Akbar Travels Of India Pvt. Ltd vs The Income Tax Act Settlement … on 2 July, 2010

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             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                              O. O. C. J.




                                                                                          
                          WRIT PETITION NO.865 OF 2010




                                                                  
    Akbar Travels of India Pvt. Ltd.                          ...Petitioner.
                            Vs.
    The Income Tax Act Settlement Commission,




                                                                 
    Mumbai & Ors.                                             ...Respondents.
                                    ....
    Mr.Percy J.Pardiwala, Sr.Advocate with Mr.Atul K.Jasani   for the 
    Petitioner.




                                                      
    Mr.B.M.Chatterji with Mr.P.S.Sahadevan   for the Respondents.
                                    .....
                                    
                                    CORAM : DR.D.Y.CHANDRACHUD AND 
                                            J.P.DEVADHAR,  JJ.

July 2, 2010.

ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J.) :

Rule, by consent returnable forthwith. With the

consent of Counsel and at their request the Petition is taken up for

hearing and final disposal.

The issue which arises in these proceedings is whether

the Settlement Commission, when it passes an order under Section

245D of the Income Tax Act, 1961, can award interest under

Section 234B even though no interest was chargeable under the

original order of assessment. Section 234B(4) provides, among

other things, that where as a result of an order of the Settlement

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Commission under Section 245D(4) “the amount on which interest

was payable under sub-section (1) or sub-section (3) has been

increased or reduced, as the case may be, the interest shall be

increased or reduced accordingly.” The contention of the assessee

is that unless initially, interest was chargeable under the original

assessment order, the question of an increase or reduction would

not arise and that a prior levy of interest in the original assessment

order is a pre-condition for the levy of interest under Section

234B(4).

2. The Petitioner is an IATA approved travel agent and is

engaged in the business of domestic and international air ticketing.

The Petitioner also acts as a money changer of foreign exchange.

The Petitioner has twenty six branches in India and a head office at

Mumbai. For Assessment Years 2002-03 to 2006-07, the Petitioner

filed returns of income. In each of the years, the tax deducted at

source was more than the tax payable on the income declared. The

returns of income for Assessment Years 2002-03 and 2004-05 were

accepted and an intimation was issued under Section 143(1). For

Assessment Year 2003-04, the case was selected for scrutiny and

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an assessment was completed under Section 143(3). A search

action was conducted under Section 132 on 9 November 2005.

Pursuant thereto, notices were issued to the Petitioner under

Section 153A, in response to which, the Petitioner filed its returns

of income. On 15 May 2007, notices were issued to the Petitioner

under Section 142(1) for the Assessment Years in question. On 31

May 2007, the Petitioner filed an application to the Settlement

Commission under Section 245C. On 19 March 2008, the

Settlement Commission passed an order under Section 245D(4)

under which the total taxable income for five Assessment Years was

determined as follows:

           
        



    Sr.No.          Assessment  Returned             Additional       Total 
                    Year        Income               Income           Income
    1               2002-03            92,03,644 1,77,76,037 2,69,79,681





    2               2003-04          2,20,96,220    14,66,628 2,35,63,248
    3               2004-05          3,09,34,034 1,08,16,326 4,17,50,360
    4               2005-06          4,79,11,704 103174081 151085785
    5.              2006-07          3,69,23,334   29,91,158 3,99,14,492

3. The Settlement Commission, on the issue of interest

under Section 234B(4), relied on an earlier order passed by it in

the Dolat Group of cases and held that interest would be charged

only if interest had been initially charged in the original order of

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assessment. Since no interest had been charged in the original

order of assessment, the Settlement Commission held that no

interest under Section 234B could be levied.

