# 11 S.C.R. 1167 BRIJ LAL & ORS v. COMMI~ SIONER OF INCOME TAX, JALANDHAR

- **Citation:** [2010] 11 S.C.R. 1167
- **Court:** Supreme Court of India
- **Decided:** 2010-10-21
- **Case number:** Civil Appeal No. 516-527 OF 2004
- **Bench:** S.H. Kapadia, B. Sudershan Reddy, K.S. Panicker Radhakrishnan, Surinder Singh Nijjar, Swatanter Kumar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/11-s-c-r-1167-brij-lal-ors-v-commi-sioner-of-income-tax-jalandhar-26339
- **Pages:** 54

## Headnote

INCOME TAX ACT, 1961:
A
B
c
CHAPTER X1X-A - Sections 245-C, 245-0 (1) and 2450(4) rlw s. 234-B - Settlement Commission - Settlement of
cases - Interest for default in payment of advance tax -
Applicability of s. 234-B - Held: Sections 234-A, 234-B and
0
234-C are applicable to the proceedings of the Settlement
Commission under Chapter XIX-A - Sections 234-B, 2450(2C) and s.245-0(6A) operate in different fields - Section
234-B comes into operation when there is default in payment
of advance tax whereas liability to pay interest u/s 245-0(2C)
arises when the additional amount of income tax is not paid
E
· within time specified u/s 245-0(2A) - Section 245-0 (6A), on
the other hand, imposes liability to pay interest only when the
tax payable in pursuance of an order of Settlement
Commission uls 245-0(4) is not made within the specified
time..
·
F
s. 234-B - Terminal point for levy of interest in settlement
of cases under Chapter XIX-A - Held: Would be up to the date
of the Order u/s 245-0(1) and not up to the date of the Order
of Settlement u/s 245-0(4).
G
ss. 154, 234-B, 245~0(4) and 245-1 - Rectification of
mistake - Levy of interest'- Order of settlement uls 2450(4)
to be conclusive - Held: In view of s. 245-1, the Settlement
Commission cannot re-open its concluded proceedings by
1167
H
1168
SUPREME COURT REPORTS
[2010] 11 S.C.R.
~ invoking s. 154 so as to levy interest uls 234-8 - Section 154
is not applicable to Chapter XIX proceedings.
Pursuant to the referral orders dated 14.12.2004 and
21.1.2005, the instant appeals were referred to the
8
Constitution Bench of the Supreme Court. The questions
for consideration before the Court were: (i) whether s.
2348 of the Income Tax Act, 1961 would apply to
proceedings of the Settlement Commission under
Chapter XIX-A of the said Act? If yes; (ii) what would be
C the terminal point for levy of such interest - whether such
interest should be computed up to the date of the Order
u/s 245-D (1) or up to the date of the Order of the
Commission u/s 245-D (4)? and (iii) whether the
Settlement Commission could reopen its concluded
proceedings by invoking s. 154 of the said Act so as to
D levy interest u/s 234-8, though it was not so done in the
original proceedings?
E
Answering the reference and disposing of the
appeals, the Court
HELD: 1.1 Sections 234-A, 234-B and 234-C of the
Income Tax Act 1961 are applicable to the proceedings
of the Settlement Commission under Chapter XIX-A of the
Act to the extent indicated in the judgment. (para 16]
F [1220-D-E]
1.2 Levy of interest is incidental to the liability and
computation of advance tax. Liability and computation of
advance tax is done under section C of Chapter XVII. On
the other hand, interest for defaults in paymenLof
G advance tax falls u/s 234-8, apart from ss.234-A and 234C, in section F of Chapter XVII. It is significant to note that
s.234-A(4) refers to the increase or reduction of interest
subsequent to the Order of the Commission u/s 245-0(4)
increasing or reducing the amount of tax payable and so
H also s.234-8(4). [para 9] (1207-A-C]
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1169
TAX, JALANDHAR
1.3 Chapter XIX-A deals with Settlement of Cases. A
The word "case" is defined u/s 245-A (b). It is an
exhaustive definition, which makes it clear that an
application for Settlement shall lie only when any
proceedings for assessment or re-assessment or an
appeal or revision in connection with such assessment s
or re-assessment is pending before the Income Tax
Authority. [para 10] [1207-H; 1208-A-B]
1.4 An application for settlement made u/s 245-C(1)
will not be maintainable without full and true disclosure
of the income by the applicant, the manner in which such C
undisclosed income was derived and that the applicant
had furnished his return of income and that the additional
tax payable on such income exceeds the specified
amount. This was the position prior to Finance Act of
2007. However, s.245-C(1A) inter a/ia provides that D
additional amo

## Text

_Characters 0–39,181 of 102,205. This is a partial read: ask again with offset=39181 for what follows._

[2010) 11 S.C.R. 1167
BRIJ LAL & ORS.
v.
COMMI~ SIONER OF INCOME TAX, JALANDHAR
(Civil Appeal No. 516-527 OF 2004)
OCTOBER 21, 2010
[S.H. KAPADIA, CJI, B. SUDERSHAN REDDY, K.S.
PANICKER RADHAKRISHNAN, SURINDER SINGH
NIJJAR AND SWATANTER KUMAR, JJ.]
