Gujarat H.C : While passing an order under Section 245D(4) of the IT Act is justified in charging the interest on he difference of the amount disclosed at the time of making application under Section 245C(1) of the IT Act and the amount determined while passing the order under Section 245D(4), under Section 234B of the IT Act a ter taking into consideration, the provisions of section 234B(2A) or not?

High Court Of Gujarat

Devdip Malls Developers (P) Ltd. & Ors. vs. Secretary, Income Tax Settlement Commission & Anr.

Section 234B, 245C(1)

Asst. Year 2008-09 to 2014-15

M. R. Shah & B. N. Karia, JJ.

Special Civil Application No. 4325 of 2017, 7112 of 2017 TO 7124 of 2017

19th July, 2017

Counsel appeared:

SN Soparkar, Senior Advocate with BS Soparkar & Swati Soparkar, Advocate for the Petitioner.: Manish Bhatt, Senior Adovcate with Mauna M Bhatt, Advocate for the Respondent

M. R. SHAH, J.

1. As common question of law and facts arise in this group of petitions, all these petitions are heard, decided and disposed of by this common judgment and order. Special Civil Application No.4325/2017

2. By way of this petition under Article 226 of the Constitution of India, M/s. Devdip Malls Developers Pvt. Ltd. and others have prayed for an appropriate writ, direction and order to hold that the amendment made by way of insertion of sub-section (2A) of Section 234B of the Income Tax Act, 1961 (hereinafter referred to as “IT Act”) is effective prospectively from 01.06.2015 only and shall accordingly by applicable to the applications filed under Section 245C (1) after this date and to further hold that the interest under Section 234B of the IT Act in cases of application filed under Section 245C(1) prior to 01.06.2015 will be charged on additional income tax declared in such applications upto the order under Section 245D(1) of the IT Act in accordance with the decision of the Hon’ble Supreme Court in the case of Brij Lal and Others vs. Commissioner of Income Tax reported in 328 ITR 477 (SC) and not on additional income tax determined in the order under Section 245D(4) and to direct the respondent No.1 to accept the interest computed and accordingly paid by the petitioners in their applications filed under Section 245C(1) of the IT Act.

Special Civil Application Nos.7112/2017 to 7124/2017

3. Special Civil Application Nos.7112/2017 to 7124/2017 have been preferred by the respective petitioners for an appropriate writ, direction and order to quash and set aside the impugned order dated 24.08.2016 (Annexure-A) passed by the Income Tax Settlement Commission (hereinafter referred to as “Settlement Commission”) insofar as levy of interest chargeable under Section 234B of the IT Act is concerned. It is also further prayed to hold that the interest under Section 234B of the IT Act in cases of application filed under Section 245C(1) prior to 01.06.2015 will be charged on additional income tax declared in such applications upto the order under Section 245D(1) of the IT Act in accordance with the decision of the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra) and not on additional income tax determined in the order under Section 245D(4) and to direct the respondent No.1 to accept the interest computed and accordingly paid by the petitioners in their applications filed under Section 245C(1) of the IT Act.

4. For the sake of convenience the facts in Special Civil Application No.7112/2017 are narrated and Special Civil Application No.7112/2017 be treated as a lead matter.

5. That on 30.08.2013, a search and seizure operation was carried out by Income Tax Department at the office and the residential premises of Taksh Group and its partners. The petitioner is one of the firm which forms part of M/s. Taksh Group of Business. That on 03.03.2015, the petitioner herein preferred settlement application being Application No.GJ/SUCC/137/2014-15/IT before the Settlement Commission under Section 245C(1) of the IT Act for AY 2010-11 to 2014-15. That similar other 13 applications were also preferred belonging to M/s. Taksh Group, the particulars of which are as under:

That in the respective applications the respective applicants disclosed additional income assessment year-wise, the particulars of which are as under:

5.1. That in the statement of facts, the disclosure of additional income was made on account of on-money receipts, disallowance of interest on entry loans and scrap sales in case of the applicant firms and in the case of three individual applicants, additional income was disclosed in the Statement of Facts / settlement applications on account of income from investment in land

i.e. income from on-money receipts in respect of land transactions, unexplained opening balance of capital account and further income on account of cash received occasionally as gift / gratitude from other developers for business advices rendered by the individual applicants. That as the issues involved in all the cases were interlinked, the applications were discussed and dealt with jointly in the proceedings under Section 245D(1) and all the applications were admitted and allowed to be proceeded further vide common order passed under Section 245D

