Brij Lal vs. CIT (Supreme Court – 5 Judge Bench)

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DATE: (Date of pronouncement)
DATE: October 22, 2010 (Date of publication)
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Click here to download the judgement (brij_lal_settlement_commission_interest_full_bench.pdf)

While interest u/ss 234A to 234C are applicable to settlement commission proceedings, it is payable only up to the s. 245D(1) order and cannot be levied u/s 154

In the light of the divergent judgements of the Supreme Court in Anjum Ghaswala 252 ITR 1, Hindustan Bulk Carrier 259 ITR 449 and Damani Brothers 259 ITR 475, a reference was made to the Full Bench of the Supreme Court to answer the questions (i) whether ss. 234A, 234B & 234C were applicable to Settlement Commission proceedings, (ii) whether such interest is payable up to the date of the s. 245D(1) order or up to the date of the s. 245D (4) order and (iii) whether the Settlement Commission can re-open its concluded proceedings by having recourse to s. 154 so as to levy interest u/s 234B, if it was not done in the original proceedings?

HELD by the Full Bench:

(i) Though Chapter XIX- A is a self-contained Code, the procedure to be followed by the Settlement Commission u/s 245C and 245D is nothing but assessment or computation of total income which takes place at the s. 245D(1) stage. In that computation, provisions dealing with a regular assessment, self-assessment and levy and computation of interest for default in payment of advance tax, etc. are engrafted. Accordingly, ss. 234A to 234C are applicable;

(ii) Interest under ss. 234A to 234C is payable only up to the date of the s. 245D (1) order and not up to the date of the s. 245D (4) order. In a case where 90% of the assessed tax is paid but on the basis of the Commission’s order u/s 245D(4) the advance tax paid turns out to be less than 90% of the assessed tax as defined in the Explanation to s. 234B(1), no interest is payable for shortfall. The Legislature has not contemplated levy of interest between the s. 245D (1) stage and the s. 245D (4) stage. Interest u/s 234B is chargeable only till the order of the Settlement Commission u/s 245D(1), i.e., admission of the case;

(iii) In view of s. 245I which provides that the order of the Settlement Commission shall be final and conclusive and also in view of the controversy as to liability for interest, the Settlement Commission cannot re-open concluded proceedings by having recourse to s. 154 to levy interest u/s 234B if it was not done in the original proceedings.

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