Full Judgment Text
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CASE NO.:
Appeal (civil) 2421 of 2000
PETITIONER:
COMMISSIONER OF INCOME TAX, MUMBAI
Vs.
RESPONDENT:
ANJUM M.H.GHASWALA & ORS.
DATE OF JUDGMENT: 18/10/2001
BENCH:
K.T.Thomas, R.C.Lahoti, N.S.Hegde, S.N.Variava.
JUDGMENT:
SANTOSH HEGDE, J.
In these appeals, the question that arises for our
consideration is: whether the Settlement Commission (for short
the Commission) constituted under Section 245B of the
Income-tax Act, 1961 (hereinafter referred to as the Act) has
the jurisdiction to reduce or waive the interest chargeable under
Sections 234A, 234B and 234C of the Act, while passing orders
of settlement under Section 245D(4) of the Act ?
Earlier, this question arose before the Commission in the
case of Ashwani Kumar Aggarwal, In re (195 ITR 861) wherein
a 5-Member Special Bench of the Commission held that under
Section 245D(4) or sub-section (6), the Commission does not
have the power either to waive or reduce the statutory interest
payable under the Act.
This view of the 5-Member Bench of the Commission
was overruled by a larger Bench comprising of 7 Members of
the Commission which held otherwise by the impugned order.
It held that the Commission is vested with the power to waive
or reduce the interest chargeable under Section 234A, 234B and
234C of the Act in cases pending before it for the assessment
year 1989-90 and onwards (i.e. the year in which Chapter XVII-
F was introduced in the Act). It further held that this power can
be exercised by any of the Benches constituted to settle cases
under Section 245BA of the Act. While coming to this
conclusion, the Commission held that the constitution of the
Commission is based on the concept of compromise and
settlement, hence, it has the necessary power to waive or
reduce the interest, even if statutorily mandated, in view of the
wordings of Section 245D(6) of the Act.
It also held that in view of the definition of the term
income-tax authority under Section 245A(d), the Commission
being an income-tax authority it has all the powers of the Board
which are incidental to the functions of the Commission, which
includes the Boards power under Section 119 of the Act to
relax the rigors of Section 234A, 234B and 234C of the Act.
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By applying the rule of construction, the Commission
further held that taking into consideration the object for which
the Commission is constituted, it should be held by the process
of purposive interpretation that it has the power of waiver or
reduction of statutory interest because the object of the
Legislature was to settle the case without there being any
restriction on Commissions power to settle the case.
For the purpose of deciding the above issue, it is
necessary for us to examine the various provisions of the Act
which are germane to the controversy in hand.
The constitution of the Commission and its powers are
traceable to the provisions of Chapter XIX-A of the Act. As
noted above, Section 245-B provides for the constitution of a
Commission by the Central Government for settlement of cases
under that Chapter. It also provides for appointment of a
Chairman, Vice-Chairman and members of the Commission,
the constitution of various Benches of the Commission and
empowers those Benches to exercise power and authority
vested in the Commission under Chapter XIX-A of the Act.
Section 245A defines various expressions under sub-clauses (a)
to (g) but does not define the expression settlement.
Section 245-C provides for filing of an application by an
assessee at any stage of the case relating to him in a prescribed
manner giving full and true disclosure of his income which has
not been disclosed before the assessing officer and further
informing the manner in which such income has been derived
by him and the quantum of additional amount of income-tax
payable on such income amongst other particulars that may be
prescribed with a prayer to the Commission to have the case
settled.
The word case has been defined under Section 245A(b)
thus :
case means any proceeding under this Act
for the assessment or reassessment of any
person in respect of any year or years, or by
way of appeal or revision in connection with
such assessment or reassessment, which may
be pending before an income-tax authority
on the date on which an application under
sub-section (1) of section 245C is made :
Provided that where any appeal or
application for revision has been preferred
after the expiry of the period specified for
the filing of such appeal or application for
revision under this Act and which has not
been admitted, such appeal or revision shall
not be deemed to be a proceeding pending
within the meaning of this clause;
Under the provisions of Chapter XIX-A, on such
application being made, the Commission is empowered to
dispose of the same in the manner provided thereunder. Section
245D provides for the procedure and exercise of power to be
followed by the Commission on receipt of an application under
Section 245C. Under this provision, the Commission has the
authority to call for the report from the Commissioner of
Income Tax (for short the Commissioner) and on the basis of
the material contained in such report and having regard to the
nature and circumstances of the case or the complexity of the
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investigation involved therein, it may by order allow the
application to be proceeded with or reject the application.
