2010 (10) TMI 8 - SC - Income Tax

Settlement Commission cannot reopen concluded proceedings to levy interest under Section 234B

Brij Lal & Ors. Versus Commissioner of Income Tax, Jalandhar

Brij Lal & Ors. Versus Commissioner of Income Tax, Jalandhar - [2010] 328 ITR 477 (SC), 2011 (1) SCC 1 Issues Involved:1. Applicability of Sections 234A, 234B, and 234C of the Income Tax Act, 1961 to proceedings of the Settlement Commission under Chapter XIX-A.2. Terminal point for the levy of interest under Section 234B.3. Authority of the Settlement Commission to reopen its concluded proceedings by invoking Section 154 to levy interest under Section 234B.Issue-wise Detailed Analysis:(I) Applicability of Sections 234A, 234B, and 234C to Chapter XIX-A Proceedings:The judgment analyzes whether Sections 234A, 234B, and 234C, which pertain to interest for default in furnishing return of income, payment of advance tax, and deferment of advance tax respectively, apply to proceedings under Chapter XIX-A of the Income Tax Act, which deals with the Settlement Commission. The court concludes that Chapter XIX-A, though a self-contained code, incorporates various provisions of the Act, including those related to the computation of total income and the levy of interest for defaults. Specifically, the court notes that the special procedure under Chapter XIX-A has an inbuilt mechanism for computing total income, which is akin to assessment, thus making Sections 234A, 234B, and 234C applicable to the proceedings of the Settlement Commission.(II) Terminal Point for the Levy of Interest:The court delves into the terminal point for the levy of interest under Section 234B, determining whether such interest should be computed up to the date of the order under Section 245D(1) or up to the date of the order under Section 245D(4). The court concludes that the interest under Section 234B is payable up to the stage of the order under Section 245D(1), which is the stage when the Settlement Commission decides to proceed with the application. The court reasons that this stage involves a pre-assessment collection of tax based on the estimation of current income by the applicant, and once the Settlement Commission admits the case, the proceedings under the normal provisions remain open only until this point.(III) Authority to Reopen Concluded Proceedings under Section 154:The court examines whether the Settlement Commission can reopen its concluded proceedings by invoking Section 154 to levy interest under Section 234B if it was not done in the original proceedings. The court holds that the Settlement Commission cannot reopen its concluded proceedings by invoking Section 154. The court emphasizes that the proceedings before the Settlement Commission are akin to arbitration proceedings and are distinct from regular assessment procedures. The court notes that Section 154, which falls under Chapter XIV dealing with procedure for assessment, does not apply to the special procedure for settlement under Chapter XIX-A. The court also highlights that the order of the Settlement Commission is final and conclusive under Section 245I, except in cases of fraud or misrepresentation, and does not contemplate the invocation of Section 154.Conclusions:1. Sections 234A, 234B, and 234C are applicable to the proceedings of the Settlement Commission under Chapter XIX-A to the extent indicated in the judgment.2. The terminal point for the levy of interest under Section 234B is up to the date of the order under Section 245D(1) and not up to the date of the order under Section 245D(4).3. The Settlement Commission cannot reopen its concluded proceedings by invoking Section 154 to levy interest under Section 234B, particularly in view of Section 245I.The reference to the Constitution Bench is accordingly answered and the matters are disposed of.