. Unless such an order becomes void on the grounds of fraud and/or misrepresentation of facts as provided in section 245D(6), the order cannot be disputed or impugned. Mr. Shah has, therefore, submitted that the Settlement Commission has no power to rectify its own order by resorting to the provisions of section 154 of the Act as the order passed by it earlier granting reduction and/or waiver of interest under sections 234A, 234B and 234C of the Act has become final and conclusive.
Mr. Shah has further relied on the decision of the Hon'ble Supreme Court in the case of Prakash H. Jain v. Ms. Marie Fernandes [2003] 8 SCC 431, wherein the issue before the court was whether the competent authority under the Maharashtra Rent Control Act, 1999, has got the power to condone the delay in filing an application. The Hon'ble Supreme Court has observed that this question can be considered not only On the nature and character of the authority, whether it is a court or not but also on the nature of powers conferred on such authority or court, the scheme underlying the provisions of the Act concerned and the nature of powers, the extent thereof or the limitations, if any, contained therein with particular reference to the intention of the Legislature as well, found expressed therein. There is no such thing as any inherent power of the court to condone the delay in filing proceedings before a court/authority concerned, unless the law warrants and permits it. Such competent authority is merely and at best a statutory authority created for a definite purpose and to exercise, no doubt, powers in a quasi-judicial manner but its powers are strictly circumscribed by the very statutory provisions which conferred upon it those powers and the same could be exercised in the manner provided therefor and subject to such conditions and limitations stipulated by the very provision of law under which the competent authority itself has been created. Based on these observations, Mr. Shah has submitted that since no specific power is conferred upon the Settlement Commission to rectify its order under section 154 of the Act, it cannot be inferred that the Settlement Commission has got such powers by virtue of the provisions contained in section 245F(1) of the Act.
Mr. Shah has further submitted that section 245F(1) of the Act is more or less similar to section 255(6) of the Act. Section 255(6) confers all the powers on the Appellate Tribunal, for the purpose of discharging its functions, which are vested in the income-tax authorities referred to in section 131. Despite this provision, under section 254(2) of the Act, a specific power is conferred on the Appellate Tribunal to amend any order passed by it under sub-section (1) and to make amendment if the mistake is brought to its notice by the assessee or the Assessing Officer, at any time within four years from the date of the order, with a view to rectify any mistake being apparent on the record. The power similar to the one which is conferred upon the Appellate Tribunal under section 254(2) of the Act is not conferred on the Settlement Commission and in the absence of such powers, the Settlement Commission cannot resort to the provisions of section 154(1) of the Act for the purpose of rectifying the order passed by it under section 245D(4) of the Act.
Mr. Shah has further submitted that even under section 154 of the Act, only a mistake apparent from the record or an arithmetical mistake can be rectified and a mistake apparent from the record must be one to point out which no elaborate argument is required. It must be a glaring, obvious or self-evident mistake. If it is a mistake which requires to be established by a complicated process of investigation, argument or proof, it cannot be regarded as a mistake apparent from the record. In this connection, he relied on the decision of this court in the case of P.M. Bharucha and Co. v. G.S. Venkatesan, ITO [1969] 74 ITR 513 wherein this court has taken the view that "the question whether capital gain in the hands of the firm would be business income in the hands of the partner, was a highly debatable question on which there might conceivably be two opinions, and therefore even if any mistake was committed by the officer, it was not a mistake apparent from the record so as to attract the corrective jurisdiction under section 35 of the old Act."
Mr. Shah has further relied on the decision of the Hon'ble Supreme Court in the case of T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 wherein the Hon'ble Supreme Court has held that "the question whether section 17(1) of the Act of 1922 was applicable to the case of the respondent firm was not free from doubt, and it was not open to the Income-tax Officer to go into the true scope of the provisions of the Act in a rectification proceedings under section 154 of the Income-tax Act, 1961: the officer was wrong in holding that there was a mistake apparent from the record of assessments of the firm". The Hon'ble Supreme Court has further held that "a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record". The Hon'ble Supreme Court has further held that "the High Court was not justified in going into the question whether the original assessments were in accordance with the law."