If the Commission allows the application filed under
Section 245C then under sub-section (3) of Section 245D it can
call for the relevant records from the Commissioner and if it
forms any opinion that any further inquiry or investigation in
the matter is necessary, it may direct the Commissioner to make
or cause to be made such further inquiry or investigation and
furnish a report on the matters covered by the application and
other matters relating to the case.
Sub-sections (4) and (6) of Section 245D being of
importance for the purpose of our discussion, the same are
extracted in verbatim hereunder :
(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).
x x x
(6) Every order passed under sub-section (4)
shall provide for the terms of settlement
including any demand by way of [tax,
penalty or interest], the manner in which any
sum due under the settlement shall be paid
and all other matters to make the settlement
effective and shall also provide that the
settlement shall be void if it is subsequently
found by the Settlement Commission that it
has been obtained by fraud or
misrepresentation of facts. (emphasis
supplied).
From the above provisions of law, it is seen that the
Commission after examination of the records and reports
submitted to him and after giving an opportunity to the
applicant and to the Commissioner of being heard, may pass
such order as it thinks fit on the matters covered by the
application. Though Section 245D(4) confers wide power on
the Commission in the process of settling a case, the Act still
mandates that the same will be done in accordance with the
provisions of the Act.
While that is the mandate which is given to the
Commission, a perusal of sub-section (6) of Section 245D
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shows that it has also empowered the Commission to provide
for the terms of settlement including any demand by way of tax,
penalty or interest; the manner in which any sum due under the
settlement shall be paid and all other matters to make the
settlement effective. It is an admitted position that by its plain
language sub-section (4) of Section 245D does not empower the
Commission to waive or reduce statutory interest payable under
the provisions of Section 234A, 234B or 234C.
The moot question, therefore, for our consideration is:
does sub-section (6) which contemplates providing for the
terms of settlement of tax, penalty or interest empowers the
Commission, in any manner, either to waive or reduce interest
payable under Section 234A, 234B or 234C in any case that
arises for settlement before the Commission ? If so, would this
waiver of interest be in accordance with the provisions of the
Act as mandated in sub-section (4) of the Act ?
For answering the above question, we will have to
examine the character of interest payable under the provisions
of Section 234A, 234B and 234C. A perusal of these Sections
shows that the interest for default in furnishing return of
income, default in payment of advance tax and interest for
deferment of advance-tax are mandatory in nature. Section
234A which refer to the payment of interest for default in
furnishing the return of income-tax mandates :
234A. (1) Where the return of income for any
assessment year under sub-section (1) or sub-
section (4) of section 139, or in response to a
notice under sub-section (1) of section 142, is
furnished after the due date, or is not furnished, the
assessee shall be liable to pay simple interest at the
rate of [one and one-half] {Substituted for two
by the Finance Act, 1999 w.e.f. 1.6.1999} per cent
for every month or part of a month comprised in
the period commencing on the date immediately
following the due date, and, ---- (emphasis
supplied).
Similarly, Sections 234B and 234C also use similar
mandatory words in regard to payment of interest. At this stage,
it is of importance to notice sub-section (4) of Section 234A
which reads thus :
(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 or an order of the
Settlement Commission under sub-section
(4) or section 245D, the amount of tax on
which interest was payable under sub-
section (1) or sub-section (3) of this section
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
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accordingly;
(ii) in a case where the interest is reduced,
the excess interest paid, if any, shall
be refunded. (emphasis supplied)
A perusal of this sub-section which refers to sub-section
(4) of Section 245D mandates that if by virtue of an order
passed under Section 245D, the amount of tax on which interest
was payable under sub-section (1) or sub-section (3) of this
Section has been increased or reduced, as the case may be, the
interest shall be increased or reduced accordingly. This Section
is an indicator of the fact that so far as the interest falling due
by virtue of default in furnishing a return of income, default in
payment of advance-tax or interest for deferment of advance-
tax are concerned, Part F of Chapter XVII has been obligated
with the duty of levy of interest, as also to make the necessary
changes in the payment of interest dependent on the change that
may occur consequent to the order of settlement under Section
245D(4).
