TMI Blog2019 (1) TMI 1090X X X X Extracts X X X X X X X X Extracts X X X X ..... ation that has been made. It would apply to all applications that have been made. Clause (b) states that whereas as a result of order of the Settlement Commission in Sub-Section (4) to Section 245D the amount of total income disclosed in the application under Sub-Section (1) to Section 245C is increased, the assessee would be liable to pay simple interest for every month or part of the month comprised in the period commencing from 1st day of April of such assessment year and ending with the date of the order on the amount by which the tax on the total income determined on the basis of such order exceeds the tax on the total income disclosed in the application filed under Sub-section (1) to Section 245C of the Act. The provision clearly uses the present tense i.e. where application under Sub-Section (1) to Section 245C of the assessment year has been made. Clause (a) is therefore clearly intended to cases where application was pending and orders had not been passed when sub-section (2A) to Section 234B was enacted. Clause (b) refers to the date of order i.e. as a result of Sub-Section (4) to Section 245D of the Act, which should be after insertion of sub-section (2A) to Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner had filed an application for settlement under Section 245 C (1) of the Act before the Settlement Commission on 30th April, 2015. The said application was admitted by the Settlement Commission vide order dated 8th May, 2015 under Section 245 D (1) of the Act. As noticed above, sub-section (2A) to Section 234 B was enacted and inserted in the statute by Finance Act, 2015 with effect from 1st June, 2015. The Settlement Commission vide its order dated 16th September, 2016 under Section 245 D (4) of the Act had settled the case, whereby further addition of ₹ 17,40,82,296/- was made to the amount already disclosed to the Settlement Commission. Accordingly, the petitioner would be liable to pay tax on the enhanced amount. To this extent, however, there is no dispute. The dispute pertains to direction of the Settlement Commission for charging of interest on the additional tax payable under sub-section (2A) to Section 234 B, which it is stated amounts to ₹ 1,98,66,722/-. Submissions. 6. The primary contention of the petitioner is that sub-section (2A) to Section 234 B introduced by the Finance Act, 2015 is not retrospective and would not be applicable as the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. Explanation 1.- In this section, assessed tax means the tax on the total income determined under sub-section (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of,- (i) any 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; (ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) any tax credit allowed to be set off in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (b) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly; (3) where, as a result of an order of reassessment or recomputation under section 147 or section 153A, the amount on which interest was payable in respect of shortfall in payment of advance tax for any financial year under sub-section (1) is increased, 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 next following such financial year and ending on the date of the reassessment or recomputation under section 147 or section 153A, on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined under subsection (1) of section 143 or on the basis of the regular assessment as referred to in sub-section (1), as the case may be; (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, the amount on which interest was payable under sub-section (1) or su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e placed by the assessee on Sub-Section (6) to Section 245-B was rejected by the Supreme Court observing that the said provision was only procedural in nature since it provides fixing of the terms by which the amount settled in terms of Sub-Section (4) to Section 245D will have to be paid. The said Sub-Section did not empower the Settlement Commission to either waive or reduce the interest either under Sub-Sections 234 A, 234 B or 234 C of the Act. The mandate of Sub-section (4) to Section 245 D requires the final settlement order should be in conformity with the Act and not contrary to/or in conflict with the provisions of the Act. Object of settlement was not to give amnesty to a tax-evader and hence, it would be preposterous to hold that the Settlement Commission has power to either waive or reduce the tax or the mandatory interest due and payable in accordance with the provisions of the Act. However, the Settlement Commission can take notice of the Circular issued under Section 119 (2) of the Act to relax the rigors of Sections 234A, 234B and 234C while passing the order of Settlement. But, while doing so, the Settlement Commission cannot act and exercise power conferred on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or reduction of amount of tax payable. 12. The legal issue and question posed in paragraph 2 and answer being confined to the legal issue was subsequently again noticed by the Supreme Court in paragraph 16 in their judgment in Brij Lal and Ors. (supra), which reads as under : 16. On the other hand, interest for defaults in payment of advance tax falls under Section 234B, apart from Sections 234-A and 234-C, in Part F of Chapter XVII. Thus, levy of interest is incidental to the liability and computation of advance tax. It is interesting to note that Section 234-A(4) in turn refers to the increase or reduction of interest subsequent to the order of the Commission under Section 245-D(4) increasing or reducing the amount of tax payable and so also Section 234B(4). Thereafter referring to question no.II and the answer given, the Supreme Court observed that an application under Section 245 C (1) for settlement is not maintainable without full and true disclosure of income and the manner in which such undisclosed income is derived. The applicant has to pay additional tax and interest due thereon while making an application, as per Section 245 C (1B) of the Act. The word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission's order under Section 245-D(4) the advance tax paid turns out to be less than 90% of the assessed tax as defined in the Explanation to Section 234-B(1)? 37. As held hereinabove, under Section 245-C(1) read with Section 245-C(1-B)(ii) and Section 245-C(1-C)(b), the additional amount of income tax payable is to be calculated on the aggregate of total income returned and the income disclosed in the settlement application as if such aggregate is the total income. Thus, the scheme of the said sections is based on computation of total income and in that sense we have stated that such application for settlement is akin to a return of income. The said provision deals with total income . Thus, as stated above, Sections 234-A, B and C are applicable up to the stage of Section 245-D(1) order passed by the Settlement Commission. However, Parliament has not extended the provisions and the liability to pay interest beyond the date of application for settlement. This is the position even after the Finance Act of 2007. 