INCOME TAX ACT, 1961:
A
B
c
CHAPTER X1X-A - Sections 245-C, 245-0 (1) and 2450(4) rlw s. 234-B - Settlement Commission - Settlement of
cases - Interest for default in payment of advance tax -
Applicability of s. 234-B - Held: Sections 234-A, 234-B and
0
234-C are applicable to the proceedings of the Settlement
Commission under Chapter XIX-A - Sections 234-B, 2450(2C) and s.245-0(6A) operate in different fields - Section
234-B comes into operation when there is default in payment
of advance tax whereas liability to pay interest u/s 245-0(2C)
arises when the additional amount of income tax is not paid
E
· within time specified u/s 245-0(2A) - Section 245-0 (6A), on
the other hand, imposes liability to pay interest only when the
tax payable in pursuance of an order of Settlement
Commission uls 245-0(4) is not made within the specified
time..
·
F
s. 234-B - Terminal point for levy of interest in settlement
of cases under Chapter XIX-A - Held: Would be up to the date
of the Order u/s 245-0(1) and not up to the date of the Order
of Settlement u/s 245-0(4).
G
ss. 154, 234-B, 245~0(4) and 245-1 - Rectification of
mistake - Levy of interest'- Order of settlement uls 2450(4)
to be conclusive - Held: In view of s. 245-1, the Settlement
Commission cannot re-open its concluded proceedings by
1167
H
1168
SUPREME COURT REPORTS
[2010] 11 S.C.R.
~ invoking s. 154 so as to levy interest uls 234-8 - Section 154
is not applicable to Chapter XIX proceedings.
Pursuant to the referral orders dated 14.12.2004 and
21.1.2005, the instant appeals were referred to the
8
Constitution Bench of the Supreme Court. The questions
for consideration before the Court were: (i) whether s.
2348 of the Income Tax Act, 1961 would apply to
proceedings of the Settlement Commission under
Chapter XIX-A of the said Act? If yes; (ii) what would be
C the terminal point for levy of such interest - whether such
interest should be computed up to the date of the Order
u/s 245-D (1) or up to the date of the Order of the
Commission u/s 245-D (4)? and (iii) whether the
Settlement Commission could reopen its concluded
proceedings by invoking s. 154 of the said Act so as to
D levy interest u/s 234-8, though it was not so done in the
original proceedings?
E
Answering the reference and disposing of the
appeals, the Court
HELD: 1.1 Sections 234-A, 234-B and 234-C of the
Income Tax Act 1961 are applicable to the proceedings
of the Settlement Commission under Chapter XIX-A of the
Act to the extent indicated in the judgment. (para 16]
F [1220-D-E]
1.2 Levy of interest is incidental to the liability and
computation of advance tax. Liability and computation of
advance tax is done under section C of Chapter XVII. On
the other hand, interest for defaults in paymenLof
G advance tax falls u/s 234-8, apart from ss.234-A and 234C, in section F of Chapter XVII. It is significant to note that
s.234-A(4) refers to the increase or reduction of interest
subsequent to the Order of the Commission u/s 245-0(4)
increasing or reducing the amount of tax payable and so
H also s.234-8(4). [para 9] (1207-A-C]
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1169
TAX, JALANDHAR
1.3 Chapter XIX-A deals with Settlement of Cases. A
The word "case" is defined u/s 245-A (b). It is an
exhaustive definition, which makes it clear that an
application for Settlement shall lie only when any
proceedings for assessment or re-assessment or an
appeal or revision in connection with such assessment s
or re-assessment is pending before the Income Tax
Authority. [para 10] [1207-H; 1208-A-B]
1.4 An application for settlement made u/s 245-C(1)
will not be maintainable without full and true disclosure
of the income by the applicant, the manner in which such C
undisclosed income was derived and that the applicant
had furnished his return of income and that the additional
tax payable on such income exceeds the specified
amount. This was the position prior to Finance Act of
2007. However, s.245-C(1A) inter a/ia provides that D
additional amount of income tax payable in respect of the
income disclosed shall be calculated in accordance with
the provisions of s.245-C(1B). [para 10] [1208-8-0]
1.5 Under sub-s. (1 B) of s.245-C, if the applicant has E
furnished his return in respect of his total income and no
assessment is made, the tax !>t"iall be calculated on the
aggregate of the total income returned and the income
disclosed in the application as if such aggregate was the
total income. The words "regular assessment" are not F
there ins. 245-C (18) (ii). However, u/s 245-C(1C)(b), it is
provided that the additional tax calculated u/s 245-C
(1 B)(ii) shall be reduced by the aggregate of the tax
deducted at source or tax paid in advance and the
amount of tax paid u/s 140-A. The resultant amount is the G
additional tax payable by the assessee. Thus, s.245-C
incorporates within it, the provisions of Chapters XVllB,
XVllC and s.140-A of the Act. [para 1 O] [1208-0-F]
1.6 A careful analysis of the provisions of s. 245-0(1)
and 245-0(4) indicates two distinct stages - one, allowing H
1170
SUPREME COURT REPORTS
(2010] 11 S.C.R.
A the application to be proceeded with (or rejected), and the
other, of disposal of the application by appropriate orders
being passed by the Settlement Commission. In between
the two stages, there are provisions which require the
applicant to pay the additional income tax and interest.
