ORDER
SHEET W.P.No.1154 of 2013 IN THE HIGH COURT AT CALCUTTA CONSTITUTIONAL WRIT JURISDICTION ORIGINAL SIDE UNION OF INDIA & ANR.
Versus INCOME TAX SETTLEMENT COMMISSION ADDITIONAL BENCH & ANR.
BEFORE: The Hon'ble JUSTICE HARISH TANDON Date: 11th April, 2014.
Appearance: Md.Nizamuddin, Adv.… for the petitioner Mr.Samit Talukdar, Sr.Adv.Mr.Ananda Sen, Adv.Mr.A.K.Mukherjee, Adv.… for the respondent no.2 The Court: This writ petition is filed at the instance of the Department challenging an order dated 30th August, 2012 passed by the Settlement Commission under Section 154 and Section 245D(6B) of the Income Tax Act, 1961.
An application was made by the private respondent before the Settlement Commission under Section 245C of the said Act pertaining to assessment years 2004-05 to 2011-12.
It is not in dispute that the application was entertained by the Settlement Commission and ultimately by an order dated 14th March, 2012 the Settlement Commission passed the following ordeRs.“44.
Regarding the terms of settlement, the fiRs.term is relating to the determination of total income of the applicant.
The applicant’s total income is computed as above.”
45. As regards the second term, the applicant prayed for waiver of interest chargeable under any section of the Income Tax Act, 1961.
Such prayer of the applicant i.e., waiver of interest, is not allowed.
The interest will have to be charged as per law by the Assessing Officer keeping the view the decision of the Hon’ble Supreme Court in Civil Appeal No.516-527 of 2004 dated 21.10.2010 in the case of Brij Lal & ORS.versus CIT, Jalandhar (328 ITR477.”
46. Regarding granting of immunity from penalty and prosecution under various sections of the Income Tax Act, 1961, the same is granted so far as the same relates to issues dealt with in this order of settlement.”
47. The fourth term is residual.
The A.R.prayed that an amount of Rs.15,00,000/- was seized from the applicant and had been kept in the custody of the Commissioner.
The same may be adjusted against the tax liability and in this regard, suitable direction may be issued to the Assessing Officer.
The A.O.will do the needful in this regard and the applicant will pay the balance tax in two equal monthly instalments.
The A.O.will issue demand notice accordingly.
However, interest for delayed payment of taxes is to be charged u/s.245D(6A) of the I.T.Act at the time of last instalment of payment by the applicant.” The parties did not feel any difficulty in understanding the said order except the prayer portion.
The Settlement Commission refused the prayer of the assessee/private respondent for waiver of the interest and allowed the interest to be charged by the Assessing Officer in the light of the decisions rendered in the case of Brij Lal & ORS.versus Commissioner of Income-Tax, Jalandhar; reported in (2010) 328 ITR477(SC).The mater went back to the Assessing Officer for the purpose of compliance of the directions made in the said order passed by the Settlement Commission for computation.
The Assessing Officer charged the interest for the entire period which was not in conformity with the ratio laid down by the Supreme Court in the case of Brij Lal & ORS.(supra).The petitioner filed an application before the Settlement Commission under Section 245D(6B) for appropriate directions.
The said provision provides for rectification of any mistake apparent on the face of the record by the Settlement Commission provided where the Settlement Commission feels that amendment is required to be effected in relation to the liability of the assessee.
It would do so after giving an opportunity of hearing to the assessee as well as the Commissioner.
The main thrust of the argument advanced by Md.Nizamuddin, learned Advocate appearing for the petitioner, is that the Settlement Commission has, in fact, acted as an Appellate Authority over the Assessing Officer which is not permissible under Section 245D(6B) of the said Act.
It is strenuously submitted though the rectification of the mistakes is permissible so far as the order of Settlement Commission is concerned which, by no stretc.of imagination, be extended to an order passed by the Assessing Officer in compliance of the directions made by the Settlement Commission.
