KAKADIA BUILDERS PVT. LTD. & ANR.versusINCOME TAX OFFICER WARD 1(3) & ANR.

                        [2019] 5 S.C.R. 279                            279


          KAKADIA BUILDERS PVT. LTD. & ANR.                            A
                                 v.
          INCOME TAX OFFICER WARD 1(3) & ANR.
               (Civil Appeal Nos.2491-2492 of 2019)
                          MARCH 05, 2019                               B
              [ABHAY MANOHAR SAPRE AND
                DINESH MAHESHWARI, JJ.]
       Income Tax Act, 1961 – ss. 154, 234A, 234B and 234C,
Chapter XIXA – The appellants-assessee filed settlement applications
                                                                       C
before the Settlement Commission during the pendency of the
assessment proceedings for determination of the tax liability – On
11.08.2000, the Settlement Commission passed an order and made
certain additions and waived interest chargeable u/ss. 234A, 234B
and 234C of the Act – Aggrieved, both appellant and Revenue filed
rectification applications – Consequent to which, Settlement           D
Commission by order dated 11.10.2002 rectified its order dated
11.08.2000 u/s.154 of the Act insofar as it pertained to waiver of
interest, which was granted to the appellant-assessee – However,
High Court set aside the Settlement Commission’s order dated
11.10.2002 – Thereafter, Revenue filed petitions against order dated
                                                                       E
11.08.2000 in the High Court – High Court modified order of the
Settlement Commission dated 11.08.2000 by reversing the waiver
of interest in terms of Settlement Commission’s directions contained
in its order dated 11.10.2002 – On appeal, held: The approach of
the High Court was without jurisdiction – The High Court failed to
see that the order dated 11.10.2002 of the Settlement Commission       F
was already set aside by the High Court itself in the first round
passed in the light of the law laid down by the Supreme Court in
Brijlal case wherein it held that the Settlement Commission had no
power to pass orders u/s. 154 of the Act – Therefore, keeping in
view the law laid down in Ghaswala case and Brijlal case, the
                                                                       G
impugned order of the High Court and order dated 11.08.2000
passed by the Settlement Commission to the extent it decided the
issue in relation to waiver of interest set aside – Case remanded to
the Settlement Commission to decide the issue relating to waiver of
interest payable by the assessee afresh.
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                                279
280            SUPREME COURT REPORTS                     [2019] 5 S.C.R.


A           Allowing the appeals, the Court
            HELD: 1. In a situation like the one arising in the case,
      the High Court instead of going into the merits of the issue, should
      have set aside the order dated 11.08.2000 passed by the
      Settlement Commission and remanded the case to the Settlement
B     Commission for deciding the issue relating to waiver of interest
      payable under Sections 234A , 234B, and 234C of the Act afresh
      keeping in view the scope and the extent of powers of the
      Settlement Commissioner in relation to waiver of interest as
      laid down in the Commissioner of Income Tax, Mumbai vs. Anjum
      M.H. Ghaswala & Ors., (2002) 1 SCC 633 and the other was
C     rendered on 21.10.2010 in Brij Lal & Ors. vs. Commissioner of
      Income Tax, Jalandhar, (2011) 1 SCC 1. [Para 22] [285-E]
            2. The High Court, however, committed a jurisdictional
      error when it observed that they (High Court) adopt the directions
      contained in the order of the Settlement Commission dated
D     11.10.2002 and then went on to make the said directions as a
      part of the impugned order in relation to waiver of interest. This
      approach of the High Court is wholly without jurisdiction.
      [Para 23] [285-F-G]
            3. The High Court failed to see that the order dated
E     11.10.2002 of the Settlement Commission was already set aside
      by the High Court itself in the first round vide order dated
      03.03.2014 passed in S.C.A. Nos. 15097 & 15101 of 2004 in the
      light of law laid down by this Court in Brijlal wherein it is laid
      down that the Settlement Commission has no power to pass orders
F     under Section 154 of the Act. [Para 24] [285-G-H]
            4. Since the order dated 11.10.2002 of the Settlement
      Commission was already held bad in law on the ground that it
      was passed under Section 154 of the Act, the same was neither in
      existence for any purpose and nor it could be relied upon by the
G     High Court much less for making it a part of their order for issuing
      a writ. [Para 25] [286-A-B]
            5. Therefore, the impugned order and the order dated
      11.08.2000 passed by Settlement Commission are set aside to
      the extent it decided the issue in relation to waiver of interest
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   KAKADIA BUILDERS PVT. LTD. & ANR. v. INCOME TAX                           281
              OFFICER WARD 1(3) & ANR.