Mr. Shah has further submitted that the very fact that the Settlement Commission has waived and/or reduced the interest while passing the order under section 245D(4) of the Act itself suggests that a conscious decision was taken by it considering the relevant provisions of the Act and thereby it cannot be said that it has committed any error. In this connection, Mr. Shah has relied on the decision of this court in the case of CIT v. Gardhanbhai Jethabhai [1994] 205 ITR 279 wherein this court has taken the view that: "not recording a finding and not passing a specific order in favour of the assessee cannot always be regarded as an error justifying the passing of a rectification order. As a general proposition, it can be said that an act of waiver being a conscious act, no inference of waiver can be drawn from an omission or in action. But as the omission is not by a person ignorant of law but by the Income-tax Officer who must be presumed to be and who is also otherwise likely to be well conversant with the relevant provisions of sections 215, 216 and 217, then such an inference can be drawn. If the Income-tax Officer does not pass an order for levy of interest even where levy of interest is mandatory, then only two inferences are possible. One is that he forgot to pass such an order and the other is that he had decided to waive the interest because the court cannot assume or infer that even though he was aware of the said provision, he deliberately did not pass that order. An intention to act contrary to law cannot ordinarily be inferred. The court cannot also draw an inference that he forgot to pass an order. That being the state of his mind, the successor-Income-tax Officer cannot definitely say that either it was a case of overlooking the provisions or a deliberate lapse on the part of the Income-tax Officer. Considering the practice which is ordinarily followed by the Income-tax Officers while making assessment orders and levying interest and the nature of discretion conferred upon the Income-tax Officer and the fairness with which he is expected to exercise his powers, the better inference that can be drawn from the omission to pass any order with respect to payment of interest under section 215 after passing the order of assessment would be that he had decided to waive payment of interest. Merely because discretion is not absolute and its exercise is dependent upon existence of certain facts and circumstances, it is difficult to appreciate how it can be said that no inference as stated above can be drawn from an omission to pass an order under section 215."
In view of the aforesaid submissions and the authorities relied on by him, Mr. Shah has vehemently submitted that the impugned order passed by the Settlement Commission under section 154 of the Act is beyond the jurisdiction of the Settlement Commission and contrary to the provisions of the Act. The order, therefore, deserves to be quashed and set aside.
Mr. B.B. Naik, learned senior standing counsel for the Revenue, has submitted that the petitioners have raised new contentions before this court during the course of argument. The petitioner's only contention before the Settlement Commission as well as in the writ petition was that the Settlement Commission is not an income-tax authority within the meaning of section 116 of the Income-tax Act and hence, the Settlement Commission has no power to pass an order under section 154 of the Act. Over and above this contention, the petitioners have raised the contention that the Settlement Commission has power to waive or reduce the interest and the discretion was rightly exercised by the Settlement Commission while passing the original order under section 245D(4) of the Act. It is further contended that even otherwise, whether the Settlement Commission has got the discretion to reduce or waive the interest or not is a debatable issue and such a debatable issue cannot be decided while exercising the power under section 154 of the Act. These contentions were not raised earlier and hence, the petitioners should not be permitted to raise these contentions.
Mr. Naik has further submitted that the provisions of section 245F are very clear. Section 245F(1) empowers the Settlement Commission to exercise all the powers which are vested in an income-tax authority under this Act. Section 245F(2) confers exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under the Act in relation to the case pending before the Settlement Commission. Such powers can be exercised by the Settlement Commission no sooner the application made under section 245C has been allowed to be proceeded with under section 245D and till an order is passed under sub-section (4) of the section 245D of the Act. He has, therefore, submitted that the Settlement Commission has all the powers of the income-tax authority under section 245F(1) of the Act prior to and subsequent to the application decided by the Settlement Commission. The Settlement Commission has therefore, power to rectify any mistake which is found in the order passed under section 245D(4) of the Act. He has further submitted that though the Settlement Commission has no discretion to reduce or waive the interest under sections 234A, 234B and 234C of the Act and still the interest was reduced or waived, the Settlement Commission has committed an error apparent from the record and hence, the same was rightly rectified by the Settlement Commission while passing the order under section 154 of the Act.
