TaxTMI 
TaxTMI 
2001 (10) TMI 4
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....wer either to waive or reduce the statutory interest payable under the Act. This view of the five-member Bench of the Commission was overruled by a larger Bench comprising seven Members of the Commission which held otherwise by the impugned order. It held that the Commission is vested with the power to waive or reduce the interest chargeable under sections 234A, 234B and 234C of the Act in cases pending before it for the assessment year 1989-90 and onwards (i.e., the year in which Chapter XVII-F was introduced in the Act). It further held that this power can be exercised by any of the Benches constituted to settle cases under section 245BA of the Act. While coming to this conclusion, the Commission held that the constitution of the Commission is based on the concept of "compromise and settlement", hence, it has the necessary power to waive or reduce the interest, even if statutorily mandated, in view of the wording of section 245D(6) of the Act. It also held that in view of the definition of the term "income-tax authority" under section 245A(d), the Commission being an income-tax authority it has all the powers of the Board which are incidental to the functions of the Commission,....
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....or application for revision under this Act and which has not been admitted, such appeal or revision shall not be deemed to be a proceeding pending within the meaning of this clause;" Under the provisions of Chapter XIX-A on such application being made, the Commission is empowered to dispose of the same in the manner provided thereunder. Section 245D provides for the procedure and exercise of power to be followed by the Commission on receipt of an application under section 245C. Under this provision, the Commission has the authority to call for the report from the Commissioner of Income-tax (for short "the Commissioner"), and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, it may by order allow the application to be proceeded with or reject the application. If the Commission allows the application filed under section 245C then under sub-section (3) of section 245D it can call for the relevant records from the Commissioner and if it forms any opinion that any further inquiry or investigation in the matter is necessary, it may direct the Commissioner to make ....
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....ts plain language subsection (4) of section 245D does not empower the Commission to waive or reduce statutory interest payable under the provisions of section 234A, 234B or 234C. The moot question, therefore, for our consideration is: Does sub-section (6) which contemplates providing for the terms of settlement of tax, penalty or interest empower the Commission, in any manner, either to waive or reduce interest payable under section 234A, 234B or 234C in any case that arises for settlement before the Commission? If so, would this waiver of interest be in accordance with the provisions of the Act as mandated in sub-section (4) of the Act? For answering the above question, we will have to examine the character of interest payable under the provisions of sections 234A, 234B and 234C. A perusal of these sections shows that the interest for default in furnishing return of income, default in payment of advance tax and interest for deferment of advance tax are mandatory in nature. Section 234A which refers to the payment of interest for default in furnishing the return of income-tax mandates: "234A. (1) Where the return of income for any assessment year under sub-section (1) or sub-sec....
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....duction of interest to be entrusted with any particular authority in any particular situation, it has done so like in section 220(2A) of the Act. It is also worthwhile to note that the Act wherever it contemplated that there should be no levy of interest, it has clearly made provision for the same as could be seen from section 158BF which mandates that no interest under the provisions of section 234A, 234B or 234C shall be levied or imposed upon the assessee in respect of the undisclosed income determined in the block assessment. If the scheme of levy of interest is thus to be analysed on the anvil of the provisions referred to hereinabove, it shows that the interest contemplated under sections 234A, 234B and 234C is mandatory in nature and the power of waiver or reduction having not been expressly conferred on the Commission, the same indicates that so far as the payment of statutory interest is concerned, the same is outside the purview of the settlement contemplated in Chapter XIX-A of the Act. The Commission, however, traced its power to waive or reduce interest to the objects of the Act and to what it termed as schematic rationalisation of the provisions of Chapter XIX-A. It....
