TMI Blog2004 (1) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... orders passed by the Settlement Commission, respondent No.2 herein, on March 20,2003, under section 154 of the Income-tax Act, 1961, withdrawing the reduction or waiver of interest granted by the Settlement Commission under sections 234A, 234B and 234C of the Act, while passing the orders under section 245D(4) of the Act on March 31,1999. The brief facts giving rise to the present petitions are as under: The petitioners have approached the Settlement Commission for settlement of their cases in accordance with the provisions of Chapter XIX-A of the Income-tax Act (hereinafter referred to as the" Act"). The Settlement Commission had passed orders on March 31,1999, under section 245D(4) in respect of each of the petitioners, inter alia, waiving and/or reducing interest under sections 234A, 234B and 234C of the Act in accordance with the state of law at the relevant point of time. After a period of a little less than four years, the petitioners received notices dated February 21,2003, from the Settlement Commission stating that in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1, the orders passed on March 31,1999, require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ghaswala [2001] 252 ITR 1 has held that the Settlement Commission has power to waive or reduce interest under sections 234A, 234B and 234C of the Act. In this connection, he has invited our attention to the penultimate para of the said judgment wherein the Hon'ble Supreme Court has taken the view that the Settlement Commission has no power to issue circulars. However, if the assessee is entitled to the benefit granted under the circular, the Settlement Commission has power to grant that benefit by reducing or waiving interest under sections 234A, 234B and 234C of the Act, under the circulars issued by the Board under section 119 of the Act. Mr. Shah has further submitted that under the Act, no specific power is given to the Settlement Commission to rectify orders passed under section 245D(4) of the Act by invoking the provisions of section 154 of the Act. In the absence of such powers, the action taken by the Settlement Commission while passing the impugned order is absolutely without jurisdiction and deserves to be quashed and set aside. In this connection, he relied on the decision of the Privy Council in the case of CIT v. Khemchand Ramdas [1938] 6 ITR 414 wherein it is held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be exercised in accordance with the provisions contained in sections 147 to 150 including sections 148 and 149. Admittedly, they were not complied with in this case." According to Mr. Shah, even the Hon'ble Supreme Court was of the view that it is not certain as to whether the Settlement Commission has got the power to reopen the assessment under section 147 of the Act and hence, it cannot be said that by virtue of section 245F(1) of the Act, the Settlement Commission has got the power to rectify the order under section 154 of the Act. Mr. Shah has further submitted that the order passed by the Settlement Commission under section 245D(4) is final and conclusive. Such finality is intended to be given by the Legislature and it has been made clear in section 245-I of the Act which lays down that every order of the Settlement Commission passed under section 245D(4) shall be conclusive as to the matters stated therein. Unless such an order becomes void on the grounds of fraud and/or misrepresentation of facts as provided in section 245D(6), the order cannot be disputed or impugned. Mr. Shah has, therefore, submitted that the Settlement Commission has no power to rectify its own o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Tribunal to amend any order passed by it under sub-section (1) and to make amendment if the mistake is brought to its notice by the assessee or the Assessing Officer, at any time within four years from the date of the order, with a view to rectify any mistake being apparent on the record. The power similar to the one which is conferred upon the Appellate Tribunal under section 254(2) of the Act is not conferred on the Settlement Commission and in the absence of such powers, the Settlement Commission cannot resort to the provisions of section 154(1) of the Act for the purpose of rectifying the order passed by it under section 245D(4) of the Act. Mr. Shah has further submitted that even under section 154 of the Act, only a mistake apparent from the record or an arithmetical mistake can be rectified and a mistake apparent from the record must be one to point out which no elaborate argument is required. It must be a glaring, obvious or self-evident mistake. If it is a mistake which requires to be established by a complicated process of investigation, argument or proof, it cannot be regarded as a mistake apparent from the record. In this connection, he relied on the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of waiver being a conscious act, no inference of waiver can be drawn from an omission or in action. But as the omission is not by a person ignorant of law but by the Income-tax Officer who must be presumed to be and who is also otherwise likely to be well conversant with the relevant provisions of sections 215, 216 and 217, then such an inference can be drawn. If the Income-tax Officer does not pass an order for levy of interest even where levy of interest is mandatory, then only two inferences are possible. One is that he forgot to pass such an order and the other is that he had decided to waive the interest because the court cannot assume or infer that even though he was aware of the said provision, he deliberately did not pass that order. An intention to act contrary to