Interest u/s 234B cannot go beyond the stage of Section 245D(I) before Settlement Commission

Interest under Section 234B of the Act cannot go beyond the stage of Section 245D(I) before the Settlement Commission as per Law declared by Supreme Court

ABCAUS Case Law Citation:
ABCAUS 2071 (2017) (09) HC

The Grievance:
The grievance made in the present case was that the Assessing Authority while giving appeal effect to the order passed by the Settlement Commission of the Income Tax, has charged excessive interest under Section 234B of the Income Tax Act, 1961 beyond the date of the order passed by the Settlement Commission under Section 245D of the Act in Chapter 20A of the Income Tax Act, 1961.

Brief Facts of the Case:
In the present case, the order was passed by the Settlement Commission on 11.03.2008 for the block of the Assessment Years 1989-1990 to 1996-1997. While appeal effect orders was passed by the Assessing Authority on 11.04.2008. The AO charged interest under Section 234B of the Act beyond the date of the order passed by the Settlement Commission on 11.03.2008.

Contention of the appellant Assessee:
Relying on the Judgment of the Constitution Bench of the Supreme Court the Petitioner submitted that the impugned orders cannot be sustained in view of the law declared by the Constitution Bench of the Hon’ble Supreme Court of India in which it is clearly held that the interest under Section 234B of the Act cannot go beyond the stage of S.245D(I) before the Settlement Commission.

Observations made by the High Court:
The High Court observed that there was considerable force in the submission made by the assessee that interest under Section 234B of the Act beyond the date of the order passed by the Settlement Commission under Section 245D(I) cannot be sustained.

The High Court observed that the law declared by the Constitution Bench would prevail over the earlier decision of the Supreme Court which was relied upon by the Department which stood disapproved and overruled by the Constitution Bench. The law declared by the Constitution Bench will apply to the period prior to the date of the said Judgment.

Held:
The orders passed by the Assessing Authority for all the assessment years 1989-90 to 1996-97 were quashed and set-aside and the matter was remanded back to the Assessing Authority to pass fresh orders in accordance with the law declared by the Hon’ble Supreme Court.