2026 (2) TMI 215 - HC - Income Tax

Settlement Commission power to reopen concluded orders under Section 154 barred; rectification quashed and interest demand set aside

Supreme Court precedent prohibits reopening concluded settlement orders by invoking rectification provisions to impose interest; consequently, a ... Validity of rectification order passed by the Settlement Commission - power of the Settlement Commission to reopen concluded orders -Finality of settlement proceedings HELD THAT:- The Hon’ble Supreme Court in the case of Brij Lal [2010 (10) TMI 8 - SUPREME COURT] has inter alia held that the Settlement Commission cannot re-open its concluded proceedings by invoking Section 154 of the Act so as to levy interest under Section 234B. Hon’ble Supreme Court has clearly opined that the Settlement Commission cannot reopen its concluded proceedings by invoking Section 154. In the present case, the settlement proceedings were concluded by the Settlement Commission by passing an Order on 30th November 1999. This order was passed under Section 245D(4) of the I.T. Act. Once these proceedings are concluded, the Settlement Commission could not have invoked Section 154 seeking to rectify the Order dated 30th November 1999 and calling upon the Petitioner to pay interest under Section 234B from the date of intimation under Section 143(1) upto 30th November 1999. No hesitation in holding that the Settlement Commission could not have invoked the powers under Section 154 to rectify the Order dated 30th November 1999. Hence, the rectification order dated 23rd March 2004 is hereby quashed and set aside. Consequently, demand notice issued pursuant to the rectification order will also have to go and accordingly is quashed and set aside. Argument of the Revenue that, notwithstanding the aforesaid, the Petitioner ought to be called upon to pay interest from the date of intimation u/s 143(1) upto the date of the admission order passed by the Settlement Commission under Section 245D(1) - Settlement Commission cannot reopen its concluded proceedings by invoking Section 154 of the Act so as to levy interest under section 234B. In other words, the Supreme Court has put a quietus to the matter by holding that, where proceedings are already concluded they are not to be re-opened by invoking Section 154. If we were to accept this argument of the Revenue, it would effectively be doing something indirectly what is proscribed by the Supreme Court directly. In these circumstances, we are unable to agree with the submission of the Revenue that the Petitioner ought to be directed to pay interest from the date of intimation u/s 143(1) till 22nd August 1996 [the date of the admission order passed by the Settlement Commission]. WP allowed. Issues: (i) Whether the Settlement Commission could invoke Section 154 of the Income-tax Act, 1961 to reopen concluded settlement proceedings and levy interest under Section 234B; (ii) Whether the Petitioner is liable to pay interest under Section 234B from the date of intimation under Section 143(1) up to the date of the admission order under Section 245D(1).Issue (i): Whether the Settlement Commission could invoke Section 154 to reopen concluded settlement proceedings and levy interest under Section 234B.Analysis: The Court analysed the statutory scheme distinguishing Chapter XIV (procedure for assessment, where section 154 applies) from Chapter XIX-A (settlement proceedings under sections 245C and 245D). It relied on the precedent of the Constitution Bench in Brij Lal holding that settlement proceedings are final and conclusive and that section 154 is not available to reopen concluded settlement orders; the Court applied that ratio to the rectification order dated 23-3-2004 which sought to invoke section 154 to levy interest.Conclusion: The rectification order dated 23-3-2004 passed by the Settlement Commission under Section 154 is without jurisdiction and is quashed and set aside; consequential demand notices are quashed.Issue (ii): Whether the Petitioner must be directed to pay interest under Section 234B from the date of intimation under Section 143(1) up to the date of the admission order under Section 245D(1).Analysis: Having held that section 154 cannot be used to reopen concluded settlement proceedings, the Court considered the Revenue's submission that interest should nonetheless be payable up to the admission order date. The Court found that giving such a direction would amount to indirectly permitting what the Supreme Court has proscribed, and that the Supreme Court has fixed the terminal point for levy of interest in the context of settlement proceedings.Conclusion: The Petitioner is not liable to be directed to pay interest from the date of intimation under Section 143(1) up to 22-8-1996 (date of admission under Section 245D(1)).Final Conclusion: The Writ Petition is allowed: the rectification order and consequential demand notices are quashed, the Petition succeeds and is disposed of; no order as to costs.Ratio Decidendi: The Settlement Commission cannot invoke Section 154 to reopen or rectify concluded settlement orders under Chapter XIX-A; interest under Section 234B in settlement matters cannot be levied by reopening concluded settlement orders and the terminal point for such interest is governed by the rules applicable to settlement proceedings as held by the Constitution Bench.