Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL Nos.24912492 OF 2019
(Arising out of S.L.P.(C) Nos.2113921140 of 2017)
Kakadia Builders Pvt. Ltd. & Anr. ….Appellant(s)
VERSUS
Income Tax Officer Ward 1(3) & Anr. ….Respondent(s)
J U D G M E N T
Abhay Manohar Sapre, J.
1. Leave granted.
2. These appeals are directed against the final
judgment and order dated 28.07.2016 passed by
the High Court of Gujarat at Ahmedabad in SCA
Nos.7814 & 7820 of 2014 whereby the High Court
Signature Not Verified
Digitally signed by
ASHOK RAJ SINGH
Date: 2019.03.05
16:47:32 IST
Reason:
disposed of the petitions(SCAs) filed by the
respondents.
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3. In order to appreciate the issue involved in
these appeals, it is necessary to set out a few
relevant facts infra .
4. The appellants herein are the respondents
(assessee) and the respondents (Revenue) herein are
the petitioners in the petitions(SCAs) before the
High Court out of which these appeals arise.
5. The appellant in S.L.P. No.21139/2017 is a
Private Limited Company and the appellant in SLP
No.21140/2017 is the promoter Director of the said
Company. On 19.01.1994, a search and seizure
operation was carried out in the premises of the
appellants (assessee) under the Income Tax Act,
1961 (hereinafter referred to as “the Act” ).
6. During pendency of the assessment
proceedings, which were initiated for determination
of the tax liability as a result of search and seizure
operation, the appellants on 12.03.1996 and
03.09.1996 filed the settlement applications before
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the Settlement Commission and offered to settle
their tax matter in accordance with the procedure
provided under Chapter XIXA of the Act.
7. On 11.08.2000, the Settlement Commission
passed an order under Section 245D(4) of the Act.
By the said order, the Settlement Commission made
certain additions and waived interest chargeable
under Sections 234A, 234 B and 234C of the Act.
8. The appellants (assessee) felt aggrieved and
filed rectification applications before the Settlement
Commission on 29.12.2000 for amending its order
dated 11.08.2000. The Revenue (Commissioner of
Income Tax) also felt aggrieved by the order dated
11.08.2000 and filed a rectification application
under Section 154 of the Act before the Settlement
Commission on 26.07.2002.
9. By order dated 11.10.2002, the Settlement
Commission dismissed the applications filed by the
appellants(assessee) and partly allowed the
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application filed by the respondents(Revenue)
rectifying its order dated 11.08.2000 insofar as it
pertained to waiver of interest, which was granted to
the appellants (assessee). The appellants(assessee)
felt aggrieved by the order dated 11.10.2002 passed
by the Settlement Commission and filed two
separate petitions (SCA Nos.15097 and 15101 of
2004) in the High Court of Gujarat.
10. The High Court, by order dated 03.03.2014
allowed the petitions(SCAs) and set aside the order
dated 11.10.2002 passed by the Settlement
Commission and granted liberty to the Revenue to
follow the remedies as may be available to them
against the order passed by the Settlement
Commission dated 11.08.2000.
11. The Revenue, therefore, felt aggrieved and filed
two petitions (SCA Nos.7814 of 2014 and 7820 of
2014) against the order dated 11.08.2000
questioning its legality. The High Court though in
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concluding paragraph observed that the petitions
are disposed of yet in substance allowed the
petitions(SCAs) and modified the order dated
11.08.2000 of the Settlement Commission by
passing the following directions in paragraph 13
which reads as under:
“Under the circumstances, we direct
modification of the order of Settlement
Commission dated 11.08.2000 by reversing
the waiver of interest in terms of Settlement
Commission’s directions contained in its
order dated 11.10.2002. In other words, we
adopt the same directions for modification of
the Settlement Commissioner’s original order
dated 11.08.2000.”
12. It is against this order, the
appellants(assessee) felt aggrieved and have filed the
present appeals by way of special leave in this
Court.
13. So, the short question which arises for
consideration in these appeals, is whether the High
Court was justified in allowing the petitions(SCAs)
and thereby was justified in modifying the order
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dated 11.08.2000 passed by the Settlement
Commission.
14. Heard Mr. R.P. Bhatt, learned senior counsel
for the appellants and Mr. K. Radhakrishnan,
learned senior counsel for the respondents.
15. Having heard the learned counsel for the
parties and on perusal of the record of the case
including the written submissions filed by the
parties, we are inclined to allow the appeals and
remand the case to the Settlement Commission for
deciding the matter in question afresh on merits
keeping in view the observations made infra .
16. At the outset, we consider it apposite to
mention that the issue involved in these appeals is
governed by the law laid down by the decision of two
Constitution Benches of this Court. One was
rendered on 18.10.2001 in Commissioner of
Income Tax, Mumbai vs. Anjum M.H. Ghaswala &
Ors., (2002) 1 SCC 633 and the other was rendered
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on 21.10.2010 in Brij Lal & Ors. vs.
