1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 06.10.2017 CORAM : HONOURABLE MR.JUSTICE T.S.SIVAGNANAM W.P. Nos. 27561 to 27563 of 2007 and W.M.P.No.1 of 2007 N.Chellakutty (HUF) ...Petitioner in W.P. No.27561/2007 N.Chellakutty (Individual) ...Petitioner in W.P. No.27562/2007 Vignesh Real Estate, C/o Sri N.Chellakutty C.R.Complex, 27, Avinashi Road, Coimbatore-641 014. ...Petitioner in W.P. No.27563/2007 Vs. 1.The Income Tax Settlement Commission, Additional Bench, 488-489, Anna Salai, Chennai-600035. 2.The Union of India represented by Chairman, Central Board of Direct Taxes, North Block, New Delhi. 3.The Commissioner of Income Tax, Coachin, Income Tax Office, Race Course, Coimbatore-641 018. 4.Income Tax Officer, Ward III (2), Income Tax Office, Race Course, Coimbatore-641 018. ... Respondents in all WPs http://www.judis.nic.in 2 Prayers in WP.No.27561/2007: Petition filed under Article 226 of Constitution of India to issue Writ of Certiorarified Mandamus to call for records of of 1st respondent Income Tax Settlement Commission, Application No.641/CBE/76/2001-IT for assessment years 1994-95 to 1996- 97, quash impugned order u/s 254D(4) dated 13.04.2007 in so far as it relates to levy and payment of interest u/s 234A and 234B. Prayer in WP.No.27562/2007: Petition filed under Article 226 of Constitution of India to issue Writ of Certiorarified Mandamus to call for records of of 1st respondent Income Tax Settlement Commission, Application No.641/CBE/77/2001-IT for assessment years 1990-91 to 2000- 01, quash impugned order u/s 254D(4) dated 13.04.2007 in so far as it relates to levy and payment of interest u/s 234A and 234B. Prayer in WP.No.27563/2007: Petition filed under Article 226 of Constitution of India to issue Writ of Certiorarified Mandamus to call for records of of 1st respondent Income Tax Settlement Commission, Application No.641/CBE/75/2001-IT for assessment years 1992-93 to 1994- 95, quash impugned order u/s 254D(4) dated 13.04.2007 in so far as it relates to levy and payment of interest u/s 234A and 234B. For Petitioners [In all W.Ps] : Mr.R.Kumar For Respondents [In all W.Ps] : Mr.A.P.Srinivas Senior Standing Counsel COMMON ORDER Heard Mr.R.Kumar, learned counsel appearing for petitioner http://www.judis.nic.in 3 and Mr.A.P.Srinivas, learned Senior Standing counsel appearing for respondents in these writ petitions. 2. petitioner has challenged common order passed by Settlement Commission [IT & WT], Additional Bench, Chennai, in respect of three applications filed by petitioners. Assessment years to which petitioners filed applications for settlement are 1990-91 to 2000-01, 1994-95, 1996-97 and 1992-93 to 1994-95. 3. Challenge to impugned proceedings is not on merits of findings recorded by Commissioner, but only with regard to levy of interest under Sections 234 (A) and 234 (B) of Income Tax Act,1961 [hereinafter called as Act ]. One other issue is with regard to interest payable under Section 220 (2) of Act. 4. During course of proceedings before Commission, learned counsel appearing for assessee submitted that levy of interest under Sections 234 (A), 234(B) and 234(C) of Act may be kept in abeyance since legal issue relating to chargeability of interest has been referred for consideration of Constitution Bench of Honourable Supreme Court in case of Brij Lal and Others Vs. CIT [reported in [2010] 328 ITR 477 (SC)]. http://www.judis.nic.in 4 5. Assesse consented before Commissioner that subject to decision of Constitution Bench of Honourable Supreme Court, assessee would have no objection for order being revised by Commission. 6. However, Commission did not accept said submission on ground that it would go by law which was holding field as on relevant date viz., in case of CIT Vs. Anjum M.H. Ghaswala reported in [2001] 252 ITR 1 (SC) and proceeded to levy interest under Sections 234 (A), 234(B) and 234(C). 7. At this juncture, assessee has prayed for waiver of interest chargeable under Section 220 (2) of Act. However, Commission observed that it is open to assessee to approach Commission after discharging liabilities. 