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TMI Blog2002 (12) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... hich an application under sub-section (1) of section 245C is made. Section 245C(1) provides for an application by an assessee in a prescribed form containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer and such other prescribed particulars for settlement of his case by the Settlement Commission. Other requirements are that no such application could be made unless- (a) the assessee has furnished the return of income which he is or was required to furnish under any of the provisions of this Act; and (b) the additional amount of income-tax payable on the income disclosed in the application exceeds (at present) one hundred thousand rupees. The other relevant requirement which has a bearing on the question involved in these appeals is sub-section (1A) of section 245C, which provides that the additional amount of income-tax payable in respect of the income disclosed in an application should be the amount calculated in accordance with the provisions of sub-sections (1B) to (1D). The next stage is section 245D which empowers the Settlement Commission to reject the application or to allow the application to be proceeded with within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosure of his income and the manner in which such income has been derived. The immunity from prosecution is for any offence under the Income-tax Act or under the Indian Penal Code or under any Central Act. However, no such immunity can be granted if the prosecution is already instituted before the date of the receipt of the application under section 245C. It also empowers the Commission to reduce the penalty as provided under the Act wholly or partly with respect to the case covered by the settlement. From this section it can be easily inferred that the Commission has no power (a) to waive tax statutorily payable under the Act, or (b) to reduce the interest on the tax payable on the income disclosed. Therefore, it cannot be contended that the assessee would be required to pay interest on the tax payable on the income disclosed by him only from the date when he files an application under section 245C. He has to pay the tax amount on the disclosed income and also the interest payable on the said tax. Further, when once the order under section 245D is passed by the Settlement Commission to proceed with the application, he is required to pay the said amount, i.e., the tax on the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t thereon. The amount at that stage would be the tax plus interest. In such cases, there is no question of paying interest on interest because the interest which the assessee is required to pay under sections 234A, 234B or 234C merges with the amount as provided under sub-section (2A). ARIJIT PASAYAT J.--A question of seminal importance relating to the period for which interest in terms of section 234B of the Income-tax Act, 1961 (in short "the Act") can be levied when the Settlement Commission (in short "the Commission") passes an order under section 245D of the Act, is the subject matter of adjudication in these appeals. These appeals are directed against the common judgment of the Special Bench of the Commission in Gulraj Engineering Construction Co., In re [1995] 215 ITR (AT) 1 which dealt with five situations where such questions may arise. The situations according to the Special Bench are as follows: "(i) The income is determined under section 143(1) but no regular assessment under section 143(3) or 144 is made with or without there being a notice under section 143(2) and/or section 142(1). (ii) A regular assessment is made under section 143(3) or section 144 in addition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder sub-section (6) are in the nature of original orders determining liability of tax, penalty and interest and quantification thereof. It has to be borne in mind that the provisions relating to settlement as appearing in Chapter XIX-A constitute a complete code. Therefore, the view of the Special Bench with reference to regular assessment as defined under section 2(40), or reassessment under section 147 has no relevance. The liability to pay interest under sections 234A, 234B and 234C, as the case may be, is of mandatory nature as was observed by a Constitution Bench of this court in CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1. The starting point of the terminus for payment of interest is not in dispute. It is only the end point. The same has to be the date on which the order is passed by the Commission under section 245D and not an earlier point of time. Per contra, learned counsel for the assessee has submitted that both points of time terminus have been fixed in the provisions, that is, sub-section (4) of each of the aforesaid three provisions. With reference to the expression "an order of the Settlement Commission under sub-section (4) of section 245D" in these provisions, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143 or on regular assessment, as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income. Explanation 2.--Where in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section. Explanation 3.