# KAKADIA BUILDERS PVT. LTD. & ANR v. INCOME TAX OFFICER WARD 1(3) & ANR

- **Citation:** [2019] 5 S.C.R. 279
- **Court:** Supreme Court of India
- **Decided:** 2019-03-05
- **Case number:** Civil Appeal Nos.2491-2492 of 2019
- **Bench:** Abhay Manohar Sapre, Dinesh Maheshwari
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/kakadia-builders-pvt-ltd-anr-v-income-tax-officer-ward-1-3-anr-33814
- **Pages:** 8

## Headnote

Income Tax Act, 1961 - ss. 154, 234A, 234B and 234C,
Chapter XIXA - The appellants-assessee filed settlement applications
before the Settlement Commission during the pendency of the
assessment proceedings for determination of the tax liability - On
11.08.2000, the Settlement Commission passed an order and made
certain additions and waived interest chargeable u/ss. 234A, 234B
and 234C of the Act - Aggrieved, both appellant and Revenue filed
rectification applications - Consequent to which, Settlement
Commission by order dated 11.10.2002 rectified its order dated
11.08.2000 u/s.154 of the Act insofar as it pertained to waiver of
interest, which was granted to the appellant-assessee - However,
High Court set aside the Settlement Commission's order dated
11.10.2002 - Thereafter, Revenue filed petitions against order dated
11.08.2000 in the High Court - High Court modified order of the
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 - On appeal, held: The approach of
the High Court was without jurisdiction - 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
passed in the light of the law laid down by the Supreme Court in
Brijlal case wherein it held that the Settlement Commission had no
power to pass orders u/s. 154 of the Act - Therefore, keeping in
view the law laid down in Ghaswala case and Brijlal case, the
impugned order of the High Court and order dated 11.08.2000
passed by the Settlement Commission to the extent it decided the
issue in relation to waiver of interest set aside - Case remanded to
the Settlement Commission to decide the issue relating to waiver of
interest payable by the assessee afresh.
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[2019] 5 S.C.R. 279
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Allowing the appeals, the Court
HELD: 1. 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 Commissioner of Income Tax, Mumbai vs. Anjum
M.H. Ghaswala & Ors., (2002) 1 SCC 633 and the other was
rendered on 21.10.2010 in Brij Lal & Ors. vs. Commissioner of
Income Tax, Jalandhar, (2011) 1 SCC 1. [Para 22] [285-E]
2. The High Court, however, committed a jurisdictional
error when it observed that they (High Court) adopt the 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.
[Para 23] [285-F-G]
3. 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 wherein it is laid
down that the Settlement Commission has no power to pass orders
under Section 154 of the Act. [Para 24] [285-G-H]
4. 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 Court much less for making it a part of their order for issuing
a writ. [Para 25] [286-A-B]
5. Therefore, the impugned order and the order dated
11.08.2000 passed by Settlement Commission are set aside to
the extent it decided the issue in r