It is also to be noted that wherever the Act contemplated
power of waiver or reduction of interest to be entrusted with
any particular authority in any particular situation, it has done
so like in Section 220(2A) of the Act. It is also worthwhile to
note that the Act wherever it contemplated that there should be
no levy of interest, it has clearly made provision for the same as
could be seen from Section 158BF which mandates that no
interest under the provisions of Section 234A, 234B or 234C
shall be levied or imposed upon the assessee in respect of the
undisclosed income determined in the block assessment.
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 Commission, however, traced its power to waive or
reduce interest to the objects of the Act and to what it termed as
schematic rationalisation of the provisions of Chapter XIX-A. It
also based its finding on the statutory provisions i.e. Sections
245D(4) and (6) and Section 119(2) of the Act.
From amongst the above grounds on which the impugned
order is founded, we will examine the correctness of the
statutory basis of the order first.
The Commission in the impugned order placed strong
reliance on the wording of Section 245D(6) the language of
which, according to the Commission, empowers it to waive or
reduce statutory interest because of the reintroduction of the
expression interest in that sub-section. According to the
findings of the Commission, the inclusion of the expression
interest clearly indicates that the Statute has permitted it to
pass such orders as it deems fit in regard to payment of interest
when an order under sub-section (4) of Section 245D is made
by it. This assumption of the Commission proceeds on the
hypothesis that sub-section (6) of Section 245D 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
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245D. 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
245D 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 245D, 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) of Section 245D. The said sub-
section also provides for terms of settlement in regard to the
tax. If the interpretation given by the Commission is to be
accepted, it would mean that under the provisions of Section
245D(6), the Commission also has the power of waiving or
reducing the tax payable on the income settled by the
Commission. If this position in law is presumed to be correct
then the very purpose of the settlement contemplated in Chapter
XIX-A would defeat the object of the principal Act itself. As
held by the Commission itself, Chapter XIX-A was included for
the purpose of quick settlement of the cases before it so that the
tax due to the Revenue is collected at the earliest. The object of
Chapter XIX-A is not to give amnesty to a tax evader from
paying the tax due. Hence, it would be preposterous to hold
that the Commission has been conferred with the power of
either reducing or waiving the tax due. We are aware that the
Commission in the impugned order has not gone to the extent
of holding that it has the power of either waiving or reducing
the tax payable but then that would be the logical conclusion if
we accept the interpretation given by the Commission in regard
to the expression interest in Section 245D(6) of the Act. A
proper reading of sub-section (6) would show that all that it
contemplates is that while the Commission makes an order of
settlement under sub-section (4) it will also have to provide for
the terms under which the amount payable by way of tax,
penalty or interest shall be paid by the assessee. The expression
terms used in that sub-section does not refer to the power of
the Commission to waive or reduce tax, penalty or interest
because quantification of amount payable under each of those
expressions are dealt with under separate provisions of the Act
like the payment of the tax is governed by various provisions of
the Act as defined in Section 2(43) of the Act while penalty is
covered by Section 245H and interest under Sections 234A,
234B and 234C of the Act. Therefore, all that the expression
term in Section 245D(6) means is that the Commission can
stipulate the conditions of payment like instalments, last date
for payment etc. Beyond that, in our opinion, sub-section (6)
does not authorise the waiver or reduction of tax, penalty or
interest settled under sub-section (4) of Section 245D.
The Commission in support of its view on this score has
placed reliance on the judgment of this Court in the case of
Commissioner of Income-Tax v. Express Newspapers Ltd. (206
[1994] ITR 443) wherein this Court observed thus :
Sub-section (4) of section 245D
provides for passing of final orders by the
Commission. It is not necessary to refer to
the other provisions in the Chapter except to
mention that the Commission is empowered
to direct the waiver of penalty as well as
interest and to direct that the tax payable
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shall be paid in prescribed instalments. It is
further empowered to direct that the assessee
whose case has been decided by it shall not
be proceeded with or prosecuted under the
Income-tax Act or under the Indian Penal
Code or under any other Central Act for the
time being in force with respect to the case
covered by the settlement. The orders of the
Commission are final, subject of course to
constitutional remedies.
