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IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE DR. JUSTICE ANITA SUMANTH Writ Petition Nos.39092 and 39093 of 2005 M/s.Vimala TradersKokalai,Trichur, Kerala M/s.Modern Arecanut Co.,Kokalai,Trichur, Kerala /versus/ 1. The Income Tax Settlement Commission, Additional Bench, 488-489, Anna Salai, Chennai – 600 035. Additional Bench, 488-489, Anna Salai, Chennai – 600 035. 2. The Union of India represented by The Chairman, Central Board of Direct Taxes, North Block, New Delhi. 3. The Commissioner of Income Tax, Cochin Income Tax Office, Kochi. Income Tax Office, Kochi. 4. The Income Tax Officer, Ward 2(2), Trichur. Ward 2(2), Trichur. .. Respondents in both W.Ps Prayer in W.P.No.39092 of 2005: Writ Petition filed under Article 226 of the Constitutionof India praying to issue a Writ of Certiorari calling for therecords for the records of the first respondent Income TaxSettlement Commission, Additional Bench, Chennai in its fileSettlement Application Nos.13/CHN/51/94-IT and 13/CHN/168/94-ITfor assessment years 1991-92 to 1994-95 quash the impugned orderdated 19.03.2004 insofar as the petitioner is concerned. 1/6 Writ Petition filed under Article 226 of the Constitutionof India praying to issue a Writ of Certiorari calling for therecords for the records of the first respondent Income TaxSettlement Commission, Additional Bench, Chennai in its fileSettlement Application Nos.13/CHN/49/94-IT and 13/CHN/167/94-ITand 13/CHN/167A/94-IT for assessment years 1986-87 to 1994-95quash the impugned order dated 19.03.2004. For Petitioner in both W.Ps:Mr.R.KumarFor Respondents in both W.Ps:Mrs.Hema Muralikrishnan and Mr.ANR.Jaya Pratap Standing Counsel -------C O M M O N O R D E R The petitioner in these Writ Petitions has challenged anorder of the Income Tax Settlement Commission (ITSC) dated19.03.2004 on the ground that it does not have the power toinvoke Section 154 of the Income Tax Act, 1961 (in short 'Act')dealing with rectification of mistakes. Thus, according to thepetitioner, the impugned order is bereft of jurisdiction. 2. The trajectory of the matter is that as against theorder of the Settlement Commission dated 28.12.1995 passed undersection 245D(4) of the Act, the Revenue had filed a petition forSpecial Leave before the Supreme Court. The Bench, in CivilAppeal Nos.3593 and 3594 of 2000 dated 12.11.2002 in VimalaTraders and M/s.Modern Arecanut Co. passed the following order:'In all these appeals the revenue hasquestioned the authority of Settlement Commission toeither waive the statutory interest or reduce thesame. This Court in the case of Commissioner ofIncome Tax, Mumbai vs. Anjum M.H.Ghaswala & Ors.reported in 2002(1) SCC 633 has held that theSettlement Commission in exercise of its powersunder Sections 245(D)(4)(6) does not have the powerto reduce or waive the interest statutory payableunder Section 234A, 234B and 234C except the extentof granting relief under CBDT circulars.However, the learned counsel for the revenue pointsout that there are two circulars issued by the Boardunder Section 119 of the Income Tax Act, 1961, onedated 2[nd] May, 1994 F.No.212/49592-IT (A-11) andother dated 23[rd] May, 1996 F.No.400/232/95-IT(B), thebenefit of which some of the respondents herein may 2/6 be entitled to. In view of the above submission on behalf of therevenue, we allow these appeals and set aside theimpugned order and remand the matter back to theSettlement Commission for the limited period purposeof examining whether the two circulars referred tohereinabove are applicable to the facts of theseappeals, if so to what relief the respondents willbe entitled to.' 2/6 be entitled to. In view of the above submission on behalf of therevenue, we allow these appeals and set aside theimpugned order and remand the matter back to theSettlement Commission for the limited period purposeof examining whether the two circulars referred tohereinabove are applicable to the facts of theseappeals, if so to what relief the respondents willbe entitled to.' 3. The matter was thus remanded to the SettlementCommission by the Supreme Court on 12.11.2002. While thepetition for Special Leave was pending before the Supreme Court,two Miscellaneous Applications were filed before the SettlementCommission on the aspect of leviability of interest and theimpugned order of the Settlement Commission dated 19.3.2004 hasbeen passed in response thereto. The order is challenged solelyon the ground that the Settlement Commission does not have aninherent power to assume jurisdiction in terms of Section 154of the Act. 4. The question of assumption of jurisdiction by theSettlement Commission in terms of Section 154 of the Act hasbeen considered by a Division Bench of the Supreme Court in thecase of Brij Lal and others V. Commissioner of Income Tax((2010) 328 ITR 477) and the Bench states as follows: III. Whether the Settlement Commission can re-openits concluded proceedings by having recourse toSection 154 of the Act so as to levy interestunder section 234B, if it was not done in theoriginal proceedings? 