TMI Blog2001 (10) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ose before the Commission in the case of Ashwani Kumar Aggarwal, In re [1992] 195 ITR 861 (ITSC) [SB] wherein a five-member Special Bench of the Commission held that under section 245D(4) or sub-section (6), the Commission does not have the power either to waive or reduce the statutory interest payable under the Act. This view of the five-member Bench of the Commission was overruled by a larger Bench comprising seven Members of the Commission which held otherwise by the impugned order. It held that the Commission is vested with the power to waive or reduce the interest chargeable under sections 234A, 234B and 234C of the Act in cases pending before it for the assessment year 1989-90 and onwards (i.e., the year in which Chapter XVII-F was introduced in the Act). It further held that this power can be exercised by any of the Benches constituted to settle cases under section 245BA of the Act. While coming to this conclusion, the Commission held that the constitution of the Commission is based on the concept of "compromise and settlement", hence, it has the necessary power to waive or reduce the interest, even if statutorily mandated, in view of the wording of section 245D(6) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax authority on the date on which an application under sub-section (1) of section 245C is made: Provided that where any appeal or application for revision has been preferred after the expiry of the period specified for the filing of such appeal or application for revision under this Act and which has not been admitted, such appeal or revision shall not be deemed to be a proceeding pending within the meaning of this clause;" Under the provisions of Chapter XIX-A on such application being made, the Commission is empowered to dispose of the same in the manner provided thereunder. Section 245D provides for the procedure and exercise of power to be followed by the Commission on receipt of an application under section 245C. Under this provision, the Commission has the authority to call for the report from the Commissioner of Income-tax (for short "the Commissioner"), and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, it may by order allow the application to be proceeded with or reject the application. If the Commission allows the application filed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to 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. It is an admitted position that by its plain language subsection (4) of section 245D does not empower the Commission to waive or reduce statutory interest payable under the provisions of section 234A, 234B or 234C. The moot question, therefore, for our consideration is: Does sub-section (6) which contemplates providing for the terms of settlement of tax, penalty or interest empower the Commission, in any manner, either to waive or reduce interest payable under section 234A, 234B or 234C in any case that arises for settlement before the Commission? If so, would this waiver of interest be in accordance with the provisions of the Act as mandated in sub-section (4) of the Act? For answering the above question, we will have to examine the character of interest payable under the provisions of sections 234A, 234B and 234C. A perusal of these sections shows that the interest for default in furnishing return of income, default in payment of advance tax and interest fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of levy of interest, as also to make the necessary changes in the payment of interest dependent on the change that may occur consequent to the order of settlement under section 245D(4). It is also to be noted that wherever the Act contemplated power of waiver or reduction of interest to be entrusted with any particular authority in any particular situation, it has done so like in section 220(2A) of the Act. It is also worthwhile to note that the Act wherever it contemplated that there should be no levy of interest, it has clearly made provision for the same as could be seen from section 158BF which mandates that no interest under the provisions of section 234A, 234B or 234C shall be levied or imposed upon the assessee in respect of the undisclosed income determined in the block assessment. If the scheme of levy of interest is thus to be analysed on the anvil of the provisions referred to hereinabove, it shows that the interest contemplated under sections 234A, 234B and 234C is mandatory in nature and the power of waiver or reduction having not been expressly conferred on the Commission, the same indicates that so far as the payment of statutory interest is concerned, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the Commission is to be accepted, it would mean that under the provisions of section 245D(6), the Commission also has the power of waiving or reducing the tax payable on the income settled by the Commission. If this position in law is presumed to be correct then the very purpose of the settlement contemplated in Chapter XIX-A would defeat the object of the principal Act itself. As held by the Commission itself, Chapter XIX-A was included for the purpose of quick settlement of the cases before it so that the tax due to the Revenue is collected at the earliest. The object of Chapter XIX-A is not to give amnesty to a tax evader from paying the tax due. Hence, it would be preposterous to hold that the Commission has been conferred with the power of either reducing or waiving the tax due. We are aware that the Commission in the impugned order has not gone to the extent of holding that it has the power of either waiving or reducing the tax payable but then that would be the logical conclusion if we accept the interpretation given by the Commission in regard to the expression "interest" in section 245D(6) of the Act. A proper reading of sub-section (6) would show that all that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the statute book. On the contrary, the corresponding provisions existing in the