Kakadia Builders Pvt Ltd vs Income Tax Officer Ward 1(3)

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)

JUDGMENT

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 Signature Not Verified Digitally signed by

disposed of the petitions(SCAs) filed by the ASHOK RAJ SINGH Date: 2019.03.05 16:47:32 IST Reason:

respondents.

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3. In order to appreciate the issue involved in

these appeals, it is necessary to set out a few

relevant facts infra.

4. The appellants herein are the respondents

(assessee) and the respondents (Revenue) herein are

the petitioners in the petitions(SCAs) before the

High Court out of which these appeals arise.

5. The appellant in S.L.P. No.21139/2017 is a

Private Limited Company and the appellant in SLP

No.21140/2017 is the promoter Director of the said

Company. On 19.01.1994, a search and seizure

operation was carried out in the premises of the

appellants (assessee) under the Income Tax Act,

1961 (hereinafter referred to as “the Act” ).

6. During pendency of the assessment

proceedings, which were initiated for determination

of the tax liability as a result of search and seizure

operation, the appellants on 12.03.1996 and

03.09.1996 filed the settlement applications before 2 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 is 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.”

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18. So far as the decision rendered in Brijlal

(supra) is concerned, this Court examined the

following three questions:

“(I) Whether Section 234­B applies to proceedings of the Settlement Commission under Chapter XIX­A of the said Act?

(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 of the application of 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 in Settlement Application

Nos.10/S/095/95­96/IT & 10/S/029/95­96/IT are

set aside.

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28. We, however, make it clear that we have not

expressed any opinion on the merits of the issue

while having formed an opinion to remand the case

to the Settlement Commission. The Settlement

Commission will accordingly decide the matter

uninfluenced by any observations made by this

Court. Let the matter be decided by the Settlement

Commission within six months from the date of this

order.

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

....……..................................J. [DINESH MAHESHWARI]

New Delhi;

March 05, 2019.

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