B Under s.245-0(4) on compliance of ss. 245D(2A) and (2C)
and on examination of relevant records and reports, the
Settlement Commission may pass such orders as it
thinks fit on the matter covered by the application and
any other matter relating to the "case" referred to in the
C report of the Commissioner of Income Tax. Even u/s 2450 (7), it is provided that where the settlement becomes
void u/s 245-0(6) the proceedings with respect to the
matters covered by the settlement shall be deemed to
have revived from the stage at which the application was
allowed to be proceeded with by the Settlement
D Commission and the income tax authority may complete
the proceedings within the period mentioned therein.
Thus, s. 245-0(7) brings out the difference between s. 2450(1) stage and s. 245-0(4) stage. Under s.245-0 (6), it is
laid down that every order u/s 245-0 (4) shall provide for
E the Terms of Settlement including any demand by way of
tax, penalty or interest. [para 10) [1209-C-F]
1. 7 Under s. 245-F (1 ), in addition to the powers
conferred on the Settlement Commission under Chapter
F XIX-A, it shall also have all the powers which are vested
in the income tax authority under the Act. However, there
is a significant difference between "procedure for
assessment" under Chapter XIV and "procedure for
settlement" under Chapter XIX-A (s.245-D). Under s. 245G F(4), it is clarified that nothing in Chapter XIX-A shall affect
the operation of any other provision of the Act requiring
the applicant to pay tax on the basis of self-assessment
in relation to matters before the Settlement Commission.
The point to be noted is that several provisions of the Act
H like s. 140A; furnishing of the return of income by the
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1171
TAX, JALANDHAR
applicant as indicated in the proviso (a) to s. 245-C(1 );
A
provisions of the Act governing liability and computation
to pay additional income tax as indicated by proviso (b)
to s. 245-C(1 ); aggregation of total income inter alia in
terms of ss. 143, 144 or 147 as indicated by s.245C(1 B)(iii); aggregation of total income as returned plus
B
income disclosed in the application for settlement as
indicated in s. 245-C(1 B)(ii); the deductions in s. 245-
. C(1C); increase of interest u/s 215(3) pursuant to the
orders of the Settlement Commission and the levy of
interest u/s 234-A(4) and 234-8(4) all bring into Chapter c
XIX-A various provisions of the Act. Thus, while reading
the provisions of ss. 245-C and 245-D one has to keep in
mind various provisions of the Act and the concepts of
self-assessment, assessment, regular assessment and
computation of total income which have been engrafted 0
in Chapter XIX-A. [para 1 OJ [1210-C-H; 1211-A-B]
1.8 Though Chapter XIX- A is a self-contained Code,
the procedure to be followed by the Settlement
Commission u/ss 245-C and 245-D in the matter of
computation of undisclosed income; in the matter of E
computation of additional income tax payable on such
income with interest thereol"; the filing of settlement
application indicating the amount of income returned in
the return of income and the additional income tax
payable on the undisclosed income to be aggregated as
F
total income shows that Chapter XIX-A indicates
aggregation of incomes so as to constitute total income
which indicates that the special procedure under Chapter
XIX-A has inbuilt mechanism of computing total income
which is nothing but assessment (computation of total G
income). The word 'assessment' can be used to cover
the whole procedure to ascertain the liability and
machinery for enforcement. [para 8 and 11] (1211-C-E;
1205-H; 1206-A]
H
'
_,,
1172
SUPREME COURT REPORTS
[201 O] 11 S.C.R.
A
C.A. Abraham v. Income-Tax Officer, Kottayam and
B
Another 1961 ( 2 ) SCR 765=1961) 41 ITR 425 (SC); and
Modi Industries Limited, Modinagar and Others v.
Commissioner of Income Tax, Delhi and Another 1995 (3)
Supp. SCR 642= 216 ITR 759 - referred to.
1.9 Under the Act, tax is payable on the total income
as computed in accordance with the provisions of the
Act. Thus, s. 143(3) provision is sought to be incorporated
in s.245-C. When Parliament uses the words "as if such
aggregate would constitute total income", it presupposes
C that under the special procedure the aggregation of the
returned income plus income disclosed would result in
computation of total income which is the basis for the
levy of tax on the undisclosed income which is nothing
but "assessment'', which takes place at s. 245-0(1) stage.
D However, in that computation, one finds that provisions
dealing with a regular assessment, self-assessment and
levy and computation of interest for default in payment
of advance tax, etc. are engrafted. [ss.245-C (18), 245-C
(1 C), 245-0(6), 245-F(3) in addition to ss. 215(3), 234-A(4)
E and 234-8(4)] [para 11) [1211-F-H; 1212-A-C]
1.10 In the case of Damani Brothers*, a 3- Judge
Bench of this Court, while analyzing the scheme of
Chapter XIX-A, has rightly held that s. 234-8, s. 245-D(2C)
F and s.245-0(SA) operate in different fields. Section 234-B
comes into operation when there is default in payment
of advance tax whereas liability to pay interest u/s 2450(2C) arises when the additional amount of income tax
is not paid within time specified u/s 245-0(2A). Section
G 245-0 (SA), on the other hand, imposes liability to pay
interest only when the tax payable in pursuance of an
order of Settlement Commission u/s 245-0(4) is not made
within the specified time. [para 10) [1209-F-H; 1210-A-B]
*C.I. T. v. Damani Brothers 2002(5) Supp. SCR 424=259
H ITR 475 - upheld.
