COMMISSIONER OF INCOME TAX MUMBAI CITY XIII MUMBAI Vs. DAMANI BROTHERS
SUPREME COURT OF INDIA (FROM: CALCUTTA)
COMMISSIONER OF INCOME TAX,MUMBAI
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(1.)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:-
1. Was the Special Bench of the Settlement Commission right in holding in the case of Om Metals and Minerals Pvt. Ltd. (193 ITR 57-ITSC) that the assessment order passed by the assessing officer before the admission of the settlement application subsisted and recovery proceedings continued even after the admission of the said application, especially after the judgment of the Supreme Court in the case of C.I.T. v. Express Newspapers Ltd., 206 ITR 443
(The Hon'ble Court, inter alia, made the following observation:-
It is equally evident that once an application made under Section 245-C is admitted for consideration (after giving notice to and considering the report of the Commissioner of Income-tax 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 himself. 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.")
2. If the answer to question No. 1 is in the affirmative, would it be correct to say that once the Settlement Commission determines a liability of the applicant for tax, penalty and interest under Section 245-D(4), the orders of the lower authorities would automatically stand set aside and consequently there will be no liability under Section 220(2) of the Act
3. If the answer to question No. 1 is in the affirmative, the question No. 2 in the negative, has the Settlement Commission powers to waive interest under Section 220(2) of the Act -
The three questions were separately and individually considered and answered. Thereupon, the answers given have been summed up as follows :-
"Para 37. In sum, our answers to the three questions referred us are as follows :-
Question No. 1.
(i) That the Special Bench in the case of Om Metals and Minerals Pvt. Ltd. (supra) was right in holding that the assessment orders passed by the Assessing Officer before the admission of the settlement application subsisted only insofar as such finding applies to assessment orders passed before the date of filing of application under Section 245-C(1).
(ii) The Special Bench of the Settlement Commission was not right in holding that the orders passed by the Assessing Officer insofar as the finding applies to orders passed after the date of application but before the application is allowed to be proceeded with.
(iii) The Special Bench was not right in holding that the recovery proceedings based on the order of assessment can be continued even after the admission of the said application, in our view, recovery proceedings cannot be continued after the application has been admitted except in the matter of self-assessment tax and in the manner laid down in Section 245-DD for safeguarding any likely future demand.
Question No. 2.
(i) The orders of lower authorities do not automatically stand set aside by the Commission's order u/S. 245-D(4). The order of assessment stands modified to give effect to the order u/S. 245-D(4) by the theory of merger applying to such order.
(ii) in cases where assessment orders were passed before filing of application, the liability of interest u/S. 220(2), if any, will be up to the date of order u/S. 245-D(1). There will be no liability for interest u/S. 220(2) thereafter. In cases where assessment orders were passed after filing of application, there will be no liability of interest under Section 220(2).
Question No. 3.
Yes. The Commission has the power to reduce/waive interest chargeable u/S. 220(2)."
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.
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