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has to pay the additional amount of tax with interest without
which the application for settlement would not be
maintainable. Thus, interest under section 234B would be
payable up to the stage of section 245D(1). Our view is
supported by the amendment made by Finance Act of 2007
w.e.f. 1.6.2007 in which interest is required to be paid for
maintainability of the Application for Settlement.
13. The question is - what happens in cases where 90% of
the assessed tax is paid but on the basis of the Commission's
order under section 245D(4) the advance tax paid turns out to
be less than 90% of the assessed tax as defined in the
Explanation to Section 234B(1)?
14. As held hereinabove, under section 245C(1) read with
section 245C(1B)(ii) and section 245C(1C)(b), the additional
amount of income tax payable is to be calculated on the
aggregate of total income returned and the income disclosed in
the settlement application as if such aggregate is the total
income. Thus, the scheme of the said sections is based on
computation of total income and in that sense we have stated
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that such application for settlement is akin to a return of
income. The said provision deals with "total income". Thus,
as stated above, sections 234A, B and C are applicable up to
the stage of section 245D(1) order passed by the Settlement
Commission. However, Parliament has not extended the
provisions and the liability to pay interest beyond the date of
application for settlement. This is the position even after
Finance Act of 2007. Once this position is taken, section 140A
is attracted. When an assessee has paid interest under
sections 234A, B and C in self-assessment under section
140A, which is similar to the scheme of section 245C(1), and
once the Settlement Commission admits the application for
settlement, one finds that even under section 140A(1B)
interest payable under section 234B has to be computed on an
amount equal to the assessed tax as defined in the
Explanation to mean tax on the total income as declared in the
return. Under sub-section (1B) to Section 140A interest
payable under section 234B can also be computed on an
amount by which the advance tax paid falls short of the
assessed tax as defined in the Explanation thereto. Thus,
there is no provision under Chapter XIX-A or even under
4
section 140A (dealing with self-assessment) to charge interest
beyond the date of application for settlement after the same is
admitted by the Commission under Section 245D(1).
Moreover, as stated above, under the Act, there is a difference
between assessment in law [regular assessment or assessment
under section 143(1)] and assessment by settlement under
Chapter XIX-A. The order under section 245D(4) is not an
order of regular assessment. It is neither an order under
section 143(1) or 143(3) or 144. Under sections 139 to 158,
the process of assessment involves the filing of the return
under section 139 or under section 142; inquiry by the A.O.
under sections 142 and 143 and making of the order of
assessment by the A.O. under section 143(3) or under section
144 and issuing of notice of demand under section 156 on the
basis of the assessment order. The making of the order of
assessment is an integral part of the process of assessment.
No such steps are required to be followed in the case of
proceedings under Chapter XIX-A. The said Chapter
contemplates the taxability determined with respect to
undisclosed income only by the process of settlement/
arbitration. Thus, the nature of the orders under sections
4
143(1), 143(3) and 144 is different from the orders of the
Settlement Commission under section 245D(4). Even in
Commissioner of Income Tax v. Anjum M.H. Ghaswala and
others [252 ITR 1] there is no finding by this Court that the
order of Settlement Commission under section 245D(4) is an
order of assessment under section 143(3) or under section
144. In Ghaswala's case the only question decided by this
Court is that the interest under section 234B is mandatory in
nature and that Settlement Commission, therefore, had no
authority to waive it. Further, as stated above, the jurisdiction
of the A.O. is not fettered merely because the applicant has
filed the Settlement Application. The Act does not contemplate
stay of the proceedings during that period, i.e., when the
Settlement Commission is deciding whether to proceed or
reject the settlement application. The jurisdiction of the
Settlement Commission to proceed commences only after an
order is passed under section 245D(1). That, after making an
application for settlement the applicant is not allowed to
withdraw it [see section 245C(3)]. Once the case stands
admitted, the Settlement Commission shall have exclusive
5
jurisdiction to exercise the powers of the Income Tax
Authority. The order of Settlement Commission under section
245D(4) shall be final and conclusive under section 245I
subject to two qualifications under which it can be recalled,
viz., fraud and misrepresentation but even here it is important
to note that under section 245D(7) where the settlement
becomes void on account of fraud and misrepresentation the
proceedings with respect to the matters covered by the
settlement shall be deemed to have been revived from the
stage at which the application was allowed to be proceeded
with by the Settlement Commission. This further supports
our view that there are two distinct stages under Chapter XIX-
A and that the Legislature has not contemplated the levy of
interest between order under section 245D(1) stage and
section 245D(4) stage. Thus, interest under section 234B will
be chargeable till the order of the Settlement Commission
under section 245D(1), i.e., admission of the case. Lastly, the
expression "interest" in section 245(6A) fastens the liability to
pay interest only when the tax payable in pursuance of an
order under section 245D(4) is not paid within the specified
time and which levy is different from liability to pay interest
5
under section 234B or under section 245D(2C). [See Damani
Brothers (supra) at page 485]
III. Whether the Settlement Commission can re-open its
concluded proceedings by having recourse to Section
154 of the Act so as to levy interest under section
234B, if it was not done in the original proceedings?
15. As stated, proceedings before Settlement Commission
are similar to arbitration proceedings. It contemplates
assessment by settlement and not by way of regular
assessment or assessment under section 143(1) or under
section 143(3) or under section 144 of the Act. In that sense,
it is a Code by itself. It does not begin with the filing of the
return but by filing the application for settlement. As stated
above, under the Act, procedure for assessment falls in
Chapter XIV (in which section 154 falls) which is different from
procedure for settlement in Chapter XIX-A in which sections
245C and 245D fall. Provision for levy of interest for default in
payment of advance tax under section 234B falls in Chapter
XVII [Section F] which deals with collection and recovery of tax
which as stated above is incidental to the liability to pay
advance tax under section 207 (which is also in Chapter XVII)
and to the computation of total income in the manner
5
indicated under Chapter XIX-A vide sections 245C(1B) and
245C(1C) read with the provisos to section 245C(1) on the
additional income tax payable on the undisclosed income.
Further, if one examines the provisions of sections 245C(1B)
and 245C(1C), one finds that various situations are taken into
account while computing the additional amount of tax
payable, viz., if the applicant has not filed his returns, if he