TaxTMI 
TaxTMI 
2017 (8) TMI 568
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....ter this date and to further hold that the interest under Section 234B of the IT Act in cases of application filed under Section 245C(1) prior to 01.06.2015 will be charged on additional income tax declared in such applications upto the order under Section 245D(1) of the IT Act in accordance with the decision of the Hon'ble Supreme Court in the case of Brij Lal and Others vs. Commissioner of Income Tax reported in 328 ITR 477 (SC) and not on additional income tax determined in the order under Section 245D(4) and to direct the respondent No.1 to accept the interest computed and accordingly paid by the petitioners in their applications filed under Section 245C(1) of the IT Act. Special Civil Application Nos.7112/2017 to 7124/2017 [3.0] Special Civil Application Nos.7112/2017 to 7124/2017 have been preferred by the respective petitioners for an appropriate writ, direction and order to quash and set aside the impugned order dated 24.08.2016 ( AnnexureA) passed by the Income Tax Settlement Commission (hereinafter referred to as "Settlement Commission") insofar as levy of interest chargeable under Section 234B of the IT Act is concerned. It is also further prayed to hold that the inter....
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....14­15 Total 1 Girish S. Shah 62.00 206.17 278.39 654.97 312.75 130.10 325.00 1,647.64 2 Girishchandra J. Patel 62.00 132.37 154.40 416.87 322.07 91.20 3.25 1,181.18 3 Ravikant Thakkar 5.40 10.21 28.99 106.72 49.58 24.99 1.10 227.01 4 Navdurga Developers 48.63 270.49 91.35 0.50 0.50 411.48 5 Shivam Associates 20.22 20.40 64.07 80.20 64.30 61.36 0.25 310.83 6 Taksh Realty 103.75 140.01 2.27 0.30 0.30 246.63 7 Nirman Associates 12.08 49.14 30.34 48.76 52.85 11.52 204.72 8 Gajkeval Developers 22.02 40.73 12.99 26.51 20.27 122.55 9 Trimurti Associates 0.15 0.20 89.59 8.28 2.80 7.45 0.25 108.73 10 Parijat Corp 0.20 0.25 38.76 19.49 24.59 7.96 3.57 94.83 11 Apple Dev 0.10 0.15 63.12 3.98 0.66 68.02 12 Taksh Creations 0.15 8.40 26.20 28.85 0.25 63.85 13 Shivam Engineers 0.10 0.15 22.09 2.75 0.20 18.01 11.09 54.41 14 Shubhalaxmi Associates 0.10 20.40 7.01 7.63 10.17 45.32 TOTAL 4,787.27 [5.1] That in the statement of facts, the disclosure of addit....
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....per order under Section 245D(4). That thereafter considering the above and the applications made on behalf of the applicants, the Settlement Commission passed the final order under Section 245D(4) as under: "11. Decision We have carefully considered the issues put forth in PCIT Rule 9 report, Applicant's rejoinder and oral arguments from both sides. We find that the applicants in true spirit of settlement has accepted further additional income of Rs. 1,83,381/in the case of Shri Girish S. Shah, on account of rectifying the error in adopting the sale consideration in the purchase of the aforesaid land, a sum of Rs. 3,26,91,128/on account of revision of onmoney and on account of additional 1% of total on money - Rs. 2,13,11,602/which shall be brought to tax as per the workings enclosed to the letter dated 10.08.2016. In aggregate, the further additional income offered for tax is Rs. 5,41,85,111/. This will increase the total additional income offered to Rs. 53.29 Crores as against initial additional income offered at Rs. 47.87 Crores. Taking into account all facts and discussions on record it is concluded that the additional income offered during 245D(4) proceedings can be accepte....
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....ty in so far as applicability of the provisions of Sec.234B(2A) is concerned and that the amendment of the provisions of Sec.234B was made subsequent to judgment of the Apex Court in the case of Brijlal and Calcutta High Court in the case of G.M. Foods. It is further stated since the applicability of the new provision came into force from 01.06.2015, it shall be applicable to the cases pending with the ITSC as on 01.06.2015 as well. We have given our careful consideration and are in agreement with the above stated position of law. Therefore, with due respect to the judgment of the Hon'ble Apex Court in the case of Brijlal vs. CIT (2010) 328 ITR 477 (SC) and judgment of the Hon'ble Calcutta High Court in G.M. Foods (2015) taxmann.com 16 (Cal.), the interest under Section 234B shall be charged after taking into consideration the provisions of Sec.234B(2A) also. 15. Immunity from Prosecution and Penalty The applicants have prayed for grant of immunity from prosecution and penalty under section 245H of the Act. The request made by the applicants is carefully considered. We are satisfied that there has been no attempt to conceal any material facts in these cases. The applicants have....
