KAKADIA BUILDERS PVT LTD vs. INCOME TAX OFFICER WARD 1(3)

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL Nos.2491­2492  OF 2019 (Arising out of S.L.P.(C) Nos.21139­21140 of 2017) Kakadia Builders Pvt. Ltd. & Anr.

….Appellant(s) VERSUS Income Tax Officer Ward 1(3) & Anr.       ….Respondent(s)

J U D G M E N T Abhay Manohar Sapre, J. 1. Leave granted. 2. These   appeals   are   directed   against   the   final judgment   and   order   dated   28.07.2016   passed   by the High Court of Gujarat at Ahmedabad in SCA Nos.7814 & 7820 of 2014 whereby the High Court disposed   of   the   petitions(SCAs)   filed   by   the respondents. 1 Digitally signed by ASHOK RAJ SINGH Date: 2019.03.05 16:47:32 IST Reason: Signature Not Verified

the   Settlement   Commission   and   offered   to   settle their tax matter in accordance with the procedure provided under Chapter XIXA of the Act. 7. On   11.08.2000,   the   Settlement   Commission passed an order under Section 245D(4) of the Act. By the said order, the Settlement Commission made certain   additions   and   waived   interest   chargeable under Sections 234A, 234 B and 234C of the Act. 8. The   appellants   (assessee)   felt   aggrieved   and filed  rectification applications before the Settlement Commission on 29.12.2000 for amending its order dated 11.08.2000. The Revenue (Commissioner of Income Tax) also felt aggrieved by the order dated 11.08.2000   and   filed   a   rectification   application under Section 154 of the Act before the Settlement Commission on 26.07.2002. 9. By   order   dated   11.10.2002,   the   Settlement Commission dismissed the applications filed by the appellants(assessee)   and   partly   allowed   the 3

application   filed   by   the   respondents(Revenue) rectifying its order dated 11.08.2000 insofar as it pertained to waiver of interest, which was granted to the appellants (assessee). The appellants(assessee) felt aggrieved by the order dated 11.10.2002 passed by   the   Settlement   Commission   and   filed     two separate   petitions   (SCA   Nos.15097   and   15101   of 2004) in the High Court of Gujarat. 10. The   High   Court,   by   order   dated   03.03.2014 allowed the petitions(SCAs) and set aside the order dated   11.10.2002   passed   by   the   Settlement Commission and granted liberty to the Revenue to follow the  remedies as  may be  available  to them against   the   order   passed   by   the   Settlement Commission dated 11.08.2000. 11. The Revenue, therefore, felt aggrieved and filed two petitions (SCA Nos.7814 of 2014 and 7820 of 2014)   against   the   order   dated   11.08.2000 questioning its legality. The High Court though in 4

concluding   paragraph   observed   that   the   petitions are   disposed   of   yet   in   substance   allowed   the petitions(SCAs)   and   modified   the   order   dated 11.08.2000   of   the   Settlement   Commission   by passing   the   following   directions   in   paragraph   13 which reads as under: “Under   the   circumstances,   we   direct modification   of   the   order   of   Settlement Commission   dated   11.08.2000   by   reversing the waiver of interest in terms of Settlement Commission’s   directions   contained   in   its order dated 11.10.2002.   In other words, we adopt the same directions for modification of the Settlement Commissioner’s original order dated 11.08.2000.” 12.  It

against

this

order,

the appellants(assessee) felt aggrieved and have filed the present   appeals   by   way   of   special   leave   in   this Court. 13. So,   the   short   question   which   arises   for consideration in these appeals, is whether the High Court was justified in allowing the petitions(SCAs) and   thereby   was   justified   in   modifying   the   order 5

dated   11.08.2000   passed   by   the   Settlement Commission. 14. Heard Mr. R.P. Bhatt, learned senior counsel for   the   appellants   and   Mr.   K.   Radhakrishnan, learned senior counsel for the respondents. 15. Having   heard   the   learned   counsel   for   the parties and  on perusal  of the  record of  the  case including   the   written   submissions   filed   by   the parties,   we are inclined to allow the appeals and remand the case to the Settlement Commission for deciding  the   matter   in  question  afresh  on  merits keeping in view the observations made infra. 16. At   the   outset,   we   consider   it   apposite   to mention that the issue involved in these appeals is governed by the law laid down by the decision of two Constitution   Benches   of   this   Court.   One   was rendered   on   18.10.2001   in  Commissioner   of Income Tax, Mumbai vs. Anjum M.H. Ghaswala & Ors., (2002) 1 SCC 633 and the other was rendered 6

on   21.10.2010   in Brij   Lal   &   Ors.   vs. Commissioner of Income Tax, Jalandhar,  (2011) 1 SCC 1. 17. So far as the decision rendered in  Ghaswala (supra) is concerned, the question involved therein was   whether   the   Settlement   Commission constituted under Section 245B of the Act has the jurisdiction   to   reduce   or   waive   the   interest chargeable under Sections 234A,  234B and 234C of the Act while passing the order of settlement under Section   245D   of   the   Act.   After   examining   the scheme of the Act in the context of the powers of the Settlement   Commission,   Justice   Santosh   Hegde speaking for the Bench held as under: “35.  For the reasons stated above, we hold that the Commission in exercise of its power under   Sections   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 issued by the Board under Section 119 of the Act.” 7

(II) If answer to the above question is in the affirmative, what is the terminal point for levy of such interest — whether such interest should   be   computed   up  to  the   date  of  the order   under   Section   245­D(1)   or   up   to   the date of the order of the Commission under Section 245­D(4)?

