TMI Blog2017 (7) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 245D provides that every order passed under subsection (4) shall provide for the directions of settlement including any demand by way of tax, penalty or interest, the manner in which any such sum due under the settlement shall be paid and all other matters to make the settlement effective. Under the circumstances, when after the amount is determined by passing the order under Section 245D(4) and the amount so determined exceeds the amount disclosed in the Settlement Commission, in that case, the Settlement Commission is authorized to pass an order of interest. As observed hereinabove, the interest under Section 234B is mandatory. Thus challenges to the impugned order/s passed by the learned Settlement Commission insofar as directing to pay the interest under Section 234B while considering applications filed under Section 245C(1) of the IT Act fails and the same deserve to be dismissed and are, accordingly, dismissed - SPECIAL CIVIL APPLICATION NO. 4325 of 2017 With SPECIAL CIVIL APPLICATION NO. 7112 of 2017 TO SPECIAL CIVIL APPLICATION NO. 7124 of 2017 - - - Dated:- 19-7-2017 - Mr. Justice M.R. Shah And Mr. Justice B.N. Karia For the Petitioners : Mr Sn Sopark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he IT Act in accordance with the decision of the Hon ble Supreme Court in the case of Brij Lal and Others (Supra) and not on additional income tax determined in the order under Section 245D(4) and to direct the respondent No.1 to accept the interest computed and accordingly paid by the petitioners in their applications filed under Section 245C(1) of the IT Act. [4.0] For the sake of convenience the facts in Special Civil Application No.7112/2017 are narrated and Special Civil Application No.7112/2017 be treated as a lead matter. [5.0] That on 30.08.2013, a search and seizure operation was carried out by Income Tax Department at the office and the residential premises of Taksh Group and its partners. The petitioner is one of the firm which forms part of M/s. Taksh Group of Business. That on 03.03.2015, the petitioner herein preferred settlement application being Application No.GJ/SUCC/137/201415/IT before the Settlement Commission under Section 245C(1) of the IT Act for AY 2010 11 to 2014 15. That similar other 13 applications were also preferred belonging to M/s. Taksh Group, the particulars of which are as under: Sr.No. Name of the Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ravikant Thakkar 5.40 10.21 28.99 106.72 49.58 24.99 1.10 227.01 4 Navdurga Developers 48.63 270.49 91.35 0.50 0.50 411.48 5 Shivam Associates 20.22 20.40 64.07 80.20 64.30 61.36 0.25 310.83 6 Taksh Realty 103.75 140.01 2.27 0.30 0.30 246.63 7 Nirman Associates 12.08 49.14 30.34 48.76 52.85 11.52 204.72 8 Gajkeval Developers 22.02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 245D(1) of the IT Act on 09.03.2015. That the report dated 20.04.2015 under Section 245D(2B) of the Principle Commissioner of Income Tax (Central), Surat was received on 22.04.2015 / 24.04.2015. That the respective applicants filed their written rejoinder on 29.04.2015. That thereafter all the cases were heard together on 29.04.2015 and upto the order under Section 245D(2C) was passed on 30.04.2015 treating the applications as not invalid and allowed them to be proceeded further. That the Principle Commissioner of Income Tax submitted on 22.06.2015 the reports under Rule 9 dated 17.06.2015. That the applicants filed on 06.10.2015 their written reply vide letter dated 05.10.2015. Thereafter, the hearing of the proceedings under Section 245D(4) were fixed. That during the course of the hearing before the Settlement Commission, the applicants placed on record a written submission vide letter dated 10.08.2016 with regard to the offer of further income as follows alongwith the working of further income offered in the hands of each applicant and assessment year wise. a) on account of error in adopting sale consideration ₹ 1,82,381/- b) on account of revision of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Total Income and Payment of Taxes The total income of the applicants for the Assessment Years 2007 08 to 2013 14 is computed separately as per the Annexures enclosed to this order. By letter dated 10.08.2016, the applicants have stated that any additional tax that is determined to be payable as a result of the order of the settlement commission may be allowed to be paid by 31st December, 2016. We have carefully considered the applicants submissions and payment of the tax and interest arising consequent to this order is allowed to be paid in two instalments i.e. by 31.10.2016 and 31.12.2016. The grant of instalments as above will not affect the chargeability of the interest under Section 245D(6A) of the I.T. Act, 1961. 14. Waiver of Interest The applicants have prayed for waiver of interest chargeable under Section 234A, 234B and 234C of the Act. In view of the Hon ble Supreme Court s decision in the case of CIT v. Anjum M.H. Ghaswala and others (2001) 252 ITR 1 (SC), the Settlement Commission is not empowered to grant waiver / reduction of interest chargeable under Section 234A and 234C of the Act. The said interest shall be charged in accordance with the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, the immunity will not be available where the proceedings for the prosecution of offence under the Income Tax Act, 1961 has been instituted before the date of the application u/s 245C of the Income Tax Act, 1961. 15.1 The immunity granted to the applicant vide this order may be withdrawn, if the applicant fails to pay the applicable tax demanded within time, andin the manner specified by this order, or fails to comply with other conditions stated in the order. 