law cannot ordinarily be inferred. The court cannot also draw an inference that he forgot to pass an order. That being the state of his mind, the successor-Income-tax Officer cannot definitely say that either it was a case of overlooking the provisions or a deliberate lapse on the part of the Income-tax Officer. Considering the practice which is ordinarily followed by the Income-tax Officers while making asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder this Act. Section 245F(2) confers exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under the Act in relation to the case pending before the Settlement Commission. Such powers can be exercised by the Settlement Commission no sooner the application made under section 245C has been allowed to be proceeded with under section 245D and till an order is passed under sub-section (4) of the section 245D of the Act. He has, therefore, submitted that the Settlement Commission has all the powers of the income-tax authority under section 245F(1) of the Act prior to and subsequent to the application decided by the Settlement Commission. The Settlement Commission has therefore, power to rectify any mistake which is found in the order passed under section 245D(4) of the Act. He has further submitted that though the Settlement Commission has no discretion to reduce or waive the interest under sections 234A, 234B and 234C of the Act and still the interest was reduced or waived, the Settlement Commission has committed an error apparent from the record and hence, the same was rightly rectified by the Settlement Commission while passing the order u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the court. In this connection, he has relied on the decision of the Hon'ble Supreme Court in the case of British Airways Plc. v. Union of India, AIR 2002 SC 391, wherein it is held that: "while interpreting a statute, the court should try to sustain its validity and give such meaning to the provisions which advance the object sought to be achieved by the enactment. The court cannot approach the enactment with a view to pick holes or to search for defects of drafting which make its working impossible. It is a cardinal principle of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well-known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute. It is the duty of the court to make such construction of a statute which shall suppress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations made by the Hon'ble Supreme Court in the said decision wherein it is in terms held that "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 is outside the purview of the settlement contemplated in Chapter XIX-A of the Act". The Hon'ble Supreme Court has shown indulgence only to the extent that if the assessee is entitled to the benefit under the circular issued by the Central Board of Direct Taxes to that extent the Settlement Commission can waive or reduce the interest. However, it was not the case before the Settlement Commission that the present petitioners were entitled to the benefit conferred under the circular and on that basis, the interest was waived or reduced by the Settlement Commission. In view of the Supreme Court's decision in the case of Ghaswala [2001] 252 ITR 1, the Settlement Commission has rightly passed the order unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions contained in section 147 of the Act. In the case of CIT v. Paharpur Cooling Towers (P.) Ltd. [1996] 219 ITR 618, though the Hon'ble Supreme Court has expressed doubt as to whether the Settlement Commission has got the power to reopen the assessments as contemplated under section 147 of the Act, it was held that even if the Settlement Commission has got such powers, the said powers will have to be exercised in accordance with the provisions contained in sections 147 to 150 of the Act. The court, therefore, took the view that the possibility of having such powers under section 147 of the Act could not be ruled out. The only condition which was to be complied with while exercising such powers is that the said powers are to be exercised in accordance with the provisions contained in sections 147 to 150 of the Act. Mr. Naik has further submitted that in view of the decision of the hon'ble Supreme Court in Ghaswala's case [2001] 252 ITR 1, the interest waived or reduced by the Settlement Commission under sections 234A, 234B and 234C of the Act while passing the order under section 245D(4) of the Act is clearly a mistake apparent from the record and it has to be rectified wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to have a look at the relevant provisions of the Act so as to throw light on the controversy and resolve it. Chapter XIX-A of the Act deals with settlement of cases. Section 245C of the Act empowers the assessee to make an application for settlement of cases. Section 245D prescribes the procedure to be followed by the Settlement Commission in respect of an application under section 245C of the Act. An application for settlement of cases may be made by a taxpayer at any stage of proceeding. On receipt of the application, the Settlement Commission calls for a preliminary report from the Commissioner who has jurisdiction over the case. The Commissioner can object to the application being proceeded with by the Settlement Commission, if he is of the view that the concealment of income was perpetration by fraud or evading any tax or other sum chargeable under the Act, on the part of the applicant has been established or is likely to be established in relation to the case by an income-tax authority. On the basis of the materials contained in the Commissioner's report and having regard to the nature and circumstances of the case of the complexity