(III) Whether the Settlement Commission could   reopen   its   concluded   proceedings   by invoking Section 154 of the said Act so as to levy interest under Section 234­B, though it was not so done in the original proceedings?” 19. After examining these questions, this Court speaking  through  Justice  S.H.   Kapadia,  the   then learned CJI, answered the questions as under : “ (1) Sections 234­A, 234­B and 234­C are applicable   to   the   proceedings   of   the Settlement Commission under Chapter XIX­A of   the   Act   to   the   extent   indicated hereinabove.

(2)   Consequent  upon   Conclusion   (1),   the terminal point for the levy of interest under Section 234­B would be up to the date of the 8

order under Section 245­D(1) and not up to the   date   of   the   order   of   settlement   under Section 245­D(4). (3)   The   Settlement   Commission   cannot reopen its concluded proceedings by invoking Section 154 of the Act so as to levy interest under Section 234­B, particularly, in view of Section 245­I.” 20. Keeping   in   view   the   law   laid   down   by   this Court   in   the   aforementioned   two   decisions,   the question arises for consideration in these appeals is whether the High Court was justified in allowing the petitions(SCAs)  filed by the Revenue. 21. It is not in dispute that when the Settlement Commission passed the first order on 11.08.2000 disposing

the

application

the appellants(aseesee),   the   issue   with   regard   to   the powers   of   the   Settlement   Commission   was   not settled   by   any   decision   of   this   Court.   These   two decisions   were   rendered   after   the   Settlement Commission   passed   the   order   in   this   case. Therefore,   the   Settlement   Commission   had   no 9

occasion to examine the issue in question in the context of law laid down by this Court in these two decisions. However,   the issue in question was, at that   time,   pending   before   the   High   Court   in   the petitions(SCAs). 22. In a situation like the one arising in the case, the High Court instead of going into the merits of the  issue, should  have  set aside the order dated 11.08.2000 passed by the Settlement Commission and   remanded   the   case   to   the   Settlement Commission for deciding the issue relating to waiver of interest payable under Sections 234A , 234B, and 234C of the Act afresh keeping in view the scope and   the   extent   of   powers   of   the   Settlement Commissioner   in relation to waiver of interest as laid down in the said two decisions. 23. The   High   Court,   however,   committed   a jurisdictional   error   when   it   observed   in   Para   13 (quoted   above)   that   they   (High   Court)   adopt   the 10

directions contained in the order of the Settlement Commission dated 11.10.2002 and then went on to make the said directions as a part of the impugned order in relation to waiver of interest. This approach of the High Court is wholly without jurisdiction. 24. The   High  Court  failed   to   see   that   the   order dated   11.10.2002   of   the   Settlement   Commission was already set aside by the High Court itself in the first round vide order dated 03.03.2014 passed in S.C.A. Nos. 15097 & 15101 of 2004 in the light of law   laid   down   by   this   Court   in  Brijlal  (supra) wherein   it   is   laid   down   that   the   Settlement Commission   has   no   power   to   pass   orders   under Section 154 (see conclusion III). 25. Since   the   order   dated   11.10.2002   of   the Settlement Commission was already held bad in law on the ground that it was passed under Section 154 of the Act, the same was neither in existence for any purpose and nor it could be relied upon by the High 11

Court much less for making it a part of their order for issuing a writ. 26. In the light of what we have held above, we consider it apposite to set aside the impugned order and   the   order   dated   11.08.2000   passed   by Settlement Commission to the extent it decided the issue in relation to waiver of interest and remand the case to the Settlement Commission to decide the issue relating to waiver of interest payable by the assessee (appellants herein) afresh keeping in view the   law   laid   down   by   this   Court   in    Ghaswala (supra)   and  Brijlal  (supra)   after   affording   an opportunity to the parties concerned. 27. The   appeals   are   accordingly   allowed.     The impugned order passed by the High Court and the order dated 11.08.2000 passed by the Settlement Commission

Settlement

Application Nos.10/S/095/95­96/IT & 10/S/029/95­96/IT are set aside. 12

………...................................J. [ABHAY MANOHAR SAPRE]

....……..................................J. [DINESH MAHESHWARI] New Delhi; March 05, 2019. 13