and remand the case to the Settlement Commission to decide                   A
the issue relating to waiver of interest payable by the assessee
(appellants herein) afresh keeping in view the law laid down by
this Court in Ghaswala and Brijlal after affording an opportunity
to the parties concerned. [Para 26] [286-B-C]
      Commissioner of Income Tax, Mumbai v. Anjum M.H.                       B
      Ghaswala & Ors. (2002) 1 SCC 633 : [2001] 4 Suppl.
      SCR 303 ; Brij Lal & Ors. v. Commissioner of Income
      Tax, Jalandhar (2011) 1 SCC 1 : [2010] 11 SCR 1167
      – relied on.
                         Case Law Reference                                  C
[2001] 4 Suppl. SCR 303            relied on               Para 16
[2010] 11 SCR 1167                 relied on               Para 16
      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.2491-
2492 of 2019                                                                 D
      From the Judgment and Order dated 28.07.2016 of the High Court
of Gujarat at Ahmedabad in Special Civil Application Nos. 7814 and
7820 of 2014.
    R. P. Bhatt, Sr. Adv., S. Sukumaran, Anand Sukumar, Bhupesh
Kumar Pathak, Ms. Meera Mathur, Advs. for the Appellants.                    E
     K. Radhakrishnan, Sr. Adv., Ms. Purnima Bhat Kak, Zoheb
Hossain (for Mrs. Anil Katiyar), Advs. for the Respondents.
      The Judgment of the Court was delivered by
      ABHAY MANOHAR SAPRE, J. 1. Leave granted.                              F
       2. These appeals are directed against the final judgment and order
dated 28.07.2016 passed by the High Court of Gujarat at Ahmedabad in
SCA Nos.7814 & 7820 of 2014 whereby the High Court disposed of the
petitions(SCAs) filed by the respondents.
      3. In order to appreciate the issue involved in these appeals, it is   G
necessary to set out a few relevant facts infra.
      4. The appellants herein are the respondents (assessee) and the
respondents (Revenue) herein are the petitioners in the petitions(SCAs)
before the High Court out of which these appeals arise.
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282            SUPREME COURT REPORTS                          [2019] 5 S.C.R.


A           5. The appellant in S.L.P. No.21139/2017 is a Private Limited
      Company and the appellant in SLP No.21140/2017 is the promoter
      Director of the said Company. On 19.01.1994, a search and seizure
      operation was carried out in the premises of the appellants (assessee)
      under the Income Tax Act, 1961 (hereinafter referred to as “the Act” ).
B            6. During pendency of the assessment proceedings, which were
      initiated for determination of the tax liability as a result of search and
      seizure operation, the appellants on 12.03.1996 and 03.09.1996 filed the
      settlement applications before the Settlement Commission and offered
      to settle their tax matter in accordance with the procedure provided
      under Chapter XIXA of the Act.
C
            7. On 11.08.2000, the Settlement Commission passed an order
      under Section 245D(4) of the Act. By the said order, the Settlement
      Commission made certain additions and waived interest chargeable under
      Sections 234A, 234 B and 234C of the Act.
D            8. The appellants (assessee) felt aggrieved and filed rectification
      applications before the Settlement Commission on 29.12.2000 for
      amending its order dated 11.08.2000. The Revenue (Commissioner of
      Income Tax) also felt aggrieved by the order dated 11.08.2000 and filed
      a rectification application under Section 154 of the Act before the
      Settlement Commission on 26.07.2002.
E
             9. By order dated 11.10.2002, the Settlement Commission
      dismissed the applications filed by the appellants(assessee) and partly
      allowed the application filed by the respondents(Revenue) rectifying its
      order dated 11.08.2000 insofar as it pertained to waiver of interest, which
      was granted to the appellants (assessee). The appellants(assessee) felt
F     aggrieved by the order dated 11.10.2002 passed by the Settlement
      Commission and filed two separate petitions (SCA Nos.15097 and 15101
      of 2004) in the High Court of Gujarat.
             10. The High Court, by order dated 03.03.2014 allowed the
      petitions(SCAs) and set aside the order dated 11.10.2002 passed by the
G     Settlement Commission and granted liberty to the Revenue to follow the
      remedies as may be available to them against the order passed by the
      Settlement Commission dated 11.08.2000.
           11. The Revenue, therefore, felt aggrieved and filed two petitions
      (SCA Nos.7814 of 2014 and 7820 of 2014) against the order dated
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 KAKADIA BUILDERS PVT. LTD. & ANR. v. INCOME TAX                              283
OFFICER WARD 1(3) & ANR. [ABHAY MANOHAR SAPRE, J.]