In our opinion, this observation in the Express
Newspapers case (supra) does not help the Commission in
support of its conclusion in regard to its power under Sections
245D(4) and (6). It is to be noted that in that case the settlement
sought was with regard to assessment years 1985-86, 1986-87
and 1987-88. It is an admitted fact that during those assessment
years, Sections 234A, 234B and 234C were not in the statute
book. On the contrary, the corresponding provisions existing in
the Statute, namely, Sections 139(8), 215(4) and 216 in terms
empowered the income-tax authorities to waive or reduce
interest. It is in that context that this Court observed, in the
paragraph extracted hereinabove, that under Section 245D(4),
the Commission has the power to direct the waiver of penalty as
well as interest because that was within the scope of the
provisions of the Act, as then existing, whereas at present and
for the assessment years involved in this case, Sections 234A,
234B and 234C being applicable that observation does not
apply to the cases in hand. The sentence except to mention that
the Commission is empowered to direct the waiver of penalty
as well as interest is used in that judgment on the basis of
the then existing law and to apply the same to the facts of the
present case with the mandatory change in law would amount
to applying those principles in the Express Newspapers case
(supra) out of context.
Nextly, the Commission also traced its power either to
waive or reduce the interest to Section 119(2) of the Act. In our
opinion, this process of tracing Commissions power to Section
119(2) of the Act is rather convoluted. It first relied upon
Section 245F which conferred on it the powers vested in an
income-tax authority. Next it relied upon the definition of the
expression income-tax authority as found in Section 245A(d)
of the Act which in turn referred to Section 116 of the Act
which included the Board as one of the income-tax authorities
for the purpose of the Act. Having equated itself with the
Board, it traced the power of the Board to Section 119(2) to
relax the rigor of Sections 234A, 234B and 234C. Thus, by this
process the Commission came to the conclusion that it can also
relax the rigur of Sections 234A, 234B and 234C while passing
the order of settlement without really considering whether in
the context in which this power is conferred on the Board, the
Commission could equate itself with the Board for the purpose
of exercising power under Section 119(2). Therefore, we will
first examine whether the Commission can be construed as a
Board for the purpose of Section 119 or in the alternative by
virtue of Section 245F(d) read with Section 245A(d) read with
Section 116 can the Commission exercise the power conferred
on the Board under Section 119 of the Act ? For this purpose it
is necessary to examine the nature of power exercised by the
Board under Section 119 of the Act. Undoubtedly, the Board is
an executive authority being a part of the Ministry of Finance.
Its actions are amenable to scrutiny by the said Ministry as also
by audit bodies and also the Parliament whereas the
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Commission constituted under Section 245B of the Act is a
quasi-judicial body (see Sec.245L) and its orders are not
amenable to either supervisory or appellate jurisdiction of the
Ministry of Finance or any of the audit bodies and for that
matter even by the Parliament. Its orders under Section 245-I
are conclusive which cannot be reopened in any proceedings
under the Act or under any other law for the time being in force.
Therefore, it cannot be said that in the context in which the
power under Section 119 could be exercised by the Board, the
Commission could either equate itself with the Board or claim
the right to exercise the power vested in the Board under
Section 119 which is an administrative power.
Then it is to be seen that the Act requires the Board to
exercise the power under Section 119 in a particular manner i.e.
by way of issuance of orders, instructions and directions. These
orders, instructions and directions are meant to be issued to
other income-tax authorities for proper administration of the
Act, the Commission while exercising its quasi-judicial power
of arriving at a settlement under Section 245D cannot have the
administrative power of issuing directions to other income-tax
authorities. It is a normal rule of construction that when a
statute vests certain power in an authority to be exercised in a
particular manner then the said authority has to exercise it only
in the manner provided in the statute itself. If that be so since
the Commission cannot exercise the power of relaxation found
in Section 119(2)(a) in the manner provided therein it cannot
invoke that power under Section 119(2)(a) to exercise the same
in its judicial proceedings by following a procedure contrary to
that provided in sub-section (2) of Section 119.
There is one other reason why Section 119(2) is not
available to the Commission, because if we examine the
provisions of Section 245A through which the Commission has
traced its power to be equated with the Board which defines the
expression case to mean any proceeding under this Act for
the assessment or reassessment of any person in respect of any
year or years..which may be pending before an income-
tax authority on the date on which an application under sub-
section (1) of Section 245 is made. As per this definition, it is
clear that the power of settlement is vested in the Commission
in regard to a particular case pertaining to an assessee, may be
for one or more years while the power of relaxation
contemplated under Section 119(2)(a) can be exercised only in
regard to class of cases or class of incomes. It is not open to be
used in regard to any particular person or case contemplated
under the definition of the expression case in Section 245A
(supra). Therefore, we are of the opinion that the context in
which the power under Section 119 is vested in the Board and
the context in which the power of settlement is vested with the
Commission under Section 245C indicates that the Parliament
did not intend that the power under section 119 of the Act could
be used by the Commission for granting the said relief, and the
Commission cannot be equated with the Board for the purpose
of exercise of the power under Section 119 of the Act. Having
noticed this difference, the Commission in the impugned order
holds that it is not exercising the administrative power of
issuing directions or instructions, hence, it relied upon the
legislative intent of giving relief of waiver or reduction of
interest to the assessee while arriving at a settlement.