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1173
TAX, JALANDHAR
2.1 The terminal point for the levy of interest u/s 234A
8 would be up to the date of the order u/s 245-0(1) and
not up to the date of the Order of Settlement u/s 245-0(4).
[para 16] [1220-E-F]
2.2 The proviso to s. 245-C(1 ), ss.245-C(18), 2458
C(1C), 245-0(4) and 245F(3) bring in the concepts of
returned income, self-assessment, aggregation of income
returned and income disclosed as if it is total income; levy
of interest u/s 215(3) read with s. 245-0(4); increase of
interest u/ss 234-A(4) and 234-8 (4) read with s. 245-0(4) C
as also ss. 140A(1A) and (18) read with ss. 234-A and 2348. [para 12] [1212-0-F]
2.3 Section 245-C (1) is voluntary disclosure by the
assessee of his undisclosed income. Under s. 245-C (1 ),
the assessee has to mention in his settlement application D
the additional amount of tax payable by him on such
undisclosed income. Under proviso (a), the application for
settlement shall not be entertained till the assessee has
furnished the return of income which he was required to
file under the Act to the extent of his income. Under E
proviso (b), the assessee has to declare the additional
amount of tax payable. Thus, the two provisos to s. 245C (1) show that Chapter XIX-A, which prescribes a special
procedure for assessment by settlement, contemplates a
pre-assessment collection of tax. With the filing of the F
settlement application and after such application is
allowed to be proceeded with u/s 245-0(1), intimation u/s
143(1), regular assessment u/ss 143(3)/144 and reassessment u/s 147 lose their existence, as u/ss 245-C(1A)
and (18) it is only the income disclosed in the return of G
income before the A.O. alone which survives for
consideration by the Settlement Commission for settling
the amount of income which is not disclosed in the return.
Under s. 245-C (18)(ii), if the applicant has furnished a
return in respect of the total income, whether or not H
1174
SUPREME COURT REPORTS
[2010] 11 S.C.R.
A assessment is made in pursuance of the return, the
additional amount of income tax payable in respect of the
total income disclosed shall be on the aggregate of the
total income returned and the income disclosed in his
application for settlement as if such aggregate was his
B total income. This is pre-assessment collection of tax.
Such pre- assessment is based on the estimation of the
current income and tax thereon by the applicant himself.
[para 12] [1213-C-H; 1214-A-8]
2.4 When the Settlement Commission accepts the
C Voluntary Disclosure by the application for settlement, s.
234-8 (2) steps in. It is significant that the assessee is
liable to pay advance tax, he commits default in payment
to the extent of the undisclosed income but he offers to
pay additional income tax then interest has to be
D calculated in accordance with ss. 207, 208 and 234-8(2)
up to the date on which such tax is paid. This is not the
interest which assessee has to pay after assessment u/s
245-D (4). Under ss. 245-C (18) and (1C) the additional
amount of income tax payable on the undisclosed income
E shall be on the total income as calculated under s. 245C(18). On computation of total income u/ss 245-C (18)
and (1 C), interest follows such computation. It is important
to note that interest follows computation of total income.
Once such computation takes place u/s 245-C(18) then
F s. 234-8(2) applies. The said sub-section deals with the
situation where before determination of total income u/s
143(1) or 143(3) tax is paid u/s 140A or otherwise interest
shall be calculated in accordance with s. 234-8(1) up to
the date on which tax is so paid. In that sense an
G application u/s 245-C (1) is a return. Section 245-C (1)
deals with computation of "total income". Thus, ss. 234A, 234-8 and 234-C are applicable upto the stage of s.2450(1) order passed by the Settlement Commission, i.e.
admission of the case. [para 12 and 14) [1214-8-F; 1215H F; 1217-F-G]
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1175
TAX, JALANDHAR
2.5 Besides, Chapter XIX-A refers to procedure of A
settlement (s. 245-D (1)). Section 245-D (1) provides for
expeditious recovery of tax by way of pre-assessment
collection. Interest on default in payment of advance tax
comes u/ss 234-A, 234-B, 234-C, which fall in Chapter
XVII which deals with collection and recovery of tax. It
B
is important to note that interest follows computation of
additional pay~ent of income tax u/ss 245-C (1 B) and
(1 C). This is how ss. 234-A, 234-B and 234-C get engrafted
into Chapter XIX-A at the stage of s. 245-D (1 ). Till the
Settlement Commission decides to admit the case u/s c
245-D (1 ), the proceedings under the normal provisions
remain open. But, once the Commission admits the case
after being satisfied that the disclosure is full and true
· then the proceedings commence with the Settlement
Commission. In the meantime, applicant has to pay the
0
additional amount of tax with interest without which the
application for settlement would not be maintainable.
Thus, interest u/s 234-B would be payable up to the stage
of s. 245-D (1 ). This view is supported by the amendment
made by Finance Act of 2007 w.e.f. 1.6.2007. in which
interest is required to be paid for maintainability of the
E
· Application for Settlement. [para 12] [1214-F-H; 1215-AC]
2.6 Parliament has not extended the provisions and
the liability to pay interest beyond the date of application
F
for settlement. This is the position even after, Finance Act
of 2007. Once this position is taken, s. 140-Ais attracted.