Lastly, it is submitted that the provisions relating to Settlement Commission is incorporated in Chapter XIX-A which does not contain any power akin or similar to the power conferred upon the Assessing Officer under Section 154 of the said Act.
Therefore, the invocation of such power by the Settlement Commission is improper, illegal and in excess of the jurisdiction vested by the statute.
Mr.Samit Talukdar, learned Senior Advocate appearing for the private respondent, at the very outset, submitted that the application under Section 245D(6B) of the said Act was taken out for removal of an ambiguity and for clarification of an order by which the Settlement Commission declined to accept the prayer for waiver of the interest.
He strenuously submitted that though the Settlement Commission declined to waive the interest but simultaneously directed the interest to be calculated in terms of the ratio laid down in the case of Brij Lal & ORS.(supra).wherein it is indicated that the interest would only be chargeable upto the stage of making an application under Section 245D(1) of the said Act and not till the order is passed under Section 245D(4) of the said Act.
According to him, the Assessing Officer was misinterpreting the aforesaid directions and, therefore, an application was made by his client for clarification and not for the purpose of assailing and/or challenging the order of the Assessing Officer as contended by Md.Nizamuddin.
Before dealing with the issues on the factual aspect, it would be profitable and/or relevant to trace out the power of Settlement Commission from Chapter XIX-A of the said Act.
The said Chapter was introduced by the Taxation Laws (Amendment) Act, 1975 with effect from 01-04-1976.
The mechanism is provided therein for making an application for settlement of the cases pertaining to assessee in a prescribed form and manner, with full and true disclosure of his income which has not been disclosed before the Assessing Officer.
Section 245D(1) of the said Act mandates the Settlement Commission to issue a notice to the applicant within seven days from the date of receipt thereof asking the explanation as to why the said application be allowed and on hearing may either reject such application or allow the same to be proceeded with.
It is the said date when the said application is formally accepted as the Settlement Commission forms its opinion by recording satisfaction that the said application is required to be proceeded with.
Under Sub-Section 245D of the said Act the Commission, after examination of the record and report submitted by the Commissioner, may pass an appropriate order on the matters covered by the said application or even a matter extraneous to the said application.
Section 245 I says that the said order is conclusive and shall not be reopened in any proceeding under the Act or any other law for the time being in force.
Sub-Section 6B of Section 245D bestowed the power on the Settlement Commission to rectify any mistake apparent from the record with further power to amend the order passed under sub-Section 4 of Section 245D provided an application is made within six months from the date of such order.
I am not unmindful of the proposition that in the garb of the rectification/clarification, the authorities cannot revisit the order or review the same.
The rectification must be restricted on the error apparent on the face of the record which does not mean that to find out such error a roving inquiry or much deliberation is required on the said subject.
The point in this writ petition is whether the application filed by the assessee/private respondent is, in fact, intended for clarification of the order passed by the Settlement Commission under Section 245D(4) of the said Act or is an application challenging against the order of the Assessing Officer for computing the interest in terms of the order passed by the Settlement Commission.
One has to look into the subject indicated in the said application dated 22nd May, 2012 where the assessee/private respondent stated as under: “Sub: Order of the Ld DCIT dated 26.04.2012 giving effect to the order of the Hon’ble Income Tax Settlement Commission u/s 245D(4) dated 14.03.2012 – Mistake apparent from record – Request to rectify the same u/s 245D(6B) of the Income Tax Act, 1961” The opening sentence of the next page of the said application says that the order passed by the DCIT while giving effect to the order of the Settlement Commission so far as it relates to the computation of total income and tax with interest is concerned, has been erroneously worked out.
Though various instances are jotted down in the said application which, according to the petitioner, the DCIT has committed error in computing the same but one and the foremost point indicated in the said application is the calculation of an interest in contravention to the ratio laid down in Brij Lal & ORS.(supra).The prayers made in the said application clearly discern that recouRs.to SubSection 6B of Section 245D of the said Act was taken in relation to the calculation of interest the tax deducted at source and calculation in total income for the assessment year 2011-12.