Nextly, 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 Finance
Act, 1987 to hold that in exercising its power under Chapter
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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 234A, 234B and 234C 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 234A, 234B and 234C is used by the
Legislature deliberately and it has not left any scope for
interpreting the said expression as may. This is clear from the
fact that prior to the Amendment brought about by the Finance
Act, 1987, the Legislature in the corresponding Section
pertaining to imposition of interest used the expression may
thereby giving a discretion to the authorities concerned to either
reduce or waive the interest. The change brought about by the
Amending Act (Finance Act, 1987) is a clear indication of the
fact that the intention of the Legislature was to make the
collection of statutory interest mandatory. In this connection,
we may usefully refer to the judgment of this Court in Jaywant
S. Kulkarni & Ors. v. Minochar Dosabhai Shroff & Ors. (AIR
1988 SC 1817) wherein this Court held that when the
Legislature changes the expression may to shall by
amendment of the statute, it is clear that it intended to make the
provision mandatory from the existing directory provision.
Therefore, the question of the Commission relying upon
external aids, for the purpose of interpretation like Wanchoo
Committee Report, Discussions of Select Committee of
Parliament and introduction of Chapter XIX-A in the Act, Press
Release of the Board dated 21.5.1996 etc. are purposeless
because of the clear and unambiguous language used in
Sections 234A, 234B and 234C and Sections 245D(4) and (6).
We notice if only the Commission were to follow the golden
rule of interpretation by giving the words of the Statute their
natural and ordinary meaning without unnecessarily going into
a forensic exercise of trying to find out the object of the
introduction of Chapter XIX-A or Part F of Chapter XVII, the
Commission would not have fallen in error.
It is no doubt true that the terminology settlement has a
very wide dictionary meaning and in the absence of a statutory
definition generally the word settlement in sub-section (4) of
Section 245D would give the Commission sufficient power to
arrive at a settlement which it deems fit, but when the statute
qualifies such expression like settlement with mandatory
words like in accordance with the provisions of this Act the
width of the term settlement becomes subject to the mandate
found in that Section, which would mean that while a
Commission has sufficient elbow-room in assessing the income
of the applicant under Section 245D(4) it cannot make any
order with a term of the settlement which would be in conflict
with the mandatory provisions of the Section like in the
quantum and payment of tax and/or interest. In this view of the
matter, we are of the opinion that assuming that there is any
room for interpretation of the provisions of Part F of Chapter
XVII and Chapter XIX-A, we would hold that it would not in
any manner empower the Commission to either waive or reduce
interest which is statutorily payable under the provisions of Part
F of Chapter XVII.
It was then argued that the Commission having been
statutorily constituted to arrive at a settlement has also the
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inherent power which includes the power to waive or reduce the
interest even though it is not specifically provided for. This
argument, in our opinion, cannot be sustained. Assuming that
the Commission has any inherent power, it is a well-established
legal principle that any inherent power vested in an authority
cannot be exercised contrary to the express provisions of the
Act. In the instant case, there being express provisions in regard
to the levy of interest under Part F of Chapter XVII even if
there is any inherent power in the Commission such power
cannot be exercised contrary to the provisions of the said
Chapter.
Shri Ramamurti, learned senior counsel appearing for
some of the respondents, placed strong reliance on the Press
Release dated 21st May, 1996 issued by the Board in support of
the contentions raised on behalf of the respondents. It is true
that by this Press Release the Board had interpreted the
provisions of the Act in a particular manner. Be that as it may,
we would like to make it clear that every Clarificatory Note or
Press Release issued by the Board does not have the statutory
force like the Circulars issued by the Board under Section 119
of the Act. It is only those Circulars issued by the Board under
the provisions of Section 119 of the Act, will have the statutory
force and will be binding on every income-tax authorities.