(1) of the IT Act on 09.03.2015. That the report da ed 20.04.2015 under Section 245D(2B) of the Principle Commissioner of Income Tax (Central), Surat was received on 22.04.2015 / 24.04.2015. That the respective applicants filed their written rejoinder on 29.04.2015. That thereafter all the cases were heard together on 29.04.2015 and upto the order under Sect on 245D(2C) was passed on 30.04.2015 treating the applications as “not invalid” and allowed them to be proceeded further. That the Principle Commissioner of Income Tax submitted on 22.06.2015 the reports under Rule 9 dated 17.06.2015. That the applicants filed on 06.10.2015 their written reply vide letter dated 05.10.2015. Thereafter, the hearing of the proceedings under Section 245D(4) were fixed. That during the course of the hearing before the Settlement Commission, the applicants placed on record a written submission vide letter dated 10.08.2016 with regard to the offer of further income as follows along with the working of further income offered in the hands of each applicant and assessment year-wise.

a) on account of error in adopting sale consideration -Rs.1,82,381/

b) on account of revision of on-money -Rs.3,26,91,128/

c) on account of additional 1% of total on money -Rs.2,13,11,602/

5.2 The applicants prayed that the immunity may be granted to them, its partners and officers from all penalty and prosecution under the IT Act. The applicants also prayed that time upto 31.12.2016 may be granted to make payment of further sum due as per order under Section 245D(4). That thereafter considering the above and the
applications made on behalf of the applicants, the Settlement Commission passed the final order under Section
245D(4) as under:

“11. Decision

We have carefully considered the issues put forth in PCIT Rule 9 report, Applicant’s rejoinder and oral arguments from both sides. We find that the applicants in true spirit of settlement has accepted further additional income of Rs.1,83,381/-in the case of Shri Girish S. Shah, on account of rectifying the error in adopting the sale consideration in the purchase of the aforesaid land, a sum of Rs.3,26,91,128/-on account of revision of on-money and on account of additional 1% of total on money -Rs.2,13,11,602/-which shall be brought to tax as per the workings enclosed to the letter dated 10.08.2016. In aggregate, the further additional income offered for tax is Rs.5,41,85,111/-. This will increase the total additional income offered to Rs.53.29 Crores as against initial additional income offered at Rs.47.87 Crores. Taking into account all facts and discussions on record it is concluded that the additional income offered during 245D(4) proceedings can be accepted with reference to income disclosed in the settlement application. The CIT (DR) and the Assessing Officer also did not make any further submissions. In the light of the above, the cases of the applicants are hereby settled on the following terms and conditions.

12. Capitalization

In the SOF and by letter dated 10.08.2016, the applicants have requested for capitalization of the additional income already introduced in the books as included in the fund flow submitted. The request is being allowed. The request for capitalization of additional income disclosed during the proceedings u/s.245D(4) is being accepted only to the extent of Rs.49,88,000/-being unaccounted investment in purchase of land Block No.127/P of village Bakrol discussed in para no.9 above.

13. Computation of Total Income and Payment of Taxes

The total income of the applicants for the Assessment Years 2007-08 to 2013-14 is computed separately as per the Annexures enclosed to this order. By letter dated 10.08.2016, the applicants have stated that any additional tax that is determined to be payable as a result of the order of the settlement commission may be allowed to be paid by 31st December, 2016. We have carefully considered the applicants submissions and payment of the tax and interest arising consequent to this order is a lowed to be paid in two instalments i.e. by 31.10.2016 and
31.12.2016. The grant of instalments as a ove will not affect the chargeability of the interest under Section
245D(6A) of the I.T. Act, 1961.

14. Waiver of Interest

The applicants have prayed for waiver of interest chargeable under Section 234A, 234B and 234C of the Act. In view of the Hon’ble Supreme Court’s decision in the case of CIT v. Anjum M.H. Ghaswala and others (2001) 252
ITR 1 (SC), the Settlement Commission is not empowered to grant waiver / reduction of interest chargeable under Section 234A and 234C of the Act. The said interest shall be charged in accordance with the provisions of the Act. Vide circular F.No.1/158/Tech./2013/SC dated 02.05.2016, the Addl. DIT (Inv.) Income Tax Settlement Commission, 4th Floor, Lok Nayak Bhawan, Khan Market, New Delhi -110 003 has circulated Central Board of Direct Taxes letter F.No.299/78/2015-IT (Inv.III/623 dated 18.04.2016 addressed to the Chairman, Income Tax Settlement Commission, New Delhi. In this letter, it is inter-alia stated that there is no ambiguity in so far as applicability of the provisions of Sec.234B(2A) is concerned and that the amendment of the provisions of Sec.234B was made subsequent to judgment of the Apex Court in the case of Brijlal and Calcutta High Court in the case of G.M. Foods. It is further stated since the applicability of the new provision came into force from 01.06.2015, it shall be applicable to the cases pending with the ITSC as on 01.06.2015 as well. We have given our careful consideration and are in agreement with the above stated position of law. Therefore, with due respect to the judgment of the Hon’ble Apex Court in the case of Brijlal vs. CIT (2010) 328 ITR 477 (SC) and judgment of the Hon’ble Calcutta High Court in G.M. Foods (2015) taxmann.com 16 (Cal.), the interest under Section 234B shall be charged after taking into consideration the-J provisions of Sec.234B(2A) also.