11.08.2000 questioning its legality. The High Court though in concluding      A
paragraph observed that the petitions are disposed of yet in substance
allowed the petitions(SCAs) and modified the order dated 11.08.2000 of
the Settlement Commission by passing the following directions in
paragraph 13 which reads as under:
        “Under the circumstances, we direct modification of the               B
      order of Settlement Commission dated 11.08.2000 by
      reversing the waiver of interest in terms of Settlement
      Commission’s directions contained in its order dated
      11.10.2002. In other words, we adopt the same directions
      for modification of the Settlement Commissioner’s original
      order dated 11.08.2000.”                                                C

      12. It is against this order, the appellants(assessee) felt aggrieved
and have filed the present appeals by way of special leave in this Court.
       13. So, the short question which arises for consideration in these
appeals, is whether the High Court was justified in allowing the              D
petitions(SCAs) and thereby was justified in modifying the order dated
11.08.2000 passed by the Settlement Commission.
     14. Heard Mr. R.P. Bhatt, learned senior counsel for the appellants
and Mr. K. Radhakrishnan, learned senior counsel for the respondents.
       15. Having heard the learned counsel for the parties and on perusal    E
of the record of the case including the written submissions filed by the
parties, we are inclined to allow the appeals and remand the case to the
Settlement Commission for deciding the matter in question afresh on
merits keeping in view the observations made infra.
      16. At the outset, we consider it apposite to mention that the issue    F
involved in these appeals is governed by the law laid down by the decision
of two Constitution Benches of this Court. One was rendered on
18.10.2001 in Commissioner of Income Tax, Mumbai vs. Anjum
M.H. Ghaswala & Ors., (2002) 1 SCC 633 and the other was rendered
on 21.10.2010 in Brij Lal & Ors. vs. Commissioner of Income Tax,
                                                                              G
Jalandhar, (2011) 1 SCC 1.
      17. So far as the decision rendered in Ghaswala (supra) is
concerned, the question involved therein was whether the Settlement
Commission constituted under Section 245B of the Act has the jurisdiction
to reduce or waive the interest chargeable under Sections 234A, 234B
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284            SUPREME COURT REPORTS                          [2019] 5 S.C.R.


A     and 234C of the Act while passing the order of settlement under Section
      245D of the Act. After examining the scheme of the Act in the context
      of the powers of the Settlement Commission, Justice Santosh Hegde
      speaking for the Bench held as under:
            “35. For the reasons stated above, we hold that the
B           Commission in exercise of its power under Sections 245-
            D(4) and (6) does not have the power to reduce or waive
            interest statutorily payable under Sections 234-A, 234-B
            and 234-C except to the extent of granting relief under the
            circulars issued by the Board under Section 119 of the Act.”
C            18. So far as the decision rendered in Brijlal (supra) is concerned,
      this Court examined the following three questions:
            “(I) Whether Section 234-B applies to proceedings of the
            Settlement Commission under Chapter XIX-A of the said
            Act?
D           (II) If answer to the above question is in the affirmative,
            what is the terminal point for levy of such interest —
            whether such interest should be computed up to the date
            of the order under Section 245-D(1) or up to the date of the
            order of the Commission under Section 245-D(4)?
E           (III) Whether the Settlement Commission could reopen its
            concluded proceedings by invoking Section 154 of the said
            Act so as to levy interest under Section 234-B, though it
            was not so done in the original proceedings?”
             19. After examining these questions, this Court speaking through
F     Justice S.H. Kapadia, the then learned CJI, answered the questions as
      under :
            “ (1) Sections 234-A, 234-B and 234-C are applicable to
            the proceedings of the Settlement Commission under
            Chapter XIX-A of the Act to the extent indicated
G           hereinabove.
            (2) Consequent upon Conclusion (1), the terminal point for
            the levy of interest under Section 234-B would be up to the
            date of the order under Section 245-D(1) and not up to the
            date of the order of settlement under Section 245-D(4).
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 KAKADIA BUILDERS PVT. LTD. & ANR. v. INCOME TAX                             285
OFFICER WARD 1(3) & ANR. [ABHAY MANOHAR SAPRE, J.]