15. As stated, proceedings before SettlementCommission are similar to arbitration proceedings.It contemplates assessment by settlement and notby way of regular assessment or assessment undersection 143(1) or under section 143(3) or undersection 144 of the Act. In that sense, it is aCode by itself. It does not begin with the filingof the return but by filing the application forsettlement. As stated above, under the Act,procedure for assessment falls in Chapter XIV (inwhich section 154 falls) which is different fromprocedure for settlement in Chapter XIX-A in whichsections 245C and 245D fall. Provision for levy ofinterest for default in payment of advance taxunder section 234Bfalls in Chapter XVII [SectionF] which deals with collection and recovery of taxwhich as stated above is incidental to the 3/6 4/6 3/6 4/6 liability to pay advance tax under section 207(which is also in Chapter XVII) and to thecomputation of total income in the mannerindicated under Chapter XIX-A vide sections 245C(1B) and 245C(1C) read with the provisos tosection 245C(1) on the additional income taxpayable on the undisclosed income. Further, if oneexamines the provisions of sections 245C(1B) and245C(1C), one finds that various situations aretaken into account while computing the additionalamount of tax payable, viz., if the applicant hasnot filed his returns, if he has filed but ordersof assessment are not passed or if the proceedingsare pending for re-assessment under section 147(again in Chapter XIV) or by way of appeal orrevision in connection with such re-assessment andthe applicant has not furnished his return oftotal income in which case tax has to becalculated on the aggregate of total income asassessed in the earlier proceedings for assessmentunder section 143 or under section 144 or undersection 147 [see section 245C(1B)]. The point tobe noted is that in computation of additionalincome tax payable by the assessee, there is nomention of section 154. On the contrary, undersection 245I the order of the SettlementCommission is made final and conclusive on mattersmentioned in the application for settlement exceptin the two cases of fraud and misrepresentation inwhich case the matter could be re- opened by wayof review or recall. Like ITAT, the SettlementCommission is a quasi-judicial body. Under section254(2), the ITAT is given the power to rectify butno such power is given to the SettlementCommission. Thus, we hold that SettlementCommission cannot reopen its concluded proceedingsby invoking section 154 of the Act. Lastly, onemust keep in mind the difference between review/recall of the order and rectification undersection 154. The Schedule of Chapter XIX-A doesnot contemplate invocation of section 154otherwise there would be no finality to theassessment by settlement which is different fromassessment under Chapter XIV where there is anappeal, revision, etc. Settlement of liability andnot determination of liability is the object ofChapter XIX-A. Even otherwise, invocation ofsection 154 on facts of this batch of cases is not justified. In this batch of cases, the situationwhich prevailed when the Settlement Commissionwaived or reduced interest chargeable undersections 234A and 234B was that a debate was on asto whether the Settlement Commission has the powerto reduce or waive interest. It is only afterGhaswala's case that the law got settled that thenature and the character of the interest wascompensatory and mandatory and that the Commissionhad no such power. But even in Ghaswala, thequestion as to whether such interest under section234B should run up to the order under section 245D(1) or up to the date of the order under section234D(4) was not decided. In fact, that was thereason for the Orders of Reference to theConstitution Bench of this Court vide orders dated14.12.2004 and 20.1.2005. There is one more reasonfor this Reference. In the case of CIT v.Hindustan Bulk Carrier [(2003) 259 ITR 449], a 3-Judge Bench of this Court, by majority, held thatwhere, upon the Order of the Settlement Commissionunder section 245D(4), there arises a deficit inthe payment of advance tax under section 208, theend point or the terminus of the period for whichinterest has to be paid under section 234B on thedeficit is the date on which the SettlementCommission passes the order under section 245D(4).This decision was delivered on 17.12.2002 afterthe judgment of this Court in Ghaswala (supra). Onthe same day, the same Bench in the case of DamaniBrothers (supra) held that interest charged undersection 234B becomes payable on the incomedisclosed in the return and the income disclosedbefore the Settlement Commission; that, suchinterest is chargeable till the Commission acts interms of section 245D(1) and that after theSettlement Commission allows the application forsettlement to be proceeded with there will be nofurther charge of interest under section 234B.Thus, even on the question of terminus there waslot of controversy and in the circumstances, weare of the view that invocation of section 154(held to be inapplicable to Chapter XIX-Aproceedings) cannot be justified. 5. In the light of the categoric pronouncement of theSupreme Court in Brij Lal (supra), the question of applicability 5/6 of section 154 to proceedings before the Settlement Commissionexcept if it had been resorted to in the original proceedings,stands settled against the Revenue. 6. These Writ Petitions are allowed. No costs. Sd/- Assistant Registrar(J)//True Copy// Sub Assistant RegistrarslTo1. The Income Tax Settlement Commission, Additional Bench, 488-489, Anna Salai, Chennai – 600 035. 2. The Chairman, Union of India Central Board of Direct Taxes, North Block, New Delhi.3. The Commissioner of Income Tax, Cochin Income Tax Office, Kochi.4. The Income Tax Officer, Ward 2(2), Trichur.+1cc to Mrs.Hema Muralikrishnan, Advocate sr.79451+1cc to Mr.T.N.Seetharaman, Advocate sr.79188Writ Petition Nos.39092 and 39093 of 2005nr 22/11/2019 6/6