4. The Commissioner of Income Tax filed an application for

rectification on 14 October 2009 under Section 254. The case for

rectification was that in directing that interest under Section 234B

should not be charged, the Settlement Commission had ignored

binding decisions of the Supreme Court in the case of C.I.T. vs

Anjum Ghaswala,1 and in C.I.T. vs. Hindustan Bulk Carriers.2

Besides, the Gujarat High Court had decided in the case of Sahitya

Mudranalaya vs. I.T.Settlement Commission,3 that while passing

an order under Section 245D(4), the Commission should direct the

payment of interest on that portion of the income which forms part

of the total income as determined by the Commission and which

was not disclosed earlier before the Assessing Officer even if no

interest could have become leviable under the original order of

assessment. The power of the Commission to rectify a mistake

apparent on the record was invoked on the ground that the
1 (2001) 252 ITR 1
2 (2003) 259 ITR 449
3 (2009) 312 ITR 115 (Guj)

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Commission had ignored binding decisions of the Supreme Court

and of the High Court.

5. By an order dated 3 February 2010, the Settlement

Commission held that the direction not to charge interest under

Section 234B was a mistake apparent on the record and had to be rectified

under Section 254. The Commission held that on 19 March 2008,

when it had passed its order, a decision of the Special Bench of the

Tribunal in Sahitya Mudranalaya,4 had taken the view that

interest under Section 234B should be awarded when the

Settlement Commission passes an order under Section 235B(4)

even if no interest was leviable at the time of the original order of

assessment. The Commission noted that the levy of interest under

Section 234B is mandatory under the judgment of the Supreme

Court in Anjum Ghaswala (supra) and that in a subsequent

decision in Hindustan Bulk Carriers (supra), the Supreme Court

has held that both the disclosed income before the Income Tax

Department and the income disclosed before the Settlement

Commission should be clubbed together and the tax and interest

4 (1995) 79 Taxman 463 (Bom)

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would be calculated on the aggregate amount. Moreover, it was

held that the Settlement Commission has no power to waive

interest. The Settlement Commission held that since the levy of

interest was mandatory, it had committed an obvious mistake in

directing that interest under Section 234B should not be charged

and having regard to the judgment of the Tribunal in Sahitya

Mudranalaya which was directly on the issue when it passed its

order, the Commission had committed an error apparent by not

charging interest. The order was accordingly rectified and the

Assessing Officer was directed to levy interest under Section 234B

on the total income determined by the order under Section 245D(4) from

the first day of April of the relevant Assessment Year until the date

of the order under Section 245D(4).

6. On behalf of the assessee, it has been urged that (i)

Under Section 254, the power of rectification can be exercised only

with a view to rectifying a mistake apparent from the record. The

finding of the Commission in its original order dated 19 March

2008, directing the Assessing Officer not to charge interest under

Section 234B(4) was not erroneous and in any event should not be

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considered to be a mistake apparent from the record which could

be rectified; (ii) On a plain reading of Section 234B(4) it is only in

a case where, as a result of the order passed by the Commission,

the amount of interest payable under Section 234B(1) or Section

234B(3) has been increased or reduced, that interest under the

Section can be reduced or increased. Accordingly, unless interest

was initially chargeable under the original order of assessment, a

question of increase or reduction would not arise. Hence, the prior

levy of interest in the original order of assessment is a pre-

condition for a levy of additional interest under Section 234B(4);

(iii) In Anjum Ghaswala, the issue before the Supreme Court was

whether the Commission has the power to reduce or waive interest

chargeable under Section 234A, 234B and 234C. The Supreme

Court held that the levy of interest under Section 234B was

mandatory and the Commission did not have the power to waive or

reduce interest in an order under Section 245D(4). This decision

is not an authority for the proposition that the Commission is

empowered to charge interest for the first time under Section

234B(4) in an order under Section 245D(1) even if it has not been

charged in the original order of assessment; (iv) The decision of the

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Supreme Court in Hindustan Bulk Carriers deals with the

question of what is the date from which interest is chargeable

under the Act and not whether the Settlement Commission has

power to levy interest for the first time under Section 245D(4).