       (3) The Settlement Commission cannot reopen its                       A
      concluded proceedings by invoking Section 154 of the Act
      so as to levy interest under Section 234-B, particularly, in
      view of Section 245-I.”
       20. Keeping in view the law laid down by this Court in the
aforementioned two decisions, the question arises for consideration in       B
these appeals is whether the High Court was justified in allowing the
petitions(SCAs) filed by the Revenue.
       21. It is not in dispute that when the Settlement Commission passed
the first order on 11.08.2000 disposing of the application of the
appellants(aseesee), the issue with regard to the powers of the Settlement   C
Commission was not settled by any decision of this Court. These two
decisions were rendered after the Settlement Commission passed the
order in this case. Therefore, the Settlement Commission had no occasion
to examine the issue in question in the context of law laid down by this
Court in these two decisions. However, the issue in question was, at
that time, pending before the High Court in the petitions(SCAs).             D

       22. In a situation like the one arising in the case, the High Court
instead of going into the merits of the issue, should have set aside the
order dated 11.08.2000 passed by the Settlement Commission and
remanded the case to the Settlement Commission for deciding the issue
relating to waiver of interest payable under Sections 234A , 234B, and       E
234C of the Act afresh keeping in view the scope and the extent of
powers of the Settlement Commissioner in relation to waiver of interest
as laid down in the said two decisions.
       23. The High Court, however, committed a jurisdictional error
when it observed in Para 13 (quoted above) that they (High Court) adopt      F
the directions contained in the order of the Settlement Commission dated
11.10.2002 and then went on to make the said directions as a part of the
impugned order in relation to waiver of interest. This approach of the
High Court is wholly without jurisdiction.
        24. The High Court failed to see that the order dated 11.10.2002     G
of the Settlement Commission was already set aside by the High Court
itself in the first round vide order dated 03.03.2014 passed in S.C.A.
Nos. 15097 & 15101 of 2004 in the light of law laid down by this Court
in Brijlal (supra) wherein it is laid down that the Settlement Commission
has no power to pass orders under Section 154 (see conclusion III).
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286                SUPREME COURT REPORTS                      [2019] 5 S.C.R.


A            25. Since the order dated 11.10.2002 of the Settlement Commission
      was already held bad in law on the ground that it was passed under
      Section 154 of the Act, the same was neither in existence for any purpose
      and nor it could be relied upon by the High Court much less for making
      it a part of their order for issuing a writ.
B            26. In the light of what we have held above, we consider it apposite
      to set aside the impugned order and the order dated 11.08.2000 passed
      by Settlement Commission to the extent it decided the issue in relation to
      waiver of interest and remand the case to the Settlement Commission to
      decide the issue relating to waiver of interest payable by the assessee
      (appellants herein) afresh keeping in view the law laid down by this
C     Court in Ghaswala (supra) and Brijlal (supra) after affording an
      opportunity to the parties concerned.
            27. The appeals are accordingly allowed. The impugned order
      passed by the High Court and the order dated 11.08.2000 passed by the
      Settlement Commission in Settlement Application Nos.10/S/095/95-96/
D     IT & 10/S/029/95-96/IT are set aside.
            28. We, however, make it clear that we have not expressed any
      opinion on the merits of the issue while having formed an opinion to
      remand the case to the Settlement Commission. The Settlement
      Commission will accordingly decide the matter uninfluenced by any
E     observations made by this Court. Let the matter be decided by the
      Settlement Commission within six months from the date of this order.


      Ankit Gyan                                                   Appeals allowed.

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