15. Immunity from Prosecution and Penalty

The applicants have prayed for grant of immunity from prosecution and penalty under section 245H of the Act. The request made by the applicants is carefully considered. We are satisfied that there has been no attempt to conceal any material facts in these cases. The applicants have extended full cooperation in furnishing the required details to enable the Commission to arrive at a proper settlement of the cases. We find that the applicants have made full and true disclosure of their income and the manner in which such income has been derived in their settlement applications and statements of facts and that the additional disclosure during the course of proceedings under Section 245D(4) of the I.T. Act, 1961 is of the same nature as above and that the material facts were properly disclosed in the respective settlement applications and statements of facts. We, therefore, grant immunity from penalty leviable, if any. For similar reasons, we grant immunity from prosecution under the applicable Sections of the Income Tax Act. However, the immunity will not be available where the proceedings for the prosecution of offence under the Income Tax Act, 1961 has been instituted before the date of the application u/s 245C of the Income Tax Act, 1961.

15.1 The immunity granted to the applicant vide this order may be withdrawn, if the applicant fails to pay the applicable tax demanded within time, and in the manner specified by this order, or fails to comply with other conditions stated in the order.

15.2 The immunity granted to the applicants may also at any time be withdrawn, if the Commission is satisfied that the applicants have in the course of the settlement proceeding , concealed any particulars material to the settlement, or have given false evidence. Thereupon, the applicant may be tried for the offence for which immunity was granted, or for any other offence for which the applicants appear to have been guilty in connection with the settlement, and the applicants shall also become liable to the imposition of any penalty under the Act to which the applicants would have been liable had such immunity not been granted.”

5.3 At this stage it is required to be noted that before the learned Settlement Commission the applicants prayed for waiver of interest chargeable under Sections 234A, 234B and 234C of the IT Act, however considering the provisions of Section 234B(2A) of the IT Act and the amendment of the provision of Section 234B of the IT Act, which came into force with effect from 01 06.2015, the Settlement Commission passed an order to charge the interest under Section 234B of the IT Act after taking into consideration the provisions of Section 234B(2A) also.

5.4 Feeling aggrieved and dissatisfied with the impugned order passed by the learned Settlement Commission insofar as charging the in erest under Section 234B while taking consideration the sub-section (2A) of section 234B of the IT Act and charging the interest on the additional amount of income tax determined under Section 245D(4) of the IT Act, the petitioners have preferred the present Special Civil Applications for the aforesaid reliefs.

6. Shri S.N. Soparkar, learned Senior Advocate has appeared on behalf of the respective petitioners and Shri M.R. Bhatt, learned Senior Advocate has appeared on behalf of the Revenue.

7. Shri Soparkar, learned Counsel appearing on behalf of the petitioners has vehemently submitted that the impugned order/s passed by the learned Settlement Commission in directing to apply the provisions of sub-section (2A) of Section 234B is absolutely perverse and illegal and contrary to law.

7.1 It is submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that as such sub-section (2A) in Section 234B came to be inserted by Finance Act, 2015 with effect from 01.06.2015. It is submitted that the aforesaid amendment was explained in the Memorandum to the Clauses in which it was specifically mentioned that the amendment will take effect from 01.06.2015. It is further submitted that the amendment came to be further explained by the CBDT through Memorandum in File No.3700149/31/2016-TPL dated 28.03.2016. It is submitted that a combined reading of section 234B(2A), Memorandum explaining the amendment and the Office Memorandum issued by CBDT clearly shows that

“a. Prior to amendment by Finance Act, 2015 by inserting Section 234B(2A) there was no specific provision in 234B for charging of interest on the amount of tax on additional income declared by an Applicant in an application filed by it under Section 245C before the Settlement Commission.

b. Accordingly, amendment was made in Section 234B by inserting new sub-section 2A which provides that Assessee shall be liable to pay interest at the rate of one per cent per month / part of the month under Section 234B on tax determined by it on additional income declared in the application under Section 245C(1).

c. Modification of interest payable u/s 234B due to increase in the additional undisclosed income as per order u/s 245D(4) will be carried out in accordance with clause (b) of subsection (2A); or under clause (c) if variation in the additional undisclosed income arises as a result of order u/s 245D(6B).

d. There is clear indication in the provision as explained by memorandum that it will be application on the applications filed. And since amendment is made effective from 1st June 2015, it will be applicable to the applications filed on or after 1st June 2015.On the contrary, there is no indication, direct or implied, in the provision or in the memorandum explaining the clauses that the amendment can also be applied to the applications filed prior to 1st June 2015.

e. Clause (a) of sub-section (2A) of section 234B imposes a l ability of interest and provides for computation mechanismly way of providing rate of interest, the quantum of income tax on which and period for which, interest is to be calculated. This computation mechanism is to be applied “where an application under sub-section 1 of section 245C for any assessment year has been made.” When such computation mechanism was not provided earlier, it clearly indicates that this new computation mechanism would be applicable prospectively and cannot be applied on applications which have been made prior to 1st June 2015.”

