Commissioner
of Income Tax, Mumbai Vs. Anjum M.H.Ghaswala & Ors [2001] Insc 551 (18 October 2001)
K.T.Thomas,
R.C.Lahoti, N.S.Hegde, S.N.Variava. Santosh Hegde, J.
In
these appeals, the question that arises for our consideration is: whether the
Settlement Commission (for short the Commission) constituted under Section 245B
of the Income-tax Act, 1961 (hereinafter referred to as the Act) has the
jurisdiction to reduce or waive the interest chargeable under Sections 234A,
234B and 234C of the Act, while passing orders of settlement under Section 245D(4)
of the Act ? Earlier, this question arose before the Commission in the case of Ashwani
Kumar Aggarwal, In re (195 ITR 861) wherein a 5-Member Special Bench of the
Commission held that under Section 245D(4) or sub-section (6), the Commission
does not have the power either to waive or reduce the statutory interest
payable under the Act.
This
view of the 5-Member Bench of the Commission was overruled by a larger Bench
comprising of 7 Members of the Commission which held otherwise by the impugned
order.
It
held that the Commission is vested with the power to waive or reduce the
interest chargeable under Section 234A, 234B and 234C of the Act in cases
pending before it for the assessment year 1989-90 and onwards (i.e. the year in
which Chapter XVII- F was introduced in the Act). It further held that this
power can be exercised by any of the Benches constituted to settle cases under
Section 245BA of the Act. While coming to this conclusion, the Commission held
that the constitution of the Commission is based on the concept of compromise
and settlement, hence, it has the necessary power to waive or reduce the
interest, even if statutorily mandated, in view of the wordings of Section
245D(6) of the Act.
It
also held that in view of the definition of the term income-tax authority under
Section 245A(d), the Commission being an income-tax authority it has all the
powers of the Board which are incidental to the functions of the Commission,
which includes the Boards power under Section 119 of the Act to relax the
rigors of Section 234A, 234B and 234C of the Act.
By
applying the rule of construction, the Commission further held that taking into
consideration the object for which the Commission is constituted, it should be
held by the process of purposive interpretation that it has the power of waiver
or reduction of statutory interest because the object of the Legislature was to
settle the case without there being any restriction on Commissions power to
settle the case.
For
the purpose of deciding the above issue, it is necessary for us to examine the
various provisions of the Act which are germane to the controversy in hand.
The
constitution of the Commission and its powers are traceable to the provisions
of Chapter XIX-A of the Act. As noted above, Section 245-B provides for the
constitution of a Commission by the Central Government for settlement of cases
under that Chapter. It also provides for appointment of a Chairman,
Vice-Chairman and members of the Commission, the constitution of various
Benches of the Commission and empowers those Benches to exercise power and
authority vested in the Commission under Chapter XIX-A of the Act.
Section
245A defines various expressions under sub-clauses (a) to (g) but does not
define the expression settlement.
Section
245-C provides for filing of an application by an assessee at any stage of the
case relating to him in a prescribed manner giving full and true disclosure of
his income which has not been disclosed before the assessing officer and
further informing the manner in which such income has been derived by him and
the quantum of additional amount of income-tax payable on such income amongst
other particulars that may be prescribed with a prayer to the Commission to
have the case settled.
The
word case has been defined under Section 245A(b) thus :
case
means any proceeding under this Act for the assessment or reassessment of any
person in respect of any year or years, or by way of appeal or revision in
connection with such assessment or reassessment, which may be pending before an
income-tax authority on the date on which an application under sub-section (1)
of section 245C is made :
Provided
that where any appeal or application for revision has been preferred after the
expiry of the period specified for the filing of such appeal or application for
revision under this Act and which has not been admitted, such appeal or
revision shall not be deemed to be a proceeding pending within the meaning of
this clause;
Under
the provisions of Chapter XIX-A, on such application being made, the Commission
is empowered to dispose of the same in the manner provided thereunder. Section
245D provides for the procedure and exercise of power to be followed by the
Commission on receipt of an application under Section 245C. Under this
provision, the Commission has the authority to call for the report from the
Commissioner of Income Tax (for short the Commissioner) and on the basis of the
material contained in such report and having regard to the nature and circumstances
of the case or the complexity of the investigation involved therein, it may by
order allow the application to be proceeded with or reject the application.
If the
Commission allows the application filed under Section 245C then under
sub-section (3) of Section 245D it can call for the relevant records from the
Commissioner and if it forms any opinion that any further inquiry or
investigation in the matter is necessary, it may direct the Commissioner to
make or cause to be made such further inquiry or investigation and furnish a
report on the matters covered by the application and other matters relating to
the case.