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.... of Section 234B(2A) also. [5.4] Feeling aggrieved and dissatisfied with the impugned order passed by the learned Settlement Commission insofar as charging the interest under Section 234B while taking consideration the subsection (2A) of section 234B of the IT Act and charging the interest on the additional amount of income tax determined under Section 245D(4) of the IT Act, the petitioners have preferred the present Special Civil Applications for the aforesaid reliefs. [6.0] Shri S.N. Soparkar, learned Senior Advocate has appeared on behalf of the respective petitioners and Shri M.R. Bhatt, learned Senior Advocate has appeared on behalf of the Revenue. [7.0] Shri Soparkar, learned Counsel appearing on behalf of the petitioners has vehemently submitted that the impugned order/s passed by the learned Settlement Commission in directing to apply the provisions of subsection (2A) of Section 234B is absolutely perverse and illegal and contrary to law. [7.1] It is submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that as such subsection (2A) in Section 234B came to be inserted by Finance Act, 2015 with effect from 01.06.2015. It is submitted that the ....
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....not be applied on applications which have been made prior to 1st June 2015." [7.2] It is submitted that despite the above, however considering the office memorandum dated 20.03.2016 issued by the CBDT in which it was mentioned that amendment shall be applicable to the pending applications before the Settlement Commission pending as on 01.06.2015, the learned Settlement Commission has passed the impugned order making the provision of section 234B(2A) applicable retrospectively, which is not permissible. [7.3] It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that the provision of section 234B(2A) shall not have retrospective effect and shall have the effect only with respect to the applications filed after 01.06.2015 and shall not be applicable to the applications filed before 01.06.2015. [7.4] It is submitted that it is a cardinal principle of law that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. It is submitted that where the object of the statute is to affect vested rights or to impose new burdens or to impaired existing obligations, it would hav....
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.... further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that as such in the memorandum to the clauses issued at the time of introduction of subsection (2A) clearly stated that there was no provision to levy interest under Section 234B on additional income tax declared in the application filed under Section 245C(1). It is submitted that therefore it is for the first time with effect from 01.06.2015 that such levy of interest has been introduced. It is submitted that therefore an altogether new levy cannot be made effective retrospectively. It is submitted that a vested right has accrued in favour of the petitioners when they had filed applications prior to 01.06.2015 which can only be taken by way of effecting retrospective amendment. [7.8] It is further submitted by Shri Soparkar, learned Counsel appearing on behalf of the petitioners that in cases where an assessment has been done either under Section 143(1) or under Section 143(3), levy of interest under Section 234B was governed by the then existing subsection (3) of section 234 before its amendment by Finance Act, 2015 with effect from 01.06.2015. It is submitted that as per subsection (3) i....
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.... (1980) 122 ITR 322 (Calcutta) 6. Star Television News Ltd. vs. Union of India (2009) 317 ITR 66 (Bombay) [8.0] All these petitions are vehemently opposed by Shri Manish Bhatt, learned Counsel appearing on behalf of the Revenue. [8.1] It is vehemently submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that the impugned order/s passed by the learned Settlement Commission directing to levy interest under Section 234B applying the provisions of section 234B(2A) and to levy the interest upto the order under Section 245D(4) is absolutely just and proper and in accordance with law and the provision of statute and considering the office memorandum / circular issued by the CBDT dated 28.03.2016. [8.2] It is further submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that as such the Hon'ble Supreme Court in the case of Income Tax Commissioner, Mumbai vs. Anjum H. Ghaswal reported in 2001 (252) ITR 1 (SC) has specifically held that a charge of interest under section 234B is mandatory. It is submitted that as per the provisions of section 234B(1) of the IT Act, an assessee is required to pay the interest for default on the payment of adv....
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....can be added nor can be removed from the Statute. It is submitted that if the contention of the assessee is accepted, in that case, it would really amount to adding words which is not permissible. [8.5] It is further submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that the impugned decision of the Settlement Commission cannot be said to be in teeth of and/or contrary to the decision of the Hon'ble Supreme Court in the case of Brij Lal and Others (Supra) as sought to be contended on behalf of the petitioners. It is submitted that as such considering some of the observations made by the Hon'ble Supreme Court in the case of Brij Lal and Others (Supra), the legislature thought it fit to clarify the position that in respect of the regular assessment, the interest on default on advance tax is payable upto the date of determination, similar provision has to apply for the assessee going for settlement. It is submitted that it is in this context that Clauses (a) and (b) of section 234B(2A) of the IT Act visualize this situation. [8.6] It is further submitted by Shri Bhatt, learned Counsel appearing on behalf of the Revenue that in the event the assessee's submi....