When an assessee has paid interest u/ss. 234-A, 234-B
and 234-C in self-assessment u/s. 140-A, which is similar
to the scheme of s.245-C (1 ), and once the Settlement G
Commission admits the application for settlement, one
finds that even u/s 140-A(1B) interest payable u/s. 234-B
has to be computed on an amount equal to the assessed
tax as defined in the Explanation to mean tax on the total
income as declared in the return. Under sub-s. (1 B) of H
1176
SUPREME COURT REPORTS
[2010) 11 S.C.R.
A
s.140-A interest payable u/s. 234-B can also be computed
on an amount by which the advance tax paid falls short
of the assessed tax as defined in the Explanation thereto.
Thus, there is no provision under Chapter XIX-A or even
u/s.140A (dealing with self-assessment) to charge
B
interest beyond the date of application for settlement
after the same is admitted by the Commission u/s.2450(1 ). [para 14] [1215-F-H; 1216-A-C]
2.7 Moreover, under the Act, there is a difference
between assessment in law [regular assessment or
C
assessment u/s 143(1)] and assessment by settlement
under Chapter XIX-A. The order u/s.245-0(4) is not an
order of regular assessment. It is neither an order u/s.
143(1) or 143(3) or 144. The making of the order of.
assessment is an integral part of the process of
D
assessment. [ss. 139 to 158) No such steps are required
to be followed in the case of proceedings under Chapter
XIX-A. The said Chapter contemplates the taxability
determined with respect to undisclosed income only by
the process of settlement/ arbitration. Thus, the nature
E
of the orders u/ss. 143(1 ), 143(3) and 144 is different from
the orders of the Settlement Commission u/s 245-0(4).
[para 14) (1216-C-G]
2.8 Further, the jurisdiction of the A.O. is not fettered
F
merely because the applicant has filed the Settlement
Application. The Act does not contemplate stay of the
proceedings during that period, i.e., when the Settlement
Commission is deciding whether to proceed or reject the
settlement application. The jurisdiction of the Settlement
G Commission to proceed commences only after an order
is passed under section 2450(1 ). After making an
application for settlement the applicant is not allowed to
withdraw it [s. 245C(3)]. Once the case stands admitted,
the Settlement Commission shall have exclusive
H jurisdiction to exercise the powers of the Income Tax
Authority. The order of Settlement Commission u/s
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1177
TAX, JALANDHAR
2450(4) shall be final and conclusive u/s 2451 subject to A
two qualifications under which it can be recalled, viz.,
fraud and misrepresentation but even here it is important
to note that u/s 2450(7) where the settlement becomes
void on account of fraud and misrepresentation the
proceedings with respect to the matters covered by the
B
settlement shall be deemed to have been revived from
the stage at which the application was allowed to be
proceeded with by the Settlement Commission. This
further supports the view that there are two distinct
stages under Chapter XIX-A and that the Legislature has c
not contemplated the levy of interest between order u/s
2450(1) stage and s.2450(4) stage. Thus, interest u/s
2348 will be chargeable till the order of the Settlement
Commission u/s 2450(1), i.e., admission of the case. (para
14) (1217-A-G]
.
Commissioner of Income Tax v. Anjum M.H. Ghaswala
and others 2001 (4) Supp. SCR 303=252 ITR 1 - referred
to.
D
2.9 Lastly, the expression "interest" in s. 245-(6A)
E
fastens the liability to pay interest only when the tax
payable in pursuance of an order u/s 245-0(4) is not paid
within the specified time and which levy is different from
liability to pay interest u/s 234-8 or u/s 245-D(2C). [para
14] (1217-F-G]
F
C.I. T. v. Damani Brothers 2002(5) Supp. SCR 424=259
ITR 475 - referred to.
3.1 The Settlement Commission cannot re-open its
concluded proceedings by invoking s. 154 of the Act so G
as to levy interest u/s 234-8, particularly, in view of s. 2451. Invocation of s.154 (held to be inapplicable to Chapter
XIX-A proceedings) cannot be justified. Descriptively, it
can be stated that assessment in law is different from
assessment by way of settlement. A reading of s.245-D H
1178
· SUPREME COURT REPORTS
[201 OJ 11 S.C.R.
A (6) with s. 245-1 makes it clear that every order of
settlement passed u/s 245-0 (4) shall be final and
conclusive as to the matte.rs contained therein and that
the same shall not be re-opened except in the case of
fraud and misrepresentation. [para 10, 15 and 16] [1219B D; 1220-F; 1210-8-C]
3.2 Proceedings before Settlement Commission are
similar to arbitration proceedings. It contemplates
assessment by settlement and not by way of regular
C assessment or assessment u/s 143(1) or u/s 143(3) or u/
s 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. Under the Act, procedure for
assessment falls in Chapter XIV (in which s. 154 falls)
which is different from procedure for settlement in
D Chapter XIX-A in which ss. 245-C and 245-0 fall.
Provision for levy of interest for default in payment of
advance tax u/s 234-8 falls in Chapter XVII [Section F]
which deals with collection and recovery of tax which is
incidental to the liability to pay advance tax u/s 207
E (which is also in Chapter XVII) and to the computation of
total income in the manner indicated. under Chapter XIXA vide ss. 245-C(18) and 245-C(1 C) read with the provisos
to s. 245-C(1) on the additional income tax payable on the
undisclosed income. Further, if one examines the
F provisions of ss. 245-C(18) and 245-C(1 C), 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 return, if he has filed but
orders of assessment are not passed or if the
G proceedings are pending for re-assessment u/s 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
H as assessed in the earlier proceedings for assessment
-
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1179
TAX, JALANDHAR
u/s 143 or u/s. 144 or u/s 147 [s. 245-C(1B)]. The point to
A
be noted is that in computation of additional income tax
payable by the assessee, there is no mention of s. 154.