Sub-sections
(4) and (6) of Section 245D being of importance for the purpose of our
discussion, the same are extracted in verbatim hereunder :
(4)
After examination of the records and the report of the Commissioner, received
under sub-section (1), and the report, if any, of the Commissioner received
under sub-section (3), and after giving an opportunity to the applicant and to
the Commissioner to be heard, either in person or through a representative duly
authorised in this behalf, and after examining such further evidence as may be
placed before 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).
x x x
(6) Every order passed under sub-section (4) shall provide for the terms of
settlement including any demand by way of [tax, penalty or interest], the
manner in which any sum due under the settlement shall be paid and all other
matters to make the settlement effective and shall also provide that the
settlement shall be void if it is subsequently found by the Settlement
Commission that it has been obtained by fraud or misrepresentation of facts. (emphasis
supplied).
From
the above provisions of law, it is seen that the Commission after examination
of the records and reports submitted to him and after giving an opportunity to
the applicant and to the Commissioner of being heard, may pass such order as it
thinks fit on the matters covered by the application. Though Section 245D(4)
confers wide power on the Commission in the process of settling a case, the Act
still mandates that the same will be done in accordance with the provisions of
the Act.
While
that is the mandate which is given to the Commission, a perusal of sub-section
(6) of Section 245D shows that it has also empowered the Commission to provide
for the terms of settlement including any demand by way of tax, penalty or
interest; the manner in which any sum due under the settlement shall be paid
and all other matters to make the settlement effective. It is an admitted
position that by its plain language sub-section (4) of Section 245D does not
empower the Commission to waive or reduce statutory interest payable under the
provisions of Section 234A, 234B or 234C.
The
moot question, therefore, for our consideration is:
does
sub-section (6) which contemplates providing for the terms of settlement of
tax, penalty or interest empowers the Commission, in any manner, either to
waive or reduce interest payable under Section 234A, 234B or 234C in any case
that arises for settlement before the Commission ? If so, would this waiver of
interest be in accordance with the provisions of the Act as mandated in
sub-section (4) of the Act ? For answering the above question, we will have to
examine the character of interest payable under the provisions of Section 234A,
234B and 234C. A perusal of these Sections shows that the interest for default
in furnishing return of income, default in payment of advance tax and interest
for deferment of advance-tax are mandatory in nature. Section 234A which refer
to the payment of interest for default in furnishing the return of income-tax mandates
:
234A.
(1) Where the return of income for any assessment year under sub-section (1) or
sub- section (4) of section 139, or in response to a notice under sub-section
(1) of section 142, is furnished after the due date, or is not furnished, the assessee
shall be liable to pay simple interest at the rate of [one and one-half]
{Substituted for two by the Finance Act, 1999 w.e.f. 1.6.1999} per cent for
every month or part of a month comprised in the period commencing on the date
immediately following the due date, and, ---- (emphasis supplied).
Similarly,
Sections 234B and 234C also use similar mandatory words in regard to payment of
interest. At this stage, it is of importance to notice sub-section (4) of
Section 234A which reads thus :
(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) or section 245D,
the amount of tax on which interest was payable under sub- section (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. (emphasis supplied) A perusal of this sub-section which refers to
sub-section (4) of Section 245D mandates that if by virtue of an order passed
under Section 245D, the amount of tax on which interest was payable under
sub-section (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.
This Section is an indicator of the fact that so far as the interest falling
due by virtue of default in furnishing a return of income, default in payment
of advance-tax or interest for deferment of advance- tax are concerned, Part F
of Chapter XVII has been obligated with the duty of levy of interest, as also
to make the necessary changes in the payment of interest dependent on the
change that may occur consequent to the order of settlement under Section 245D(4).
It is
also to be noted that wherever the Act contemplated power of waiver or
reduction of interest to be entrusted with any particular authority in any
particular situation, it has done so like in Section 220(2A) of the Act. It is
also worthwhile to note that the Act wherever it contemplated that there should
be no levy of interest, it has clearly made provision for the same as could be
seen from Section 158BF which mandates that no interest under the provisions of
Section 234A, 234B or 234C shall be levied or imposed upon the assessee in
respect of the undisclosed income determined in the block assessment.
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
Commission, however, traced its power to waive or reduce interest to the
objects of the Act and to what it termed as schematic rationalisation of the
provisions of Chapter XIX-A. It also based its finding on the statutory
provisions i.e. Sections 245D(4) and (6) and Section 119(2) of the Act.
