High Court sets aside Tax Commission order on interest, emphasizes limited review powers under statute

The High Court allowed the writ petition, setting aside the Income Tax Settlement Commission's order on the terminal date for charging interest under Section 234B. The Court emphasized that the power of review is not inherent and must be specifically conferred by statute. Rectification of mistakes apparent from the record is allowed, not review based on subsequent legal developments. The Commission's order was deemed unsustainable and quashed, with the Department entitled to interest as ordered in a specific prior decision. No costs were awarded in this judgment.

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Issues:
Challenge to the order passed by the Income Tax Settlement Commission regarding the terminal date for charging interest under Section 234B.

Analysis:
The petitioner sought a Writ of Certiorari to quash the order passed by the Income Tax Settlement Commission, Additional Bench, Chennai, specifically concerning the terminal date for charging interest. Both parties referred to a previous case, R.Vijayalakshmi vs. Income Tax Settlement Commission Additional Bench, where it was held that the Department would only be entitled to interest as ordered by the Commission under Section 245D(4) of the Income Tax Act. The Court emphasized that the power of review is not inherent and must be specifically conferred by statute. Even with the amendment under Section 6(b) of Section 245D by Finance Act 2011, the power granted is for rectification of mistakes apparent from the record, not for review.

In another case, Smt.U.Narayanamma challenged the Settlement Commission's order rectifying its earlier decision under Section 245D. The Andhra Pradesh High Court ruled that such rectification was impermissible, citing a Supreme Court decision. The Court stated that subsequent legal developments cannot be a basis for review jurisdiction, and the Revenue's reliance on post-decision Supreme Court rulings for rectification was not valid. Consequently, the Settlement Commission's order was deemed unsustainable and quashed, specifically regarding the computation of the terminal date for charging interest under Section 234B.

The Court clarified that setting aside the Commission's order did not affect the rate of interest as ordered by the Commission in previous decisions. Ultimately, the writ petition was allowed, and the order of the Income Tax Settlement Commission was set aside regarding the computation of the terminal date for charging interest under Section 234(B), with the Department entitled to interest as ordered by the Commission in a specific prior order dated 12.09.1998. No costs were awarded in this judgment.

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