Therefore, the Press Release relied upon by Shri Ramamurti not
being a Circular issued under Section 119 of the Act will not be
of any assistance to the respondents in support of their
contentions.
It is then contended that if it is to be construed that the
Commission has no power of waiver or reduction of interest
then the entire purpose of Chapter XIX-A would be defeated
since a person making an application to the Commission would
not be in any way better off than pursuing his remedy otherwise
provided in the Act. We are unable to accept this argument
advanced on behalf of the respondents because the persons who
approach the Commission under Chapter XIX-B are admittedly
the persons who had not declared their true incomes to the
income-tax authorities as required under the Act. Inspite of this
default, Section 245C comes to the aid of such assessees by
providing a way out of the statutory implications of their
default. The object of the Legislature in introducing this Section
is to see that the protracted proceedings before the authorities or
in courts are avoided by resorting to settlement of cases. In this
process, an assessee cannot expect any reduction in amounts
statutorily payable under the Act. While the Settlement
Commission arrives at the taxable income of the assessee on the
basis of records available before it, it has to levy the
mandatorily chargeable tax on such income arrived at by it and
wherever interest is due under the mandatory provisions like
Sections 234A, 234B and 234C, it has to include the said
interest also in the settlement. But, at the same time, the
assessee who because of his non-disclosure would otherwise
have been liable for various penal actions, gets an opportunity
of getting immunity from penal proceedings. It is to be seen
that under Section 245H the Commission has the power to grant
immunity to the assessee from prosecution and penalty. This
immunity is not confined only to the penal provisions of the Act
but it is also available if granted by the Commission to offences
under the Indian Penal Code or under any other Central Act for
the time being in force and also get the benefit of waiver or
reduction in the imposition of penalty under the Act with
respect to the cases covered by the settlement. Therefore, it is
futile to contend that merely because the Settlement
Commission has not been vested with the power of waiving or
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reducing the interest, Chapter XIX-A would either become
otiose or would not serve any purpose. Hence, this argument
has to be rejected.
Learned Solicitor General has pointed out that by virtue
of the power vested in the Board under Section 119(2)(a) of the
Act, the Board has issued Circulars by Notification
No.F.No.400/234/95-IT(B) dated 23.5.1996. As per this
Circular, it has empowered that the Chief Commissioner of
Income Tax and Director General of Income-tax may waive or
reduce interest charged under Sections 234A, 234B and 234C
of the Act in the class of cases or class of incomes specified in
paragraph 2 of the said order for the period and on conditions
which are enumerated therein. He submitted that in view of the
said Circular, the same authority can be exercised by the
Commission since the said Circular would amount to relaxation
of the rigor of Sections 234A, 234B and 234C of the Act. We
are in unison with this submission of the learned Solicitor
General. This Court in a catena of cases has held that the
Circulars of the Central Board of Direct Taxes are legally
binding on the Revenue. See UCO Bank v. Commissioner of
Income Tax (1999) [237 ITR 889]. Since these Circulars are
beneficial to the assessees, such benefit can be conferred also
on the assessees who have approached the Settlement
Commission under Section 245C of the Act on such terms and
conditions as contained in the Circular. In our opinion, it is for
this purpose that Section 245F of the Act has empowered the
Settlement Commission to exercise the power of an income-tax
authority under the Act. We must clarify here that while
exercising the power derived under the Circulars of the Board,
the Commission does not act as a subordinate to the Board but
will be enforcing the relaxed provisions of the Circulars for the
benefit of the assessee in the process of settlement.
For the reasons stated above, we hold that the
Commission in exercise of its power under Sections 245(4) and
(6) does not have the power to reduce or waive interest
statutorily payable under Sections 234A, 234B and 234C except
to the extent of granting relief under the Circulars issued by the
Board under Section 119 of the Act.
In conclusion, we must note that we have taken up for
consideration Civil Appeal Nos.4126-50/2000 and have decided
the issue pertaining to the power of the Commission to waive or
reduce the interest chargeable under Sections 234A, 234B and
234C of the Act while passing orders of settlement under
Section 245D(4) of the Act. We have not decided any other
issue that might arise in all the appeals/petitions.
Having decided the abovesaid question of law, we think
it proper that all these matters be placed before a Division
Bench of this Court for disposal in accordance with law.
It is ordered accordingly. No costs.
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