From
amongst the above grounds on which the impugned order is founded, we will
examine the correctness of the statutory basis of the order first.
The
Commission in the impugned order placed strong reliance on the wording of
Section 245D(6) the language of which, according to the Commission, empowers it
to waive or reduce statutory interest because of the reintroduction of the
expression interest in that sub-section. According to the findings of the
Commission, the inclusion of the expression interest clearly indicates that the
Statute has permitted it to pass such orders as it deems fit in regard to
payment of interest when an order under sub-section (4) of Section 245D is made
by it. This assumption of the Commission proceeds on the hypothesis that
sub-section (6) of Section 245D is a substantive provision. We are unable to
agree with this view of the Commission. The substantive provision in regard to
settlement in Chapter XIX-A, in our opinion, is sub-section (4) of Section
245D. It is under this provision of the Act that the Commission will have to
pass orders as it thinks fit on the matters covered by the application. In our
opinion, sub-section (6) of Section 245D is only procedural in nature. It
provides for fixing the terms by which the amount settled in sub-section (4)
will have to be paid. It is not a Section which empowers the Commission either
to waive or reduce the interest. At the cost of repetition, we must point out
that apart from the fact that there is no specific empowerment of waiver or
reduction of tax in Chapter XIX-A, it is also clear from the use of the
expression in accordance with the provisions of this Act found in sub- section
(4) of Section 245D, the settlement will have to be in conformity with the Act
and not contrary to or in conflict with it. There is yet another factor to be
taken note of while interpreting sub-section (6) of Section 245D. The said sub-
section also provides for terms of settlement in regard to the tax. If the
interpretation given by the Commission is to be accepted, it would mean that
under the provisions of Section 245D(6), the Commission also has the power of
waiving or reducing the tax payable on the income settled by the Commission. If
this position in law is presumed to be correct then the very purpose of the
settlement contemplated in Chapter XIX-A would defeat the object of the
principal Act itself. As held by the Commission itself, Chapter XIX-A was
included for the purpose of quick settlement of the cases before it so that the
tax due to the Revenue is collected at the earliest. The object of Chapter
XIX-A is not to give amnesty to a tax evader from paying the tax due. Hence, it
would be preposterous to hold that the Commission has been conferred with the
power of either reducing or waiving the tax due. We are aware that the
Commission in the impugned order has not gone to the extent of holding that it
has the power of either waiving or reducing the tax payable but then that would
be the logical conclusion if we accept the interpretation given by the
Commission in regard to the expression interest in Section 245D(6) of the Act.
A proper reading of sub-section (6) would show that all that it contemplates is
that while the Commission makes an order of settlement under sub-section (4) it
will also have to provide for the terms under which the amount payable by way
of tax, penalty or interest shall be paid by the assessee. The expression terms
used in that sub-section does not refer to the power of the Commission to waive
or reduce tax, penalty or interest because quantification of amount payable
under each of those expressions are dealt with under separate provisions of the
Act like the payment of the tax is governed by various provisions of the Act as
defined in Section 2(43) of the Act while penalty is covered by Section 245H
and interest under Sections 234A, 234B and 234C of the Act. Therefore, all that
the expression term in Section 245D(6) means is that the Commission can
stipulate the conditions of payment like instalments, last date for payment
etc. Beyond that, in our opinion, sub-section (6) does not authorise the waiver
or reduction of tax, penalty or interest settled under sub-section (4) of
Section 245D.
The
Commission in support of its view on this score has placed reliance on the
judgment of this Court in the case of Commissioner of Income-Tax v. Express
Newspapers Ltd. (206 [1994] ITR 443) wherein this Court observed thus :
Sub-section
(4) of section 245D provides for passing of final orders by the Commission. It
is not necessary to refer to the other provisions in the Chapter except to
mention that the Commission is empowered to direct the waiver of penalty as
well as interest and to direct that the tax payable shall be paid in prescribed
instalments. It is further empowered to direct that the assessee whose case has
been decided by it shall not be proceeded with or prosecuted under the
Income-tax Act or under the Indian Penal Code or under any other Central Act
for the time being in force with respect to the case covered by the settlement.
The orders of the Commission are final, subject of course to constitutional
remedies.