7.2 It is submitted that despite the above, however considering the office memorandum dated 20.03.2016 issued by the CBDT in which it was mentioned that amendment shall be applicable to the pending applications before the Settlement Commission pending as on 01.06.2015, the learned Settlement Commission has passed the impugned order making the provision of section 234B(2A) applicable retrospectively, which is not permissible.

7.3 It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that the provision of section 234B(2A) shall not have retrospective effect and shall have the effect only with respect to the applications filed after 01.06.2015 and shall not be applicable to the applications filed before 01.06.2015.

7.4 It is submitted that it is a cardinal principle of law that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. It is submitted that where the object of the statute is to affect vested rights or to impose new burdens or to impaired existing obligations, it would have prospective operations. It is submitted that in the matter of substantive law, legislature does not operate on matters taking place before its enactment. It is submitted that therefore there is a presumption that statute are not intended to have retroactive effect unless they merely change legal procedure. It is submitted that therefore section 234B(2A) can never be applied retrospectively. It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that expression “substantive” relates to the issue of substance as approach to form or procedure. It is submitted that provisions providing for imposition of interest as a substantive provision. It is submitted that in absence of a contract or usage providing for payment of interest, interest can be levied only under the law and therefore, the liability to pay interest and emanates from the statutory provision.

7.5 It is submitted that in the present case section 234B would not lay down in clear terms as to how interest under section 234B would be levied in cases of applicants filing applications under Section 245C(1) before
01.06.2015. It is submitted that it was only after the decision of the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra) that the matter became clear that interest under section 234B has to be charged in such cases upto the date of order under section 245C(1). It is submitted that despite the law laid down by the Hon’ble Supreme Court in the case of Brij Lal (Supra) by which the Hon’ble Supreme Court held that the interest under Section 234B has to be charged upto the order under Section 245C(1), taking recourse of subsection (2A) of section 234B and applying the same retrospectively, the Settlement Commission has passed an order to charge the interest in the order under Section 245D(4) of the IT Act. It is submitted that therefore the impugned order is in teeth of the order passed by the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra).

7.6 It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that there is no explanation attached or introduced in section 234B(2A), like that which was inserted in section 234D by the Finance Act, 2012 with retrospective effect from 01.06.2003, clarifying that sub-section (2A) will also be applicable to pending cases of settlement.

7.7 It is further submitted by Shri Soparkar, learned Counsel appearing on beha f of the petitioners that as such in the memorandum to the clauses issued at the time of introduction of sub-section (2A) clearly stated that there was no provision to levy interest under Section 234B on additional income tax declared in the application filed under Section 245C(1). It is submitted that therefore it is for the first t me with effect from 01.06.2015 that such levy of interest has been introduced. It is submitted that therefore an altogether new levy cannot be made effective retrospectively. It is submitted that a vested right has accrued in favour of the petitioners when they had filed applications prior to 01.06.2015 which can only be taken by way of effecting retrospective amendment.

7.8 It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that in cases where an assessment has been done either under Section 143(1) or under Section 143(3), levy of interest under Section 234B was governed by the then existing sub-section (3) of section 234 before its amendment by Finance Act, 2015 with effect from 01.06.2015. It is submitted that as per sub-section (3) interest under Section 234B would be charged on additional income tax from the date of filing of the regular assessment under Section 143(1) or section 143(3) of the IT Act o the date of reassessment or recomputation under Section 147 or section 153A. It is submitted that however the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra) held that, the terminal point for the levy of interest under Section 234B would be upto the date of order under Section 245D(1) and not upto the date of the order of settlement under Section 245D(4) of the IT Act. It is submitted that therefore the petitioners are liable for interest under Section 234B on additional amount of income tax determined under Section 245D(1) of the IT Act only.

7.9 It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that as held by the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra), sections 234A, 234B and 234C are applicable upto the stage of section 245C(1) of the IT Act being the order passed by the learned Settlement Commission. It is submitted that it clearly means that quantum on which the interest has been levied is the one declared in the application under Section 245C(1) of the IT Act as in view of the decision of the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra), the Parliament has not extended the provisions and the liability to pay interest beyond the date of application for settlement. It is submitted that in the case of Brij Lal and Others (Supra), the Hon’ble Supreme Court held that the order of Settlement Commission under Section 245D(4) is not an order of assessment and the interest has to be charged only upto the stage of admission of the case under Section 245C(1), then the quantum of tax on which interest can be charged will be taxed as per the application of section 245C(1).

Making above submissions and relying upon the following decisions, it is requested to allow the present petitions and grant the reliefs as prayed for.

