The judgment of the court was delivered by
Mr. Justice Akil Kureshi-Since the facts are similar, we may record those arising in Special Civil Application No.15097/2004.
2. The petitioner has challenged an order dated 11.10.2002 passed by the Settlement Commission in the following background :
2.1) The petitioner had applied for settlement under the scheme provided under the Income Tax Act, 1961. The Settlement Commission passed an order on 12.3.1996. In such order, the Tribunal provided for charging of interest under section 234A, 234B and 234C of the Act as under :
“22. A request has been made for waiver of interest chargeable u/s.234A, 234B and 234C of the Incometax Act in both the cases. In the case of Kakadia Bulders P. Ltd. returns for assessment years 1994-1995 and 1995-1996 were due after the date of search. Considering the same, the interest chargeable for nine out of twelve months delay in 1994-95 is waived. Interest u/s.234A for 1995-96 is chargeable for three months only which shall be charged as per law. In the facts of the case, interest u/s.234A for 1992-93 and 1993-94 is waived to the extent of 50%. Interest chargeable u/s.234B for all the four years will be reduced by 50%.
Regarding Shri Mahnarlal M. Kakadia, interest u/s.234A for the assessment years 1993-94 and 1994-95 will be charged for eighteen and six months respectively. The balance interest is waived. Interest u/s.234A for assessment years 1995-96 will be charges as per law. Interest u/s. 234B will be reduced by 50% of the chargeable amount in all the four years under settlement. Interest us.234C in both the cases will be charged as per law.”
2.2) Revenue thereupon approached the Settlement Commission and requested for rectification of the said order in connection with the interest portion contending that as per the decision of Supreme Court in case of Commissioner of Incometax v. Anjum M.H. Ghaswala and others reported in 252 ITR 1, charging of interest was mandatory. The Commission therefore, could not have waived any portion of such interest liability.
2.3) The Settlement Commission thereupon passed the impugned order and stated thus :
“4. The applicant’s miscellaneous application dated 29th December, 2000 was to the effect that interest charged under section 234A and 234B as a part of the order under section 245D(4) was not chargeable in view of the judgement of the Patna High Court in the case of CIT v/s Ranchi Club Ltd., later affirmed by the Supreme Court (164 CTR 2000). It is noticed that the law has been amended with the deletion and amendment of Explanation 4 to Section 234A and Explanation 1 to Section 234B respectively by Finance Act 2001 with retrospective effect from 1.4.89 . Therefore, the miscellaneous applications moved by the applicants fail. Shri Vijay Metha clarified that interest charged by the Assessing Officer has been on the basis of the Special Bench decision in the case of Gulraj Engineering & Construction Company 1995(215 ITR at 1).
5. Shri Mehta pleaded for time to pay the liability arising to the applicants as a result of this order citing financial constraints. We allow both the applicants to pay the resultant liability in four quarterly installments beginning 30th November, 2002. Interest payable under section 245D (6A) will be payable along with the last installment.
6. In the result, the miscellaneous application moved by the applications are rejected and the miscellaneous application moved by the Department is partly allowed.”
3. It could thus be seen that the Commission Settlement modified its direction with respect to charging of interest exercising powers of rectification. The Supreme Court in case of Brij Lal and others v. Commissioner of Incometax reported in (2010) 328 ITR 477(SC), held that the Settlement Commission had no power of rectification.
4. In that view of the matter, on this short ground, the impugned order is required to be set aside. We clarify that we do not express any opinion on the Revenue’s contention which finds favour with the Settlement Commission that in view of the decision of the Supreme Court in case of Commissioner of Incometax v. Anjum M.H. Ghaswala and others (supra), no portion of interest liability of the assessee could have been waived or reduced by the Commission. If the Revenue was aggrieved by such order of the Settlement Commission, it ought to have challenged the same in accordance with law. In any case, application for rectification was not maintainable as the statute stood at the relevant time as interpreted by the Supreme Court in case of Brij Lal and others v. Commissioner of Incometax( supra).
5. Under the circumstances, impugned order dated 11.10.2002 is quashed leaving it open to the Revenue to follow its remedies against the original order of the Settlement Commission.
6. Petition is disposed of. Rule made absolute accordingly.