Moreover, in Brij Lal vs. CIT,5 the decision in Anjum Ghaswala

has been referred for consideration to a larger Bench.

7.

On the other hand, on behalf of the Revenue, Counsel

submitted that (i) The power of the Settlement Commission to

award interest under Section 234B(4) is not subject to the

condition that interest should have been leviable under the original

order of assessment; (ii) The observations of the Supreme Court in

Anjum Ghaswala and Hindustan Bulk Carriers would establish

that interest is chargeable under Section 234B(4) for the first time,

under an order of the Settlement Commission under Section

245D(4); (iii) The Settlement Commission was under Section 254

duty bound to rectify a mistake which had occurred, which was

apparent from the record, since it is a fundamental principle that

no party appearing before the Tribunal, be it an assessee or the

5 (2005) 279 ITR 432 (SC)

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Department, should suffer on account of any mistake committed by

the Tribunal. In ignoring the binding judgment of the Tribunal in

Sahitya Mudranalaya (supra), which held the field when the

Settlement Commission had passed an order originally on 19

March 2008, the Settlement Commission committed an error

apparent on the record which it could rectify under Section 254.

8.

Sub-sections (1) and (4) of Section 234B are of

particular relevance to the controversy which arises in these

proceedings. For aiding the discussion, it would be appropriate to

extract in entirety, the statutory provision :

“234B. (1) Subject to the other provisions of this section,

where, in any financial year, an assessee who is liable to
pay advance tax under section 208 has failed to pay such
tax or, where the advance tax paid by such assessee

under the provisions of section 210 is less than ninety
per cent of the assessed tax, the assessee shall be liable to
pay simple interest at the rate of one per cent for every
month or part of a month comprised in the period from
the 1st day of April next following such financial year to

the date of determination of total income under Sub-

section (1) of Section 143 and where a regular
assessment is made, to the date of such regular
assessment, on an amount equal to the assessed tax or,
as the case may be, on the amount by which the advance
tax paid as aforesaid falls short of the assessed tax,

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Explanation 1, – In this section, “assessed tax” means the
tax on the total income determined under sub-section (1)

of section 143 and where a regular assessment is made,
the tax on the total income determined under such

regular assessment as reduced by the amount of, –

(i) any tax deducted or collected at source in
accordance with the provisions of Chapter XVII on

any income which is subject to such deduction or
collection and which is taken into account in
computing such total income;

(ii) any relief of tax allowed under section 90 on
account of tax paid in a country outside India;

(iii)any relief of tax allowed under section 90A on
account of tax paid in a specified territory outside

India referred to in that section;

(iv)any deduction, from the Indian income-tax
payable, allowed under section 91, on account of

tax paid in a country outside India; and

(v)any tax credit allowed to be set off in accordance
with the provisions of section 115JAA.

Explanation 2.- Where, in relation to an assessment year,
an assessment is made for the first time under section
147 or section 153A, the assessment so made shall be
regarded as a regular assessment for the purposes of this
section.

Explanation 3.- In Explanation 1 and in sub-section (3)
“tax on the total income determined under Sub-section
(1) of Section 143” shall not include the additional
income-tax, if any, payable under section 143.

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     -(2)        Where,   before   the   date   of   determination   of 

total income under Sub-section (1) of Section 143 or

completion of a regular assessment, tax is paid by the
assessee under Section 140A or otherwise.-

(i) interest shall be calculated in accordance with the
foregoing provisions of this section up to the date
on which the tax is so paid, and reduced by the

interest, if any, paid under section 140A towards
the interest chargeable under this section;

(ii)thereafter, interest shall be calculated at the rate

aforesaid on the amount by which the tax so paid
together with the advance tax paid falls short of

the assessed tax.

