JUDGEMENT
Vineet Kothari, J. -
(1.)The grievance made in the present case is that the Assessing Authority while giving appeal effect to the order passed by the Settlement Commission of the Income Tax, has charged excessive interest under Section 234B of the Income Tax Act, 1961 beyond the date of the order passed by the Settlement Commission under Section 245D of the Act in Chapter 20A of the Income Tax Act, 1961.
(2.)In the present case, the order was passed by the Settlement Commission on 11.03.2008 for the block of the Assessment Years 1989-1990 to 1996- 1997. While appeal effect orders was passed by the Assessing Authority on 11.04.2008 vide Annexure 'B' series, he has charged interest under Section 234B of the Act apparently beyond the date of the order passed by the Settlement Commission on 11.03.2008.
(3.)Learned counsel for the petitioner relied upon the Judgment of the Constitution Bench of the Supreme Court in the case of BRIJ LAL & ORS. Vs COMMISSIONER OF INCOME TAX, 2010 328 ITR 477 decided on 21.10.2010 in which the Hon'ble Supreme Court interalia, disapproving the earlier decision in the case of CIT vs Hindustan Bulk Carriers, 2003 179 CTR(SC) 362 (SC)), held as under:
"By its very nature, advance tax is a preassessment collection of tax either by deduction at source or by payment of advance tax which has to be adjusted towards income-tax levied on the total income. In fact, section 190(1) of the Income-tax Act, 1961, clarifies that this method of payment of tax will not prejudice the charge of tax under section 4(1) nor modify the liability of the assessee to pay income-tax pursuant to an assessment order.
MODI INDUSTRIES LIMITED v. CIT, 1995 216 ITR 759 (SC) followed.
The meaning of the expression "assessment" in a given provision must be determined on an examination of the relevant provisions in question and the fact that it is used in the narrower sense elsewhere does not mean that it is so used in the provision under examination.
C.A. ABRAHAM v. ITO, 1961 41 ITR 425 (SC) relied on.
Section 234B comes into operation when there is default in payment of advance tax, whereas liability to pay interest under section 245D(2C) arises when the additional amount of income-tax is not paid within the time specified in section 245D(2A). Section 245D(6A) imposes liability to pay interest only when the tax payable in pursuance of an order of the Settlement Commission under section 245D(4) is not paid within the specified time. Consequently, section 234B, section 245D(2C) and section 245D(6A) in Chapter XIX-A operate in different fields.
When one reads the provisions of sections 245C and 245D one has to keep in mind the concept of self-assessment, assessment, regular assessment and computation of total income which have been engrafted in Chapter XIX-A which deals with settlement of cases. The special procedure under sections 245C and 245D in Chapter XIX-A shows that the special type of computation of total income is engrafted in the said provisions, which is nothing but assessment which takes place at the section 245D(1) stage. However, in that computation one finds that provisions dealing with regular assessment, self-assessment and levy and computation of interest for default in payment of advance tax, etc., are engrafted.
In the case of proceedings before the Settlement Commission, till the Commission decides to admit the case under section 245D(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, the proceedings commence with the Settlement Commission. In the meantime, the applicant has to pay the additional amount of tax with interest without which the application for settlement would not be maintainable. Thus, interest under section 234B would be payable up to the stage of section 245D(1). Parliament has not extended the provisions and the liability to pay interest beyond the date of application for settlement.
There is no provision either under Chapter XIX-A or even under section 140A (dealing with self assessment) to charge interest beyond the date of the application for settlement after it is admitted by the Commission under section 245D(1). There are two distinct stages under Chapter XIX A, and the Legislature had not contemplated levy of interest between the order under the section 245D(1) stage and the section 245D(4) stage.
The Settlement Commission cannot reopen its proceedings under section 154 of the Income tax Act, 1961, so as the levy interest under section 234B, particularly in view of section 245-I."
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