S.C.GARG V. UNION OF INDIA AND ORS.

CWP/1326/2006

AI Insights

The case involves two writ petitions challenging the orders of the Income Tax Settlement Commission and the subsequent demand notices issued based on these orders. In CWP No. 1326 of 2006, the petitioner challenged the Settlement Commission's order for the assessment years 1998-99 to 2001-2002, arguing that the order was perverse and lacked evidence. In CWP No. 4061 of 2007, the challenge was against the Settlement Commission's order for certain assessment years, specifically contesting the directive for payment of tax and interest within 35 days. Both petitions were linked by the common issue of the legality and computation of interest on the tax payable as per the Settlement Commission's orders. The Supreme Court's decision in Brij Lal and others Vs. Commissioner of Income Tax, which addressed the applicability of interest under Sections 234A, 234B, and 234C of the Income Tax Act to proceedings of the Settlement Commission, was pivotal in resolving these petitions.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 684820 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 06-08-2012
• Assessment Year: misc
• Other Referred Cases: Brij Lal and others Vs. Commissioner of Income Tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: YOGESH PUTNEY; VIVEK SETHI
• Assessee Lawyers: AKSHAY BHAN
• Keywords: Demand notices; Immunity from prosecution; Income Tax; Interest payment; Settlement commission; Re-opened Assessments
• Section: 234B; 234A; 234C; 245C(1); 245D(4); 156; 245D(1)

Judgement Text

"CWP No. 1326 of 2006 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 1. CWP No. 1326 of 2006 SC Garg ..... Petitioner Versus Union of India and another ..... Respondents 2. CWP No. 4061 of 2007 Vijay Kumar Jain ..... Petitioner Versus Union of India and another ..... Respondents Date of decision: 6.8.2012 CORAM: HON'BLE MR. JUSTICE SURYA KANT HON'BLE MR.JUSTICE R.P. NAGRATH PRESENT: Mr. Akshay Bhan, Advocate, for the petitioner (in both cases). Mr. Yogesh Putney, Senior Standing Counsel, for the revenue/respondents (in CWP No. 1326 of 2006). Mr. Vivek Sethi, Senior Standing Counsel, for the revenue/respondents (in CWP No. 4061 of 2007). RP NAGRATH, J. This order shall dispose of two writ petitions bearing CWP CWP No. 1326 of 2006 -2- Nos. 1326 of 2006 and 4061 of 2007, as the identical issues are involved therein. In CWP No. 1326 of 2006, the Income Tax Department had re-opened assessments of the petitioner for the assessment years 1998-99, 1999-2000, 2000-2001 and 2001-2002. The petitioner moved two applications for settlement under Section 245C(1) of the Income Tax Act, for these years one of which is a separate application for the assessment year 2001-02. His applications were admitted under Section 245D(1) vide a combined order dated 1.11.2002. The Settlement Commission, decided the matter vide order dated 30.9.2005 (Annexure P-1). While deciding the petitions, the immunity was granted to the petitioner from prosecution under the Income Tax Act and other Central Act(s). The amount of penalty leviable on the petitioner was also worked out. It was directed that the amount of tax, together with interest, if any, shall be payable within 35 days of the receipt of this order. On the basis of the order passed by the Settlement Commission, the demand notices dated 1.12.2005 (Annexure P-2) (Colly) were issued for these assessment years. The order of the Settlement Commission as well as the demand raised have been challenged in this writ petition. The order of Settlement Commission is attacked on the ground that it is perverse, illegal and un-sustainable as no evidence was allegedly ever produced to show that the credits had actually appeared in the bank account of the appellant nor in the bank account of M/s Jac Brothers and also that the matter regarding to interest has been referred to larger Bench before the Hon'ble Supreme Court in the case of Brij Lal CWP No. 1326 of 2006 -3- and others Vs. Commissioner of Income Tax. In CWP no. 4061 of 2007, the challenge is to the order dated 13.12.2006 (Annexure P-1) of the Settlement Commission relating to certain assessment years for which the application of the petitioner was admitted on 15.12.1995 under Section 254D(1) of the Income Tax Act. The grievance of the petitioner is that the Settlement Commission while granting immunities for penalty and prosecution directed that the balance amount of tax, together with interest, if any, shall be payable within 35 days of the receipt of the copy of this order. Thereafter, demand notices were issued to the petitioner. The grievance of the petitioner is against the direction contained in the order of the Settlement Commission with regard to the balance payment of the tax, together with interest to be payable within 35 days. These writ petitions were adjourned sine die as the matter with regard to the liability to pay the interest in respect of cases before the Settlement Commission, was pending before Hon'ble Supreme Court. Hon'ble Supreme Court has decided the matter in Brij Lal and others Vs. Commissioner of Income Tax , (2005) 279 ITR 432 (SC) and held as under: “(1) Sections 234A, 234B and 234C are applicable to the proceedings of the Settlement Commission under Chapter XIX-A of the Act to the extent indicated hereinabove. (2) Consequent upon conclusion (1), the terminal point for the levy of interest under Section 234B would be up to the date of the order CWP No. 1326 of 2006 -4- under Section 245D(1) and not up to the order of settlement under Section 245D(4). (3) XXX XXX XXX XXX” We have heard learned counsel for the parties at some length and gone through the records. Learned counsel for the petitioner has challenged the order of the Settlement Commission and consequent demand raised under Section 156 of the Income Tax Act, in so far as it pertains to the payment of interest. The factual contention in CWP No. 1326 of 2006 that the authorities have failed to appreciate that neither any evidence was produced to show that the credits had actually appeared in the bank account of the appellant nor any indication in the bank account etc. being the matter adjudicated upon by the Settlement Commission has not been insisted upon during the course of arguments. The Income Tax Authorities while raising demand against the petitioner on the basis of the order of the Settlement Commission, have not disclosed the manner of computing the amount of interest. Learned counsel for both the parties, therefore, submitted quite fairly that these petitions may be disposed of in view of the principles determined by the Hon'ble Supreme Court, with reference to the provisions of Sections 245D(1) and 245D(4) of the Income Tax Act. Both the writ petitions are, therefore disposed of with a direction that the payment of interest as observed in the impugned orders dated 30.9.2005 (Annexure P-1) (in CWP No. 1326 of 2006) and dated 13.12.2006 (Annexure P-1) (in CWP No. 4061 of 2007) of the Settlement Commission would mean the interest up to the admission of CWP No. 1326 of 2006 -5- the application for settlement under Section 245C(1) of the Income Tax Act, as held by the Hon'ble Supreme Court that the terminal point for the levy of interest under Section 234B would be up to the date of the order under Section 245D(1) and not up to the order of settlement under Section 245D(4) of the Income Tax Act and the demand raised subsequent to the order of Settlement Commission for the assessment years in question would automatically stands quashed. Let the fresh/revised demand notices be raised in accordance with law. Disposed of. ( SURYA KANT ) ( R.P. NAGRATH ) JUDGE JUDGE August 6, 2012 rishu "