On the contrary, u/s 245-1 the order of the Settlement
Commission is made final and conclusive on matters
mentioned in the application for settlement except in the
B
two cases of fraud and misrepresentation in which case
the matter could be re-opened by way of review or recall.
[para 15] [1218-B-H; 1219-A-B]
3.3 Like ITAT, the Settlement Commission is a quasijudicial body. Under s. 254(2), the ITAT is given the power
C
to rectify, but no such power is given to the Settlement
Commission. Thus, the Settlement Commission cannot
reopen its concluded proceedings by invoking s. 154 of
the Act. [para 15] [1219-B-C]
3.4 Lastly, one must keep in mind the difference
between review/recall of the order and rectification u/s
154. The Schedule of Chapter XIX-A does not contemplate
invocation of s. 154 otherwise there would be no finality
to the assessment by settlement which is different from
assessment under Chapter XIV where there is an appeal,
revision, etc. Settlement of liability and not determination
of liability is the object of Chapter XIX-A. Even otherwise,
invocation of s. 154 on facts of this batch of cases is not
justified. [para 15] [1219-C-E]
Commissioner of Income Tax v. Anjum M.H. Ghaswala
and others 200'! (4) Supp. SCR 303= 252 ITR 1; and CIT v.
Hindustan Bulk Carrier 2002 (5) Suppl. SCR 387 =(2003) ·
259 ITR 449 - referred to.
Case Law Reference:
1995(3) Supp. SCR 642
referred to
para 7
1961 (2) SCR 765
referred to
para 7
2002 (5) Suppl. SCR 387 referred to
para 7
D
E
F
G
H
1180
SUPREME COURT REPORTS
[201 OJ 11 S.C.R.
A
2002(5) Supp. SCR 424
2001 (4) Supp. SCR 303
upheld
para 10
referred to
para 14
B
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 516527 of 2004.
From the Judgment & Order dated 07.03.2003 of the
Income Tax Settlement Commission (IT & WT), Kolkata in
Settlement Applications Nos. 1/J/297/89-IT, 1/J/295/89-IT, 1/
J/294/89-IT, 1/J/299/89-IT, 1/J/296/89-IT, 1/J298/89-IT, 1/J/302/
C 90-IT, 1/J/307/90-IT, 1/J/305/90-IT, 1/J/305/90-IT, 1/J/304/90IT, 1/J/301/90-IT.
With
· C.A. Nos. 280-286 of 2005, 8324-8328 of 2004, 603, 990,
D 925, 924 of 2005, Writ Petition (CO Nos. 556, 555 of 2004,
C.A. Nos. 2247-2250, 923, 995, 994 of 2005, Writ Petition (C)
Nos. 63, 61, .62, 60 of 2005, C.A. Nos. 2246, 3231-3232 of
2005, 3091, 3087, 3092, 4599-4601, 528-531 of 2004, Writ
Petition (C) Nos. 325, 324, 326 of 2004, C.A. Nos. 992 of
E 2007, 9174 of 2010, 532 of 2004, 604 of 2005.
Gopal Subramanium, SG, C.S. Aggarwal, Parus F. Kaka,
R.P. Bhat, O.S. Bajpai, Rajiv K. Garg, Vivek Verma, Ashish
Garg, Vineet Garg, A.D.N. Rao, Preetesh Kapur, G.S. Pikale,
F E.C. Agarwala, Mahesh Agarwal, Rishi Agrawala, Amit Kumar
Sharma, Rohma Hameed, Rajiv Tyagi, Vijay Verma, Chanchal
Biswal, Asha Gopalan Nair, Balaji Subramanium, Aman
Ahluwalia, B.V. Balaram Das,Subramonium Prasad, Ajay
Majithia, Manish Kanth, Rajesh Kumar, Dr. Kailash Chand,
Chirag M. Shroff, Dattatray Vyas, Ajay Vohra, Kavita Jha, Amit
G Sachdeva, Prem Malhotra, Rachna Gupta, C.S. Jain, Y. Raja
Gopala Rao, Krishna, V.N. Jha, V.N. Raghupathy, Ajay Jain,
Rajiv Tyagi, R.K. Raghavan, Chanchal Biswal, Manjit Singh,
Kamal Mohan Gupta, Santosh Aggarwal, Bhargava V. Desai,
Rahul Gupta, Nikhil Sharma, Vivek Verma, Pallavi Mohan,
H Pa_nkaj Jain, Abhay Jain, Rakesh Jain, Manish Kr. Choudhary,
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1181
TAX, JALANDHAR [S.H. KAPADIA, CJI.]
Namita Chaudhary, S. K. Verma, Mohit Chaudhary, Ashok A
Kulkarni, Puja Sharma, A. Das, Rituraj Chaudhary fof the
appearing parties.
The Judgment of the Court was delivered by
S.H. KAPADIA, CJI. 1. Leave granted.
