Whether settlement commission has power to reduce interest payable under provisions of sections 234A, 234B & 234C of IT Act, 1961

The Apex Court held that

Settlement Commission does not havepower to reduce or waive interest statutorily payable under S.234A, 234B and 234C of the Act – Matter remanded to Settlement Commission.

FACT OF THE CASE

1. Settlement Commission while passing the order u/s.245D(4) made certain addition and also waived theinterest levied u/s. 234A, 234B and 234C of the Act.
2. On a rectification application filed by the revenuethe Settlement Commission partly allowed theapplication.
3. Being aggrieved by the order of SettlementCommission the assessee filed two writ petitionsbefore the High Court.
4. High Court set aside the rectification order passedby the Settlement Commission.
5. Revenue aggrieved by the order of SettlementCommission filed two petitions before the HighCourt.
6. High Court reversed the waiver of interest in termsof Settlement Commission 's direction contained inits order dt 11-10-2002.

DECISION OF THE CASE

1. On appeal the Court held that, when SettlementCommission passed first order disposing ofassessee’s application, issue with regard to powersof Commission was not settled by any decision ofApex Court.

2. Decisions in CIT v. Anjum M.H. Ghaswala (1997) 252ITR 1 (SC) and Brij Lal v. CIT (2010) 328 ITR 477 (SC),were rendered after Settlement Commission passed
order in present case.

3. Therefore, Commission had no occasion to examineissue in question in the context of law laid down bythis Court in those two decisions. High Court instead
of going into merits of issue, should have set asideoriginal order passed by Commission and remandedcase to Commission for deciding issue relating towaiver of interest payable under S. 234A, 234B, and 234C afresh.

4. High Court failed to see that order of Commissionwas already set aside by High Court itself in first round in light of law laid down by in case of Brijlalwherein, it was laid down that Commission had nopower to pass orders u/s. 154.

5. Order passed by Settlement Commission to extentit decided issue in relation to waiver of interest wasset aside and case was remanded to Commission to
decide issue afresh.

6. Settlement Commission in exercise of its powerunder S. 245D(4) and (6) does not have the powerto reduce or waive interest statutorily payable underS. 234A, 234B and 234C, except to the extent ofgranting relief under the circulars issued by theBoard under S. 119 of the Act.

7. Matter remanded to settlement Commission.

CONCLUSION

Provisions of Section 245(4) & (6) nowhere confer power to reduce or waive statutory liability of payment of interest u/s 234A, 234B & 234D by the settlement commission.

DISCLAIMER: The case law presented here is only for sharing information and knowledge with the readers. The views are personal, shall not be considered and professional advice.

SECTION 245(D)(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 theprovisions 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).

SECTION 245D(6) IN THE INCOME- TAX ACT, 1995

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.