I.T. Commr., Mumbai v. M/s. Damani Brothers, (SC) BS115138
SUPREME COURT OF INDIA

Before:- N. Santosh Hegde and Doraiswamy Raju, JJ.

Civil Appeal No. 7248 of 1999 with S.L.P. (C) Nos. 18012-18015 of 2000. D/d. 11.2.2002.

Commissioner of Income-tax, Mumbai City-XIII, Mumbai - Appellant

Versus

M/s. Damani Brothers - Respondent

WITH

Commissioner of Income-tax, Ludhiana (Punjab) - Appellant

Versus

Sant Ram Mangat Ram Jewellers and others - Respondents

For the Appellant :- R.P. Bhatt, Sr. Advocate, Ms. Neera Gupta, B.V. Balram Das, Ms Sushma Suri, Advocates.

For the Respondent :- Ms. Shobha Jagtiani, Vijay Kakwani, Bhargsava V. Desai, Ms. Anmand Kumari and Ms. Sweta Kakkad, Advocates.

Income Tax Act, 1961, Sections 245C, 245D, 245E and 245F - Settlement Commission - Powers and scope of its jurisdiction - Held that the question is referred for consideration of larger Bench for detailed consideration of the views expressed in earlier decisions.

[Para 12]

Cases Referred :-

Anjum Mohammed Hussein Ghaswala v. C.I.T., (1998)230 ITR (AT) 1.

C.I.T. v. Anjum M.H. Ghaswala, (2001)252 ITR 1.

C.I.T. v. Express Newspapers Ltd., (1994)206 ITR 443.

C.I.T. v. Paharpur Cooling Towers Pvt. Ltd., (1996)219 ITR 618.

JUDGMENT

Doraiswamy Raju, J. - Pursuant to the order dated 28-3-2001, these matters, which were directed to be delinked from the other batch, have come up for hearing.

Civil Appealn No. 7248 of 1999 :

2. This appeal has been filed ahainst the decision dated 15-4-1999 of the Income-Tax Settlement Commission, Additional Bench, Mumbai. The said decision was rendered by the Special Bench of the Income-Tax Settlement Commission constituted by the Chairman in exercise of his powers under Section 245-BA(5A) of the Income Tax Act (hereinafter referred to as "the Act"). The Reference to the Special Bench was in respect of the following questions :-

The three questions were separately and individually considered and answered. Thereupon, the answers given have been summed up as follows :-

Aggrieved, the Revenue has come up in appeal to this Court.

S.L.P. (C) Nos. 18012-18015 of 2000 :

3. The above Special Leave Petitions have been filed against the order dated 20-9-1999 passed by the Income-Tax Settlement Commissioner (IT and WT), Additional Bench, Calcutta. The said order came to be passed on the applications seeking for rectification of the earlier order dated 16-2-1999 placing reliance upon the decision of the Settlement Commission, Special Bench, in Anjum Mohammed Hussein Ghaswala v. C.I.T., (1998)230 ITR (AT) 1. The Special Bench felt obliged to apply the decision in 230 ITR (AT) 1 and allowed full waiver of interest charged under Section 234-B of the Act for the Assessment Years 1991-92, 1992-93, and for the Assessment Year 1993-94 allowed waiver of interest restricting to 50% of the interest charged under Section 234-B of the Act. Aggrieved, the Revenue has filed these petitions.

4. It may be noticed even at this stage that on appeal filed by the Revenue against the decision reported in (1998) 230 ITR (AT) 1, this Court in the decision reported in C.I.T. v. Anjum M.H. Ghaswala and others, (2001)252 ITR 1, varied the order of the Commission holding that in exercise of its powers under Section 245-D(4) and (6) of the Act, the Settlement Commission had no power to reduce or waive interest statutorily payable under Sections 234-A, 234-B and 234-C of the Act, except to the extent of granting relief in accordance with Circulars issued by the Central Board of Direct Taxes under Section 119, e.g. Circular No. 400/234/95-IT(B), dated May 23, 1996.

5. We have heard arguments in the appeal made by Shri R.P. Bhatt, Senior Advocate, for the appellant and Ms. Shobha Jagtiani, Advocate, for the respondent. In the other appeal, the respondent sought time, but having regard to the decision taken by us to have the matter placed before a larger Bench, both are dealt with together by this order.

6. Serious issue has been raised in the matter before us with directly conflicting stands on either side as to the extent of powers that could be exercised by the Settlement Commission, pursuant to the applications filed under Section 245-C of the Act. Whereas it was vehemently contended for the Revenue that the Settlement Commission is not empowered to waive or reduce the interest under Section 234-A read with Section 220(2) of the Act while exercising its jurisdiction under Section 245-D(4) of the said Act, that the assessment order passed by the Assessing Officer prior to the admission of Settlement Application under Section 245-C will subsist so as to enable the Revenue to continue the recovery proceedings and that on the determination of liability by the Settlement Commission on the application filed before it, the orders passed by the lower authorities would not automatically stand set aside, revoked or cancelled, on behalf of the assessee, a contrary position and stand has been asserted with equal vehemence. Both parties sought to place strong reliance upon the earlier decision of this Court in C.I.T. v. Express Newspapers Ltd., (1994)206 ITR 443.