--In Explanation 1 and in sub-section (3) 'tax on the total income determined under sub-section (1) of section 143' shall not include the additional income-tax, if any, payable under section 143. (2) Where, before the date of determination of total income under sub-section (1) of section 143 or completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise,-- (i) interest shall be calculated in accordance with the foregoing provisions of this section up to the date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section; (ii) thereafter, interest shall be calcul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant financial year. Different end points are prescribed. They are: (i) up to the date of determination of total income under sub-section (1) of section 143; (ii) the date of regular assessment when a regular assessment is made; and (iii) where there is an order of reassessment or recomputation under section 147, or the difference of assessed income on reassessment or recomputation and originally assessed income till date of reassessment or recomputation, as the case may be. Sub-section (3) provides the modalities to be adopted. Section 234C deals with interest for deferment of advance tax. As noted above, great emphasis is laid by the assessee on sub-section (4) of section 245D which, inter alia, provides that where as a result of an order of the Settlement Commission under sub-section (4) of section 245D the amount on which interest was payable under sub-section (1) or sub-section (3) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly. From this, according to the assessee, the inference to be drawn has to be that only the quantum of income on which interest is charged is varied, but the period remains fixed. One basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant has not furnished a return in respect of the total income of that year in the course of such proceeding for reassessment, tax shall be calculated on the aggregate of the total income as assessed in the earlier proceeding for assessment under section 143 or section 144 or section 147 and the income disclosed in the application as if such aggregate were the total income. (1C) The additional amount of income-tax payable in respect of the income disclosed in the application relating to the previous year referred to in sub-section (1B) shall be,-- (a) in a case referred to in clause (i) of that sub-section, the amount of tax calculated under that clause; (b) in a case referred to in clause (ii) of that sub-section, the amount Of tax calculated under that clause as reduced by the amount of tax calculated on the total income returned for that year; (c) in a case referred to in clause (iii) of that sub-section, the amount of tax calculated under that clause as reduced by the amount of tax calculated on the total income assessed in the earlier proceeding for assessment under section 143 or section 144 or section 147." Prior to the substitution by the Finance Act, 1987, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the time specified in that sub-section, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments if the assessee furnishes adequate security for the payment thereof. (2C) Where the additional amount of income-tax is not paid within the time specified under sub-section (2A), then, whether or not the Settlement Commission has extended the time for payment of the amount which remains unpaid or has allowed payment thereof by instalments under sub-section (2B), the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty-five days referred to in sub-section (2A).... (3) Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess of settlement. 2. Interest due under the mandatory provisions like sections 234A, 234B and 234C has to be included in the settlement. 3. Wherever the Act contemplated power to waive or reduction of interest to be exercised by any particular authority in any particular situation it has done so like in sections 139(8), 215(4), 216 and section 220(2A) of the Act. 4. Prior to the Finance Act, 1987, the corresponding sections pertaining to imposition of interest used the expression 'may' but the change brought about in the Finance Act, 1987, is a clear indication that the intention of the Legislature was to make the collection of statutory interest mandatory. The expression 'shall' is used deliberately." Sub-section (1) of section 245C makes it clear that at any stage of a case relating to him an assessee may make an application to the Commission disclosing fully and truly his income which has not been disclosed before the Assessing Officer. To put it differently, an assessee cannot approach the Commission for settlement of his case in respect of an income which has already been disclosed before the Assessing Officer. The income disclosed as contemplated is in the nature of v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich would be in conflict with the mandatory provisions of the Act like in the quantum and payment of tax and the interest. The object of the Legislature, as noted by the Constitution Bench, in introducing section 245C is to see that protracted proceedings before the authorities or in courts are avoided by resorting to settlement of cases. In this process an assessee cannot expect any reduction in amounts statutorily payable under the Act. Under section 245H, the Commission has the power to grant immunity to the assessee from prosecution and penalty. The immunity extends not only to the penal provisions of the Act but to offences under the Indian Penal Code, 1860 (in short "the