-(3) Where, as a result of an order of reassessment

or recomputation under section 147 or section 153A, the
amount on which interest was payable under sub-section
(1) is increased, the assessee shall be liable to pay simple
interest a the rate of one per cent for every month or part

of a month comprised in the period commencing on the
date following the date of determination of total income

under Sub-section (1) of Section 143 and where a
regular assessment is made as is referred to in sub-
section (1) following the date of such regular assessment

and ending on the date of the reassessment or
recomputation under section 147 or section 153A, on the
amount by which the tax on the total income determined
on the basis of the reassessment or recomputation
exceeds the tax on the total income determined under

Sub-section (1) of Section 143 or on the basis of the
regular assessment aforesaid.

-(4) Where, as a result of an order under section
154 or section 155 or section 250 or section 254 or
section 260 or section 262 or section 263 or section 264
or an order of the Settlement Commission under Sub-
section (4) of Section 245D, the amount on which

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interest was payable under sub-section (1) or sub-section
(3) has been increased or reduced, as the case may be,

the interest shall be increased or reduced accordingly,
and –

(i) in a case where the interest is increased, the
Assessing Officer shall serve on the assessee a
notice of demand in the prescribed form specifying

the sum payable and such notice of demand shall
be deemed to be a notice under section 156 and
the provisions of this Act shall apply accordingly;

(ii)in a case where the interest is reduced, the excess
interest paid, if any, shall be refunded.

-(5) The provisions of this section shall apply in
respect of assessments for the assessment year
commencing on the 1st day of April, 1989 and subsequent
assessment years.”

9. Section 234B provides for the payment of interest on

default in the payment of advance tax. The provision is attracted

where in any financial year: (i) An assessee who is liable to pay

advance tax has failed to do so; or (ii) Where the advance tax paid

by the assessee is less than ninety per cent of the assessed tax. The

assessee in such a case is liable to pay interest as specified in the

Section from the first day of April next following the financial year

to the date of determination of the total income under Section

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143(1) and, where a regular assessment is made, to the date of the

regular assessment. Interest is payable on “an amount equal to the

assessed tax or, as the case may be, on the amount by which the

advance tax paid as aforesaid falls short of the assessed tax”. Sub-

section (4) of Section 234B applies in a situation where, as a result

of orders passed under Sections 154, 155, 250, 254, 260, 262, 263

or 264 or an order of the Settlement Commission under Section

245D(4), “the amount on which the interest was payable under

Sub-sections (1) or (3) has been increased or reduced, as the case

may be.” Thereupon, the provision is that interest shall be

increased or reduced accordingly. In a case where the interest is

increased, the Assessing Officer has to serve on the assessee a

notice of demand whereas if the interest is reduced, the excess

interest has to be refunded.

10. In the present case, the issue before the Court arises out

of the order of the Settlement Commission under Section 245D(4)

and the question is as to whether the amount on which interest was

payable under Sub-section (1) or sub-section (3) has been

increased or reduced. Now, in Sub-section (1) of Section 234B,

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interest is payable on an amount equal to the assessed tax (where

the assessee who is liable to pay advance tax has failed to pay such

tax) or on the amount by which the advance tax paid falls short of

the assessed tax. In a situation where the assessee has paid

advance tax which is less than ninety per cent of the assessed tax,

interest is payable on the difference between the assessed tax and

the advance tax paid. Sub-section 4 of Section 234(B) refers to a

situation where “the amount on which interest was payable under

sub-section (1) or sub-section (3) has been increased or reduced”

inter alia as a result of an order of the Settlement Commission.

The amount which is referred to in sub-section (4), is the amount

on which interest is payable under sub-section (1) or sub-section

(3). That amount is the amount by which the advance tax paid

falls short of the assessed tax. When Sub-section (4) of Section

234B refers to “the amount on which interest was payable under

Sub-section (1) or Sub-section (3)”, that amount is the difference

between the advance tax paid and the assessed tax. The words “on

which interest was payable” have been used in a descriptive

sense to identify the amount specified in Sub-section (1), or as the

case may be, in sub-section (3). In Sub-section (1), the amount is

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the difference between the advance tax and the assessed tax.