Mr. Naik has further submitted that the language of section 245F is very clear and unambiguous. By reading some other provisions of the Act, namely, section 254(2) of the Act in the present case, it cannot be presumed that the Settlement Commission has no such power to rectify the order passed under section 245D(4) of the Act. The wording of section 245F(1) is wide enough to empower the Settlement Commission to rectify the mistake apparent on record and waiver or reduction of interest under sections 234A, 234B and 234C while passing the order under section 245D(4) of the Act by the Settlement Commission, when no such powers similar to the one under section 254(2) of the Act are conferred on the Settlement Commission, is clearly a mistake apparent on record and the same is rightly rectified by the Settlement Commission. Mr. Naik has further submitted that while interpreting the provisions contained in section 245F(1) of the Act, it cannot be inferred that the powers under section 154 of the Act are totally excluded so far as the Settlement Commission is concerned. The principles governing the interpretation of statutes are well established. In this regard, he has invited our attention to the decision of the Supreme Court in the case of Bhatia International v. Bulk Trading S.A., AIR 2002 SC 1432, wherein it is held that:
"while examining a particular provision of a statute to find out whether the jurisdiction of a court is ousted or not, the principle of universal application is that ordinarily the jurisdiction may not be ousted unless the very statutory provision explicitly indicates or even by inferential conclusion the court arrives at the same when such a conclusion is the only conclusion."
Mr. Naik has further submitted that the true meaning and import should be given to sections 245F(1) and 245F(2) of the Act. If it is held that the Settlement Commission has no power to rectify the mistake under section 154 of the Act, though such powers are conferred on the income-tax authority under section 154, the provisions contained in section 245F(1) would be rendered nugatory. He has, therefore, submitted that the principles of harmonious construction require that efforts should be made to see that each provision in the statute will have its play. Consequences likely to flow from the intended interpretation should be considered by the court. In this connection, he has relied on the decision of the Hon'ble Supreme Court in the case of British Airways Plc. v. Union of India, AIR 2002 SC 391, wherein it is held that:
"while interpreting a statute, the court should try to sustain its validity and give such meaning to the provisions which advance the object sought to be achieved by the enactment. The court cannot approach the enactment with a view to pick holes or to search for defects of drafting which make its working impossible. It is a cardinal principle of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well-known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute. It is the duty of the court to make such construction of a statute which shall suppress the mischief and advance the remedy. While interpreting a statute the courts are required to keep in mind the consequences which are likely to flow upon the intended interpretation."
Mr. Naik has further relied on the decision of the Hon'ble Supreme Court in the case of Grasim Industries Ltd. v. Collector of Customs [2003] 1 RC 440; [2002] 4 SCC 297, 303, wherein it is held that: "No words or expressions used in any statute can be said to be redundant or superfluous. In matters of interpretation one should not concentrate too much on one word and pay too little attention to other words. No provision in the statute and no word in any section can be construed in isolation. Every provision and every word must be looked at generally and in the context in which it is used. It is said that every statute is an edict of the Legislature. The elementary principle of interpreting any word while considering a statute is to gather the mens or sententia legis of the Legislature. Where the words are clear and there is no obscurity, and there is no ambiguity and the intention of the Legislature is clearly conveyed, there is no scope for the court to take upon itself the task of amending or alternating the statutory provisions. Wherever the language is clear the intention of the Legislature is to be gathered from the language used. While doing so, what has been said in the statute, as also what has not been said has to be noted. The construction which requires for its support addition or substitution of words or which results in rejection of words has to be avoided."
