High Court erred in relying upon previously set aside order of Settlement Commission and making it a part of their order for issuing writ- SC
ABCAUS Case Law Citation:
ABCAUS 2813 (2019) (03) SC
Important Case Laws Cited/relied upon by the parties
Brij Lal & Ors. vs. Commissioner of Income Tax, Jalandhar, (2011) 1 SCC 1
Commissioner of Income Tax, Mumbai vs. Anjum M.H. Ghaswala & Ors., (2002) 1 SCC 633
The appeals in the instant case were filed by assessee against the order passed by the High Court
A search and seizure operation was carried out in the premises of the appellants (assessee) under he provisions if the Income Tax Act, 1961 (the Act).
The appellants filed application before the Settlement Commission and offered to settle their tax matter in accordance with the procedure provided under Chapter XIXA of the Act.
The Settlement Commission passed the order u/s 245D(4) of the Act by making certain additions and waived interest chargeable u/s 234A, 234B and 234C of the Act.
The assessee feeling aggrieved filed rectification applications before the Settlement Commission. The Revenue also felt aggrieved by the order and filed a rectification application u/s 154 of the Act before the Settlement Commission.
The Settlement Commission dismissed the applications filed by the assessee and partly allowed the application filed by the Revenue rectifying its order insofar as it pertained to waiver of interest, which was granted to the assessee.
Against the order of the Commission, the assessee filed two petitions in the High Court which set aside the order passed by the Settlement Commission and granted liberty to the Revenue to follow the available remedies against the order passed by the Settlement Commission.
The Revenue, therefore, filed petitions against the original order of the Commission questioning its legality.
The High Court directed modification of the original order of Settlement Commission by reversing the waiver of interest and stated that it adopted the same directions as contained in the subsequent order of the Settlement Commission.
Aggrieved by the order of the High Court the assessee had filed the present appeals by way of special leave in the Hon’ble Supreme Court.
The Hon’ble Supreme Court observed that issue involved in the appeals was governed by the law laid down by the decision of two Constitution Benches of the Court wherein it was held that the Commission in exercise of its power under Sections 245D(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 circulars issued by CBDT under Section 119 of the Act. It was also laid down that the Settlement Commission cannot reopen its concluded proceedings by invoking Section 154 of the Act so as to levy interest under Section 234B, particularly, in view of Section 245I.
The Hon’ble Supreme Court further observed that at the time when the Commission passed its original/first order, the issue with regard to the powers of the Settlement Commission was not settled by any decision of the Apex Court. Both the above said decisions of the Constitution Bench were rendered after the Settlement Commission passed the order.
The Hon’ble Supreme Court opined that in such situation, the High Court instead of going into the merits of the issue, should have set aside the original order of the Settlement Commission and remanded the case to the Settlement Commission for deciding the issue relating to waiver of interest payable under Sections 234A , 234B, and 234C of the Act afresh keeping in view the scope and the extent of powers of the Settlement Commissioner in relation to waiver of interest as laid down in the said two decisions.
The Hon’ble Supreme Court opined that the High Court committed a jurisdictional error when it observed in the order that they adopted the directions contained in the second order of the Settlement Commission and then went on to make the said directions as a part of the impugned order in relation to waiver of interest. This approach of the High Court was wholly without jurisdiction.
The Hon’ble Supreme Court opined that when the High Court, in the light of the law laid down by the Constitution Bench decision, already held the second order of the Settlement Commission as bad in law on the ground that it was passed under Section 154 of the Act, the same was neither in existence for any purpose and nor it could be relied upon by the High Court much less for making it a part of their order for issuing a writ.
The Hon’ble Supreme Court allowed the appeals and remanded the case to the Settlement Commission for deciding the matter in question afresh on merits keeping in view the observations made infra.