W.P No.432 of 2012 IN THE HIGH COURT AT CALCUTTA Constitutional Writ Jurisdiction Original Side The Peerless General Finance & Investment Company Limited versus Income Tax Settlement Commission, Additional Bench, Kolkata and Others For the Petitioner : Mr.S.Bagchi, Sr.Advocate Mr.Gopal Ram Sharma, Advocate For the Respondents : Mr.R.N.Bandyopadhyay, Advocate Ms.S.Chatterjee, Advocate Hearing concluded on Judgment on : September 9, 2015 : September 23, 2015 DEBANGSU BASAK, J.:- The writ petitioners have challenged an Order dated March 25, 2010 passed by the Settlement Commission under Section 245F(1) read with Section 154 of the Income Tax Act, 1961.
By the impugned order the Settlement Commission has refused to rectify computation of interest under Sections 234B and 234C pursuant to its order of settlement of income under Section 245D(4) of the Income Tax Act, 1961 dated February 13, 2009.
By the impugned order the Settlement Commission had also refused to waive interest under Section 220(2) of the Income Tax Act, 1961.
It is contended on behalf of the writ petitioners that, Chapter XIXA of the Income Tax Act, 1961 is a self-contained code.
Once an assessee invokes the provisions of settlement under the Income Tax Act, 1961 and pays the enhanced income tax consequent upon the revised income tax return, the date when the Settlement Commission admits such request of the assessee, such date should be considered as the terminus for the calculation of interest.
Sections 234B and 234C would not apply for a period subsequent to an order under Section 245D(1) of the Act of 1961.
It is contended that, the law on this subject is settled by the Supreme Court in (2010) 328 ITR477(Brij Lal v.
Commissioner of Income-tax).This Court has also followed Brij Lal (supra) in the judgment and order dated February 2, 2015 delivered in W.P.No.44 of 2015 (G.M.Foods & Another v.
Income Tax & Wealth Tax Settlement Commissioner).So far as Section 220 (2) of the Income Tax Act, 1961 is concerned it is submitted that, for such provision to apply there has to be a notice of demand under Section 156 and the assessee not paying within the time specified in such notice of demand for the income tax authorities to charge interest under Section 220(2) of the Act of 1961.
In the facts scenario according to the writ petitioneRs.the provisions of Section 220(2) of the Income Tax Act, 1961 is not attracted.
The respondent authorities are represented.
The fiRs.writ petitioner had filed a settlement application under Section 245C(1) on March 20, 2008 in respect of four assessment years from 2004 till 2008.
By an Order dated April 2, 2008 passed under Section 245D(1) the settlement case was admitted by the Settlement Commission.
By an Order dated February 13, 2009 the Settlement Commission had settled the total income of the fiRs.writ petitioner for the four assessment years concerned.
This order was forwarded to Assessing Officer with a direction to compute the tax/interest/penalty and communicate the same to the assessee.
The Assessing Officer by an Order dated April 29, 2009 had passed four separate ordeRs.By such orders the Assessing Officer had imposed interests under Sections 234B and 234C as well as under Section 220(2) apart from interest under Section 244A.
The fiRs.writ petitioner had filed a miscellaneous application on July 15, 2009 claiming that mistakes in computation of interest under Section 234B and 234C as well as under Section 220(2) had crept in the Order dated April 29, 2009.
By an Order dated March 25, 2010 the Settlement Commission had disposed of the miscellaneous application of the fiRs.writ petitioner by holding that the terminus for interest was the date of the final order of settlement under Section 245D(4).The Settlement Commission thereby had declined to interfere with the order of the Assessing Officer.
The Assessing Officer thereafter had recomputed interest by an Order dated June 30, 2010.
The fiRs.writ petitioner had filed an appeal against the order of recomputation which had since been withdrawn.
Three issues arise for consideration in the present petition.
They are:(1) What is the terminus for calculating interest when a settlement proposal is admitted?.
(2) Does Sections 234B and 234C apply for the period subsequent to an Order under Section 245D(1) of the Act of 1961?.
(3) Is Section 220(2) attracted in the facts of the case?.
The second issue is corollary to the fiRs.issue.
Both are taken up together for the sake of convenience.
The two issues have received consideration by the Supreme Court in Brij Lal (supra).The date of the judgment of Brij Lal (supra) is October 21, 2010 while the date of the last order of the Settlement Commission is March 25, 2010.
Consequently, Settlement Commission did not have the occasion to consider Brij Lal (supra).In Brij Lal (supra) it has been held that, a proceeding before the Settlement Commission is similar to an arbitration proceedings.
It begins with the filing of an application of settlement.
When the Settlement Commission accepts the voluntary disclosure made by the application for settlement, Section 234B(2) steps in.
As the assessee is liable to pay advance tax, he commits default in payment to the extent of the undisclosed income.
When he offers to pay additional income tax then interest has to be calculated in accordance with the Sections 207, 208 and 234B(2) up to the date on which such tax is paid.
The legislature has not contemplated levy of interest for the period between an order under Section 245D(1) and Section 245D(4).The terminal point of interest would be the date of the order under Section 245D(1) admitting the case and not the date of settlement order under Section 245D(1).In G.M.Foods & Another (supra) it has been held that, the decision in Brij Lal (supra) regarding levy of interest under Sections 234B and 245D(1) as well as the terminal point for the levy of such interest were substantially in issue before it and, therefore, such decision of the Supreme Court is not obiter dicta.
The order passed by the Settlement Commission charging interest under Section 234B up to the date of the order under Section 245D(4) was set aside.
In view of Brij Lal (supra) the fiRs.issue is answered by holding that the date of terminus for calculating interest is the date of order of admission under Section 245D(1) and not Section 245D(4).No interest is payable for the period between the date of order under Section 245D(1) and the order under Section 245D(4).The second issue, again in view of Brij Lal (supra).has to be answered in the negative.
In the present case, the Settlement Commission has refused to rectify the mistake of charging interest under Sections 234A and 234B up to the date of the order under Section 245D(4).The order impugned to such extent therefore is required to be set aside and is hereby set aside.
Section 220(2) of the Act of 1961 is not attracted in the facts scenario of the instant case as the notice of demand under Section 156 of the Act of 1961 has not been served upon the assessee.
The third issue is answered in the negative and in favour of the writ petitioneRs.That portion of the order impugned is also required to be set aside on such ground and is hereby set aside.
Consequently, the entirety of the order impugned is set aside.
The Settlement Commission is directed to hear and decide the application for rectification of the mistakes afresh and to dispose of the same in accordance with the observations made herein and in terms of Brij Lal (supra).W.P.No.432 of 2012 is allowed.
No order as to costs.
[DEBANGSU BASAK, J.].