Brij Lal and Others vs. Commissioner of Income Tax 328 ITR 477 (SC) J.K. Synthetics Limited vs. Commercial Taxes Officer (1994) 4 SCC 276 Tata Teleservices vs. Union of India (2016) 66 Taxmann.com 157 (Gujarat) Commissioner of Income Tax vs. Smt. Sushma Saxena (1997) 223 ITR 395 (P&H) Commissioner of Income Tax vs. Ram Kumar Agarwalla & Ors. (1980) 122 ITR 322 (Calcutta) Star Television News Ltd. vs. Union of India (2009)
317 ITR 66 (Bombay)

8. All these petitions are vehemently opposed by Shri Manish Bhatt, learned Counsel appearing on behalf of the
Revenue.

8.1 It is vehemently submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that the impugned order/s passed by the learned Settlement Commission directing to levy interest under Section 234B applying the provisions of section 234B(2A) and to levy the interest upto the order under Section 245D(4) is absolutely just and proper and in accordance with law and the provision of statute and considering the office memorandum / circular issued by the CBDT dated 28.03.2016.

8.2 It is further submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that as such the Hon’ble Supreme Court in the case of Income Tax Commissioner, Mumbai vs. Anjum H. Ghaswal reported in 2001 (252) ITR 1 (SC) has specifically held that a charge of interest under section 234B is mandatory. It is submitted that as per the provisions of section 234B(1) of the IT Act an assessee is required to pay the interest for default on the payment of advance tax, starting from 1st day of April, next following the financial year till the date of determination of income under Section 143(1) or the date of regular assessment. It is submitted that thus, interest is payable for the default, upto the date of determination of the income. It is submitted that on the same line, are the provisions of section 234B(2A) of th IT Act. It is submitted that Clause (a) relates to the period commencing from the 1st day of April, of such assessment year and ends on the date of making application before the Settlement Commission under section 245C(1) of the IT Act. It is submitted that Clause (b) of section 234B(2A) requires the payment of interest on the additional amount determined by the Settlement Commission which exceeds the disclosure under Section 245C(1) of the IT Act. It is submitted that as can be seen from the above, under section 234B(2A), the interest has been bifurcated into two parts i.e. (1) upto the stage of section 245C(1) application and (2 in he event of any additional determination of income beyond the disclosure under Section 245(1) of the IT Act.

8.3 It is submitted that the Settlement Commission while passing the order under Section 245D

(4) of the IT Act may in accordance with the provisions of the IT Act pass such order as it thinks fit. It is submitted that thus when the Settlement Commission takes up the matter after 01.06.2015 necessarily it will have to take note of the existing provisions relating to the interest payable on defaults on advance tax, which would also encompass the provision of section 234B (2A) of the IT Act.

8.4 It is submitted that the contention of the assessee that the same provision of section 234B (2A) of the IT Act shall be applicable only to the applications filed after 01.06.2015 is absolutely misconceived. It is submitted that the legislature intended to charge interest on default on advance tax. It is submitted that had the intention of of legislature been, as contended by the assessee, sub-section (2A) of section 234B of the IT Act would be worded as “necessary application under sub-section (1) of section 245C for any assessment year has been made on or after 01.06.2015, the assessee shall be liable to pay simple interest…”. It is submitted that as per the settled proposition of law the provision of the Statute is required to be read as it is and neither any word can be added nor can be removed from the Statute. It is submitted that if the contention of the assessee is accepted, in that case, it would really amount to adding words which is not permissible.

8.5 It is further submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that the impugned decision of the Settlement Commission cannot be said to be in teeth of and/or contrary to the decision of the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra) as sought to be contended on behalf of the petitioners. It is submitted that as such considering some of the observations made by the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra), the legislature thought it fit to clarify the position that in respect of the regular assessment, the interest on default on advance tax is payable upto the date of determination, similar provision has to apply for the assessee going for settlement. It is submitted that it is in this context that Clauses (a) and (b) of section 234B(2A) of the IT Act visualize this situation.

8.6 It is further submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that in the event the assessee’s submission is accepted, as against a regular assessment procedure, where the assessee is required to pay the interest on default of advance tax, under the provisions of section 234B(1), from the 1st day of April, following the end of financial year till the date of determination, the assessee going for settlement would not be required to pay such interest though admittedly there is a shortfall. It is submitted that such can never be the intention of legislature. It is submitted that it is in this context that the issue has been clarified by the Board that the provisions of section 234B(2A) would apply to all pending proceedings.

8.7 It is submitted that therefore when it was found that there is a difference in the disclosure made by the assessee in the application submitted under Section 245C(1) of the IT Act and the amount determined by the Settlement Commission under Section 245D(4) of the IT Act and there is an additional liability to pay the tax on the enhanced amount determined, the assessee has to pay the interest upto the order of determination of the exact amount by the Settlement Commission under Section 245D(4) of the T Act. It is submitted that otherwise if the submission on behalf of the petitioners is accepted, in that case, there would not be any interest liability for the period between the application under Section 245C(1) and the order under Section 245D(4) of the IT Act. It is submitted that such cannot be the intention of the legislature. It is submitted that therefore the impugned order/s are absolutely just and proper and the same are not required to be interfered with by this Court.