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....the very purpose of the settlement contemplated in Chapter XIX-A would defeat the object of the principal Act itself. As held by the Commission itself, Chapter XIX-A was included for the purpose of quick settlement of the cases before it so that the tax due to the Revenue is collected at the earliest. The object of Chapter XIX-A is not to give amnesty to a tax evader from paying the tax due. Hence, it would be preposterous to hold that the Commission has been conferred with the power of either reducing or waiving the tax due. We are aware that the Commission in the impugned order has not gone to the extent of holding that it has the power of either waiving or reducing the tax payable but then that would be the logical conclusion if we accept the interpretation given by the Commission in regard to the expression "interest" in section 245D(6) of the Act. A proper reading of sub-section (6) would show that all that it contemplates is that while the Commission makes an order of settlement under sub-section (4) it will also have to provide for the terms under which the amount payable by way of tax, penalty or interest shall be paid by the assessee. The expression "terms" used in that su....
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....xtracted hereinabove, that under section 245D(4), the Commission has the power to direct the waiver of penalty as well as interest because that was within the scope of the provisions of the Act, as then existing, whereas at present and for the assessment years involved in this case, sections 234A, 234B and 234C being applicable that observation does not apply to the cases in hand. The sentence "except to mention that the Commission is empowered to direct the waiver of penalty as well as interest..." is used in that judgment on the basis of the then existing law and to apply the same to the facts of the present case with the mandatory change in law would amount to applying those principles in Express Newspapers' case [1994] 206 ITR 443 (SC) out of context. Next, the Commission also traced its power either to waive or reduce the interest to section 119(2) of the Act. In our opinion, this process of tracing the Commission's power to section 119(2) of the Act is rather convoluted. It first relied upon section 245F which conferred on it the powers vested in an income-tax authority. Next it relied upon the definition of the expression "income-tax authority" as found in section 245A(d) o....
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....ement under section 245D cannot have the administrative power of issuing directions to other income-tax authorities. It is a normal rule of construction that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself. If that be so since the Commission cannot exercise the power of relaxation found in section 119(2)(a) in the manner provided therein it cannot invoke that power under section 119(2)(a) to exercise the same in its judicial proceedings by following a procedure contrary to that provided in sub-section (2) of section 119. There is one other reason why section 119(2) is not available to the Commission, because if we examine the provisions of section 245A through which the Commission has traced its power to be equated with the Board which defines the expression "case" to mean "any proceeding under this Act for the assessment or reassessment of any person in respect of any year or years...which may be pending before an income-tax authority on the date on which an application under sub-section (1) of section 245 is made". As per this definition, it is c....
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....on as "may". This is clear from the fact that prior to the Amendment brought about by the Finance Act, 1987, the Legislature in the corresponding section pertaining to imposition of interest used the expression "may" thereby giving a discretion to the authorities concerned to either reduce or waive the interest. The change brought about by the Amending Act (Finance Act, 1987) is a clear indication of the fact that the intention of the Legislature was to make the collection of statutory interest mandatory. In this connection, we may usefully refer to the judgment of this court in Jaywant S. Kulkarni v. Minochar Dosabhai Shroff, AIR 1988 SC 1817, wherein this court held that when the Legislature changes the expression "may" to "shall" by amendment of the statute, it is clear that it intended to make the provision mandatory from the existing directory provision. Therefore, the question of the Commission relying upon external aids, for the purpose of interpretation like the Wanchoo Committee Report, Discussions of the Select Committee of Parliament and introduction of Chapter XIX-A in the Act, Press Release of the Board dated May 21, 1996, etc., are purposeless because of the clear and....
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....l appearing for some of the respondents, placed strong reliance on the Press Release dated May 21, 1996, issued by the Board in support of the contentions raised on behalf of the respondents. It is true that by this press release the Board had interpreted the provisions of the Act in a particular manner. Be that as it may, we would like to make it clear that every clarificatory note or press release issued by the Board does not have statutory force like the circulars issued by the Board under section 119 of the Act. It is only those circulars issued by the Board under the provisions of section 119 of the Act, which will have statutory force and will be binding on every income-tax authorities. Therefore, the press release relied upon by Shri Ramamurti, not being a circular issued under section 119 of the Act, will not be of any assistance to the respondents in support of their contentions. It is then contended that if it is to be construed that the Commission has no power of waiver or reduction of interest then the entire purpose of Chapter XIX-A would be defeated since a person making an application to the Commission would not be in any way better off than pursuing his remedy othe....