IPC"), or under any other Central Act for the time being in force. The benefit of waiver or reduction in the imposition of penalty under the Act with respect to the cases covered by the settlement is extended as provided under section 245H(1). Here again, the immunity is not available in cases where the proceedings for prosecution for the indicated offences have been instituted before the date of receipt of the application under section 245C. The immunity granted stands withdrawn in case of failure to pay th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, based on the view that Parliament would legislate only for the purpose of bringing about an effective result, referred to in Pye v. Minister for Lands for New South Wales [1954] 3 All ER 514 (PC)). The principles indicated in the said cases were reiterated by this court in Mohan Kumar Singhania v. Union of India, AIR 1992 SC 1. The statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute. The court must ascertain the intention of the Legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with other parts of the law and the setting in which the clause to be interpreted occurs. Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between two different sections or provisions of the same statute. It is the duty of the court to avoid a head on clash between two sections of the same Act. Whenever it is possible to do so, it must be done to construe the provisions which appear to conflict so that they harmonise. It should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt financial year up to the date of the Commission's order at the rate applicable, on interest chargeable under section 234B, when an order under section 245D(4) is passed, followed by quantification under section 245D(6). The appeals are allowed to the extent indicated above. D.M. DHARMADHIKARI J.--I am in respectful agreement with the reasoning and conclusion recorded by Brother Pasayat J. in his opinion prepared by him in these appeals. I, however, consider it necessary to supplement his reasons for the conclusion reached by us. Since in these appeals common questions on the interpretation and extent of application of the provisions of Chapter XIX-A of the Income-tax Act, 1961 (for short "the IT Act"), are involved, I propose to discuss the questions involved by this common judgment. Brother Pasayat J. has reproduced all the relevant provisions of the Income tax Act and the questions formulated and answered by the Special Bench of the Settlement Commission constituted in accordance with the provisions contained in Chapter XIX-A of the said Act. Chapter XIX-A providing the forum and procedure for "settlement of cases" was introduced in the Income-tax Act by the Taxation Laws ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence under Chapter XXII of the Act in relation to that case." On the questions formulated by the Special Bench of the Settlement Commission two main issues require consideration and answer by this court. The first main question is what is the efficacy of the regular assessment proceedings which took place before and after the admission of the case for consideration by the Settlement Commission. The second question is what would be the extent of liability towards payment of interest on the tax due as determined in a "case" by the Settlement Commission in the light of various situations of no payment of tax or delayed payment of tax in the course of regular assessment. The various situations contemplated in the Income-tax Act have been delineated in the order of the Special Bench of the Settlement Commission and reproduced in the two separate opinions of Brother Pasayat J. For answering these two main questions, it is necessary to examine the scheme of Chapter XIX-A as reflected in its various provisions and the other relevant provision in sections 234A to 234C on the subject of interest chargeable in various specified circumstances on tax due. For taking a case for settlement bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of determining taxable income of a particular year. The Settlement Commission, thus, is empowered to this limited extent to re-open the assessment proceedings already undertaken, for settlement of the "case" before it on the basis of subsequently disclosed income and pass a composite order determining the liability of assessee towards tax, penalty and interest. This is clear from sub-section (6) of section 245D which requires the Settlement Commission to make an order providing for terms of settlement, indicating the demand towards tax, penalty and interest and the manner in which it shall be paid. The above discussed provisions make it clear that once a case is admitted by the Settlement Commission for consideration, it shall have exclusive jurisdiction to exercise all powers of regular authorities under the Income-tax Act for the purpose of effecting a settlement and for recovery of tax, penalty and interest. Sub-sections (1) and (2) of section 245F are important for the questions raised before us and they read thus: "245F. (1) In addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me and tax in accordance with the other relevant provisions of the Act applicable to the relevant assessment year or years. There is no power with the Settlement Commission to settle the "case" de hors the provisions of the Income-tax Act applicable to regular assessment because the provisions