Delhi High Court Upholds Income Tax Settlement Commission’s Action In Restricting Interest Liability To Application Admission Date

The Delhi High Court has upheld the action of Income Tax Settlement Commission (ITSC) in restricting the interest liability to the date of admission of the application.

The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the interest liability flowing from Section 234 B cannot go or travel beyond the date of admission of the application under Section 245D(1) of the Income Tax Act.

Background

The Commissioner of Income Tax questioned the validity of the order passed by the Income Tax Settlement Commission and is aggrieved to the extent that the said order restricts the applicability of interest under Section 234B of the Income Tax Act, 1961 on the total income which came to be disclosed in the Statement of Facts up to the date of admission of that application under Section 245D(1). 

The ITSC has essentially rested its decision with respect to the interest liability bearing in mind the decision handed down by a Constitution Bench of the Supreme Court in Brij Lal and Others v. Commissioner of Income Tax, Jalandhar. It is the correctness of the view so taken by the ITSC which is sought to be assailed in the present writ petition.

A search and seizure under Section 132 was carried out at the business and residential premises of the Radico Khaitan Group in which the respondent-assessee was the Chief Financial Officer. During the course of that search and seizure proceedings, according to the writ petitioner, a number of incriminating documents were found alongside a substantial amount of cash, jewellery and other valuables. A notice under Section 153A is stated to have been issued.

However, and before that assessment could be completed, the respondent filed a settlement application under Section 245C(1) before the ITSC. The application was admitted on 08 February 2013. The income as declared in the SOF for Assessment Years5 2010-11 and 2011-12 was ultimately determined by the ITSC in terms as contemplated under Section 245D(4).

Read More: CAPITAL GAINS COMPUTED ON DEPRECIABLE ASSET TO BE GIVEN BENEFIT OF LOWER TAX RATE: ITAT’S MEMBERS HAVE DISSENTING VIEWS

Arguments

The assessee contended that it was incumbent upon the ITSC to have called upon the respondent-assessee to pay interest on the income as disclosed in the SOF up to the date when the ITSC finally determined the settlement amount in terms contemplated under Section 245D(4).

The assessee contended that the liability to pay interest up to that terminal date was one which clearly existed and stood embodied as a statutory obligation by virtue of the provisions contained in Section 234B(4) as it stood at the relevant time and which required a payment of interest up to the date when the ITSC makes a final order determining the settlement amount.

Conclusion

The court held that the ITSC must firstly be satisfied that the applicant has made a full and true disclosure with respect to all details pertaining to income and the amount at which a settlement is prayed to be entered. This becomes apparent from Section 245D(1) enabling the ITSC to issue a notice to the applicant to explain why the application so made be allowed to be proceeded with. 

The court noted that the ITSC is enabled to call for reports and records from the Principal Commissioner with respect to the disclosures as made in such an application. It is only after the ITSC is convinced that a full, true and candid disclosure has been made by the applicant, that it is admitted for further consideration. 

The court dismissed the petition filed by the department.

FAQs

Case Details

Case Title: CIT Versus Dalip Kumar Banthiya

Case No.: W.P.(C) 6560/2016

Date: 12.09.2024

Counsel For Petitioner: Anurag Ojha

Counsel For Respondent: Kavita Jha

Read Order