In our
opinion, this observation in the Express Newspapers case (supra) does not help
the Commission in support of its conclusion in regard to its power under
Sections 245D(4) and (6). It is to be noted that in that case the settlement
sought was with regard to assessment years 1985-86, 1986-87 and 1987-88. It is
an admitted fact that during those assessment years, Sections 234A, 234B and
234C were not in the statute book. On the contrary, the corresponding
provisions existing in the Statute, namely, Sections 139(8), 215(4) and 216 in
terms empowered the income-tax authorities to waive or reduce interest. It is
in that context that this Court observed, in the paragraph extracted
hereinabove, that under Section 245D(4), the Commission has the power to direct
the waiver of penalty as well as interest because that was within the scope of
the provisions of the Act, as then existing, whereas at present and for the
assessment years involved in this case, Sections 234A, 234B and 234C being
applicable that observation does not apply to the cases in hand. The sentence
except to mention that the Commission is empowered to direct the waiver of
penalty as well as interest is used in that judgment on the basis of the then
existing law and to apply the same to the facts of the present case with the
mandatory change in law would amount to applying those principles in the
Express Newspapers case (supra) out of context.
Nextly,
the Commission also traced its power either to waive or reduce the interest to
Section 119(2) of the Act. In our opinion, this process of tracing Commissions
power to Section 119(2) of the Act is rather convoluted. It first relied upon
Section 245F which conferred on it the powers vested in an income-tax
authority. Next it relied upon the definition of the expression income-tax
authority as found in Section 245A(d) of the Act which in turn referred to
Section 116 of the Act which included the Board as one of the income-tax
authorities for the purpose of the Act. Having equated itself with the Board,
it traced the power of the Board to Section 119(2) to relax the rigor of
Sections 234A, 234B and 234C. Thus, by this process the Commission came to the
conclusion that it can also relax the rigur of Sections 234A, 234B and 234C
while passing the order of settlement without really considering whether in the
context in which this power is conferred on the Board, the Commission could
equate itself with the Board for the purpose of exercising power under Section
119(2). Therefore, we will first examine whether the Commission can be
construed as a Board for the purpose of Section 119 or in the alternative by
virtue of Section 245F(d) read with Section 245A(d) read with Section 116 can
the Commission exercise the power conferred on the Board under Section 119 of
the Act ? For this purpose it is necessary to examine the nature of power
exercised by the Board under Section 119 of the Act. Undoubtedly, the Board is
an executive authority being a part of the Ministry of Finance.
Its
actions are amenable to scrutiny by the said Ministry as also by audit bodies
and also the Parliament whereas the Commission constituted under Section 245B
of the Act is a quasi-judicial body (see Sec.245L) and its orders are not
amenable to either supervisory or appellate jurisdiction of the Ministry of
Finance or any of the audit bodies and for that matter even by the Parliament.
Its orders under Section 245-I are conclusive which cannot be reopened in any
proceedings under the Act or under any other law for the time being in force.
Therefore,
it cannot be said that in the context in which the power under Section 119
could be exercised by the Board, the Commission could either equate itself with
the Board or claim the right to exercise the power vested in the Board under
Section 119 which is an administrative power.
Then
it is to be seen that the Act requires the Board to exercise the power under
Section 119 in a particular manner i.e. by way of issuance of orders,
instructions and directions. These orders, instructions and directions are
meant to be issued to other income-tax authorities for proper administration of
the Act, the Commission while exercising its quasi-judicial power of arriving
at a settlement under Section 245D cannot have the administrative power of
issuing directions to other income-tax authorities. It is a normal rule of
construction that when a statute vests certain power in an authority to be
exercised in a particular manner then the said authority has to exercise it
only in the manner provided in the statute itself. If that be so since the
Commission cannot exercise the power of relaxation found in Section 119(2)(a)
in the manner provided therein it cannot invoke that power under Section
119(2)(a) to exercise the same in its judicial proceedings by following a
procedure contrary to that provided in sub-section (2) of Section 119.
There
is one other reason why Section 119(2) is not available to the Commission,
because if we examine the provisions of Section 245A through which the
Commission has traced its power to be equated with the Board which defines the
expression case to mean any proceeding under this Act for the assessment or
reassessment of any person in respect of any year or years..which may be
pending before an income- tax authority on the date on which an application
under sub- section (1) of Section 245 is made. As per this definition, it is
clear that the power of settlement is vested in the Commission in regard to a
particular case pertaining to an assessee, may be for one or more years while
the power of relaxation contemplated under Section 119(2)(a) can be exercised
only in regard to class of cases or class of incomes. It is not open to be used
in regard to any particular person or case contemplated under the definition of
the expression case in Section 245A (supra). Therefore, we are of the opinion
that the context in which the power under Section 119 is vested in the Board
and the context in which the power of settlement is vested with the Commission
under Section 245C indicates that the Parliament did not intend that the power
under section 119 of the Act could be used by the Commission for granting the
said relief, and the Commission cannot be equated with the Board for the
purpose of exercise of the power under Section 119 of the Act. Having noticed
this difference, the Commission in the impugned order holds that it is not
exercising the administrative power of issuing directions or instructions,
hence, it relied upon the legislative intent of giving relief of waiver or
reduction of interest to the assessee while arriving at a settlement.