## Text

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 KAKADIA BUILDERS PVT. LTD. & ANR.
v.
INCOME TAX OFFICER WARD 1(3) & ANR.
(Civil Appeal Nos.2491-2492 of 2019)
 MARCH 05, 2019
[ABHAY MANOHAR SAPRE AND
DINESH MAHESHWARI, JJ.]
Income Tax Act, 1961 - ss. 154, 234A, 234B and 234C,
Chapter XIXA - The appellants-assessee filed settlement applications
before the Settlement Commission during the pendency of the
assessment proceedings for determination of the tax liability - On
11.08.2000, the Settlement Commission passed an order and made
certain additions and waived interest chargeable u/ss. 234A, 234B
and 234C of the Act - Aggrieved, both appellant and Revenue filed
rectification applications - Consequent to which, Settlement
Commission by order dated 11.10.2002 rectified its order dated
11.08.2000 u/s.154 of the Act insofar as it pertained to waiver of
interest, which was granted to the appellant-assessee - However,
High Court set aside the Settlement Commission's order dated
11.10.2002 - Thereafter, Revenue filed petitions against order dated
11.08.2000 in the High Court - High Court modified order of the
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 - On appeal, held: The approach of
the High Court was without jurisdiction - 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
passed in the light of the law laid down by the Supreme Court in
Brijlal case wherein it held that the Settlement Commission had no
power to pass orders u/s. 154 of the Act - Therefore, keeping in
view the law laid down in Ghaswala case and Brijlal case, the
impugned order of the High Court and order dated 11.08.2000
passed by the Settlement Commission to the extent it decided the
issue in relation to waiver of interest set aside - Case remanded to
the Settlement Commission to decide the issue relating to waiver of
interest payable by the assessee afresh.
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SUPREME COURT REPORTS
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Allowing the appeals, the Court
HELD: 1. 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 Commissioner of Income Tax, Mumbai vs. Anjum
M.H. Ghaswala & Ors., (2002) 1 SCC 633 and the other was
rendered on 21.10.2010 in Brij Lal & Ors. vs. Commissioner of
Income Tax, Jalandhar, (2011) 1 SCC 1. [Para 22] [285-E]
2. The High Court, however, committed a jurisdictional
error when it observed that they (High Court) adopt the 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.
[Para 23] [285-F-G]
3. 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 wherein it is laid
down that the Settlement Commission has no power to pass orders
under Section 154 of the Act. [Para 24] [285-G-H]
4. 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 Court much less for making it a part of their order for issuing
a writ. [Para 25] [286-A-B]
5. Therefore, the impugned order and the order dated
11.08.2000 passed by Settlement Commission are set aside to
the extent it decided the issue in relation to waiver of interest
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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 and Brijlal after affording an opportunity
to the parties concerned. [Para 26] [286-B-C]
Commissioner of Income Tax, Mumbai v. Anjum M.H.
Ghaswala & Ors. (2002) 1 SCC 633 : [2001] 4 Suppl.
SCR 303 ; Brij Lal & Ors. v. Commissioner of Income
Tax, Jalandhar (2011) 1 SCC 1 : [2010] 11 SCR 1167
- relied on.
Case Law Reference
[2001] 4 Suppl. SCR 303
 relied on
Para 16
[2010] 11 SCR 1167
 relied on
Para 16
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.24912492 of 2019
From the Judgment and Order dated 28.07.2016 of the High Court
of Gujarat at Ahmedabad in Special Civil Application Nos. 7814 and
7820 of 2014.
R. P. Bhatt, Sr. Adv., S. Sukumaran, Anand Sukumar, Bhupesh
Kumar Pathak, Ms. Meera Mathur, Advs. for the Appellants.
K. Radhakrishnan, Sr. Adv., Ms. Purnima Bhat Kak, Zoheb
Hossain (for Mrs. Anil Katiyar), Advs. for the Respondents.
The Judgment of the Court was delivered by
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.
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.
KAKADIA BUILDERS PVT. LTD. & ANR. v. INCOME TAX
OFFICER WARD 1(3) & ANR.
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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 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 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
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11.08.2000 questioning its legality. The High Court though in 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 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
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
KAKADIA BUILDERS PVT. LTD. & ANR. v. INCOME TAX
OFFICER WARD 1(3) & ANR. [ABHAY MANOHAR SAPRE, J.]
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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 234-A, 234-B
and 234-C except to the extent of granting relief under the
circulars issued by the Board under Section 119 of the Act."
18. So far as the decision rendered in Brijlal (supra) is concerned,
this Court examined the following three questions:
"(I) Whether Section 234-B applies to proceedings of the
Settlement Commission under Chapter XIX-A 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 245-D(1) or up to the date of the
order of the Commission under Section 245-D(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 234-B, 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 234-A, 234-B and 234-C are applicable to
the proceedings of the Settlement Commission under
Chapter XIX-A of the Act to the extent indicated
hereinabove.
(2) Consequent upon Conclusion (1), the terminal point for
the levy of interest under Section 234-B would be up to the
date of the order under Section 245-D(1) and not up to the
date of the order of settlement under Section 245-D(4).
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 (3) The Settlement Commission cannot reopen its
concluded proceedings by invoking Section 154 of the Act
so as to levy interest under Section 234-B, particularly, in
view of Section 245-I."
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 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 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).
KAKADIA BUILDERS PVT. LTD. & ANR. v. INCOME TAX
OFFICER WARD 1(3) & ANR. [ABHAY MANOHAR SAPRE, J.]
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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 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/095/95-96/
IT & 10/S/029/95-96/IT are set aside.
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.
Ankit Gyan
 Appeals allowed.