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Interpretation of settlement agreement regarding tax liabilities and interest under the Income Tax Act. Analysis: The case involved a firm with eight partners suspected of underreporting income for assessment years 1961-62 to 1968-69. The firm proposed a settlement to the Commissioner of Income-tax, agreeing to pay a specified amount by a certain date and in installments. The Commissioner accepted the proposal, and the firm made the payments as scheduled. However, the Income Tax Department claimed interest on the balance of tax due, citing Section 220(2) of the Income Tax Act. The firm contended that as per the settlement agreement, the Commissioner had accepted delayed payments, and thus, the tax had not become due within 35 days of the notice under Section 156 of the Act. Upon analyzing the provisions of the Act and relevant rules, the court found that while interest under certain sections could be reduced or waived, Section 220(2) mandated the payment of interest on delayed tax. It was highlighted that even the ITO lacked the power to waive or reduce interest under Section 220. The court emphasized that the settlement agreement did not imply any waiver of interest under Section 220(2) and that the Commissioner did not have the authority to waive such interest. The clause in the settlement agreement regarding payment terms did not absolve the firm from paying interest as per the Act. The court concluded that the settlement agreement did not exempt the firm from paying interest as per Section 220(2) of the Act. The firm was obligated to pay the interest on the tax amount due, as the settlement agreement did not provide for any waiver or reduction of such interest. Therefore, the petition was dismissed, and no costs were awarded in the case. Both judges concurred with the decision, upholding the obligation of the firm to pay interest as per the statutory provisions, despite the terms of the settlement agreement.
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