involved in the investigation therein, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority under this Act in relation to the case." Section 245F(1) vests Settlement Commission with all the powers which are vested in an income-tax authority under the Act, in addition to the powers that the Commission has under Chapter XIX-A of the Act. Section 245F(2) clarifies that between the dates when the Settlement Commission allows an application under section 245C to be proceeded with and when it makes a final order under section 245D(4), the Commission is vested with the exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority in relation to the matters covered by the case before it. Section 245-I lays down that every order of the Settlement Commission passed under section 245D(4) shall be conclusive as to the matters stated therein. It reads as under: "245-I. Every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force." On the basis of the aforesaid provisions contained in Chapter XIX-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aiver or reduction of interest or tax. It is made clear from the use of the expression "in accordance with the provisions of this Act" in section 245D(4) that the Settlement Commission will have to be in conformity with the Act and not contrary to or in conflict with it. Interest contemplated under section 234A for default in furnishing a return, under section 234B for deficiency or default in payment of advance tax and under section 234C for deferment of advance tax is mandatory in nature and the fact that the power of waiver has not been conferred on the Settlement Commission, indicates that so far as payment of statutory interest is concerned, the same is outside the purview of the settlement contemplated in Chapter XIX-A. While the Settlement Commission arrives at the taxable income of the assessee on the basis of the records before it, it has to levy the mandatorily chargeable tax on such income arrived at by it and whatever interest is due under mandatory provisions like sections 234A, 234B and 234C, it has to include that interest also in the settlement. The hon'ble Supreme Court has also made it clear that since the circular is beneficial to the assessee, such benefit can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion does not figure in this list and hence, in the strict sense, it cannot be said that the Settlement Commission is an income-tax authority. Power under section 154 of the Act is exercised by the income-tax authority as enumerated in section 116 of the Act. Section 154 reads as under: "154. With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may, - (a) amend any order passed by it under the provisions of this Act; (b) amend any intimation or deemed intimation under sub-section (1) of section 143." Section 116 of the Act does not include the Settlement Commission and section 154 empowers only the income-tax authority to rectify its orders and hence, the argument canvassed before us that since the Settlement Commission is not an income-tax authority, it has no power to rectify its earlier order. However, the provisions contained in section 245F(1) of the Act cannot be lost sight of. It states in unequivocal terms that in addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an income-tax authority under this Act. The word "powers" cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gains which are computed and included in the total income of the assessee. We are also of the view that the Settlement Commission has committed an error apparent on the face of the record in reducing and/or waiving the interest chargeable under sections 234A, 234B and 234C of the Act. When the hon'ble Supreme Court held that the Settlement Commission has no power to reduce or waive the interest, it merely stated what the law had always been and must always to be understood to have been. As for the issue as to whether the Settlement Commission is an income-tax authority or not it would not detain us any longer as section 245F specifically states that the Settlement Commission has got all the powers of an income-tax authority, over and above the powers under Chapter XIX-A of the Act. The hon'ble Supreme Court has also made a distinction in Ghaswala's case [2001] 252 ITR 1 by taking the view that the powers of the Central Board of Direct Taxes cannot be exercised by the Settlement Commission and in that sense it is not an income-tax authority. In other words, the Settlement Commission cannot issue circulars which power is vested in the Central Board of Direct Taxes under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer." Simply because a provision similar to the one which is contained in section 254(2) of the Act is not there empowering the Settlement Commission to rectify its orders, it cannot be said that the Settlement Commission cannot exercise such powers. In our opinion, section 245F is very wide and it covers within its sweep all the powers exercised by the income-tax authority under the Act. As observed earlier, the rules of interpretation require that a true meaning and import should be given to the words used in the section and if the language is very clear, the court should not be influenced by the fact that provisions similar to the one under section 254(2) of the Act are absent in Chapter XIX-A and hence the Commission has no power to rectify the order. If the plain language of the section indicates that such powers can be exercised, the court should adhere to the said interpretation rather than be influenced by the provisions made in respect of other authorities. Even otherwise, there is one basic differen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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