9. Heard learned Counsel appearing for the respective parties at length.

The short question which is posed for consideration of this Court is whether in the facts and circumstances of the case the learned Settlement Commission, while passing an order under Section 245D(4) of the IT Act is justified in charging the interest on he difference of the amount disclosed at the time of making application under Section 245C(1) of the IT Act and the amount determined while passing the order under Section 245D(4), under Section 234B of the IT Act a ter taking into consideration, the provisions of section 234B(2A) or not?

9.1 It is the case on behalf of the petitioners that as section 234B(2A) was enacted and came into force with effect from 01.06.2015, the same shall not be applicable retrospectively and shall not be applicable to the applications under Section 245C(1) of the IT Act, filed before 01.06.2015. It is also the case on behalf of the petitioners that as Clause (a) of sub-section (2A) of section 234B imposes the liability of interest for the interegnum period i.e. for the period between the application under Section 245C(1) and the order under Section 245D(4) of the IT Act and provides for computation maximum by way of providing rate of interest and the quantum of income tax and the period for which the interest is to be calculated, the same shall not be made applicable retrospectively. It is also the case on behalf of the petitioners relying upon the decision of the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra) that as held by the Hon’ble Supreme Court in the said decision, the Settlement Commission has no jurisdiction to levy and compute the interest upto the date of order of commission under Section 245D(4) of the IT Act and therefore also, the impugned orders passed by the Settlement Commission, to compute the interest under Section 234B of the IT Act after taking into consideration the provisions under Section 234B(2A) of the IT Act is just contrary to the decision of the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra) and in any case the amended provision of section 234B(2A) of the IT Act shall not be made effective retrospectively and more particularly with respect to the application submitted prior to 01.06.2015.

9.2 On the other hand it is the case on behalf of the Revenue that infact as observed and held by the Hon’ble Supreme Court in the case of Anjum H Ghaswal (Supra), charge of interest under Section 234B of the IT Act is mandatory. It is the case on behalf of the petitioners that as per the provision of section 234B(1), an assessee is required to pay the interest for default on payment of advance tax, starting from 1st day of April, next following the financial year till the date of determination of income under Section 143(1) of the IT Act from the date of regular assessment and thus interest is payable for the default, upto the date of determination of income. Therefore, it is the case on behalf of the Revenue that on the same lines are the provisions of Section 234B(2A) of the IT Act. It is the case on behalf of the Revenue that Clause (a) of section 234B(2A) of the IT Act relates to the period commencing from the 1st day of April, of such assessment year and ends on the date of making application before the Settlement Commission under section 245C(1) and Clause (b) of section 234B(2A) of the IT Act requires payment of interest on the additional income which exceeds the disclosure under Section 245C (1) of the IT Act. Therefore, it is the case on behalf of the Revenue that when the Settlement Commission passes the order under section 234B(4) determining the exact amount and the additional amount determined by the Settlement Commission which exceeds disclosure under Section 245C(1), the Settlement Commission is absolutely justified in directing to compute the interest under Section 234B of the IT Act considering the provisions of section 234B(2A) of the IT Act.

10. Having heard learned Counsel appearing for respective parties and on thoughtful consideration of the issue for the reaosns stated hereinbelow, we are of the opinion that the learned Se tlement Commission is absolutely justified in directing to compute the interest under Section 234B of the IT Act after considering the provisions of section 234B(2A) of the IT Act.

10.1 At the outset it is required to be noted that as such while submitting the application under Section 245C(1) of the IT Act, a duty is cast upon the concerned applicant to make the disclosure truly and correctly. At the time of making application under Section 245 and at the stage of the proceedings before the Settlement Commission under Section 245C(1) of the IT Act, an applicant is required to make the true and correct disclosure and is required to pay the tax liability on such disclosure with interest upto the application under Section 245C(1) of the IT Act. However, thereafter, when the Settlement Commission passes an order under Sections 245D(1) and 245D(4) of the IT Act and it is found that there is a difference in the disclosure made at the time of making the application under Section 245C(1) of the IT Act and the amount determined while passing the order under Section 245D(4) and it exceeds the amount disclosed, in that case, the question with respect to the interest on such difference of amoun will rise. Therefore, as such the concerned applicant / assessee is liable to pay the interest on such difference of amount till it is actually paid. If submission on behalf of the petitioners is accepted, in that case, there shall not be any interest liability during the interegnum period i.e. from the date of the order under Section 245C(1) of the IT Act and till the actual amount is determined under Section 245D(1) or 245D(4) of the IT Act. As observed hereinabove while submitting the application under Section 245C(1) of the IT Act, the applicant is required to make true and correct disclosure. If the submission on behalf of the petitioners is accepted and interest during the interegnum period is not charged, in that case, it will be giving the premium to such applicant who did not make true and correct disclosure, which he was supposed to at the time of approaching the Settlement Commission under Section 245C(1) of the Act. Under the circumstances also, the concerned applicant / assessee is liable to pay the interest under Section 234B of the IT Act. At this stage it is required to be noted that as per the decision of the Hon’ble Supreme Court in the case of Anjum H Ghaswal (Supra), charge of interest under Section 234B is mandatory.

