AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2004 (1) TMI 47
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....A of the Income-tax Act (hereinafter referred to as the" Act"). The Settlement Commission had passed orders on March 31,1999, under section 245D(4) in respect of each of the petitioners, inter alia, waiving and/or reducing interest under sections 234A, 234B and 234C of the Act in accordance with the state of law at the relevant point of time. After a period of a little less than four years, the petitioners received notices dated February 21,2003, from the Settlement Commission stating that in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1, the orders passed on March 31,1999, required rectification and the petitioners were asked to file their objections latest by March 7,2003, and to attend the hearing on March 11, 2003. Since the time granted was very short, the petitioners have asked for further time to file their reply and hence, the Settlement Commission had issued another notice dated March 7,2003, for rectification of the order dated March 31,1999. The petitioners have filed their reply on March 8,2003, stating, inter alia, that the Settlement Commission has no power to rectify its order under section 154 of the Act....
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.... 234A, 234B and 234C of the Act, under the circulars issued by the Board under section 119 of the Act. Mr. Shah has further submitted that under the Act, no specific power is given to the Settlement Commission to rectify orders passed under section 245D(4) of the Act by invoking the provisions of section 154 of the Act. In the absence of such powers, the action taken by the Settlement Commission while passing the impugned order is absolutely without jurisdiction and deserves to be quashed and set aside. In this connection, he relied on the decision of the Privy Council in the case of CIT v. Khemchand Ramdas [1938] 6 ITR 414 wherein it is held that once a final assessment is arrived at, it cannot be reopened except in the circumstances detailed in sections 34 and 35 of the Act and within the time limit by these sections. Section 34 of the old Act, i.e., Act of 1922, deals with reopening of assessment whereas section 35 of the said Act deals with rectification of mistake. Mr. Shah has further submitted that the decision of the Privy Council in the case of CIT v. Khemchand Ramdas [1938] 6 ITR 414 was considered by this court in the case of Mandal Ginning and Pressing Co. Ltd. v.....
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....ct. Mr. Shah has further submitted that the order passed by the Settlement Commission under section 245D(4) is final and conclusive. Such finality is intended to be given by the Legislature and it has been made clear in section 245-I of the Act which lays down that every order of the Settlement Commission passed under section 245D(4) shall be conclusive as to the matters stated therein. Unless such an order becomes void on the grounds of fraud and/or misrepresentation of facts as provided in section 245D(6), the order cannot be disputed or impugned. Mr. Shah has, therefore, submitted that the Settlement Commission has no power to rectify its own order by resorting to the provisions of section 154 of the Act as the order passed by it earlier granting reduction and/or waiver of interest under sections 234A, 234B and 234C of the Act has become final and conclusive. Mr. Shah has further relied on the decision of the Hon'ble Supreme Court in the case of Prakash H. Jain v. Ms. Marie Fernandes [2003] 8 SCC 431, wherein the issue before the court was whether the competent authority under the Maharashtra Rent Control Act, 1999, has got the power to condone the delay in filing an appli....
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....provisions of section 154(1) of the Act for the purpose of rectifying the order passed by it under section 245D(4) of the Act. Mr. Shah has further submitted that even under section 154 of the Act, only a mistake apparent from the record or an arithmetical mistake can be rectified and a mistake apparent from the record must be one to point out which no elaborate argument is required. It must be a glaring, obvious or self-evident mistake. If it is a mistake which requires to be established by a complicated process of investigation, argument or proof, it cannot be regarded as a mistake apparent from the record. In this connection, he relied on the decision of this court in the case of P.M. Bharucha and Co. v. G.S. Venkatesan, ITO [1969] 74 ITR 513 wherein this court has taken the view that "the question whether capital gain in the hands of the firm would be business income in the hands of the partner, was a highly debatable question on which there might conceivably be two opinions, and therefore even if any mistake was committed by the officer, it was not a mistake apparent from the record so as to attract the corrective jurisdiction under section 35 of the old Act." Mr. Shah h....
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.... to pass such an order and the other is that he had decided to waive the interest because the court cannot assume or infer that even though he was aware of the said provision, he deliberately did not pass that order. An intention to act contrary to law cannot ordinarily be inferred. The court cannot also draw an inference that he forgot to pass an order. That being the state of his mind, the successor-Income-tax Officer cannot definitely say that either it was a case of overlooking the provisions or a deliberate lapse on the part of the Income-tax Officer. Considering the practice which is ordinarily followed by the Income-tax Officers while making assessment orders and levying interest and the nature of discretion conferred upon the Income-tax Officer and the fairness with which he is expected to exercise his powers, the better inference that can be drawn from the omission to pass any order with respect to payment of interest under section 215 after passing the order of assessment would be that he had decided to waive payment of interest. Merely because discretion is not absolute and its exercise is dependent upon existence of certain facts and circumstances, it is difficult to ap....