15.2 The immunity granted to the applicants may also at any time be withdrawn, if the Commission is satisfied that the applicants have in the course of the settlement proceedings, concealed any particulars material to the settlement, or have given false evidence. Thereupon, the applicant may be tried for the offence for which immunity was granted, or for any other offence for which the applicants appear to have been guilty in connection with the settlement, and the applicants shall also become liable to the imposition of any penalty under the Act to which the applicants would have been liable had such immunity not been granted. [5.3] At this stage it is required to be noted that before the learned Settlement Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement Commission. b. Accordingly, amendment was made in Section 234B by inserting new sub section 2A which provides that Assessee shall be liable to pay interest at the rate of one per cent per month / part of the month under Section 234B on tax determined by it on additional income declared in the application under Section 245C(1). c. Modification of interest payable u/s 234B due to increase in the additional undisclosed income as per order u/s 245D(4) will be carried out in accordance with clause (b) of sub section (2A); or under clause (c) if variation in the additional undisclosed income arises as a result of order u/s 245D(6B). d. There is clear indication in the provision as explained by memorandum that it will be application on the applications filed. And since amendment is made effective from 1st June 2015, it will be applicable to the applications filed on or after 1st June 2015.On the contrary, there is no indication, direct or implied, in the provision or in the memorandum explaining the clauses that the amendment can also be applied to the applications filed prior to 1st June 2015. e. Clause (a) of sub section (2A) of section 234B imposes a liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a contract or usage providing for payment of interest, interest can be levied only under the law and therefore, the liability to pay interest and emanates from the statutory provision. [7.5] It is submitted that in the present case section 234B would not lay down in clear terms as to how interest under section 234B would be levied in cases of applicants filing applications under Section 245C(1) before 01.06.2015. It is submitted that it was only after the decision of the Hon ble Supreme Court in the case of Brij Lal and Others (Supra) that the matter became clear that interest under section 234B has to be charged in such cases upto the date of order under section 245C(1). It is submitted that despite the law laid down by the Hon ble Supreme Court in the case of Brij Lal (Supra) by which the Hon ble Supreme Court held that the interest under Section 234B has to be charged upto the order under Section 245C(1), taking recourse of sub section (2A) of section 234B and applying the same retrospectively, the Settlement Commission has passed an order to charge the interest in the order under Section 245D(4) of the IT Act. It is submitted that therefore the impugned order is in teeth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 245D(1) of the IT Act only. [7.9] It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that as held by the Hon ble Supreme Court in the case of Brij Lal and Others (Supra), sections 234A, 234B and 234C are applicable upto the stage of section 245C(1) of the IT Act being the order passed by the learned Settlement Commission. It is submitted that it clearly means that quantum on which the interest has been levied is the one declared in the application under Section 245C(1) of the IT Act as in view of the decision of the Hon ble Supreme Court in the case of Brij Lal and Others (Supra), the Parliament has not extended the provisions and the liability to pay interest beyond the date of application for settlement. It is submitted that in the case of Brij Lal and Others (Supra), the Hon ble Supreme Court held that the order of Settlement Commission under Section 245D(4) is not an order of assessment and the interest has to be charged only upto the stage of admission of the case under Section 245C(1), then the quantum of tax on which interest can be charged will be taxed as per the application of section 245C(1). Making above submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additional amount determined by the Settlement Commission which exceeds the disclosure under Section 245C(1) of the IT Act. It is submitted that as can be seen from the above, under section 234B(2A), the interest has been bifurcated into two parts i.e. (1) upto the stage of section 245C(1) application and (2) in the event of any additional determination of income beyond the disclosure under Section 245(1) of the IT Act. [8.3] It is submitted that the Settlement Commission while passing the order under Section 245D(4) of the IT Act may in accordance with the provisions of the IT Act pass such order as it thinks fit. It is submitted that thus when the Settlement Commission takes up the matter after 01.06.2015 necessarily it will have to take note of the existing provisions relating to the interest payable on defaults on advance tax, which would also encompass the provision of section 234B(2A) of the IT Act. [8.4] It is submitted that the contention of the assessee that the same provision of section 234B(2A) of the IT Act shall be applicable only to the applications filed after 01.06.2015 is absolutely misconceived. It is submitted that the legislature intended to charge int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as found that there is a difference in the disclosure made by the assessee in the application submitted under Section 245C(1) of the IT Act and the amount determined by the Settlement Commission under Section 245D(4) of the IT Act and there is an additional liability to pay the tax on the enhanced amount determined, the assessee has to pay the interest upto the order of determination of the exact amount by the Settlement Commission under Section 245D(4) of the IT Act. It is submitted that otherwise if the submission on behalf of the petitioners is accepted, in that case, there would not be any interest liability for the period between the application under Section 245C(1) and the order under Section 245D(4) of the IT Act. It is submitted that such cannot be the intention of the legislature. It is submitted that therefore the impugned order/s are absolutely just and proper and the same are not required to be interfered with by this Court. [9.0] Heard learned Counsel appearing for the respective parties at length. The short question which is posed for consideration of this Court is whether in the facts and circumstances of the case the learned Settlement Commission, while passi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to