Mr. Naik has further submitted that though the Settlement Commission has not referred in its order passed under section 245D(4) of the Act that interest was reduced or waived following the larger Bench decision of the Settlement Commission in the case of Anjum Mohammed Hussein Ghaswala, In re [1998] 230 ITR (AT) 1 (Mum) [SB], it was the prevalent practice of the Settlement Commission to pass such orders based on the said decision. However, the said decision has been reversed by the Hon'ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1, and hence, it is obligatory on the part of the Settlement Commission to rectify the said order by resorting to the provisions contained in section 154 of the Act. In this connection, Mr. Naik has invited specific attention of the court to the observations made by the Hon'ble Supreme Court in the said decision wherein it is in terms held that "if the scheme of levy of interest is thus to be analysed on the anvil of the provisions referred to hereinabove it shows that the interest contemplated under sections 234A, 234B and 234C is mandatory in nature and the power of waiver or reduction having not been expressly conferred on the Commission, the same indicates that so far as the payment of statutory interest is concerned, the same is outside the purview of the settlement contemplated in Chapter XIX-A of the Act". The Hon'ble Supreme Court has shown indulgence only to the extent that if the assessee is entitled to the benefit under the circular issued by the Central Board of Direct Taxes to that extent the Settlement Commission can waive or reduce the interest. However, it was not the case before the Settlement Commission that the present petitioners were entitled to the benefit conferred under the circular and on that basis, the interest was waived or reduced by the Settlement Commission. In view of the Supreme Court's decision in the case of Ghaswala [2001] 252 ITR 1, the Settlement Commission has rightly passed the order under section 154 of the Act withdrawing the reduction or waiver of interest under sections 234A, 234B and 234C granted at the time of passing the order under section 245D(4) of the Act. Mr. Naik has further submitted that the Hon'ble Supreme Court has rightly made distinction and held that the Settlement Commission has no power to issue circulars and in this regard, the powers exercised by the Central Board of Direct Taxes under section 119(2)(a) of the Act cannot be exercised by the Settlement Commission. However, the Settlement Commission is certainly an income-tax authority vis-a-vis the benefit which is to be given to the assessee on the basis of the circular issued by the Central Board of Direct Taxes. Mr. Naik has, therefore, submitted that once the law is declared by the Hon'ble Supreme Court, it becomes law of the land and once it is held that the Settlement Commission has no power to waive or reduce the interest chargeable under sections 234A, 234B and 234C of the Act, but for the circular, the Settlement Commission cannot waive or reduce interest without taking recourse to the said circular and if it is done, the same is amounting to the mistake apparent from record which can be rectified while exercising powers under section 154 of the Act. Since the powers were exercised by the Settlement Commission within four years from the date of the judgment of the Hon'ble Supreme Court in Ghaswala's case [2001] 252 ITR 1, the limitation prescribed in section 154 has been duly complied with and hence, such an order cannot be challenged in the present petition.
Mr. Naik has further relied on the decision of the Hon'ble Supreme Court in the case of CIT v. Hindustan Bulk Carriers [2003] 259 ITR 449, wherein all the three Hon'ble judges have given their separate concurrent findings and they have come to the conclusion that the Settlement Commission has no power to waive the tax or interest because, as laid down in section 245D(4), it has to pass orders on the matter determining the quantum of income and tax in accordance with the other relevant provisions of the Act applicable to the relevant assessment year or years. There is no power in the Settlement Commission to settle the" case" de hors the provisions of the Income-tax Act.
Mr. Naik has further submitted that even the Hon'ble Supreme Court had an occasion to deal with a similar issue while considering the provisions contained in section 147 of the Act. In the case of CIT v. Paharpur Cooling Towers (P.) Ltd. [1996] 219 ITR 618, though the Hon'ble Supreme Court has expressed doubt as to whether the Settlement Commission has got the power to reopen the assessments as contemplated under section 147 of the Act, it was held that even if the Settlement Commission has got such powers, the said powers will have to be exercised in accordance with the provisions contained in sections 147 to 150 of the Act. The court, therefore, took the view that the possibility of having such powers under section 147 of the Act could not be ruled out. The only condition which was to be complied with while exercising such powers is that the said powers are to be exercised in accordance with the provisions contained in sections 147 to 150 of the Act.