These words do not impose a condition that for interest to be

attracted under Section 234B(4) interest should actually have been

levied under the original order of assessment under sub-section

(1). The effect of the order of the Settlement Commission in this

case is to enhance the assessed income. The amount by which the

advance tax paid by the assessee falls short of the assessed tax has

been increased as a result of the order passed by the Settlement

Commission. This is the amount on which interest was payable

under Sub-section (1) for if the assessee were to make a correct

disclosure of his income in the first instance, the assessee would

have been liable to pay interest under Sub-section (1) on the short

fall. The words, “the interest shall be increased”, would

contemplate both a situation where interest had been levied on the

assessee in the first instance, and a situation where no interest has

been levied on the assessee in the original order of assessment.

There is no reason or justification for the Court on the basis of the

plain language used in sub-section (4) to exclude the latter

category of cases as contended on behalf of the assessee from the

liability to pay interest. In accepting the submission of the

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assessee, the Court would be adopting an interpretation which

would be contrary both to the language used by the Legislature and

the intent that is embodied in Sub-section (4).

11. The view which we have taken on the interpretation of

Sub-sections (1) and (4) of Section 234B, as a matter of first

principle, is also consistent with the interpretation placed by the

Supreme Court on the provisions of the statute. In CIT vs. Anjum

M.H.Ghaswala (supra), a Constitution Bench of the Supreme

Court was considering the question as to whether the Settlement

Commission has the jurisdiction to reduce or waive interest

chargeable under Section 234A, 234B and 234C while passing an

order of settlement under Section 245D(4). The principle of law

which emerges from the judgment of the Supreme Court is that

though Section 245D(4) confers a wide power on the Commission

while settling a case, nevertheless the Act mandates that this shall

be done in accordance with the provisions of the Act. The Supreme

Court held that the liability to pay interest under Sections 234A,

234B and 234C is mandatory and the Commission would have no

power to waive or reduce interest payable statutorily except to the

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extent of granting relief under circulars issued by the Board under

Section 119. In the following observations, the judgment of the

Supreme Court indicates that necessary changes in regard to the

payment of interest would have to be made depending on the

change that has occurred upon the order of the Settlement

Commission under Section 245D(4):

“A perusal of this sub-section which refers to sub-section
(4) of Section 245D mandates that if by virtue of an

order passed under section 245D, the amount of tax on
which interest was payable under sub-section (1) or sub-
section (3) of this section has been increased or reduced,

as the case may be, the interest shall be increased or
reduced accordingly. This section is an indicator of the
fact that so far as the interest falling due by virtue of
default in furnishing a return of income, default in

payment of advance tax or interest for deferment of
advance tax are concerned, Part F of Chapter XVII has

been obligated with the duty of levy of interest, as also to
make the necessary changes in the payment of interest
dependent on the change that may be occur consequent

to the order of settlement under section 245D(4).

…

If the scheme of levy of interest is thus to be

analysed on the anvil of the provisions referred to
hereinabove, it shows that the interest contemplated
under sections 234A, 234B and 234C is mandatory in
nature and the power of waiver or reduction having not
been expressly conferred on the Commission, the same
indicates that so far as the payment of statutory interest
is concerned, the same is outside the purview of the
settlement completed in Chapter XIX-A of the Act.”

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The Supreme Court has also held that while providing for the terms

of settlement under Sub-section (6) of Section 245D, the

Commission does not have the power to waive or reduce tax,

penalty or interest. In the subsequent judgment in CIT vs.

Hindustan Bulk Carriers (supra), the issue before the Supreme

Court related to the period for which interest was chargeable under

Section 234B. Three separate judgments were delivered in that

case. Mr.Justice Arijit Pasayat while interpreting the provisions of

Section 234B observed thus:

“It cannot be even countenanced that no interest is

chargeable for that portion of the income forming part of
the total income as determined by the Commission which
was not earlier disclosed before the Assessing Officer.”