contained in the scheme of settlement under Chapter XIX-A as examined above, do not envisage and allow the Commission to settle a "case" based on disclosure of income before it in any other manner. As has been found from the Statement of Objects and Reasons for introducing Chapter XIX-A, which can be taken aid of for construing various provisions of the Act, the forum of the Settlement Commission is constituted for "early recovery of tax and to unearth black money". The only impetus given to the assessee to avail of the forum is to allow him to make a request to the Settlement Commission to grant immunity from prosecution and penalty in exercise of its powers under section 245H. In all other respects, on the question of tax and interest, the Settlement Commission has to settle a "case" in accordance with the other provisions of the Act as are applicable regular assessment proceedings. The Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) of section 245D, the amount of tax on which interest was payable under subsection (1) or sub-section (3) of this section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and- (i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly; (ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded." Similarly, necessary adjustment to be made towards interest payable on the tax due after settlement of a case in case of default in payment of advance tax can be found in sub-section (4) of section 234B which reads thus: "234B. (4) Where, as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) or sub-section (3) has been incre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1994] 2 SCC 374 and CIT v. Anjum M. H. Ghaswala [2001] 252 ITR 1 (SC); [2002] 1 SCC 633 which authoritatively construe some of the provisions in Chapter XIX-A and record its conclusions on some aspects of the question raised before us for answer. In the case of Express Newspapers Ltd. [1994] 206 ITR 443 (SC) it was found that in regular assessment for the years 1985-86, 1986-87 and 1987-1988 the assessee had fraudulently claimed certain losses and when they were being enquired into and investigated by the assessing authorities for reaching a finality, the assessee approached the Settlement Commission for settlement of the cases. The Supreme Court was of the view that it was a case of fraud in claiming certain losses where there were none for the assessment years in question and it was not a case of any subsequent disclosure of income by the assessee. It was, therefore, held that it was not open to the assessee to avail of the procedure for settlement of cases before the forum of the Settlement Commission. While construing sub-section (4) of section 245D, it was observed that the Commission is empowered to direct the waiver of penalty as well as interest and to direct that the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Settlement Commission is neither intended in the scheme of Chapter XIX-A nor can such a power be inferred because conceding such power to Settlement Commission to waive interest would help tax evaders who did not disclose full income at the relevant time and made a disclosure subsequently. Such interpretation would also be a discouragement to an honest taxpayer who fully discloses his income and on the basis of regular assessment makes payment of tax and interest. In the case of Anjum M.H. Ghaswala [2001] 252 ITR 1, the five-judge Bench of this court came to the conclusion that the Settlement Commission has to complete the assessment proceedings and determine the quantum of tax as also interest payable in accordance with the provisions applicable to regular assessment. The observations in that case pertinent for this case read as under: "It is no doubt true that the terminology 'settlement' has a very wide dictionary meaning and in the absence of a statutory definition generally the word 'settlement' in sub-section (4) of section 245D would give the Commission sufficient power to arrive at a settlement which it deems fit, but when the statute qualifies such expression like 'settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application for consideration of settlement is recorded by the Settlement Commission that all earlier assessment proceedings and recovery proceedings, if any, issued pursuant thereto, would become subject to the order of the Settlement Commission which will exercise all powers conferred on the income-tax authority under the Income-tax Act. The second question is what would be the extent of liability towards payment of interest on the tax as determined and found due in a case settled by the Settlement Commission in various situations contemplated in the Income-tax Act like non-payment of tax or delayed payment of tax in the course of regular assessment. As has been settled by the five-judge Bench in the case of Anjum M.H. Ghaswala [2001] 252 ITR 1 (SC), the Settlement Commission has no power to waive interest on the tax determined and found due while considering the case under Chapter XIX-A in various statutory eventualities as delineated in the impugned orders of the Special Bench of the Settlement Commission. The interest on the "aggregate income" based on earlier disclosed and subsequently disclosed income, is to be determined by the Settlement Commission and on the tax found ..... X X X X Extracts X X X X X X X X Extracts X X X X
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