2004 (4) TMI 67 - HC - Income Tax

Settlement Commission's Orders Final; No Authority to Waive Interest; Emphasizing Finality and Legislative Intent

The court held that orders made by the Income-tax Settlement Commission under section 245D(4) are final and conclusive, immune from being reopened except ... Contention raised by the petitioners is that an order made by the Settlement Commission under section 245D is conclusive under section 245-I of the Act and it cannot be reopened in any proceedings under the Act, or any other law for the time being in force – petitioner’s contention is acceptable - Section 154 could not have been invoked as the Settlement Commission ceases to be an authority under the Act after the order is made and can exercise such power only if authorised under the Act and under Chapter XIX-A only. Issues Involved:1. Conclusiveness of the Settlement Commission's order under section 245D(4) and its immunity from being reopened.2. Authority of the Settlement Commission to waive or reduce statutory interest under sections 234A, 234B, and 234C.3. Applicability of section 154 for rectification of the Settlement Commission's orders.4. The concept of functus officio in the context of the Settlement Commission's powers.Issue-wise Detailed Analysis:1. Conclusiveness of the Settlement Commission's Order:The petitioners contended that an order made by the Settlement Commission under section 245D(4) of the Income-tax Act, 1961, is conclusive under section 245-I and cannot be reopened in any proceedings under the Act or any other law. The court examined the relevant provisions, including sections 245D, 245E, and 245-I, which collectively indicate that the Settlement Commission's order is final and cannot be reopened except in cases of fraud or misrepresentation. The court emphasized that the Settlement Commission becomes functus officio after passing its order under section 245D(4), meaning it has no further jurisdiction to alter or rectify the order.2. Authority to Waive or Reduce Statutory Interest:The Commissioner of Income-tax argued that the Settlement Commission does not have the power to waive or reduce statutory interest under sections 234A, 234B, and 234C. This argument was based on the Supreme Court's judgment in CIT v. Anjum M.H. Ghaswala, which held that the Settlement Commission does not have the inherent power to waive mandatory interest. The court agreed with this interpretation, stating that the Settlement Commission must adhere to the statutory provisions and cannot grant relief that is not explicitly authorized by the Act.3. Applicability of Section 154 for Rectification:The Revenue contended that the Settlement Commission could rectify its orders under section 154 of the Act, which allows for the correction of mistakes apparent from the record. However, the court found that section 154 could not be invoked by the Settlement Commission after it had issued its final order under section 245D(4). The court noted that the Settlement Commission ceases to be an authority under the Act after making its final order, and any rectification must be explicitly authorized within the Chapter governing the Settlement Commission.4. Functus Officio Concept:The court elaborated on the concept of functus officio, which means that once an authority has fulfilled its purpose and issued its final decision, it has no further power to alter that decision. The court cited several precedents, including the Supreme Court's decision in Government of Uttar Pradesh v. Raja Mohammad Amir Ahmad Khan, to support the view that once the Settlement Commission has made its final order, it cannot subsequently modify or rectify that order. The court concluded that the Settlement Commission, having become functus officio, could not entertain applications for rectification under section 154.Conclusion:The court quashed and set aside the orders made by the Income-tax Settlement Commission under section 154, reaffirming that the Settlement Commission's orders under section 245D(4) are final and conclusive and cannot be reopened or rectified except as provided within the specific provisions of Chapter XIX-A of the Income-tax Act. The court emphasized the importance of finality in legal proceedings and the limited scope for reopening settled matters, thereby upholding the legislative intent behind the provisions governing the Settlement Commission.