10.2 Now, so far as the submission on behalf of the petitioners that the provisions of section 234B(2A) shall be applicable prospectively and with respect to the applications filed on or after 01.06.2015 only and the submission on behalf of the petitioners that the charge of interest under section 234B of the IT Act considering section 234B(2A) shall be contrary to the decision of the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra) is concerned, the aforesaid has no substance. It is required to be noted that as such the charge of interest under Section 234B is mandatory as held by the Hon’ble Supreme Court in the case of Anjuman H Ghaswal (Supra). However, because of the decision of the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra), the legislature thought it fit to clarify and therefore, section 234B (2A) of the IT Act was brought into Statute. Sections 234B and 234B(2A) of the IT Act reads as under:

“234B. Interest for defaults in payment of advance tax.

(1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub-section (1) of section 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.

Explanation 2-In this section, “assessed tax” means the tax on the total incom dete mined under sub-section (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of,

(i) any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income;

(ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India;

(iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section;

(iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and

(v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA or section 115JD. Explanation 2.-Where, in relation to an assessment year, an assessment is made for the first time under section
147 or section 153A, the ass ssment so made shall be regarded as a regular assessment for the purposes of this
section.

Explanation 3.-In Explanation 2 and in sub-section (3), “tax on the total income determined under sub-section

(1) of section 143” shall not include the additional income-tax, if any, payable under section 143.

(2) Where, before the date of determination of total income under sub-section (1) of section 143 or completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,

(i) interest shall be calculated in accordance with the foregoing provisions of this section up to the date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section;

(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax. 234B

(2A)(a) Where an application under sub-section (1) of section 245C for any assessment year has been made, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the 1st day of April of such assessment year and ending on the date of making such application, on the additional amount of income-tax referred to in that sub-section;

(b) where as a result of an order of the Settlement Commission under sub-section (4) of section 245D for any assessment year, the amount of total income disclosed in the application under sub-section (1) of section 245C is increased, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the 1st day of April of such assessment year and ending on the date of such order, on the amount by which the tax on the total income determined on the basis of such order exceeds the tax on the total income disclosed in the application filed under sub-section (1) of section
245C;

(c) where, as a result of an order under sub-section (6B) of section 245D, the amount on which interest was payable under clause (b) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly;”

10.3 Levy of interest / computation of interest shall arise only at the stage of order under Section 245D(4) of the IT Act and when the actual amount is determined, after following due procedure under Section 245 of the IT Act. Therefore, the relevant date would be the date on which the Settlement Commission passes the order under Section 245D(4) of the IT Act. Therefore, as such considering the decision o the Hon’ble Supreme Court in the case of the Brij Lal and Others (Supra), the legislature thought it fit to clar fy the position that in respect of the regular assessment, the interest on default of advance tax is payabl upto the date of determination, similar provision has to apply for an assessee going for settlement. It is in this ontext that clauses (a) and (b) of section 234B(2A) visualizes this situation. As rightly submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue, in the event, the assessee’s submission is accep ed, as against the regular assessment procedure, where the assessee is required to pay the interest on default advance tax under the provisions of section 234B(1), from the 1st day of April, following the end of f nancial year till the date of determination, the assessee going for settlement would not be required to pay such interest though admittedly there is a shortfall. Such can never be the intention of the legislature A this stage it is required to be noted that it is in this context that the issue has been clarified by the Board that provision of Section 234B(2A) would apply to all pending proceedings pending as on 01.06.2015. The CBDT has issued the clarificatory circular in exercise of powers under Section 119 of the IT Act.

Considering the aforesaid facts and circumstances, the submission on behalf of the petitioners that the provision of section 234B(2A) shall be applicable retrospectively, is absolutely misconceived. As observed hereinabove, liability under Section 234B of the IT Act, which is mandatory was already there which further came to be clarified with respect to the application before the Settlement Commission by way of section 234B(2A) of the IT Act. Therefore, the submission on behalf of the petitioners that the new liability would be created by way of section 234B(2A) of the IT Act and therefore, the same cannot be made applicable restrospectively has no substance. At the cost of repetition, as observed hereinabove, section 234B of the IT Act was very much there, however considering the decision of the Hon’ble Supreme Court in the case of Brij Lal and Others (Supra), the things were required to be clarified and that is why the legislature came out with section 234B(2A) of the IT Act, which requires payment of interest on the additional amount determined by the Settlement Commission which exceeds the disclosure under Section 245C(1) of the IT Act. 10.4 At this stage it is required to be noted that under Section 234B(2A) of the IT Act, the interest has been bifurcated into two parts i.e. (1) upto the stage of section 245C(1) application and (2) in the event of any additional determination of income of the disclosure under section 245(1) of the IT Act. As observed hereinabove, if the submission on behalf of the petitioners is accepted, in that case, despite section 234B of the IT Act which is held to be mandatory, there shall not be any interest liability upon the application on the additional amount determined by the Settlement Commission which exceeds disclosure under Section 245C(1) of the IT Act. It cannot be the intention of the legislature not to charge the interest on the additional amount determined by the Settlement Commission which exceeds disclosure under Section 245C(1) of the IT Act. As observed hereinabove and it cannot be disputed that while approaching the Settlement Commission, he has to make true and correct disclosure. The eventuality such as happened in the present petitions has arisen only when it is found that on determination of the actual amount while passing the order under Section 245D(4) of the IT Act, it has been found that the amount exceeds the disclosure made by the applicant under Section 245C(1) of the IT Act. If the assessee would have made the true and correct disclosure and thereafter on determination and passing the order under Section 245D(4) of the IT Act, the amount determined does not exceed the amount disclosed at the time of disclosure under Section 245C