Nextly,
the Commission has elaborately discussed the object of introduction of Chapter
XIX-A in the Act, the history behind the introduction and schematic rationalisation
of the provisions of Chapter XIX-A brought about through Finance Act, 1987 to
hold that in exercising its power under Chapter XIX-A it has almost an
unbridled power to arrive at a settlement. This exercise of purposive
interpretation by looking into the object and scheme of the Act and legislative
intendment would arise, in our opinion, if the language of the Statute is
either ambiguous or conflicting or gives a meaning leading to absurdity. We do
not find any such problem in the provisions of the Act to which we have already
referred to.
Sections
234A, 234B and 234C in clear terms impose a mandate to collect interest at the
rates stipulated therein. The expression shall used in the said Section cannot
by any stretch of imagination be construed as may. There are sufficient
indications in the scheme of the Act to show that the expression shall used in
Sections 234A, 234B and 234C is used by the Legislature deliberately and it has
not left any scope for interpreting the said expression as may. This is clear
from the fact that prior to the Amendment brought about by the Finance Act,
1987, the Legislature in the corresponding Section pertaining to imposition of
interest used the expression may thereby giving a discretion to the authorities
concerned to either reduce or waive the interest. The change brought about by
the Amending Act (Finance Act, 1987) is a clear indication of the fact that the
intention of the Legislature was to make the collection of statutory interest
mandatory. In this connection, we may usefully refer to the judgment of this
Court in Jaywant S. Kulkarni & Ors. v. Minochar Dosabhai Shroff & Ors.
(AIR 1988 SC 1817) wherein this Court held that when the Legislature changes
the expression may to shall by amendment of the statute, it is clear that it
intended to make the provision mandatory from the existing directory provision.
Therefore,
the question of the Commission relying upon external aids, for the purpose of
interpretation like Wanchoo Committee Report, Discussions of Select Committee
of Parliament and introduction of Chapter XIX-A in the Act, Press Release of
the Board dated 21.5.1996 etc. are purposeless because of the clear and
unambiguous language used in Sections 234A, 234B and 234C and Sections 245D(4)
and (6).
We
notice if only the Commission were to follow the golden rule of interpretation
by giving the words of the Statute their natural and ordinary meaning without
unnecessarily going into a forensic exercise of trying to find out the object
of the introduction of Chapter XIX-A or Part F of Chapter XVII, the Commission
would not have fallen in error.
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 settlement with mandatory words like in
accordance with the provisions of this Act the width of the term settlement
becomes subject to the mandate found in that Section, which would mean that
while a Commission has sufficient elbow-room in assessing the income of the
applicant under Section 245D(4) it cannot make any order with a term of the
settlement which would be in conflict with the mandatory provisions of the
Section like in the quantum and payment of tax and/or interest. In this view of
the matter, we are of the opinion that assuming that there is any room for
interpretation of the provisions of Part F of Chapter XVII and Chapter XIX-A,
we would hold that it would not in any manner empower the Commission to either
waive or reduce interest which is statutorily payable under the provisions of
Part F of Chapter XVII.
It was
then argued that the Commission having been statutorily constituted to arrive
at a settlement has also the inherent power which includes the power to waive
or reduce the interest even though it is not specifically provided for. This
argument, in our opinion, cannot be sustained. Assuming that the Commission has
any inherent power, it is a well-established legal principle that any inherent
power vested in an authority cannot be exercised contrary to the express
provisions of the Act. In the instant case, there being express provisions in
regard to the levy of interest under Part F of Chapter XVII even if there is
any inherent power in the Commission such power cannot be exercised contrary to
the provisions of the said Chapter.
