High Court Of Gujarat
Kakadia Builders (P.) Ltd. vs. ITO
Assessment Years : 1992-93 To 1995-96
Section : 245F, 234A, 234B and 234C
Akil Kureshi And Ms. Sonia Gokani, JJ.
Sca Nos. 15097 & 15101 Of 2004
March 3, 2014
JUDGMENT
Akil Kureshi, J. – Since the facts are similar, we may record those arising in Special Civil Application No. 15097 of 2004.
The petitioner has challenged an order dated October 11, 2002, passed by the Settlement Commission in the following background :
2.1 The petitioner had applied for settlement under the scheme provided under the Income-tax Act, 1961. The Settlement Commission passed an order on March 12, 1996. In such order, the Tribunal provided for charging of interest under sections 234A, 234B and 234C of the Act as under :
“22. A request has been made for waiver of interest chargeable under sections 234A, 234B and 234C of the Income-tax Act in both the cases. In the case of Kakadia Builders P. Ltd. returns for the assessment years 1994-95 and 1995-96 were due after the date of search. Considering the same, the interest chargeable for nine out of twelve months delay in 1994-95 is waived. Interest under section 234A for 1995-96 is chargeable for three months only which shall be charged as per law. In the facts of the case, interest under section 234A for 1992-93 and 1993-94 is waived to the extent of 50 per cent. Interest chargeable under section 234B for all the four years will be reduced by 50 per cent. Regarding Shri Mahnarlal M. Kakadia, interest under section 234A for the assessment years 1993-94 and 1994-95 will be charged for eighteen and six months, respectively. The balance interest is waived. Interest under section 234A for the assessment year 1995-96 will be charged as per law. Interest under section 234B will be reduced by 50 per cent. of the chargeable amount in all the four years under settlement. Interest under section 234C in both the cases will be charged as per law.”
2.2 The Revenue thereupon approached the Settlement Commission and requested for rectification of the said order in connection with the interest portion contending that as per the decision of the Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [1997] 252 ITR 1/119 Taxman 352, charging of interest was mandatory. The Commission, therefore, could not have waived any portion of such interest liability.
2.3 The Settlement Commission thereupon passed the impugned order and stated thus:
“4. The applicant’s miscellaneous application dated December 29, 2000, was to the effect that interest charged under sections 234A and 234B as a part of the order under section 245D(4) was not chargeable in view of the judgment of the Patna High Court in the case of Ranchi Club Ltd. v. CIT [1996] 222 ITR 44 (Patna) later affirmed by the Supreme Court in CIT v. Ranchi Club Ltd. [2001] 247 ITR 209 (SC); 164 CTR 200 (SC). It is noticed that the law has been amended with the deletion and amendment of Explanation 4 to section 234A and Explanation 1 to section 234B, respectively, by the Finance Act, 2001, with retrospective effect from April 1, 1989. Therefore, the miscellaneous applications moved by the applicants fail. Shri Vijay Metha clarified that interest charged by the Assessing Officer has been on the basis of the Special Bench decision in the case of Gulraj Engineering Construction Co., In re [1995] 215 ITR (AT) 1 (ITSC) [SB].
5. Shri Mehta pleaded for time to pay the liability arising to the applicants as a result of this order citing financial constraints. We allow both the applicants to pay the resultant liability in four quarterly instalments beginning November 30, 2002. Interest payable under section 245D(6A) will be payable along with the last instalment.
6. In the result, the miscellaneous application moved by the applicant are rejected and the miscellaneous application moved by the Department is partly allowed.”
It could thus be seen that the Settlement Commission modified its direction with respect to charging of interest exercising powers of rectification. The Supreme Court in the case of Brij Lal v. CIT [2010] 328 ITR 477/194 Taxman 566, held that the Settlement Commission had no power of rectification.
In that view of the matter, on this short ground, the impugned order is required to be set aside. We clarify that we do not express any opinion on the Revenue’s contention which finds favour with the Settlement Commission that in view of the decision of the Supreme Court in the case of Anjum M.H. Ghaswala (supra), no portion of interest liability of the assessee could have been waived or reduced by the Commission If the Revenue was aggrieved by such order of the Settlement Commission, it ought to have challenged the same in accordance with law. In any case, the application for rectification was not maintainable as the statute stood at the relevant time as interpreted by the Supreme Court in the case of Brij Lal (supra).
Under the circumstances, the impugned order dated October 11, 2002, is quashed leaving it open to the Revenue to follow its remedies against the original order of the Settlement Commission.
The petition is disposed of. Rule made absolute accordingly.
[Citation : 362 ITR 342]