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....shall not be applicable retrospectively and shall not be applicable to the applications under Section 245C(1) of the IT Act, filed before 01.06.2015. It is also the case on behalf of the petitioners that as Clause (a) of subsection (2A) of section 234B imposes the liability of interest for the interegnum period i.e. for the period between the application under Section 245C(1) and the order under Section 245D(4) of the IT Act and provides for computation maximum by way of providing rate of interest and the quantum of income tax and the period for which the interest is to be calculated, the same shall not be made applicable retrospectively. It is also the case on behalf of the petitioners relying upon the decision of the Hon'ble Supreme Court in the case of Brij Lal and Others (Supra) that as held by the Hon'ble Supreme Court in the said decision, the Settlement Commission has no jurisdiction to levy and compute the interest upto the date of order of commission under Section 245D(4) of the IT Act and therefore also, the impugned orders passed by the Settlement Commission, to compute the interest under Section 234B of the IT Act after taking into consideration the provisions under Sec....
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.... [10.1] At the outset it is required to be noted that as such while submitting the application under Section 245C(1) of the IT Act, a duty is cast upon the concerned applicant to make the disclosure truly and correctly. At the time of making application under Section 245 and at the stage of the proceedings before the Settlement Commission under Section 245C(1) of the IT Act, an applicant is required to make the true and correct disclosure and is required to pay the tax liability on such disclosure with interest upto the application under Section 245C(1) of the IT Act. However, thereafter, when the Settlement Commission passes an order under Sections 245D(1) and 245D(4) of the IT Act and it is found that there is a difference in the disclosure made at the time of making the application under Section 245C(1) of the IT Act and the amount determined while passing the order under Section 245D(4) and it exceeds the amount disclosed, in that case, the question with respect to the interest on such difference of amount will arise. Therefore, as such the concerned applicant / assessee is liable to pay the interest on such difference of amount till it is actually paid. If submission on behalf....
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....ax, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under subsection (1) of section 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax. Explanation 1In this section, "assessed tax" means the tax on the total income determined under subsection (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of, (i) any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income; (ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii) any relief of tax allowed under section 90A on account of tax paid in a specified te....
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....isclosed in the application filed under subsection (1) of section 245C; (c) where, as a result of an order under subsection (6B) of section 245D, the amount on which interest was payable under clause (b) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly;" [10.3] Levy of interest / computation of interest shall arise only at the stage of order under Section 245D(4) of the IT Act and when the actual amount is determined, after following due procedure under Section 245 of the IT Act. Therefore, the relevant date would be the date on which the Settlement Commission passes the order under Section 245D(4) of the IT Act. Therefore, as such considering the decision of the Hon'ble Supreme Court in the case of the Brij Lal and Others (Supra), the legislature thought it fit to clarify the position that in respect of the regular assessment, the interest on default of advance tax is payable upto the date of determination, similar provision has to apply for an assessee going for settlement. It is in this ontext that clauses (a) and (b) of section 234B(2A) visualizes this situation. As rightly submitted by Shri Bhatt, learned Counsel app....
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....pite section 234B of the IT Act which is held to be mandatory, there shall not be any interest liability upon the application on the additional amount determined by the Settlement Commission which exceeds disclosure under Section 245C(1) of the IT Act. It cannot be the intention of the legislature not to charge the interest on the additional amount determined by the Settlement Commission which exceeds disclosure under Section 245C(1) of the IT Act. As observed hereinabove and it cannot be disputed that while approaching the Settlement Commission, he has to make true and correct disclosure. The eventuality such as happened in the present petitions has arisen only when it is found that on determination of the actual amount while passing the order under Section 245D(4) of the IT Act, it has been found that the amount exceeds the disclosure made by the applicant under Section 245C(1) of the IT Act. If the assessee would have made the true and correct disclosure and thereafter on determination and passing the order under Section 245D(4) of the IT Act, the amount determined does not exceed the amount disclosed at the time of disclosure under Section 245C(1) of the IT Act, such an eventua....
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....clusions in Anjum's case (supra) can be summed up as follows. (1) Commission in exercise of its power under Section 245D(4) and (6), does not have the power to reduce or waive interest statutorily payable under Sections 234A, 234B and 234C, except to the extent of granting relief under the Circulars by Notification dated 23rd May, 1996 issued by the Board under Section 119 of the Act. While exercising the power derived under the Circulars of the Board, the Commission does not act as a subordinate to the Board but will be enforcing the relaxed provisions of the circulars for the benefit of the assessee in the process of settlement. (2) Interest due under the mandatory provisions like Sections 234A, 234B and 234C has to be included in the settlement. (3) Wherever the Act contemplated power to waive or reduction of interest to be exercised by any particular authority in any particular situation it has done so like in Sections 139(8), 215(4), 216 and Section 220(2A). (4) Prior to Finance Act, 1987, the corresponding sections pertaining to imposition of interest used the expression 'may' but the change brought about in the Finance Act, 1987 is a clear indication that....