Shri Ramamurti,
learned senior counsel appearing for some of the respondents, placed strong
reliance on the Press Release dated 21st May, 1996 issued by the Board in
support of the contentions raised on behalf of the respondents. It is true that
by this Press Release the Board had interpreted the provisions of the Act in a
particular manner. Be that as it may, we would like to make it clear that every
Clarificatory Note or Press Release issued by the Board does not have the
statutory force like the Circulars issued by the Board under Section 119 of the
Act. It is only those Circulars issued by the Board under the provisions of
Section 119 of the Act, will have the statutory force and will be binding on
every income-tax authorities.
Therefore,
the Press Release relied upon by Shri Ramamurti not being a Circular issued
under Section 119 of the Act will not be of any assistance to the respondents
in support of their contentions.
It is
then contended that if it is to be construed that the Commission has no power
of waiver or reduction of interest then the entire purpose of Chapter XIX-A
would be defeated since a person making an application to the Commission would
not be in any way better off than pursuing his remedy otherwise provided in the
Act. We are unable to accept this argument advanced on behalf of the
respondents because the persons who approach the Commission under Chapter XIX-B
are admittedly the persons who had not declared their true incomes to the
income-tax authorities as required under the Act. Inspite of this default,
Section 245C comes to the aid of such assessees by providing a way out of the
statutory implications of their default. The object of the Legislature in
introducing this Section is to see that the 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. While the Settlement Commission arrives at the taxable
income of the assessee on the basis of records available before it, it has to
levy the mandatorily chargeable tax on such income arrived at by it and
wherever interest is due under the mandatory provisions like Sections 234A,
234B and 234C, it has to include the said interest also in the settlement. But,
at the same time, the assessee who because of his non-disclosure would
otherwise have been liable for various penal actions, gets an opportunity of
getting immunity from penal proceedings. It is to be seen that under Section
245H the Commission has the power to grant immunity to the assessee from
prosecution and penalty. This immunity is not confined only to the penal
provisions of the Act but it is also available if granted by the Commission to
offences under the Indian Penal Code or under any other Central Act for the
time being in force and also get the benefit of waiver or reduction in the
imposition of penalty under the Act with respect to the cases covered by the
settlement. Therefore, it is futile to contend that merely because the
Settlement Commission has not been vested with the power of waiving or reducing
the interest, Chapter XIX-A would either become otiose or would not serve any
purpose. Hence, this argument has to be rejected.
Learned
Solicitor General has pointed out that by virtue of the power vested in the
Board under Section 119(2)(a) of the Act, the Board has issued Circulars by
Notification No.F.No.400/234/95-IT(B) dated 23.5.1996. As per this Circular, it
has empowered that the Chief Commissioner of Income Tax and Director General of
Income-tax may waive or reduce interest charged under Sections 234A, 234B and
234C of the Act in the class of cases or class of incomes specified in
paragraph 2 of the said order for the period and on conditions which are
enumerated therein. He submitted that in view of the said Circular, the same
authority can be exercised by the Commission since the said Circular would
amount to relaxation of the rigor of Sections 234A, 234B and 234C of the Act.
We are in unison with this submission of the learned Solicitor General. This
Court in a catena of cases has held that the Circulars of the Central Board of
Direct Taxes are legally binding on the Revenue. See UCO Bank v. Commissioner
of Income Tax (1999) [237 ITR 889]. Since these Circulars are beneficial to the
assessees, such benefit can be conferred also on the assessees who have
approached the Settlement Commission under Section 245C of the Act on such
terms and conditions as contained in the Circular. In our opinion, it is for
this purpose that Section 245F of the Act has empowered the Settlement
Commission to exercise the power of an income-tax authority under the Act. We
must clarify here that while exercising the power derived under the Circulars
of the Board, the Commission does not act as a subordinate to the Board but
will be enforcing the relaxed provisions of the Circulars for the benefit of
the assessee in the process of settlement.
For
the reasons stated above, we hold that the Commission in exercise of its power
under Sections 245(4) and (6) does not have the power to reduce or waive
interest statutorily payable under Sections 234A, 234B and 234C except to the
extent of granting relief under the Circulars issued by the Board under Section
119 of the Act.
In
conclusion, we must note that we have taken up for consideration Civil Appeal
Nos.4126-50/2000 and have decided the issue pertaining to the power of the
Commission to waive or reduce the interest chargeable under Sections 234A, 234B
and 234C of the Act while passing orders of settlement under Section 245D(4) of
the Act. We have not decided any other issue that might arise in all the
appeals/petitions.
Having
decided the abovesaid question of law, we think it proper that all these
matters be placed before a Division Bench of this Court for disposal in
accordance with law.
It is
ordered accordingly. No costs.
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