2017 (11) TMI 685 - HC - Income Tax

Court Dismisses Writ Petition on ITSC Order; Clarifies Limits on Rectification

Pr. Commissioner of Income Tax (Central) -2 Versus M/s. Frontline Business Solutions Pvt. Ltd. & Ors.

The court dismissed the writ petition challenging the ITSC's order on rectification, stating that rectification of the order was not permissible under ... Seeking rectification of the rectification order by passed by the Income Tax Settlement Commission - Held that:- Revenue, in the present writ petition, has only challenged the order dated 17th March, 2016 and there is no challenge to the order of the ITSC dated 31st December, 2015 by which the rectification application of the assessee was allowed, accepting the contention of the assessee that interest under Section 234B should be charged only upto the date of order under Section 245D(1) and not upto the order under Section 245D(4) of the Act, as amendment made by enacting sub-section 2A(b) to Section 234B with effect from 1st June, 2015 was not retrospective and would not apply to pending applications. The Revenue would have to challenge this order dated 31st December, 2015 passed by the Principal Bench of the ITSC by filing an appropriate writ petition. In the said petition, reference can be made to the subsequent order dated 17th March, 2016 passed by the ITSC, but as noticed above, this order dated 17th March, 2016 per se cannot be held to be bad in law for the ITSC does not have power to rectify, review or re-examine the order passed in the rectification application. Issues:1. Rectification of order by the Income Tax Settlement Commission (ITSC)2. Application for settlement of disputes under Section 245C of the Income Tax Act, 19613. Charging of interest under Section 234B of the Act4. Applicability of amended provisions of Section 234B(2A) introduced from 1st June, 20155. Challenge by Revenue to the order dated 17th March, 2016Analysis:1. The writ petition challenged the order passed by the ITSC on the miscellaneous application filed by the Principal CIT seeking rectification of the rectification order dated 31st December 2015. The impugned order dismissed the application, stating that rectification of the rectification order was not permissible as per Section 245D(6B) of the Income Tax Act, 1961.2. The respondent-assessee had applied to the ITSC for settlement of disputes under Section 245C of the Act. The ITSC, in its order dated 29th June, 2015, enhanced the undisclosed income declared by the assessee and directed the payment of interest under Section 234B of the Act up to the date of the order under Section 245D(4).3. The assessee later filed an application for rectification of the order dated 29th June, 2015, seeking correction of typographical errors and a direction to charge interest under Section 234B only up to the date of the order under Section 245D(1) and not beyond. The ITSC, by a majority decision of 2:1, allowed the rectification application, holding that interest would be chargeable only up to the date of the order under Section 245D(1) and not beyond.4. The ITSC's order analyzed the impact of the amended provision of Section 234B(2A) introduced from 1st June, 2015. It was held that the amended provision would apply to settlement applications filed on or after 1st June, 2015, and not to orders passed by the ITSC after that date.5. The Revenue challenged the order dated 17th March, 2016, but did not contest the order dated 31st December, 2015, which allowed the rectification application of the assessee. The Court clarified that the ITSC does not have the power to rectify, review, or re-examine the order passed in the rectification application. The Revenue was advised to file a separate writ petition to challenge the order dated 31st December, 2015.6. The Court disposed of the present writ petition, reserving the right to examine the issue on merits if the Revenue files a fresh writ petition challenging the order dated 31st December, 2015. No opinion on the merits was expressed in the present judgment.