THE COMMISSIONER OF INCOME TAX V. SETTLEMENT COMMISSION

WP(C)/36138/2004

AI Insights

The case involves the Commissioner of Income Tax, Cochin, challenging the Settlement Commission's order which rejected the petitioner's applications for rectification of mistakes in the commission's earlier orders concerning the charging of interest under Sections 234A and 234B of the Income Tax Act for various assessment years. The petitioner argued that the waivers granted were in violation of a Supreme Court decision. The Settlement Commission had rejected the applications on the grounds that the issues were debatable and the applications were time-barred. The High Court found that the rejection was unjustified, as the Supreme Court's decision should have been followed without question by inferior courts and tribunals.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 694174 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 19-09-2008
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Anjum M.H.Ghaswala and others [252 ITR(1)], Netai Chandra Rarhi & Co.v. ITSC [263 ITR 186 (Cal)], CIT v. Hindustan Bulk Carriers [259 ITR 449 (SC)]
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K R SUDHAKARAN PILLAI; SAJITH V
• Assessee Lawyers: P K MENON; GEORGE GEORGE
• Keywords: Debatable Issue; Income Tax; Interest Waiver; Rectification of Mistakes; Settlement commission
• Section: 143(3); 234B; 234A; 143(1)(a); 245F

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.BALAKRISHNAN NAIR FRIDAY, THE 19TH SEPTEMBER 2008 / 28TH BHADRA 1930 WP(C).No. 36138 of 2004(B) --------------------------------------- PETITIONER: ------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.P.K. RAVEENDRANATHA MENON, SR.COUNSEL,GOI (TAXES), ADV. SRI.GEORGE K. GEORGE, SC FOR IT. RESPONDENTS: ----------------------- 1. SETTLEMENT COMMISSION (IT & WT), ADDITIONAL BENCH, 488-489, ANNASALAI, CHENNAI-600 035. 2. SHRI.K.A.DAVIS, VANITHA JEWELLERY, BROADWAY, ERNAKULAM. ADV. SRI.K.R.SUDHAKARAN PILLAI FOR R2, ADV. SRI.SAJITH KUMAR V. FOR R2. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 19/09/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C). NO.36138/2004-B: APPENDIX PETITIONERS' EXHIBITS: EXT.P.1: COPY OF THE ORDER DTD. 21/07/1995 OF THE SETTLEMENT COMMISSION FOR THE ASST. YEAR 1992-93. EXT.P.1.A: COPY OF THE ORDER OF THE SETTLEMENT COMMISSION DTD. 08/05/1997. EXT.P.1.B: COPY OF THE ORDER OF THE SETTLEMENT COMMISSION DTD. 29/08/2000. EXT.P.2: COPY OF THE MISC. PETITION FILED ON 12/03/2002. EXT.P.2.A: COPY OF THE MISC. PETITION FILED ON 02/07/2002. EXT.P.3: COPY OF THE ORDER DTD. 26/03/2004 OF THE SETTLEMENT COMMISSION. RESPONDENTS' EXHIBITS: NIL. //TRUE COPY// P.S. TO JUDGE. prv. K. BALAKRISHNAN NAIR, J. ---------------------------------------- W.P.(C) No.36138 OF 2004 ---------------------------------------- Dated this the 19th day of September, 2008 J U D G M E N T ~~~~~~~~~~~ The Commissioner of Income Tax challenges Ext.P3 order of the 1st respondent, Settlement Commission(IT & WT), in this writ petition. It is an order rejecting Exts.P2 and P2(A) applications filed by the petitioner for rectification of certain mistakes in Ext.P1(A) order. 2. The petitioner is aggrieved by paragraphs 7.1 and 7.2 of Ext.P1(A). The said portions of Ext.P1(A) are quoted below for convenient reference. “7.1 Regarding Section 234A Interest: Since there was no delay in the filing of the IT return for the assessment years 1991-92, 1994-95 and 1995-96, no interest u/s 234A would be chargeable for these assessment years. For the assessment year 1992-93, we hold that no interest u/s 234A is chargeable in respect of the period of delay of 4 months in the filing of the Income Tax return, since there was a reasonable cause for this delay as the applicant had to face the action u/s 132 on 5.2.1992. However, for the assessment year 1993-94, the interest would be charged for the period of delay of 3 months in the filing of the IT return on 21.7.1994, as against the due date of 31.10.1993. W.P.(C) No.36138/2004 2 7.2 The interest u/s 234B shall be charged upto the date of the Section 143(3) order for the assessment year 1991-92 and upto the date of the order u/s 143(1) (a) for the assessment years 1992-93 to 1995-96 in the light of the Special Bench decision of the Settlement Commission, Bombay in the case of Guljaj Engineering Construction Co. & Others [215/ITR 1(AT)].” 3. Aggrieved by the waiver of interest allowed by Settlement Commission under Sections 234A and 234B of the Income Tax Act, The petitioner preferred Ext.P2 petition. It was pointed out that the waiver granted was in violation of the law laid down by the Constitution Bench of the Apex Court in Commissioner of Income Tax v. Anjum M.H.Ghaswala and others [252 ITR(1)] dated 18.10.2001. The said application was considered and rejected by Ext.P3 by the 1st respondent in the following manner. “10.2. As regards the first Miscellaneous Petition filed by the Department on 18.3.2002 relying on the decision of Hon'ble Supreme Court CIT v. Anjum M.H.Ghaswala and Others [2001] 252 ITR 1 (SC) it is found that the matter is squarely covered by the decision of Hon'ble Calcutta High Court in the case of Netai Chandra Rarhi & Co.v. ITSC [2003] 263 ITR 186 (Cal). The relevant extracts have already been quoted above in para 7.1. Respectfully following the decision of the Hon'ble Calcutta High Court it is held that as on the date of application the matter regarding the ratio of decision in the case of CIT v. W.P.