BRIJ NAYYAR vs. INCOME TAX SETTLEMENT COMMISSION, DELHI

The short question that arises for consideration in this petition filed under Articles 226/227 of the Constitution of India is whether the Settlement Commission could reopen its concluded proceedings by invoking Section 154 of the Income Tax Act, 1961 (in short, “the Act”) so as to levy interest under section 234B of the Act if it was not done in the original proceedings.

A few facts relevant for the decision of this case, as narrated in the petition may be noticed. The petitioner is an individual and proprietor of M/s Fashion Boom, Ludhiana. She derives income from the business of purchase and sale of woollen/semi woollen shawls. The CWP no.11693 of 2003 2 Settlement Commission vide order dated 21.3.2003, Annexure P.1 rectified its earlier order dated 21.6.1999, Annexure P.2 passed under section 245D(4) of the Act. The Settlement Commission vide its order dated 21.6.1999 had waived interest under section 234A of the Act for late filing of return as it was late for less than one year in view of decision of the Special Bench of the Tribunal in the case of M/s Gulraj Engineering Construction Company, and for non-payment/less payment of tax, interest under section 234B of the Act was to be paid on income so settled upto the date of filing of return and balance was waived as per powers under section 245D(6) of the Act. On 18.3.2003, a miscellaneous petition was filed by the Income Tax Department, Annexure P.7 seeking rectification of the said order on the ground that there was mistake apparent from the record in giving direction for not charging interest under section 234A of the Act and for charging interest under section 234B of the Act upto the date of filing of return for non payment of advance tax in view of judgment of the Hon'ble Supreme Court in the case of CIT v. Arjum M.H.Ghaswala and others, (2001) 252 ITR 1. The Settlement Commission considered the matter and allowed the necessary rectification to be carried out in the order dated 21.6.1999 and accordingly interest under sections 234A and 234B of the Act was levied. Consequently demand was raised vide Annexure P.

Hence this petition.

Learned counsel for the petitioner relying upon judgment of the Apex Court in Brij Lal and others v. Commissioner of Income Tax, (2010) 328 ITR 477 and this Court in M/s Bansal Engineering

Learned counsel for the respondents, however, could not dispute the aforesaid proposition.

After hearing learned counsel for the parties, we find that the matter stands concluded by the judgment of the Hon'ble Supreme Court in Brij Lal's case (supra), wherein it was held as under:- “Proceedings before Settlement Commission are similar to arbitration proceedings. It contemplates assessment by settlement and not by way of regular assessment or assessment under section 143(1) or under section 143(3) or under section 144. In that sense,it is a Code by itself. It does not begin with the filing of the return but by filling the application for settlement. Under the Act, procedure for assessment falls in Chapter XIV (in which section 154 falls) which is different from procedure for settlement in Chapter XIX-A in which sections 245C and 245D fall. Provision for levy of interest for default in payment of advance tax under section 234B falls in Chapter XVII (Section F) which deals with collection and recovery of tax which is incidental to the liability to pay advance tax under section 207(which is also in Chapter XVII) and to the computation of total income in the manner indicated under Chapter XIX-A vide sections 245C(1B) and 245C(1C) read with the proviso to section 245C (1) on the additional income tax payable on the undisclosed income. Further,if one examines the provisions of sections 245C (1B) and 245(1C), one finds that various

In view of the above, the writ petition is allowed and the impugned order dated 21.3.2003, Annexure P.1 is, hereby, set aside.