The length and breadth of the said application manifests that the petitioner has indicated various discrepancies and/or anomalies in computing the income tax as well as interest by the DCIT which is not in conformity with the order of Settlement Commission.
The Settlement Commission assumes its powers under Chapter XIX-A of the said Act which is the self contained code and should not transgress its limit.
The power of rectification of the mistake apparent on the face of the record should be exercised sparingly and within the definite compass and should not be assumed for the purpose of revisiting and/or rehearing the matter.
This Court finds force in the submission of Md.Nizamuddin that the rectification is permissible to an order of the Settlement Commission provided there is a mistake apparent on the face of record.
The application filed by the petitioner proceeded on the basis as the DCIT has erroneously and/or illegally computed the income tax and the interest and the order passed by the Settlement Commission would suggest that it assumes the jurisdiction of an Appellate Authority while exercising the powers conferred under Sub-Section 6B of Section 245D of the said Act.
Mr.Talukdar tried to convince this court that it was, in fact, a clarification which has been made by the Settlement Commission of its own order and did not proceed to verify and/or test the order of the Assessing Officer as an Appellate Authority.
If one looks into the paragraph 11 of the impugned order it would give an impression beyond any ambiguity that the entire approach of the Settlement Commission while considering the said application is based on the findings recorded by the Assessing Officer and which can be apparently quoted as under: “We come to the conclusion that the order dated 26.04.2012 passed by the A.O.while giving effect to the order of Settlement Commission suffers from the mistake apparent from record.” This Court, therefore, does not accept the submission made by Mr.Talukdar that the Settlement Commission, in fact, clarified its order and did not consider the order of the Assessing Officer by invoking the powers as aforesaid.
The Court also cannot lose sight of the another aspect.
The very fiRs.page of the impugned order reflects that the order is passed under Section 154 and Section 245D(6B) of the said Act.
As I have already indicated that Chapter XIX-A of the said Act is self-contained code and, therefore, Settlement Commission is required to travel within the periphery thereof.
Any action de hors the aforesaid provision is impermissible and is liable to be struck down on the ground of exercise of the excess jurisdiction.
In this regard, the reference can conveniently be made the judgment of the Apex Court rendered in the case of Brij Lal & ORS.(supra) wherein it is held that the Settlement Commission is not empowered to invoke Section 154 of the said Act in these words: “The point to be noted is that in computation of additional incometax payable by the assessee, there is no mention of section 154.
On the contrary, under section 245-I the order of the Settlement Commission is made final and conclusive on matters mentioned in the application for settlement except in the two cases of fraud and misrepresentation in which case the matter could be reopened by way of review or recall.
Like the Income-tax Appellate Tribunal, the Settlement Commission is a quasi-judicial body.
Under section 254(2).the Income-tax Appellate Tribunal is given the power to rectify but no such power is given to the Settlement Commission.
Thus, we hold that the Settlement Commission cannot reopen its concluded proceedings by invoking section 154 of the Act.
Lastly, one must keep in mind the difference between review/recall of the order and rectification under section 154.
The Schedule of Chapter XIX-A does not contemplate invocation of section 154 otherwise there would be no finality to the assessment by settlement which is different from assessment under Chapter XIV where there is an appeal, revision, etc.Settlement of liability and not determination of liability is the object of Chapter XIX-A.
Even otherwise, invocation of section 154 on facts of this batch of cases is not justified.” It is clearly discernable from the impugned order that the Settlement Commission while dealing with the said application have invoked the powers conferred under Section 154.
On whichever angle this Court look at the matter, it is evident that the order impugned is illegal and is contrary to law and, therefore, cannot be sustained.
Accordingly, the order impugned is hereby quashed and set aside.
The dismissal of the application shall not prevent the petitioner from taking recouRs.to the other provisions, if applicable, before the appropriate authority against an order passed by the DCIT.
With these observations the writ petition is disposed of without any order as to costs.
(HARISH TANDON, J.) sg2