(1) of the IT Act, such an eventuality would not have taken place. Under the circumstances, the case on behalf of the petitioners that they are not liable to pay the interest on the additional amount upto the date of order under Section 245D(4) of the IT Act cannot be accepted.

10.5 Now, so far as the reliance placed upon the decision of the Hon’ble Supreme Court in the case of J.K. Synthetics Limited (Supra) by the learned Counsel appearing on behalf of the petitioners is concerned, in the facts and circumstances of the case, the said decision shall not be applicable to the facts of the case on hand. In the aforesaid decision the Hon’ble Supreme Court was considering the liability to pay the interest on unpaid tax amount under Section 11B of the Rajasthan Sales Tax Act. On considering section 11B of the Rajasthan Sales Tax Act, before the 1979 amendment, nowhere provided for payment of interest on the unpaid tax amount as found on final assessment from the date of the filing of the return under Section 7 of the said Act, the Hon’ble Supreme Court held that the amendment shall be applicable prospectively. Under the circumstances, the said decision shall not be applicable to the facts of the case on hand. Similarly, decision of this Court in the case of Tata Teleservices (Supra) and decision of Punjab & Haryana High Court in the case of Sushma Saxena (Supra) and the decision of the Calcutta High Court in the case of Ram Kumar Agarwalla & Bros (Supra) shall not be applicable to the facts of the case on hand more particularly when, as observed hereinabove, the charge of interest under Section 234B is mandatory as held by the Hon’ble Supreme Court in the case of Anjuman H. Ghaswal (Supra).

10.6 At this stage the decision of the Hon’ble Supreme Court in the case of Commissioner of Income Tax, Mumbai vs. Damani Brothers r ported in (2003) 3 SCC 86 is required to be referred to. One of the question before the Hon’ble Supreme Court was whether the Settlement Commission is empowered to waive or reduce the interest under Section 234A read with Section 220(2) of the IT Act while exercising its jurisdiction under Section 245D(4) of the IT Act?

After considering the entire scheme and the procedure to be followed by the Settlement Commission under Section 245 more particularly while passing the order under Section 245D, the Hon’ble Supreme Court has observed and held in para 9 as under:

“9. The conclusions in Anjum’s case (supra) can be summed up as follows.

(1) Commission in exercise of its power under Section 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 by Notification dated 23rd May, 1996 issued by the Board under Section 119 of 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 be enforcing the relaxed provisions of the circulars for the benefit of the assessee in the process of settlement.

(2) Interest due under the mandatory provisions like Sections 234A, 234B and 234C has to be included in the settlement.

(3) Wherever the Act contemplated power to waive or reduction of interest to be exercised by any particular authority in any particular situation it has done so like in Sections 139(8), 215(4), 216 and Section 220(2A).

(4) Prior to Finance Act, 1987, the corresponding sections pertaining to imposition of interest used the expression ‘may’ but the change brought about in the Finance Act, 1987 is a clear indication that the intention of the legislature was to make the collection of statutory interest mandatory. The expression ‘shall’ is used deliberately.”

10.7 As per sub-section (4) of section 245D, 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 authorized 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). Sub-section (6) of section 245D provides that every order passed under sub-section (4) shall provide for the directions of settlement including any demand by way of tax, penalty or interest, the manner in which any such sum due under the settlement shall be paid and all other matters to make the settlement effective. Under the circumstances, when after the amount is determined by passing the order under Section 245D(4) and the amount so determined exceeds the amount disclosed in the Settlement Commission, in that case, the Settlement Commission is authorized to pass an order of interest. As observed hereinabove, the interest under Section 234B is mandatory.

11. In view of the above and for the reasons stated above, challenges to the impugned order/s passed by the learned Settlement Commission insofar as directing to pay the interest under Section 234B while considering applications filed under Section 245C(1) of the IT Act fails and the same deserve to be dismissed and are, accordingly, dismissed.

[Citation : 408 ITR 145]