(C) No.36138/2004 3 Anjum M.H.Ghaswala and Others was debatable and therefore, rectification was not possible as on the date of filing of Miscellaneous Petition by the Department.” 4. The petitioner attacks the above decision contending that when there is a direct decision of the Constitution Bench of the Apex Court, the same can never be treated as a debatable point by Inferior courts and Tribunals, even assuming a Bench of two Judges of the Hon'ble Supreme Court have raised doubts regarding the correctness of that decision. 5. Ext.P2(A) application was filed to correct the error in Ext.P1(A) regarding the terminal date for charging interest under Section 234B of the Income Tax Act. The Settlement Commission ordered to charge interest for the respective assessment years upto the date of order of assessment or the date of intimation of that order, as the case may be. But, in view of the decision of the Apex Court, the terminal date should be the date of the decision of the Settlement Commission. The said application was considered and rejected by the Settlement Commission as per Ext.P3 order in the following manner. W.P.(C) No.36138/2004 4 “11.1 As regards the second Miscellaneous Petition filed by the Department on 3.7.2003 relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Hindustan Bulk Carriers [2003] 259 ITR 449 (SC) it is held that the decision of the Hon'ble Supreme Court was pronounced much after the expiry of limitation period and therefore, the same cannot be pressed into service for rectifying a mistake which already got time barred on an earlier date. 11.2 The second Miscellaneous Petition filed by the Department on 3.7.2003 is also dismissed.” 6. The petitioner would submit that the Settlement Commission has got inherent power to correct any mistake by virtue of Section 245F of the Act and therefore, the Commission should have allowed Ext.P2(A) application. 7. The 2nd respondent has filed a counter affidavit supporting the impugned order and the petitioner has filed a reply affidavit. 8. I heard Mr.P.K.R.Menon, learned Senior Counsel for the Government of India (Taxes), and Mr.K.R.Sudhakaran Pillai, learned Counsel who appeared for the 2nd respondent. W.P.(C) No.36138/2004 5 9. It is not seriously disputed that when an application for rectification is filed, within the permitted time limit, based on a subsequent decision of the Apex Court, directly on the point , normally, it has to be entertained. But, in this case, the Settlement Commission has rejected Ext.P2 on the ground that the issue raised is a debatable issue. But, I feel that when there is a decision of the Apex Court, no inferior court or Tribunal can say that the issue is a debatable issue for the reason that a Bench of two judges of the Apex Court has doubted the correctness of the decision of the Constitution Bench. Even assuming there is a final judgment of a two Judge Bench of the Apex Court, the same has to be ignored and inferior courts and Tribunals are bound to follow the decision of the Constitution Bench in view of the law relating to precedents and also article 141 of the Constitution of India. So, the rejection of Ext.P2 application is unjustified. Accordingly, Ext.P3 order to the extent it rejects Ext.P2 is set aside and the said application is remitted to the 1st respondent for disposal, in accordance with law, as expeditiously as possible. W.P.(C) No.36138/2004 6 10. Ext.P2(A) application has been rejected on the ground of limitation. Though the learned senior counsel appearing for the writ petitioner raised several points to review that decision, I feel that the view taken by the Settlement Commission is a plausible view and this Court, while exercising its jurisdiction under Article 226 of the Constitution of India, is not justified in interfering with it. Normally, power to review or recall an order can be exercised, if only, it is expressively conferred by the statute. In limited circumstances, to correct patent mistakes inherent jurisdiction is also conceded to Courts and Tribunals. But, I think on the facts of the case, the point involved is not one, where this Court should compel the Settlement Commission to entertain a time barred petition. Normally, a petition barred by time limit has to be rejected. Such an order cannot be described as an order which is ultravires or one passed without jurisdiction. In the result, the challenge against the rejection of Ext.P2(A) is repelled. The writ petition is disposed of as above. (K.BALAKRISHNAN NAIR, JUDGE) ps "