statute, namely, sections 139(8), 215(4) and 216 in terms empowered the income-tax authorities to waive or reduce interest. It is in that context that this court observed, in the paragraph extracted hereinabove, that under section 245D(4), the Commission has the power to direct the waiver of penalty as well as interest because that was within the scope of the provisions of the Act, as then existing, whereas at present and for the assessment years involved in this case, sections 234A, 234B and 234C being applicable that observation does not apply to the cases in hand. The sentence "except to mention that the Commission is empowered to direct the waiver of penalty as well as interest..." is used in that judgment on the basis of the then existing law and to apply the same to the facts of the present case with the mandatory change in law would amount to applying those principles in Express Newspapers' case [1994] 206 ITR 443 (SC) out of context. Next, the Commission also traced its power either to waive or reduce the interest to section 119(2) of the Act. In our opinion, this process of tracing the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e., by way of issuance of orders, instructions and directions. These orders, instructions and directions are meant to be issued to other income-tax authorities for proper administration of the Act, the Commission while exercising its quasi-judicial power of arriving at a settlement under section 245D cannot have the administrative power of issuing directions to other income-tax authorities. It is a normal rule of construction that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself. If that be so since the Commission cannot exercise the power of relaxation found in section 119(2)(a) in the manner provided therein it cannot invoke that power under section 119(2)(a) to exercise the same in its judicial proceedings by following a procedure contrary to that provided in sub-section (2) of section 119. There is one other reason why section 119(2) is not available to the Commission, because if we examine the provisions of section 245A through which the Commission has traced its power to be equated with the Board which defines the expression "case" to mean "a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retch of imagination be construed as "may". There are sufficient indications in the scheme of the Act to show that the expression "shall" used in sections 234A, 234B and 234C is used by the Legislature deliberately and it has not left any scope for interpreting the said expression as "may". This is clear from the fact that prior to the Amendment brought about by the Finance Act, 1987, the Legislature in the corresponding section pertaining to imposition of interest used the expression "may" thereby giving a discretion to the authorities concerned to either reduce or waive the interest. The change brought about by the Amending Act (Finance Act, 1987) is a clear indication of the fact that the intention of the Legislature was to make the collection of statutory interest mandatory. In this connection, we may usefully refer to the judgment of this court in Jaywant S. Kulkarni v. Minochar Dosabhai Shroff, AIR 1988 SC 1817, wherein this court held that when the Legislature changes the expression "may" to "shall" by amendment of the statute, it is clear that it intended to make the provision mandatory from the existing directory provision. Therefore, the question of the Commission relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant case, there being express provisions in regard to the levy of interest under Part F of Chapter XVII even if there is any inherent power in the Commission such power cannot be exercised contrary to the provisions of the said Chapter. Shri Ramamurti, learned senior counsel appearing for some of the respondents, placed strong reliance on the Press Release dated May 21, 1996, issued by the Board in support of the contentions raised on behalf of the respondents. It is true that by this press release the Board had interpreted the provisions of the Act in a particular manner. Be that as it may, we would like to make it clear that every clarificatory note or press release issued by the Board does not have statutory force like the circulars issued by the Board under section 119 of the Act. It is only those circulars issued by the Board under the provisions of section 119 of the Act, which will have statutory force and will be binding on every income-tax authorities. Therefore, the press release relied upon by Shri Ramamurti, not being a circular issued under section 119 of the Act, will not be of any assistance to the respondents in support of their contentions. It is then con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower vested in the Board under section 119(2)(a) of the Act, the Board has issued circulars by Notification No. F. No. 400/234/95-IT(B), dated May 23, 1996. As per this circular, it has empowered that the Chief Commissioner of Income-tax and Director-General of Income-tax may waive or reduce interest charged under sections 234A, 234B and 234C of the Act in the class of cases or class of incomes specified in paragraph 2 of the said order for the period and on conditions which are enumerated therein. He submitted that in view of the said circular, the same authority can be exercised by the Commission since the said circular would amount to relaxation of the rigour of sections 234A, 234B and 234C of the Act. We are in unison with this submission of the learned Solicitor General. This court in a catena of cases has held that the circulars of the Central Board of Direct Taxes are legally binding on the Revenue: see UCO Bank v. CIT [1999] 237 ITR 889 (SC). Since these circulars are beneficial to assessees, such benefit can be conferred also on assessees who have approached the Settlement Commission under section 245C of the Act on such terms and conditions as contained in the circular. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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