Mr. Naik has further submitted that in view of the decision of the hon'ble Supreme Court in Ghaswala's case [2001] 252 ITR 1, the interest waived or reduced by the Settlement Commission under sections 234A, 234B and 234C of the Act while passing the order under section 245D(4) of the Act is clearly a mistake apparent from the record and it has to be rectified while passing the order under section 154 of the Act. He relied on the decision of this court in the case of Standard Radiators v. CIT [1987] 165 ITR 178, wherein it is held that: "it is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Hence, the law laid down by the High Court has to be followed by the income-tax authorities situated in the area over which the High Court has jurisdiction". While dealing with the case before the court, it was held that "the decision of the High Court was rendered in September, 1973, and the Income-tax Officer had passed the order of rectification on March 6, 1975. In the light of this decision which was binding on the Income-tax Officer, it must be held that the Income-tax Officer had committed an error apparent on the face of the record in failing to determine the tax payable on the capital gains which were computed and included in the total income of the assessee. It was immaterial that the decision of the court was not before the Income-tax Officer when he passed the assessment order. When the court held that capital gains were taxable in the hands of a registered firm, it merely stated what the law had always been and must always be understood to have been. The assessment order which failed to determine such tax was bad from its very inception and was liable to be rectified in exercise of the powers conferred under section 154."
Mr. Naik has, therefore, submitted that in view of the aforesaid decision of this court, the Settlement Commission is justified in taking the view that the order passed under section 245D(4) of the Act granting reduction or waiver of interest under sections 234A, 234B and 234C of the Act suffers from mistake apparent from the record and hence the same is required to be rectified under section 154 of the Act.
We have heard at length Mr. J.P. Shah, the learned advocate appearing for the petitioners, and Mr. B.B. Naik, learned senior standing counsel for the Revenue. We have also minutely examined various submissions made and the contentions raised by them in support of their case. Various authorities of this court as well as of the hon'ble Supreme Court cited before us were read, reread and closely considered. Before deciding the controversy raised before us, it is of utmost importance to have a look at the relevant provisions of the Act so as to throw light on the controversy and resolve it. Chapter XIX-A of the Act deals with settlement of cases. Section 245C of the Act empowers the assessee to make an application for settlement of cases. Section 245D prescribes the procedure to be followed by the Settlement Commission in respect of an application under section 245C of the Act. An application for settlement of cases may be made by a taxpayer at any stage of proceeding. On receipt of the application, the Settlement Commission calls for a preliminary report from the Commissioner who has jurisdiction over the case. The Commissioner can object to the application being proceeded with by the Settlement Commission, if he is of the view that the concealment of income was perpetration by fraud or evading any tax or other sum chargeable under the Act, on the part of the applicant has been established or is likely to be established in relation to the case by an income-tax authority. On the basis of the materials contained in the Commissioner's report and having regard to the nature and circumstances of the case of the complexity involved in the investigation therein, the Settlement Commission may decide to proceed with the application or reject the application. If the Settlement Commission decides to proceed with the application, sub-section (4) of section 245D will start playing its role. It reads as under:
"245D. (4) After examination of the records and the report of the Commissioner, received under sub-section (1), and the report, if any, of the Commissioner received under sub-section (3), and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub-section (1) or sub-section (3)."
From a perusal of section 245D(4), it is clear that the Settlement Commission, after examination of the records and the report of the Commissioner and after giving an opportunity to the applicant and to the Commissioner to be heard and after such further evidence as may be placed before it or obtained by it, may pass an order in accordance with the provisions of the Act.
Section 245E empowers the Settlement Commission to reopen completed proceedings subject to the conditions laid down therein. It confers an extended jurisdiction so as to cover certain assessments which had already become final in the absence of any remedial proceedings pending there-against.
Section 245F deals with powers and procedure of Settlement Commission. Sub-sections (1) and (2) of section 245F are very relevant for our purpose. They read as under:
"245F. (1) In addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an income-tax authority under this Act.
(2) Where an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall, until an order is passed under sub-section (4) of section 245D, have, subject to the provisions of sub-section (3) of that section, exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under this Act in relation to the case." Section 245F(1) vests Settlement Commission with all the powers which are vested in an income-tax authority under the Act, in addition to the powers that the Commission has under Chapter XIX-A of the Act. Section 245F(2) clarifies that between the dates when the Settlement Commission allows an application under section 245C to be proceeded with and when it makes a final order under section 245D(4), the Commission is vested with the exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority in relation to the matters covered by the case before it. Section 245-I lays down that every order of the Settlement Commission passed under section 245D(4) shall be conclusive as to the matters stated therein. It reads as under:
"245-I. Every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force."
