Interest under Sections 234A/234B/234C computed on tax determined by Settlement Commission; cannot be waived, accrues from due date

SC held that interest under sections 234A/234B/234C must be computed on the tax determined by the Settlement Commission and cannot be waived by it; interest accrues from the due date for advance tax or assessed tax until the date of the Settlement Commission's order. If interest was already charged in prior regular assessment proceedings, no further interest on that interest may be levied and appropriate adjustments will be made against tax and interest found due by the Commission. Appeals were disposed accordingly.

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Issues: (i) Period for which interest under section 234B is chargeable where income is disclosed before the Settlement Commission and an order under section 245D(4) is passed; (ii) Whether the Settlement Commission has power to waive or reduce statutory interest under sections 234A, 234B and 234C; (iii) Effect of admission/allowance of an application by the Settlement Commission on prior regular assessment and recovery proceedings.

Issue (i): Period for which interest under section 234B is chargeable when the Settlement Commission passes an order under section 245D(4).

Analysis: Sections 234A234C fix the commencement and potential terminus points for interest on defaults in return filing, advance tax payment and deferment of advance tax. Chapter XIX-A (sections 245C, 245D and related provisions) deals with voluntary disclosure of undisclosed income before the Settlement Commission and mandates computation of the additional tax on the aggregate of disclosed and previously undisclosed income. Section 245D(4) is the operative order by which the Commission determines tax, penalty and interest; section 245D(6) quantifies terms of settlement and section 245D(2A)/(2C)/(6A) regulate payment and interest on unpaid amounts. Harmonising these provisions, the interest under sections 234A234C applicable to the consolidated tax liability (aggregate income) must be computed from the statutory starting point up to the date of the Settlement Commission's order under section 245D(4), after which the Commissions own provisions govern any further liability.

Conclusion: Interest under section 234B (and similarly under sections 234A and 234C) is chargeable from the statutory commencement date up to the date of the Settlement Commission's order under section 245D(4) on the consolidated (aggregate) income.

Issue (ii): Whether the Settlement Commission can waive or reduce statutory interest payable under sections 234A, 234B and 234C.

Analysis: Chapter XIX-A must be read in harmony with mandatory interest provisions. The legislative change making interest provisions mandatory (use of 'shall') and the scheme of sections 234A234C indicate no general power in the Commission to waive or reduce statutorily mandated interest, except as specifically permitted (e.g., limited relief under Board circulars where applicable). Section 245D(4) must operate "in accordance with the provisions of this Act," constraining any settlement term that would conflict with statutory interest obligations.

Conclusion: The Settlement Commission has no power to waive or reduce statutory interest payable under sections 234A, 234B and 234C; such interest must be included in the settlement and determined in accordance with the Act.

Issue (iii): Effect of the Commission's allowance/admission of an application on prior regular assessment and recovery proceedings.

Analysis: Section 245F(1)(2) grants the Commission the powers of income-tax authorities in relation to a case only after the Commission formally allows the application to be proceeded with under section 245D(1). Until such formal admission, regular assessment and recovery proceedings continue unaffected. Once the application is admitted, the Commission has exclusive jurisdiction until it passes its order under section 245D(4), and must determine tax, penalty and interest in accordance with the Act, with adjustments for amounts already paid or demanded.

Conclusion: Regular assessment and recovery proceedings become subject to the Commission's powers only after the Commission formally allows the application to be proceeded with; prior proceedings remain operative until such admission.

Final Conclusion: The Settlement Commission must determine tax and include mandatory statutory interest (under sections 234A234C) on the aggregate income up to the date of its order under section 245D(4); the Commission cannot waive or reduce such statutory interest; regular assessment proceedings are subsumed only upon formal allowance of the Commission to proceed with the application.

Ratio Decidendi: Where undisclosed income is disclosed before the Settlement Commission and the Commission admits the application and passes an order under section 245D(4), statutory interest under sections 234A234C is mandatorily chargeable on the aggregate income up to the date of that order, the Commission lacks power to waive such statutory interest, and earlier assessment/recovery proceedings are displaced only from the date the Commission formally assumes jurisdiction.

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