The judgment holds that while the Commission has “sufficient

elbow room in assessing the income of the assessee”, the terms of

settlement cannot be in conflict with the mandatory provisions of

the Act such as quantum and payment of tax and the interest. The

Learned Judge further held as follows :

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“There is another way of looking at the issue. Section
234B(3) provides differently for regular assessment and

reassessment. In a reassessment, ordinarily income
assessed is more than what was determined originally. If

two different periods are provided to meet such a
situation, it is inconceivable that the Legislature intended
to totally give a go by to interest on the income which for
the first time is disclosed before the Commission. By

analogy and harmony, the period has to be till the date
of the Commission’s order.

To put it differently, the interest charged in
terms of sections 234A, 234B and 234C becomes payable

on the income already disclosed in the returns filed,
together with the income disclosed before the

Commission. The concerned interest as aforesaid shall
be on the consolidated amount of income, i.e., both
disclosed and undisclosed. as indicated above, such

interest shall be charged till the Commission acts in
terms of section 245D.”

Concurring judgments were delivered by Mr.Justice M.B.Shah and

Mr.Justice D.M.Dharmadhikari. In the judgment of Mr.Justice

D.M.Dharmadhikari, it was observed thus:

“The provisions contained in Chapter XIX-A merely aim
at encouraging taxpayers to approach the Settlement
Commission with full disclosure of their income which

they had not earlier disclosed in the course of regular
assessment. Such assessees who co-operate with the
assessing authorities in making proper assessment of tax
can be granted immunity from prosecution and penalty.
There is no provision that they can be granted immunity
from payment of interest on the tax assessed.”

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It is true, as contended by Counsel appearing on behalf of the

Assessee, that the issue which arose in Anjum Ghaswala was

whether the Settlement Commission while passing an order under

Section 245D(4) has the power to waive or reduce interest and the

question was answered in the negative. Similarly, in Hindustan

Bulk Carriers, the specific issue that came up before the Supreme

Court was the date from which interest is chargeable under the Act.

The judgments of the Supreme Court, however, cannot be

distinguished purely on that basis. In so far as the High Court is

concerned, the observations of the Supreme Court made while

interpreting the provisions of Section 234B are binding.

12. The fact that there is a reference to the Constitution

Bench in Brij Lal Vs.CIT, (supra) on the question as to whether

Sections 234A, 234B and 234C are applicable to proceedings

before the Settlement Commission and whether the Settlement

Commission can reopen concluded proceedings by recourse to

Section 254 so as to levy interest under these Sections though it

was not done in the original proceedings, will not detract from the

binding force of the judgment in Anjum Ghaswala so long as it

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continues to hold the field.

13. A Division Bench of the Gujarat High Court in Sahitya

Mudranalaya (supra) has specifically dealt with the issue as to

whether interest can be levied under Section 234B in a case where

no interest was leviable under the original order of assessment.

After adverting to the observations of the Supreme Court in

Hindustan Bulk Carriers, the Division Bench observed as follows:

“Therefore, it becomes more than abundantly clear that

while passing an order under Section 245D(4) of the Act
the Commission exercises powers of an income-tax
authority as provided under Section 245F of the Act and
the Commission cannot be precluded from fastening

liability to pay interest for that portion of income
forming part of the total income as determined by the

Commission which was not earlier disclosed before the
Assessing Officer, even if no interest could have become
leviable if originally disclosed income is considered in

isolation by operation of section 234B(1) of the Act.”