On the basis of the aforesaid provisions contained in Chapter XIX-A of the Act, if we appreciate the orders passed by the Settlement Commission, firstly under section 245D(4) of the Act on March 31,1999, and thereafter under section 154 of the Act on March 20,2003, we find that while passing the order under section 245D(4) of the Act, the Settlement Commission has dealt with the issue regarding waiver of interest chargeable under sections 139(8)/234A and 215/234B of the Act.
Without ascertaining the legal position as to whether, it has got such powers to waive or reduce the interest or not, the same was reduced or waived. The Settlement Commission has also not referred to the circular issued by the Central Board of Direct Taxes bearing No. F. No. 400/234/95IT(B), dated May 23,1996, which empowers the Chief Commissioner of Income-tax and the Director General of Income-tax to waive or reduce interest charged under sections 234A, 234B and 234C of the Act in the class of cases or in the class of incomes specified in paragraph 2 of the said order for the period and on conditions which are enumerated therein. It is not the case of the petitioners before the Settlement Commission that they are entitled to reduction or waiver of interest by virtue of the circular issued by the Central Board of Direct Taxes. The Settlement Commission, however, passed the said order of reduction or waiver of interest possibly on the basis of the order dated December 12,1997, of the Income-tax Settlement Commission, Special Bench, Mumbai, in the case of CIT v. Anjum M.H. Ghaswala [1998] 230 ITR (AT) 1. The Settlement Commission has, however, not referred to the said judgment of the Special Bench of the Settlement Commission. But the fact remains that during that period, the Settlement Commission used to pass such orders with regard to waiver of interest under sections 234A, 234B and 234C of the Act following the said Special Bench decision which has taken the view that the Settlement Commission is empowered to reduce or waive the interest under sections 234A, 234B and 234C of the Act.
As observed earlier, the said decision of the Special Bench of the Settlement Commission was challenged by the Revenue before the hon'ble Supreme Court and the hon'ble Supreme Court has reversed the said decision of the Settlement Commission. The hon'ble Supreme Court in Ghaswala's case [2001] 252 ITR 1 has specifically held that there is no specific empowerment of waiver or reduction of interest or tax. It is made clear from the use of the expression "in accordance with the provisions of this Act" in section 245D(4) that the Settlement Commission will have to be in conformity with the Act and not contrary to or in conflict with it. Interest contemplated under section 234A for default in furnishing a return, under section 234B for deficiency or default in payment of advance tax and under section 234C for deferment of advance tax is mandatory in nature and the fact that the power of waiver has not been conferred on the Settlement Commission, indicates that so far as
payment of statutory interest is concerned, the same is outside the purview of the settlement contemplated in Chapter XIX-A. While the Settlement Commission arrives at the taxable income of the assessee on the basis of the records before it, it has to levy the mandatorily chargeable tax on such income arrived at by it and whatever interest is due under mandatory provisions like sections 234A, 234B and 234C, it has to include that interest also in the settlement. The hon'ble Supreme Court has also made it clear that since the circular is beneficial to the assessee, such benefit can be conferred also on assessees who approach the Settlement Commission under section 245C on such terms and conditions as are specified in the circular. It is for this purpose that section 245F has empowered the Settlement Commission to exercise the power of an income-tax authority under 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 been enforcing the relaxed provisions for the benefit of the assessee in the process of settlement.
The above principles laid down by the hon'ble Supreme Court were reiterated in the later decision in the case of CIT v. Hindustan Bulk Carriers [2003] 259 ITR 449 and it was held in unequivocal terms that interest payable on the tax due has to be determined by the Settlement Commission after settlement of the case and there is no power in the Settlement Commission to settle the case de hors the provisions of the Income-tax Act.
