Full Judgment Text
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CASE NO.:
Appeal (crl.) 7966-67 of 1996
Appeal (civil) 7248 of 1999
PETITIONER:
Commissioner of Income Tax
RESPONDENT:
M/s Hindustan Bulk Carriers, M/s Damani Brothers
DATE OF JUDGMENT: 17/12/2002
BENCH:
M.B. SHAH
JUDGMENT:
J U D G M E N T
Shah, J.
I have gone through the Judgments rendered by brother
Pasayat, J. and brother Dharmadhikari, J. I agree with the views
expressed in those Judgments. However, for clarifying the position
with regard to payment of interest I would like to add as under:
As provided under Section 245B of the Income-Tax Act, 1961,
(hereinafter referred to as ’the Act’) the Central Government has
constituted the Income Tax Settlement Commission for the settlement
of cases. The word "case" has been defined under Section 245A(b) of
the Act to mean any proceeding under the Income Tax Act for the
assessment or reassessment of any person in respect of any year or
years and includes 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. Section 245C(1) provides for an
application by an assessee in a prescribed form containing a full and
true disclosure of his income which has not been disclosed before the
assessing officer and such other prescribed particulars for settlement
of his case by the Settlement Commission.
Other requirements are that no such application could be made
unless-
(a) the assessee has furnished the return of income
which he is or was required to furnish under any of
the provisions of this Act; and
(b) the additional amount of income-tax payable on
the income disclosed in the application exceeds (at
present) one hundred thousand rupees.
The other relevant requirement which has a bearing on the
question involved in these appeals is sub-section (1A) of Section
245C, which provides that the additional amount of income tax
payable in respect of the income disclosed in an application should be
the amount calculated in accordance with the provisions of sub-
sections (1B) to (1D).
The next stage is Section 245D which empowers the Settlement
Commission to reject the application or to allow the application to
proceed with within a period of one year from the end of the month in
which such application was made. Rejection of such application could
be only after giving an opportunity of hearing to the applicant as well
as after considering the report of the Commissioner of Income Tax. If
the application is not rejected and the Settlement Commission decides
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to proceed with the application, then the assessee is required to pay
the additional amount of income tax payable on the income disclosed
in the application within 35 days of the receipt of the copy of the order
passed by the Settlement Commission.
The subsequent stage provided under sub-sections (2B) and
(2C) to Section 245D is that if the assessee is not in a position to pay
the said amount within a period of 35 days it may extend the time for
payment of the amount which remains unpaid but the assessee would
be liable to pay simple interest at the rate of 15% per annum on the
amount remaining unpaid from the date of the expiry of the period of
35 days referred to in sub-section (2A).
The question which arises is whether the assessee is required to
pay any interest on the amount of tax on the income disclosed before
the Settlement Commission as contemplated under Sections 234A,
234B and 234C? That question is concluded by a decision rendered
by the Constitution Bench of this Court in Commissioner of Income
Tax, Mumbai v. Anjum Ghaswala [(2002) 1 SCC 633] where it was
held 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, waiver or
reduction in payment of statutory interest is outside the purview of the
settlement contemplated in Chapter XIX-A of the Act. Therefore, the
assessee is required to pay interest at the prescribed rate from the date
when the amount became due and payable on the undisclosed income
which is disclosed before the Settlement Commission, till the date of
the order of entertaining such application, passed by the Settlement
Commission under Section 245C. He is given 35 days’ time for
making such payment under sub-section (2A) of Section 245D.
Under Section 245H, Settlement Commission has jurisdiction
to grant immunity from prosecution and penalty if the Settlement
Commission is satisfied that the assessee has co-operated with it in the
proceedings before it and has made a full and true disclosure of his
income and the manner in which such income has been derived. The
immunity from prosecution is for any offence under the Income Tax
Act or under the Indian Penal Code or under any Central Act.
However, no such immunity can be granted if the prosecution is
already instituted before the date of the receipt of the application
under Section 245C. It also empowers the Commission to reduce the
penalty as provided under the Act wholly or partly with respect to the
case covered by the settlement. From this Section it can be easily
inferred that the Commission has no power (a) to waive tax statutorily
payable under the Act, or (b) to reduce the interest on the tax payable
on the income disclosed.
Therefore, it cannot be contended that the assessee would be
required to pay interest on the tax payable on the income disclosed by
him only from the date when he files an application under Section
245C. He has to pay the tax amount on the disclosed income and also
the interest payable on the said tax. Further, when once the order
under Section 245D is passed by the Settlement Commission to
proceed with the application, he is required to pay the said amount i.e.
the tax on the income subsequently disclosed and the interest payable
thereon, within a period of 35 days. If that amount is not paid the
Commission may extend the period of payment with a specific
condition that he shall pay the same interest thereon. It is true that to
that extent he would be required to pay interest on interest but the
scheme of Section 245D contemplates that he has to pay tax on the
disclosed income and as the Commission has no power to waive
interest on the said tax, he is also required to pay the tax with interest.
That means under sub-section (2A) to Section 245D the assessee
would be required to pay the income tax payable on the disclosed
income plus the interest payable thereon as contemplated under
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Sections 234A, 234B or 234C.
The next step is if the Commission gives further time to pay the
said amount whether assessee is required to pay interest as
contemplated under sub-section (2C) of Section 245D? For
simplification it can be stated that once the amount is crystallized i.e.
X is the tax payable on the disclosed income and Y is the interest
payable thereon, on aggregate of this amount (i.e. X+Y), if the time
for payment is extended by the Settlement Commission, the assessee
is also required to pay the interest on the amount of ’X+Y’. That is
the scheme of sub-section (2C) of Section 245D. It specifically
provides that where the additional amount of income tax is not paid
within the time specified under sub-section (2A) then on the amount
which remains unpaid "the assessee shall be liable to pay simple
interest at the rate of 15% per annum on the amount remaining unpaid
from the date of expiry of the period of 35 days referred to in sub-
section (2A)". It is also to be noted that under sub-section (2D) where
the additional amount of income tax referred to in sub-section (2A) is
not paid by the assessee within the time specified under that sub-
section or the time to pay is extended under sub-section (2B) the
Settlement Commission is empowered to direct recovery of the said
amount with interest payable thereon under sub-section (2C) and
penalty for default in making payment of such additional amount in
accordance with the provisions of Chapter XVII, by the assessing
officer having jurisdiction over the assessee. The aforesaid scheme of
Section 245D leaves no doubt that the assessee would be required to
pay the amount with interest thereon. The amount at that stage would
be the tax plus interest. In such cases, there is no question of paying
interest on interest because the interest which the assessee is required
to pay under Sections 234A, 234B or 234C merges with the amount as
provided under sub-section (2A).