Case Law Details
G.Gopalakrishna Pillai Vs Income Tax Settlement Commission (Madras High Court)
In G. Gopalakrishna Pillai Vs Income Tax Settlement Commission, the Madras High Court addressed whether the Settlement Commission’s orders could be rectified under Section 154 of the Income Tax Act. Both parties agreed that, following the precedent set in Brij Lal & Others v. Commissioner of Income Tax (2010), such rectification was not permissible. The court emphasized that the Settlement Commission operates under a distinct procedural code separate from the assessment procedures covered under Chapter XIV, which includes Section 154. The judgment highlighted that the Settlement Commission’s proceedings are akin to arbitration, and its decisions are final under Chapter XIX-A, with no provision for post-settlement rectification under Section 154. The court quashed the order dated November 20, 2003, as it was based on an incorrect application of the rectification provisions. Thus, the petition was allowed, reinforcing the principle that Settlement Commission orders cannot be altered post-facto through rectification processes.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Both Mr.R.Kumar, learned counsel, for Mr.T.N.Seetharaman, learned counsel for the petitioner and Mr.A.P.Srinivas, learned Senior Standing Counsel for the respondents would accede to the position that the issue that arises in this matter relating to the assumption of jurisdiction by the Assessing Officer for rectification under Section 154 of an order of the Settlement Commission should be decided adverse to the Department and in favour of the petitioner by virtue of a judgment in the case of Brij Lal and Others v. Commissioner of Income Tax [(2010) 328 ITR 477).
2. The operative portion of the judgment reads thus:
‘III. Whether the Settlement Commission can re-open its concluded proceedings by having recourse to Section 154 of the Act so as to levy interest under section 234B, if it was not done in the original proceedings?
15. As stated, proceedings before Settlement Commission are similar to arbitration proceedings. It on templates 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 of the Act. In that sense, it is a Code by itself. It does not begin with the filing of the return but by filing the application for settlement. As stated above, 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 as stated above 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 provisos 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 245C(1C), one finds that various situations are taken into account while computing the additional amount of tax payable, viz., if the applicant has not filed his returns, if he has filed but orders of assessment are not passed or if the proceedings are pending for re-assessment under section 147 (again in Chapter XIV) or by way of appeal or revision in connection with such re-assessment and the applicant has not furnished his return of total income in which case tax has to be calculated on the aggregate of total income as assessed in the earlier proceedings for assessment under section 143 or under section 144 or under section 147 [see section 245C(1B)]. The point to be noted is that in computation of additional income tax payable by the assessee, there is no mention of section 154. On the contrary, under section 245I the order of the Settlement Commission is made final and conclusive on matters mentioned in the application for settlement except in the two cases of he Settlement Commission passes the order under ection 245D(4). This decision was delivered on 7.12.2002 after the judgment of this Court in Ghaswala (supra). On the same day, the same Bench in the case of Damani Brothers (supra) held that interest charged under section 234B becomes payable on the income disclosed in the return and the income disclosed before the Settlement Commission; that, such interest is chargeable till the Commission acts in terms of section 245D(1) and that after the Settlement Commission allows the application for settlement to be proceeded with there will be no further charge of interest under section 234B. Thus, even on the question of terminus there was lot of controversy and in the circumstances, we are of the view that invocation of section 154 (held to be inapplicable to Chapter XIX-A proceedings) cannot be justified.’
3. In light of the aforesaid admitted position, the impugned order dated 20.11.2003 is quashed and this writ petition is allowed. No costs.
Author Bio