Based on the aforesaid two decisions, if the Settlement Commission issues notice for rectification of its earlier order and ultimately passes an order under section 154 of the Act, can it be said that the Settlement Commission has no such power or that it is not an income-tax authority within the meaning of section 116 of the Act or that the issue regarding waiver and/or reduction of interest is a debatable issue which cannot be rectified under section 154 of the Act? To examine this issue, it is necessary to decide as to whether the Settlement Commission is an income-tax authority or not. Section 116 of the Act enumerates the income-tax authorities which reads as under:
"116. There shall be the following classes of income-tax authorities for the purposes of this Act, namely: -
(a) the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963),
(b) Directors-General of Income-tax or Chief Commissioners of Income-tax,
(c) Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax (Appeals),
(d) Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy Commissioners of Income-tax (Appeals),
(e) Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,
(f) Income-tax Officers,
(g) Tax Recovery Officers,
(h) Inspectors of Income-tax."
Admittedly, the name of the Settlement Commission does not figure in this list and hence, in the strict sense, it cannot be said that the Settlement Commission is an income-tax authority. Power under section 154 of the Act is exercised by the income-tax authority as enumerated in section 116 of the Act. Section 154 reads as under:
"154. With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may, -
(a) amend any order passed by it under the provisions of this Act;
(b) amend any intimation or deemed intimation under sub-section (1) of section 143."
Section 116 of the Act does not include the Settlement Commission and section 154 empowers only the income-tax authority to rectify its orders and hence, the argument canvassed before us that since the Settlement Commission is not an income-tax authority, it has no power to rectify its earlier order. However, the provisions contained in section 245F(1) of the Act cannot be lost sight of. It states in unequivocal terms that in addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an income-tax authority under this Act. The word "powers" cannot be read in the restricted sense that it is used in respect of only those powers which are mentioned in Chapter XIII-C starting with section 131 to section 136 of the Act. It may also contemplate powers to make assessment, reassessment or rectification. The hon'ble Supreme Court in the case of CIT v. Paharpur Cooling Towers (P.) Ltd. [1996] 219 ITR 618 has, however, kept that issue open by observing that it is not sure as to whether the power under section 147 can also be claimed by the Settlement Commission. However, even assuming that the Commission could exercise the power under section 147, the said power has to be exercised in accordance with the provisions contained in sections 147 to 150. Here in the present case, even without going into the aspect as to whether the Settlement Commission has got the power under section 154 of the Act to rectify its own order and if we proceed on that assumption that the Commission could exercise the power under section 154, the said power has to be exercised in accordance with the provisions contained in section 154 of the Act. Section 154 of the Act contemplates that powers thereunder can be exercised only with a view to rectifying the mistake apparent from the record and that the said powers are exercised by an income-tax authority referred to in section 116. Sub-section (7) of section 154 prescribes the time limit for exercise of such powers and it says that no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was to be passed. The Settlement Commission has waived or reduced the interest under sections 234A, 234B and 234C of the Act despite the fact that it has no such power under the Act and it is contrary to the law laid down by the hon'ble Supreme Court. Based on two decisions of the hon'ble Supreme Court, the Settlement Commission was of the view that it has committed a mistake apparent from the record while granting reduction and/or waiver of interest and hence, it is required to be rectified. In view of the decision of this court in the case of Standard Radiators v. CIT [1987] 165 ITR 178, it is certainly a mistake apparent from the record wherein this court has taken the view that the Income-tax Officer had committed an error apparent on the face of the record in failing to determine the tax payable on the capital gains which are computed and included in the total income of the assessee. We are also of the view that the Settlement Commission has committed an error apparent on the face of the record in reducing and/or waiving the interest chargeable under sections 234A, 234B and 234C of the Act. When the hon'ble Supreme Court held that the Settlement Commission has no power to reduce or waive the interest, it merely stated what the law had always been and must always to be understood to have been. As for the issue as to whether the Settlement Commission is an income-tax authority or not it would not detain us any longer as section 245F specifically states that the Settlement Commission has got all the powers of an income-tax authority, over and above the powers under Chapter XIX-A of the Act. The hon'ble Supreme Court has also made a distinction in Ghaswala's case [2001] 252 ITR 1 by taking the view that the powers of the Central Board of Direct Taxes cannot be exercised by the Settlement Commission and in that sense it is not an income-tax authority. In other words, the Settlement Commission cannot issue circulars which power is vested in the Central Board of Direct Taxes under section 119 of the Act, but it is certainly an income-tax authority to confer the benefit available to the assessee under the circular and for that purpose, section 245F can be pressed into service. If we apply this very analogy to the facts of the present case, even if we assume that the Settlement Commission is not an income-tax authority, for the purpose of exercising powers under section 154 of the Act, it is certainly an income-tax authority to give effect to the judgment of the hon'ble Supreme Court which says that but for the circular, the Settlement Commission has no power to waive or reduce the interest under sections 234A, 234B and 234C of the Act and if such powers are exercised by the Settlement Commission within four years from the date of the original order passed under section 245D of the Act, the same can certainly be in accordance with the provisions contained in section 154 of the Act. In this view of the matter, there is no infirmity in the order passed by the Settlement Commission while exercising the powers under section 154 of the Act for the purpose of rectifying the mistake committed by it in the original order under section 245D of the Act.
