TMI Blog2002 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ced before a Bench of two learned judges, it was considered appropriate to list the appeal before a larger Bench than merely Bench of two judges. That is how the matter was placed before us. The factual backdrop in a nutshell is as follows: The respondent-Damani Brothers (hereinafter referred to as the "assessee") filed an application for settlement before the Mumbai Bench of the Commission. The Chairman of the Commission exercising power under section 245BA(5A) of the Act constituted a Special Bench vide order dated September 18, 1998, for adjudicating the following three issues: "1. Was the Special Bench of the Settlement Commission right in holding in the case of Om Metals and Minerals Pvt. Ltd., In re [1992] 193 ITR 57 (ITSC) (Delhi) that the assessment order passed by, the Assessing Officer before the admission of the settlement application subsisted and recovery proceedings continued, even after the admission of the said application, especially after the judgment of the Supreme Court in the case of CIT v. Express Newspapers Ltd. [19941 206 ITR 443? 2. If the answer to question No. 1 is in the affirmative would it be correct to say that once the Settlement Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1. Reference was made to various provisions of Chapter XIX-A in this regard. It is further submitted that there is no power of waiver conferred on the Commission to waive the interest charged under section 220(2) of the Act. In response, learned counsel for the assessee submitted that an artificial distinction is sought to be made between the date of filing of a petition under section 245C and the date of decision to proceed with the petition under section 245D. With reference to the definition of the expression "case" as appearing under section 245A, it is submitted that the proceedings may be pending before the concerned authority, i.e., the assessing authority, the appellate authority or the revisional authority; and Explanation (1)(v) to section 153(3) makes it clear that extension is granted for completing the pending proceedings in case the petition under section 245C is rejected. Therefore, the Commission gets jurisdiction to deal with the matter, as soon as an application is made under section 245C. The Commission till admission of the petition exercises powers of the income-tax authorities and after admission it functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount has caused or would cause genuine hardship to the assessee; (ii) default in the payment of the amount on which interest has been paid or was payable under the said sub-section was due to circumstances beyond the control of the assessee; and (iii) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him." "234B. Interest for defaults in payment of advance tax.--(1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent. of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one and one-half per cent. for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub-section (1) of section 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission may, by order, allow the application to be proceeded with or reject the application: Provided that an application shall not be rejected under this sub-section unless an opportunity has been given to the applicant of being heard: Provided further that the Commissioner shall furnish the report within a period of forty-five days of the receipt of communication from the Settlement Commission in case of all applications made under section 245C on or after the 1st day of July, 1995 and if the Commissioner fails to furnish the report within the said period, the Settlement Commission may make the order without such report. (1A) Omitted.... (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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit of the assessee in the process 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). (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. It has to be noted that the Commission exercises power in respect of income which was not disclosed before the authorities in any proceeding, but are disclosed in the petition under section 245C. It is not that any amount of undisclosed income can be brought to the notice of the Commission in the said petition. The Commission exercises jurisdiction if the additional amount of tax on such undisclosed income is more than a particular figure (which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is pending before the Assessing Officer or even cannot act as an appellate or revisional authority. The return filed is in respect of disclosed income. Similar is the position vis-a-vis the appellate and the revisional authority. The petition before the Commission is in respect of undisclosed income, therefore, the situation is different till the Commission decides to proceed with the matter. That being the position, the income-tax authorities are free to proceed in the prescribed manner till the Commission decides to proceed with the petition. Emphasis was laid by the assessee on certain observations made by this court in CIT v. Express Newspapers Ltd. [1994] 206 ITR 443. The observations to the effect that the proceedings before the Commission are not confined to the income disclosed before it, does not mean that even before the Commission decides to proceed with the case, it can deal with disclosed income. While determining the total income, the Commission has to take note of both the disclosed income and the undisclosed income. This is logical because there cannot be two different total incomes for the same assessment year, i.e., disclosed total income and undisclosed total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when there is default in payment of advance tax, Liability to pay interest under section 245D(2C) arises when additional amount of income-tax is not paid within the time specified under sub-section (2A). Section 245D(6A) fastens liability to pay interest when tax payable in pursuance of an order under sub-section (4) is not paid within the specified time. Therefore, when interest is charged in respect of the said provisions it does not amount to double levy of interest, as the infractions are different. To put it differently, the interests charged in terms of sections 234A, 234B and 234C become payable on the income already disclosed in the returns filed, together with the income disclosed before the Commission. The concerned interest as aforesaid shall be on the consolidated amount of income, i.e., both disclosed and undisclosed. As indicated above, such interests shall be charged till the Commission acts in terms of section 245D. Thereafter, the prescription relating to charging of interests etc. becomes operative, after the Commission allows the application for settlement to be proceeded with. In such event, there is no further charge of interest in terms of sections 234A, 234 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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