2. Vide referral orders dated 14.12.2004 and 20.1.2005
the following questions have been referred to the Constitution
Bench of this Court:
(i)
Whether sections 234A, 2348 and 234C of
the Income Tax Act, 1961 (for short "the Act")
are at all applicable to proceedings of the
Settlement Commission under Chapter XIXA of the Act?
B
c
D
(ii)
Whether the Settlement Commission can
reopen its concluded proceedings by having
recourse to section 154 of the Act so as to
levy interest under sections 234A, 2348 and
234C of the Act, though it was not so done E
in the original proceedings?
(iii)
Whether in the absence of period of
limitation prescribed for making the order of
the Settlement, the relevant date for F
determining the quantum of interest could be
the date of the said order?
3. For the sake of convenience, after hearing learned
counsel on both sides, we reframe the above questions.
(I)
Whether section
2348
applies
to
proceedings of the Settlement Commission
under Chapter XIX-A of the said Act?
G
(II}
If answer to the above question is in the H
A
B
c
1182
SUPREME COURT REPORTS
[201 OJ 11 S.C.R.
(Ill)
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 2450(1) or up to the
date of the Order of the Commission under
section 2450(4)?
Whether the Settlement Commission could
reopen its concluded proceedings by
invoking section 154 of the said Act so as
to levy interest under section 2348, though
it was not so done in the original
proceedings?
Relevant provisions of the Income Tax Act, 1961:
o
4. In order to answer the reframed questions, quoted
E
F
G
H
above, it would be necessary for us to cite the relevant
provisions of the Act and the Income Tax Rules, as they stood
at the material time, which are as under:
Definitions
2(40)
1"regular assessment" means the assessment
made under sub-section (3) of section 143 or section 144;
2(45) "total income" means the total amount of income
referred to in section 5, computed in the manner laid down
in this Act;
Chapter XIV - Procedure for Assessment
Self-assessment
140A. (1) Where any tax is payable on the basis of any
return required to be furnished under section 139 or
section 142 or as the case may be, section 148, after
taking into account the amount of tax, if any, already paid
under any provision of this Act, the assessee shall be
BRIJ LAL & ORS. v. COMMISSIONER 0E_ INCOME 1183
TAX, JALANDHAR [S.H. KAPADIA, CJI.]
liable to pay such tax together with interest payable under
A
any provision of this Act for any delay in furnishing the return
or any default or delay in payment of advance tax, before
furnishing the return and the return shall be accompanied
by proof of payment of such tax and interest.
Explanation.-Where the amount paid by the assessee
under this sub-section falls short of the aggregate of the
tax and interest as aforesaid, the amount so paid shall first
be adjusted towards the interest payable as aforesaid and
B
the balance, if any, shall be adjusted towards the tax
C
payable.
(2) After a regular assessment under section 143 or
section 144 has been made, any amount paid under subsection (1) shall be deemed to have been paid towards
such regular assessment.
D
Assessment
143. (1)(a) Where a return has been made under section
139, or in response to a notice under sub-section (1) of
E
section 142, -
(i) if any tax or interest is found due on the basis of
such return, after adjustment of any tax deducted at source,
any advance tax paid and any amount paid otherwise by
way of tax or interest, then, without prejudice to the
F
provisions of sub-section (2), an intimation shall be sent
to the assessee specifying the sum so payable, and such
intimation shall be deemed to be a notice of demand
issued under section 156 and all the provisions of this Act
. shall apply accordingly;
G
***
***
***
Provided also that an intimation for any tax or interest due
under this clause shall not be sent after the expiry of two
years from the end of the assessment year in which the
H
A
B
c
D
E
F
1184
SUPREME COURT REPORTS
[201 O] 11 S.C.R.
income was first assessable.
(b) Where as a result of an order made under sub-section
(3) of this section or section 144 or section 147 or section
154 or section 155 or section 250 or section 254 or section
260 or section 262 or section 263 or section 264, or any
order of settlement made under sub-section (4) of section
2450 relating to any earlier assessment year and passed
subsequent to the filing of the return referred to in clause
(a), there is any variation in the carry forward loss,
deduction, allowance or relief claimed in the return, and as
a result of which, -
(i) if any tax or interest is found due, an intimation shall be
sent to the assessee specifying the sum so payable, and
such intimation shall be deemed to be a notice of demand
issued under section 156 and all the provisions of this Act
shall apply accordingly, and
(ii) if any refund is due, it shall be granted to the assessee:
Provided that an intimation for any tax or interest due under
this clause shall not be sent after the expiry of four years
from the end of the financial year in which any such order
was passed.
(4) Where a regular assessment under sub-section (3) of
this section or section 144 is made,-
(a) any tax or interest paid by the assessee under
sub-section (1) shall be deemed to have been paid
towards such regular assessment ;
G Rectification of mistake.
H
154. (1) With a view to rectifying any mistake apparent from
the record an income-tax authority referred to in section
116 may,-
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1185
TAX, JALANDHAR [S.H. KAPADIA, CJI.]
(a) amend any order passed by it under the A
provisions of this Act ;
(b) amend any intimation sent by it under sub-section
(1) of section 143. or enhance or reduce the amount of
refund granted by it under that sub-section.
B
(1A) Where any matter has been considered and decided
in any proceeding by way of appeal or revision relating to
an order referred to in sub-section (1 ), the authority
passing such order may, notwithstanding· anything
contained in any law for the time being in force, amend the C
order under that sub-section in relation to any matter other
than the matter which has been so considered and
decided.