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.... powers of the income-tax authority under section 245F(1) of the Act prior to and subsequent to the application decided by the Settlement Commission. The Settlement Commission has therefore, power to rectify any mistake which is found in the order passed under section 245D(4) of the Act. He has further submitted that though the Settlement Commission has no discretion to reduce or waive the interest under sections 234A, 234B and 234C of the Act and still the interest was reduced or waived, the Settlement Commission has committed an error apparent from the record and hence, the same was rightly rectified by the Settlement Commission while passing the order under section 154 of the Act. Mr. Naik has further submitted that the language of section 245F is very clear and unambiguous. By reading some other provisions of the Act, namely, section 254(2) of the Act in the present case, it cannot be presumed that the Settlement Commission has no such power to rectify the order passed under section 245D(4) of the Act. The wording of section 245F(1) is wide enough to empower the Settlement Commission to rectify the mistake apparent on record and waiver or reduction of interest under sections....
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....ciple of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well-known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute. It is the duty of the court to make such construction of a statute which shall suppress the mischief and advance the remedy. While interpreting a statute the courts are required to keep in mind the consequences which are likely to flow upon the intended interpretation." Mr. Naik has further relied on the decision of the Hon'ble Supreme Court in the case of Grasim Industries Ltd. v. Collector of Customs [2003] 1 RC 440; [2002] 4 SCC 297, 303, wherein it is held that: "No words or expressions used in any statute can be said to be redundant or superfluous. In matters of interpretation one should not concentrate too ....
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....emplated in Chapter XIX-A of the Act". The Hon'ble Supreme Court has shown indulgence only to the extent that if the assessee is entitled to the benefit under the circular issued by the Central Board of Direct Taxes to that extent the Settlement Commission can waive or reduce the interest. However, it was not the case before the Settlement Commission that the present petitioners were entitled to the benefit conferred under the circular and on that basis, the interest was waived or reduced by the Settlement Commission. In view of the Supreme Court's decision in the case of Ghaswala [2001] 252 ITR 1, the Settlement Commission has rightly passed the order under section 154 of the Act withdrawing the reduction or waiver of interest under sections 234A, 234B and 234C granted at the time of passing the order under section 245D(4) of the Act. Mr. Naik has further submitted that the Hon'ble Supreme Court has rightly made distinction and held that the Settlement Commission has no power to issue circulars and in this regard, the powers exercised by the Central Board of Direct Taxes under section 119(2)(a) of the Act cannot be exercised by the Settlement Commission. However, the Settlement Co....
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....iew that the possibility of having such powers under section 147 of the Act could not be ruled out. The only condition which was to be complied with while exercising such powers is that the said powers are to be exercised in accordance with the provisions contained in sections 147 to 150 of the Act. Mr. Naik has further submitted that in view of the decision of the hon'ble Supreme Court in Ghaswala's case [2001] 252 ITR 1, the interest waived or reduced by the Settlement Commission under sections 234A, 234B and 234C of the Act while passing the order under section 245D(4) of the Act is clearly a mistake apparent from the record and it has to be rectified while passing the order under section 154 of the Act. He relied on the decision of this court in the case of Standard Radiators v. CIT [1987] 165 ITR 178, wherein it is held that: "it is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Hence, the law laid down by the High Court has to be followed by the income-tax authorities situated in the area over which the High Court has jurisdiction". While dealing with the cas....
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....e Settlement Commission calls for a preliminary report from the Commissioner who has jurisdiction over the case. The Commissioner can object to the application being proceeded with by the Settlement Commission, if he is of the view that the concealment of income was perpetration by fraud or evading any tax or other sum chargeable under the Act, on the part of the applicant has been established or is likely to be established in relation to the case by an income-tax authority. On the basis of the materials contained in the Commissioner's report and having regard to the nature and circumstances of the case of the complexity involved in the investigation therein, the Settlement Commission may decide to proceed with the application or reject the application. If the Settlement Commission decides to proceed with the application, sub-section (4) of section 245D will start playing its role. It reads as under: "245D. (4) After examination of the records and the report of the Commissioner, received under sub-section (1), and the report, if any, of the Commissioner received under sub-section (3), and after giving an opportunity to the applicant and to the Commissioner to be heard, either in....
