Interest under section 234B in settlement proceedings is limited to the stage of admission, not the final order stage.

In settlement proceedings under the Income-tax Act, interest under section 234B is chargeable only up to the stage of admission under section 245D(1), because once the application is admitted the Settlement Commission assumes control and the statute does not contemplate levy beyond that point. Interest cannot therefore continue up to the final order under section 245D(4). Any levy extending beyond section 245D(1) is unsustainable and must be set aside to that extent, with recomputation limited to the admissible stage.

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Issues: Whether interest under section 234B of the Income-tax Act, 1961, in proceedings before the Settlement Commission, could be levied only up to the stage of admission under section 245D(1) or could continue up to the stage of final order under section 245D(4).

Analysis: The liability to pay interest in settlement proceedings was governed by the principle that, once the application was admitted under section 245D(1), the proceedings stood taken over by the Settlement Commission and the statutory scheme did not contemplate levy of interest beyond that stage. The Court relied on the settled position that interest under section 234B is payable only up to the stage of section 245D(1), and not for the period thereafter up to section 245D(4). Since the impugned order had charged interest up to section 245D(4), it travelled beyond the permissible limit.

Conclusion: The levy of interest under section 234B beyond section 245D(1) was unsustainable and had to be set aside to that extent, with direction for recomputation only up to the admissible stage.

Ratio Decidendi: In settlement proceedings, interest under section 234B of the Income-tax Act, 1961 can be levied only up to the stage of admission under section 245D(1) and not beyond it.

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