pay the interest for default on payment of advance tax, starting from 1st day of April, next following the financial year till the date of determination of income under Section 143(1) of the IT Act from the date of regular assessment and thus interest is payable for the default, upto the date of determination of income. Therefore, it is the case on behalf of the Revenue that on the same lines are the provisions of Section 234B(2A) of the IT Act. It is the case on behalf of the Revenue that Clause (a) of section 234B(2A) of the IT Act relates to the period commencing from the 1st day of April, of such assessment year and ends on the date of making application before the Settlement Commission under section 245C(1) and Clause (b) of section 234B(2A) of the IT Act requires payment of interest on the additional income which exceeds the disclosure under Section 245C(1) of the IT Act. Therefore, it is the case on behalf of the Revenue that when the Settlement Commission passes the order under section 234B(4) determining the exact amount and the additional amount determined by the Settlement Commission which exceeds disclosure under Section 245C(1), the Settlement Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich he was supposed to at the time of approaching the Settlement Commission under Section 245C(1) of the Act. Under the circumstances also, the concerned applicant / assessee is liable to pay the interest under Section 234B of the IT Act. At this stage it is required to be noted that as per the decision of the Hon ble Supreme Court in the case of Anjum H Ghaswal (Supra), charge of interest under Section 234B is mandatory. [10.2] Now, so far as the submission on behalf of the petitioners that the provisions of section 234B(2A) shall be applicable prospectively and with respect to the applications filed on or after 01.06.2015 only and the submission on behalf of the petitioners that the charge of interest under section 234B of the IT Act considering section 234B(2A) shall be contrary to the decision of the Hon ble Supreme Court in the case of Brij Lal and Others (Supra) is concerned, the aforesaid has no substance. It is required to be noted that as such the charge of interest under Section 234B is mandatory as held by the Hon ble Supreme Court in the case of Anjuman H Ghaswal (Supra). However, because of the decision of the Hon ble Supreme Court in the case of Brij Lal and Others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax. 234B (2A)(a) Where an application under sub section (1) of section 245C for any assessment year has been made, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the 1st day of April of such assessment year and ending on the date of making such application, on the additional amount of income tax referred to in that sub section; (b) where as a result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard that provision of Section 234B(2A) would apply to all pending proceedings pending as on 01.06.2015. The CBDT has issued the clarificatory circular in exercise of powers under Section 119 of the IT Act. Considering the aforesaid facts and circumstances, the submission on behalf of the petitioners that the provision of section 234B(2A) shall be applicable retrospectively, is absolutely misconceived. As observed hereinabove, liability under Section 234B of the IT Act, which is mandatory was already there which further came to be clarified with respect to the application before the Settlement Commission by way of section 234B(2A) of the IT Act. Therefore, the submission on behalf of the petitioners that the new liability would be created by way of section 234B(2A) of the IT Act and therefore, the same cannot be made applicable restrospectively has no substance. At the cost of repetition, as observed hereinabove, section 234B of the IT Act was very much there, however considering the decision of the Hon ble Supreme Court in the case of Brij Lal and Others (Supra), the things were required to be clarified and that is why the legislature came out with section 234B(2A) of the IT Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court was considering the liability to pay the interest on unpaid tax amount under Section 11B of the Rajasthan Sales Tax Act. On considering section 11B of the Rajasthan Sales Tax Act, before the 1979 amendment, nowhere provided for payment of interest on the unpaid tax amount as found on final assessment from the date of the filing of the return under Section 7 of the said Act, the Hon ble Supreme Court held that the amendment shall be applicable prospectively. Under the circumstances, the said decision shall not be applicable to the facts of the case on hand. Similarly, decision of this Court in the case of Tata Teleservices (Supra) and decision of Punjab Haryana High Court in the case of Sushma Saxena (Supra) and the decision of the Calcutta High Court in the case of Ram Kumar Agarwalla Bros (Supra) shall not be applicable to the facts of the case on hand more particularly when, as observed hereinabove, the charge of interest under Section 234B is mandatory as held by the Hon ble Supreme Court in the case of Anjuman H. Ghaswal (Supra). [10.6] At this stage the decision of the Hon ble Supreme Court in the case of Commissioner of Income Tax, Mumbai vs. Damani Brothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub section (1) or sub section (3). Sub section (6) of section 245D provides that every order passed under sub section (4) shall provide for the directions of settlement including any demand by way of tax, penalty or interest, the manner in which any such sum due under the settlement shall be paid and all other matters to make the settlement effective. Under the circumstances, when after the amount is determined by passing the order under Section 245D(4) and the amount so determined exceeds the amount disclosed in the Settlement Commission, in that case, the Settlement Commission is authorized to pass an order of interest. As observed hereinabove, the interest under Section 234B is mandatory. [11.0] In view of the above and for the reasons stated above, challenges to the impugned order/s passed by the learned Settlement Commission insofar as directing to pay the interest und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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