7. We have carefully considered the matter in the light of the relevant provisions of the Act and decisions to which a reference will be made hereafter. The decision in Express Newspapers Ltd. (supra) has been rendered by a Bench of three learned Judges. That was a case where in a question of the nature now sought to be raised was not directly in issue or under detailed consideration and the judgment also specifically clarifies that the order therein was confined only to the question of jurisdiction of the Settelement Commission and the validity of its order taking seisin of the case. On the conclusion arrived at that the application filed before the Settlement Commission in that case was not in compliance with the first and foremost requirement of Section 245-C(1) the very application was held to be not maintainable and ought to have been rejected in limine. In the course of dealing with the said case, a conspectus of the relevant provisions of law came to be incidentally considered and there has been an observation at page 451 of the Report that "it is equally evident that once an application made under Section 245-C is admitted for consideration (after giving notice to and considering report of the CIT as provided by Section 245-D) the Commission shall have to withdraw the case relating to that assessment year (or years, as the case may be) from the assessing/appellate/revising authority and deal with the case, as a whole, by itself. In other words, the proceedings before the Commission are not confined to the income disclosed before it alone. Once the application is allowed to be proceeded with by the Commission, the proceedings pending before any authority under the Act relating to that assessment year have to be transferred to the Commission and the entire case for that assessment year will be dealt with by the Commission itself."

8. Yet the said decision did not specifically and clearly spell out to what extent it can grant relief or deal with the case and could such consideration be to the extent of over-reaching an earlier order passed and concluded or even if proceedings were pending, to what extent the consideration by the Commission can expand.

9. In C.I.T. v. Paharpur Cooling Towers Pvt. Ltd., (1996)219 ITR 618, the powers of the Settlement Commission came to be considered by a Bench of two learned Judges and Jeevan Reddy, J., who spoke for the earlier Bench, speaking for the Bench in this case also, while dealing with the Scheme of the provisions contained in Chapter XIX-A, has categorically held that not only an application envisaged under Section 245-C can be made only in respect of a pending case and the Commission take over all the proceedings relating to that case which may be pending before any authority under the Act, such power is confined to "the case before the Commission, which means the case relating to the assessment year for which the application for settlement is filed and admitted for settlement". It has also been stated that while Section 245-E empowers the Commission to reopen any completed proceedings connected with the case before it, such power is circumscribed by the requirement expressly stated in that Section that such reopening of completed proceedings should be "necessary or expedient for the proper disposal of the case pending before it". It was also observed therein as follows :-

10. At page 631 of the Report, it is further observed as follows :-

11. In the decision reported in 252 ITR 1 (supra) also, a Constitution Bench of this Court observed that the object of Chapter XIX-A is not to give an amnesty to a tax evader from paying the tax due and that it would be preposterous to hold that the Commission has been conferred with the power for either reducing or waiving the tax due.

12. We find that Section 245-C has undergone a specific amendment of considerable significance with effect from 1-10-1984 under the Taxation Laws (Amendment) Act, 1984 (Act 67 of 1984) making it imperative that an application to be filed is not only to be in such form and in such manner as has been prescribed, but it should contain full disclosure of an income "which has not been disclosed before the Assessing Officer and the manner in which such income has been derived, with the additional amount of income-tax payable "on such income" and with such further and other particulars as may be prescribed. Sub-section (4) of Section 245-D enables the Commission to pass, in accordance with the provisions of the Act, orders on "matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub-section (1) or sub-section (3)." Reference has been earlier made to Section 245-E and the powers thereunder. The scope and impact of Section 245-F(4) are also required to be considered. We further find that nowhere in any of the provisions contained in the said Chapter XIX-A, any specific provision or stipulation is made that once the application is taken up for consideration after notice to the Commissioner and after receipt of the Report from the Commissioner, the proceedings pending on the file of the income-tax authority at various stages shall stand transferred automatically to the Commission to be dealt with as a whole, nor is there any specific indication as to the extent or manner in or up to which the Settlement Commission can deal with claims other than those covered by the application made by an applicant. Does the Settlement Commission get a complete role in total substitution of the other authorities under the Act and, if so, for what purpose and to what extent. An answer to the questions thus raised before us may call for a detailed consideration of the views expressed in the earlier decisions in order either to further elaborate or to confine them in a manner that is desirable or permissible in terms of the Scheme, the language used and the purpose underlying the various statutory provisions. Therefore, we would consider it more appropriate as well as proper to have the matter referred for the consideration of a larger Bench than merely a Bench of two Judges as we are. Such questions, being recurring in nature, deserve to be decided at an early date.

13. We direct that the papers may be placed before the Hon'ble the Chief Justice for appropriate orders as the matter may deserve.

Order accordingly.