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....ers and perform the functions of an income-tax authority in relation to the matters covered by the case before it. Section 245-I lays down that every order of the Settlement Commission passed under section 245D(4) shall be conclusive as to the matters stated therein. It reads as under: "245-I. Every order of settlement passed under sub-section (4) of section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force." On the basis of the aforesaid provisions contained in Chapter XIX-A of the Act, if we appreciate the orders passed by the Settlement Commission, firstly under section 245D(4) of the Act on March 31,1999, and thereafter under section 154 of the Act on March 20,2003, we find that while passing the order under section 245D(4) of the Act, the Settlement Commission has dealt with the issue regarding waiver of interest chargeable under sections 139(8)/234A and 215/234B of the Act. Without ascertaining the legal position as to whether, it has got such powers to waive or reduce the intere....
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....r of waiver has not been conferred on the Settlement Commission, indicates that so far as payment of statutory interest is concerned, the same is outside the purview of the settlement contemplated in Chapter XIX-A. While the Settlement Commission arrives at the taxable income of the assessee on the basis of the records before it, it has to levy the mandatorily chargeable tax on such income arrived at by it and whatever interest is due under mandatory provisions like sections 234A, 234B and 234C, it has to include that interest also in the settlement. The hon'ble Supreme Court has also made it clear that since the circular is beneficial to the assessee, such benefit can be conferred also on assessees who approach the Settlement Commission under section 245C on such terms and conditions as are specified in the circular. It is for this purpose that section 245F has empowered the Settlement Commission to exercise the power of an income-tax authority under 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 been enforcing the relaxed provisions for the benefit of the assessee in the process o....
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....n or deemed intimation under sub-section (1) of section 143." Section 116 of the Act does not include the Settlement Commission and section 154 empowers only the income-tax authority to rectify its orders and hence, the argument canvassed before us that since the Settlement Commission is not an income-tax authority, it has no power to rectify its earlier order. However, the provisions contained in section 245F(1) of the Act cannot be lost sight of. It states in unequivocal terms that in addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an income-tax authority under this Act. The word "powers" cannot be read in the restricted sense that it is used in respect of only those powers which are mentioned in Chapter XIII-C starting with section 131 to section 136 of the Act. It may also contemplate powers to make assessment, reassessment or rectification. The hon'ble Supreme Court in the case of CIT v. Paharpur Cooling Towers (P.) Ltd. [1996] 219 ITR 618 has, however, kept that issue open by observing that it is not sure as to whether the power under section 147 can also be claimed by the Settlement Commiss....
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....ue as to whether the Settlement Commission is an income-tax authority or not it would not detain us any longer as section 245F specifically states that the Settlement Commission has got all the powers of an income-tax authority, over and above the powers under Chapter XIX-A of the Act. The hon'ble Supreme Court has also made a distinction in Ghaswala's case [2001] 252 ITR 1 by taking the view that the powers of the Central Board of Direct Taxes cannot be exercised by the Settlement Commission and in that sense it is not an income-tax authority. In other words, the Settlement Commission cannot issue circulars which power is vested in the Central Board of Direct Taxes under section 119 of the Act, but it is certainly an income-tax authority to confer the benefit available to the assessee under the circular and for that purpose, section 245F can be pressed into service. If we apply this very analogy to the facts of the present case, even if we assume that the Settlement Commission is not an income-tax authority, for the purpose of exercising powers under section 154 of the Act, it is certainly an income-tax authority to give effect to the judgment of the hon'ble Supreme Court which sa....
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....powers exercised by the income-tax authority under the Act. As observed earlier, the rules of interpretation require that a true meaning and import should be given to the words used in the section and if the language is very clear, the court should not be influenced by the fact that provisions similar to the one under section 254(2) of the Act are absent in Chapter XIX-A and hence the Commission has no power to rectify the order. If the plain language of the section indicates that such powers can be exercised, the court should adhere to the said interpretation rather than be influenced by the provisions made in respect of other authorities. Even otherwise, there is one basic difference between the provisions of sections 255(6) and 245F of the Act. Section 255(6) refers only to powers to be exercised by the Tribunal or an income-tax authority referred to in section 131 of the Act whereas under section 245F, it is mentioned that the Settlement Commission has got all the powers which are conferred on the income-tax authority under the Act. Thus, the scope and ambit of section 245F is wide enough to enable the Commission to rectify the order, and the presence of the provisions like sec....