14. In C.I.T. Vs. Kotak Mahindra Finance Ltd.,6 the

contention of the assessee was that an assessment under

Section115J is on deemed income and hence Sections 234B and

234C will not apply. The contention was that the accounts of a

6 (2004) 265 ITR 119

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Company under Schedule VI cannot be prepared before the end of

the previous year whereas, Section 207 provides for the estimation

of current income at the end of the previous year. Hon’ble

Mr.Justice S.H.Kapadia (as the Learned Chief Justice then was)

rejected the argument and held that the difficulty faced by the

assessee in computation could not defeat the liability to pay

advance tax. The Division Bench of this Court held as follows:

“Under section 207 of the Income Tax Act, advance tax is
payable during any financial year in respect of the
“current income”. The words “current income” are very

crucial. The words “current income” refer to
computation of total income under the provisions of the
Income-tax Act including section 115J. Under section
207 of the Income-tax Act, the words “total income” have

been equated to the expression “current income”. The
matter can be looked at from another angle. The interest

which is leviable under section 234B and section 234C is
compensatory in nature. It has no element of penalty in
it. Therefore, it is clear that if there is non-payment or

short payment of tax on the current income, then the
assessee has to pay interest as the income has accrued to
the assessee for the previous year. In our opinion,
merely because the curtain rises in the cases of
companies falling under section 115J after March 31, is

no ground for the assessee-company not to pay interest
under section 234B and section 234C.”

15. Counsel appearing on behalf of the Assessee relied on

the judgment of the Delhi High Court in Modi Cement Ltd. Vs.

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Union of India.7 In that case, Section 143(1A(a) came up for

consideration under which it had been provided that where, in the

case of any person, the total income, as a result of the adjustments

made under the first proviso to clause (a) of Sub-section (1) exceeds

the total income declared in the return by any amount, the Assessing Officer

shall further increase the amount of tax payable under Sub-section

(1) by an additional income-tax calculated as specified on such

excess amount. In the context of the specific words which were

used in Section 143(1A)(a), the Delhi High Court held that where,

after the adjustments under Section 143(1) are carried out, the

resultant figure is still a loss, Section 143(1A) would not apply

since no tax is payable if the resultant figure is a loss. These

observations are made in the context of the specific words used in

the Section.

16. We have dealt with the merits of the challenge to the

order of the Settlement Commission dated 3 February 2010. But, it

must be noted that it was urged on behalf of the Assessee that the

Settlement Commission ought not to have exercised the power

7 (1992) 193 ITR 91

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under Section 254 on the ground that the original order, which had

followed an earlier view of the Commission in the Dolat Group of

cases could not be said to suffer from an error apparent on the

record. This submission cannot be accepted for the simple reason

that on the date on which the Settlement Commission declined to

order interest, namely, on 19 March 2008, there was a binding

judgment of the Special Bench of the Tribunal in the case of

Sahitya Mudranalaya vs. CIT.8 As a matter of fact, the judgment

of the Gujarat High Court confirming the judgment of the Tribunal

noted earlier was delivered on 3 March 2008 which was also prior

to the original order of the Settlement Commission. The

Settlement Commission, therefore, committed an error apparent by

not following the decision of the Special Bench of the Tribunal

which was confirmed by the Gujarat High Court. These judgments,

as we have noted earlier, were also consistent with the law laid

down by the Supreme Court in Anjum Ghaswala and Hindustan

Bulk Carriers. The Settlement Commission was, therefore,

justified in allowing the Miscellaneous Application under Section

154 and setting right the error apparent which occurred in the

8 (1995) 79 Taxman 463

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original order. In Honda Siel Power Products Ltd. vs. CIT,9 the

Supreme Court has emphasized that the basic purpose underlying

Section 254 is based on the fundamental principle that no party

appearing before the Tribunal, be it an assessee or the Department,

should suffer on account of any mistake committed by the

Tribunal. In the circumstances, the Settlement Commission, was

therefore, justified in exercising the power under Section 254 and

in allowing the miscellaneous application.

17. For these reasons, we are of the view that there is no

merit in the Writ Petition. The Petition shall stand dismissed. No

order as to costs.

( Dr.D.Y.Chandrachud, J.)

( J.P.Devadhar, J.)

9 (2007) 295 ITR 466 (SC)

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