Commissioner of Income Tax, Jalandhar, (2011)
1 SCC 1.
17. So far as the decision rendered in Ghaswala
(supra) is concerned, the question involved therein
was whether the Settlement Commission
constituted under Section 245B of the Act has the
jurisdiction to reduce or waive the interest
chargeable under Sections 234A, 234B and 234C of
the Act while passing the order of settlement under
Section 245D of the Act. After examining the
scheme of the Act in the context of the powers of the
Settlement Commission, Justice Santosh Hegde
speaking for the Bench held as under:
“35. For the reasons stated above, we hold
that the Commission in exercise of its power
under Sections 245D(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.”
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18. So far as the decision rendered in Brijlal
(supra) is concerned, this Court examined the
following three questions:
“(I) Whether Section 234B applies to
proceedings of the Settlement Commission
under Chapter XIXA 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 245D(1) or up to the
date of the order of the Commission under
Section 245D(4)?
(III) Whether the Settlement Commission
could reopen its concluded proceedings by
invoking Section 154 of the said Act so as to
levy interest under Section 234B, though it
was not so done in the original proceedings?”
19. After examining these questions, this Court
speaking through Justice S.H. Kapadia, the then
learned CJI, answered the questions as under :
“ ( 1 ) Sections 234A, 234B and 234C are
applicable to the proceedings of the
Settlement Commission under Chapter XIXA
of the Act to the extent indicated
hereinabove.
( 2 ) Consequent upon Conclusion ( 1 ), the
terminal point for the levy of interest under
Section 234B would be up to the date of the
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order under Section 245D(1) and not up to
the date of the order of settlement under
Section 245D(4).
( 3 ) The Settlement Commission cannot
reopen its concluded proceedings by invoking
Section 154 of the Act so as to levy interest
under Section 234B, particularly, in view of
Section 245I.”
20. Keeping in view the law laid down by this
Court in the aforementioned two decisions, the
question arises for consideration in these appeals is
whether the High Court was justified in allowing the
petitions(SCAs) filed by the Revenue.
21. It is not in dispute that when the Settlement
Commission passed the first order on 11.08.2000
disposing of the application of the
appellants(aseesee), the issue with regard to the
powers of the Settlement Commission was not
settled by any decision of this Court. These two
decisions were rendered after the Settlement
Commission passed the order in this case.
Therefore, the Settlement Commission had no
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occasion to examine the issue in question in the
context of law laid down by this Court in these two
decisions. However, the issue in question was, at
that time, pending before the High Court in the
petitions(SCAs).
22. In a situation like the one arising in the case,
the High Court instead of going into the merits of
the issue, should have set aside the order dated
11.08.2000 passed by the Settlement Commission
and remanded the case to the Settlement
Commission for deciding the issue relating to waiver
of interest payable under Sections 234A , 234B, and
234C of the Act afresh keeping in view the scope
and the extent of powers of the Settlement
Commissioner in relation to waiver of interest as
laid down in the said two decisions.
23. The High Court, however, committed a
jurisdictional error when it observed in Para 13
(quoted above) that they (High Court) adopt the
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directions contained in the order of the Settlement
Commission dated 11.10.2002 and then went on to
make the said directions as a part of the impugned
order in relation to waiver of interest. This approach
of the High Court is wholly without jurisdiction.
24. The High Court failed to see that the order
dated 11.10.2002 of the Settlement Commission
was already set aside by the High Court itself in the
first round vide order dated 03.03.2014 passed in
S.C.A. Nos. 15097 & 15101 of 2004 in the light of
law laid down by this Court in Brijlal (supra)
wherein it is laid down that the Settlement
Commission has no power to pass orders under
Section 154 (see conclusion III).
25. Since the order dated 11.10.2002 of the
Settlement Commission was already held bad in law
on the ground that it was passed under Section 154
of the Act, the same was neither in existence for any
purpose and nor it could be relied upon by the High
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Court much less for making it a part of their order
for issuing a writ.
26. In the light of what we have held above, we
consider it apposite to set aside the impugned order
and the order dated 11.08.2000 passed by
Settlement Commission to the extent it decided the
issue in relation to waiver of interest and remand
the case to the Settlement Commission to decide the
issue relating to waiver of interest payable by the
assessee (appellants herein) afresh keeping in view
the law laid down by this Court in Ghaswala
(supra) and (supra) after affording an
Brijlal
opportunity to the parties concerned.
27. The appeals are accordingly allowed. The
impugned order passed by the High Court and the
order dated 11.08.2000 passed by the Settlement
Commission in Settlement Application
Nos.10/S/095/9596/IT & 10/S/029/9596/IT are
set aside.
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28. We, however, make it clear that we have not
expressed any opinion on the merits of the issue
while having formed an opinion to remand the case
to the Settlement Commission. The Settlement
Commission will accordingly decide the matter
uninfluenced by any observations made by this
Court. Let the matter be decided by the Settlement
Commission within six months from the date of this
order.
………...................................J.
[ABHAY MANOHAR SAPRE]
....……..................................J.
[DINESH MAHESHWARI]
New Delhi;
March 05, 2019.
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