This leaves us to deal with the submission of Mr. Shah that the provisions similar to the one contained in sections 255(6) and 254(2) are not there on the statute book so as to empower the Settlement Commission to rectify its order. The Income-tax Appellate Tribunal is vested with powers under section 255(6) of the Act which reads as under:
"255. (6) The Appellate Tribunal shall, for the purpose of discharging its functions, have all the powers which are vested in the income-tax authorities referred to in section 131, and any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code (45 of 1860), and the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1898 (5 of 1898)."
Over and above these powers, the Income-tax Appellate Tribunal is vested with power to rectify its order by virtue of section 254(2) of the Act. It reads as under:
"254. (2) The Appellate Tribunal, may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer."
Simply because a provision similar to the one which is contained in section 254(2) of the Act is not there empowering the Settlement Commission to rectify its orders, it cannot be said that the Settlement Commission cannot exercise such powers. In our opinion, section 245F is very wide and it covers within its sweep all the powers exercised by the income-tax authority under the Act. As observed earlier, the rules of interpretation require that a true meaning and import should be given to the words used in the section and if the language is very clear, the court should not be influenced by the fact that provisions similar to the one under section 254(2) of the Act are absent in Chapter XIX-A and hence the Commission has no power to rectify the order. If the plain language of the section indicates that such powers can be exercised, the court should adhere to the said interpretation rather than be influenced by the provisions made in respect of other authorities. Even otherwise, there is one basic difference between the provisions of sections 255(6) and 245F of the Act. Section 255(6) refers only to powers to be exercised by the Tribunal or an income-tax authority referred to in section 131 of the Act whereas under section 245F, it is mentioned that the Settlement Commission has got all the powers which are conferred on the income-tax authority under the Act. Thus, the scope and ambit of section 245F is wide enough to enable the Commission to rectify the order, and the presence of the provisions like section 254(2) of the Act, in Chapter XIX-A, may not be considered to be indispensable.
The decisions relied on by Mr. Shah in the case of CIT v. Khemchand [1938] 6 ITR 414 (PC) and Mandai Ginning and Pressing Co. Ltd. v. CIT [1973] 90 ITR 332 (Guj) do not render much assistance to the petitioners as there is no dispute about the proposition that once a final assessment is arrived at, it cannot be reopened except in the circumstances detailed in sections 34 and 35 of the Act. However, a provision similar to the one contained in section 245F was not under consideration before the Privy Council. Even section 245-I also makes an exception that "save as otherwise provided in this Chapter", meaning thereby that though the order passed by the Settlement Commission under section 245D(4) is final and conclusive, it can be reopened or amended by resorting to the provisions contained in section 245F(1) of the Act.
Considering the over all view of the matter and taking into consideration the binding decisions of the hon'ble Supreme Court and the law laid down therein, we are of the view that the Settlement Commission has no power to reduce or waive the interest chargeable under sections 234A, 234B and 234C of the Act, de hors the circular referred to by the hon'ble Supreme Court in Ghaswala's case [2001] 252 ITR 1and since it was a mistake apparent from the record, the said mistake was rightly rectified by the Settlement Commission while resorting to the provisions contained in section 154 of the Act. We accordingly dismiss all these petitions. Rule discharged without any order as to costs. Interim relief granted earlier is vacated.
DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that VATinfoline Multimedia is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.