39. Moreover, as stated above, under the Act, there is a difference between assessment in law [regular assessment or assessment under Section 143(1)] and ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 245 D(1) of the Act. However, the Supreme Court in this decision did not deal with the issue in question namely on the quantum of tax on which interest would be paid. The Supreme Court did not therefore hold that the quantum of tax would not determine the interest. This would necessarily follow from sub-section (6) to Section 245 D under which the computation sheet is made following the order under Section 245 D (4) of the Act. The computation-sheet under Sub-Section (6) to Section 245 D has to separately compute the tax payable which could in a given case include the enhanced amount as well as interest due on the said amount. 14. Counsel for the petitioner is correct in its proposition that imposition of interest, even if compensatory would be substantive enactment and not a mere procedural change, as was held by the Supreme Court in J.K. Synthetics Limited (supra), and as is clear from paragraph 16 of the judgment which reads as under: 6. Now Section 7(2) says that every such return, meaning thereby the return referred to in Section 7(1), shall be accompanied by a receipt showing the deposit of the full amount of tax due on the basis of the return . In other w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax so deposited is to be deemed to be provisional and subject to necessary adjustments in pursuance of the final assessment. Section 7-AA empowers levy of penalty if the assessing authority is satisfied that any dealer has without reasonable cause failed to furnish the return under Section 7(1) within the time allowed. The use of the words without reasonable cause clearly implies that if the dealer can show reasonable cause for his lapse he cannot be visited with the penalty prescribed by Section 7-AA. To put it differently if reasonable cause is shown by the dealer for the lapse, he cannot be visited with penalty under this provision. This is also suggestive of the fact that the legislature desired to be harsh with wilful defaulters or those guilty of wilful omission of material information and not with dealers who failed to supply some information under the bona fide belief that the same was not necessary or those who had failed to pay the full tax due not with a view to evading or avoiding the liability to pay the tax but because they bona fide believed that they were liable to pay the tax assessed by them on the basis of the return and no more. If at a later date on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled. We would begin by referring to the decision of the Constitution Bench in Mohanlal Jain Vs. His Highness Maharaja Shri Sawai Mansinghji, AIR 1962 SC 73 , which had examined the question whether Section 87B inserted by Section 12 of the Code of Civil Procedure (Amendment) Act, 1951, stating that provisions of Section 85 and Sub-sections (1) and (2) of Section 86 of the Code would apply to the rulers of former Indian States would apply prospectively or would even apply to pending suits. On principles discernible on the question of retrospectivity of law, reference was made to United Provinces Vs. Atiqa Begum s case 1940 F.C.R. 1102 to observe that when vested rights are affected amended law should not be presumed to be retrospective and that the rights of the parties to an action would ordinarily be determined in accordance with law as it stood on the date of commencement of the action. The above rule is however subject to the second rule as pointed out by the Privy Council in K.C. Mukherjee Vs. Mst. Ram Ratan Kuer (1935) I.L.R. 15 (Patna) that the language of the enactment might be sufficient to rebut the first principle. When the language of the enactment includes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aradachariar, J ., referred to the two principles applicable to cases where the question of retrospectivity of a law has to be considered. They are that vested rights should not be presumed to be affected, and that the rights of the parties to an action should ordinarily be determined in accordance with the law, as it stood at the date of the commencement of the action. But, the learned Judge pointed out that the language of the enactment might be sufficient to rebut the first, and cited the case of the Privy Council in K.C. Mukherjee v. Mst Ram Ratan Kuer [(1935) ILR 15 Pat 268] . Here, the matter can be resolved on the language of the enactment. The language employed is of sufficient width and certainty to include even pending actions, and the contrary Rule applies, namely, that unless pending actions are saved from the operation of the new law, they must be taken to be affected. The word sued , as we have shown, denotes not only the start but also the continuation of a civil action, and the prohibition, therefore, affects not only a suit instituted after the enactment of Section 87-B but one which, though instituted before its enactment, is pending. In our judgment, the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the coming into force of this Act, shall be deemed to be valid could not be given their full effect. As there are no such saving clauses in express or implied terms, it must be held that the amendment was clearly intended by the legislature to apply to all cases of election of president or VicePresident, whether or not the matter had been taken to court. It is the duty of courts to give full effect to the intentions of the legislature as expressed in a statute. That being so, it must be held that the amending Act had the effect of curing any illegality or irregularity in the elections in question with reference to the provisions of Section 19 of the Act. 19. Similarly, in Lakshminarayan Guin Ors. Vs. Niranjan Modak AIR 1985 SC 111 , while dealing with the question of applicability of rent control legislation, referring to the language of the Statute, Supreme Court had considered whether the protection under the rent control legislation would cover decrees for recovery of possession which have already been passed or only to new institution of suits. It was emphasized that when new law speaks in language which expressly or by clear intendment takes in even pending mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and so far as the previous provisions are applicable. I think, therefore, that the sub section is applicable to pending proceedings, and that we have jurisdiction under it, unless the fact of this being an appeal prevents our having it. 20. We would now turn to the sub-section (2A) to Section 234B and examine whether same states that it would be applicable to pending proceedings. Clause (a) of the said Sub-Section states that where an application under Sub-Section 245C for any assessment year has been made, the assessee shall be liable to pay simple interest at the rate specified for every month or part of the month comprised in the period commencing on 1st day of April of the assessment year and ending with the date of making such application. This refers to the application that has been made. It would apply to all applications that have been made. Clause (b) states that whereas as a result of order of the Settlement Commission in Sub-Section (4) to Section 245 D the amount of total income disclosed in the application under Sub-Section (1) to Section 245C is increased, the assessee would be liable to pay simple interest for every month or part of the month comprised in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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