8. issue which was referred to Constitution Bench in case of Brij Lal and Others Vs. CIT has been answered in decision reported in 2010 [328] ITR 477 (SC). It was held by Honourable Supreme Court :- In case of proceedings before Settlement Commission, till Commission decides to admit case under Section 245D(1), proceedings under normal provisions http://www.judis.nic.in 5 remain open. But once Commission admits case, after being satisfied that disclosure is full and true, proceedings commence with Settlement Commission. In meantime, applicant has to pay additional amount of tax with interest without which application for settlement would not be maintainable. Thus, interest under Section 234B would be payable tup to stage of Section 245D(1). Parliament has not extended provisions and liability to pay interest beyond 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 date of application for settlement after it is admitted by Commission under Section 245D(1). There are two distinct stages under Chapter XIX- A, and Legislature had not contemplated levy of interest between order under Seciton 245D(1) stage and Section 245D(4) stage . 9. In light of above decision of Constitution Bench of Hon'ble Supreme Court, interest under Section 234(B) can be charged only upto to stage under Section 245 (D)(1) of Act. However, in impugned order, Commission has charged interest upto stage of 245 (D)(4). http://www.judis.nic.in 6 10. Therefore, to that extent, impugned order has to be interfered with. So far as interest under Section 234 (A) is concerned, learned counsel appearing for petitioner would submit that assessee does not dispute their liability but would contend that there is some computation error committed by Commission. However, for such matter, case cannot be sent back to said Commission as Commission has no power to review its order. Nevertheless, assessing officer of petitioner is well within his jurisdiction to examine correctness of stand taken by assessee, as regards error in computation. 11. With regard to interest under Section 220 (2) of Act, learned counsel appearing for petitioner would submit that petitioner will workout their remedies under Act. 12. In light of above, writ petitions are partly allowed with following directions: (i) interest charged under Section 234(B) of Act upto stage of 245 (D)(4) of Act is setaside and assessing officer of petitioner is directed to recompute interest upto stage of 245(D)(1) of Act and on such re-computation, assessee / petitioner shall pay http://www.judis.nic.in 7 interest. (ii) With regard to alleged contention that there is computation error with regard to interest chargeable under Section 234(A), petitioners are granted liberty to file appropriate application before Assessing Officer who shall consider same and examine correctness of stand and if there is any computation error, same may be rectified. (iii) With regard to interest payable under Section 220(2) of Act, petitioners are granted liberty to workout their remedies under provisions of Act. 13. No costs. Consequently, connected miscellaneous petition is closed. 06.10.2017 Index:Yes/No Internet :Yes/No Speaking /Non-speaking order sk/maya To 1.The Income Tax Settlement Commission, Additional Bench, 488-489, Anna Salai, Chennai-600035. http://www.judis.nic.in 8 2.The Union of India represented by Chairman, Central Board of Direct Taxes, North Block, New Delhi. 3.The Commissioner of Income Tax, Coachin, Income Tax Office, Race Course, Coimbatore-641 018. 4.Income Tax Officer, Ward III (2), Income Tax Office, Race Course, Coimbatore-641 018. http://www.judis.nic.in 9 T.S.SIVAGNANAM, J. sk/maya W.P. Nos. 27561 to 27563 of 2007 06.10.2017 http://www.judis.nic.in N. Chellakutty (HUF) v. Income-tax Settlement Commission, Chennai/The Union of India, Delhi/ Commissioner of Income-tax, Coimbatore/Income-tax Officer, Ward III (2), Coimbatore