(2) Subject to the other provisions of this section, the 0
authority concerned-
(a) may make an amendment under sub-section (1)
of its own motion, and
(b) shall make such amendment for rectifying any E
such mistake which has been brought to its notice by the
assessee, and where the authority concerned is the Deputy
Commissioner (Appeals), or the Commissioner (Appeals)
by the Assessing Officer also.
F
(3) An amendment, which has the effect of enhancing an
assessment or reducing a refund or otherwise increasing
the liability of the assessee, shall not be made under this
section unless the authority concerned has given notice to
the assessee of its intention so to do and has allowed the
assessee a reasonable opportunity of being heard.
G
Chapter XVII - Collection and Recovery of Tax
Liability for payment of advance tax.
H
1186
SUPREME COURT REPORTS
[2010) 11 S.C.R.
A
207. Tax shall be payable in advance during any financial
year, in accordance with the provisions of sections 208 to
219 (both inclusive), in respect of the total income of the
assessee which would be chargeable to tax for the
assessment year immediately following the financial year,
B
such income being hereafter in this Chapter referred to as
"current income".
c
D
E
F
G
H
Computation of advance tax.
209. (1) The amount of advance tax payable by an
assessee in the financial year shall, subject to the
provisions of sub-sections (2) and (3), be computed as
follows, namely:-
(a) where the calculation is made by the assessee for the
purposes of payment of advance tax under sub-section (1)
or sub-section (2) or sub-section (5) or sub-section (6) of
section 210, he shall first estimate his current income and
income-tax thereon shall be calculated at the rates in force
in the financial year;
Payment of advance tax by the assessee of his own
accord or in pursuance of order of Assessing Officer.
210. (1) Every person who is liable to pay advance tax
under section 208 (whether or not he has been previously
assessed by way of regular assessment) shall, of his own
accord, pay, on or before each of the due dates specified
'in section 211, the appropriate percentage, specified in
that section, of the advance tax on his current income,
calculated in the manner laid down in section 209.
(2) A person who pays any instalment or instalments of
advance tax under sub-section (1 ), may increase or
reduce the amount of advance tax payable in the remaining
instalment or instalments to accord with his estimate of his
current income and the advance tax payable thereon, and
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1187
TAX, JALANDHAR [S.H. KAPADIA, CJI.]
make payment of the said amount in the remaining
A
instalment or instalments accordingly.
Interest payable by assessee.
215. (1) Where, in any financial year, an assessee has
8
paid advance tax under section 209A or section 212 on
the basis of his own estimate (including revised estimate),
and the advance tax so paid is less than seventy-five per
cent of the assessed tax, simple interest at the rate of
fifteen per cent per annum from the 1st day of April next
following the said financial year up to the date of the regular C
assessment shall be payable by the assessee upon the
amount by which the advance tax so paid falls short of the
assessed tax:
Provided that in the case of an assessee, being a o
company,. the provisions of this sub-section shall have
effect as if for the words "seventy-five per cent', the words
"eighty-three and one-third per cent" had been substituted.
(2) Where before the date of completion of a regular
assessment, tax is paid by the assessee under section
E
140A or otherwise,-
(i) interest shall be calculated in accordance with the
foregoing provision up to the date on which the tax is so
paid; and
(ii) thereafter, interest shall be calculated at the rate
aforesaid on the amount by which the tax as so paid (in
so far as it relates to income subject to advance tax) falls
short of the assessed tax.
(3) Where as a result of an order under section 147 or
section 154 or section 155 or section 250 or section 254
F
G
or section 260 or section 262 or section 263 or section
264 or an order of the Settlement Commission under subsection (4) of section 2450, the amount on which interest H
A
B
c
D
E
F
G
1188
SUPREME COURT REPORTS
[2010] 11 S.C.R.
was payable under sub-section (1) has been increased or
reduced, as the case may be, the interest shall be
increased or reduced accordingly, and-
(i) in a case where the interest is increased, the Assessing
Officer shall serve on the assessee, a notice of demand
in the prescribed form specifying the sum payable, and
such notice of demand shall be deemed to be a notice
under section 156 and the provisions of this Act shall apply
accordingly;
(ii) in a case where the interest is reduced, the excess
interest paid, if any, shall be refunded.]
(4) In such cases and under such circumstances as may
be prescribed, the Assessing Officer may reduce or waive
the interest payable by the assessee under this section.
(5) In this section and sections 217 and 273, "assessed
tax" means the tax determined on the basis of the regular
assessment (reduced by the amount of tax deductible in
accordance with the provisions of sections 192 to 194,
section 194A, section 194C, section 1940, section 195
and section 196A so far as such tax relates to income
subject to advance tax and so far as it is not due to
variations in the rates of tax made by the Finance Act
enacted for the year for which the regular assessment is
made.
(6) Where, in relation to an assessment year, an
assessment is made for the first time under section 147,
the assessment so made shall be regarded as a regular
assessment for the purposes of this section and sections
216, 217 and 273.
Interest for defaults in furnishing return of income.
234A. (1) V\[here the return of income for any assessment
H
year under sub-section (1) or sub-section (4) of section
BRIJ LAL & ORS. v. COMMISSIONER OF INCOME 1189
TAX, JALANDHAR [S.H.