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INCOME TAX ACT, 1961: CHAPTER X1X-A – Sections 245-C, 245-D (1) and 245-D(4) r/w s. 234-B – Settlement Commission – Settlement of cases – Interest for default in payment of advance tax – Applicability of s. 234-B – Held: Sections 234-A, 234-B and 234-C are applicable to the proceedings of the Settlement Commission under Chapter XIX-A – Sections 234-B, 245-D(2C) and s.245-D(6A) operate in different fields – Section 234-B comes into operation when there is default in payment of advance tax whereas liability to pay interest u/s 245-D(2C) arises when the additional amount of income tax is not paid within time specified u/s 245-D(2A) – Section 245-D (6A), on the other hand, imposes liability to pay interest only when the tax payable in pursuance of an order of Settlement Commission u/s 245-D(4) is not made within the specified time.. s. 234-B – Terminal point for levy of interest in settlement of cases under Chapter XIX-A – Held: Would be up to the date of the Order u/s 245-D(1) and not up to the date of the Order of Settlement u/s 245-D(4). ss. 154, 234-B, 245-D(4) and 245-I – Rectification of mistake – Levy of interest – Order of settlement u/s 245D(4) to be conclusive – Held: In view of s. 245-I, the Settlement Commission cannot re-open its concluded proceedings by invoking s. 154 so as to levy interest u/s 234-B – Section 154 is not applicable to Chapter XIX proceedings. Pursuant to the referral orders dated 14.12.2004 and 21.1.2005, the instant appeals were referred to the Constitution Bench of the Supreme Court. The questions for consideration before the Court were: (i) whether s. 234B of the Income Tax Act, 1961 would apply to proceedings of the Settlement Commission under Chapter XIX-A of the said Act? If yes; (ii) what would be the terminal point for levy of such interest – whether such interest should be computed up to the date of the Order u/s 245-D (1) or up to the date of the Order of the Commission u/s 245-D (4)? and (iii) whether the Settlement Commission could reopen its concluded proceedings by invoking s. 154 of the said Act so as to levy interest u/s 234-B, though it was not so done in the original proceedings? =Answering the reference and disposing of the appeals, the Court HELD: 1.1 Sections 234-A, 234-B and 234-C of the Income Tax Act 1961 are applicable to the proceedings of the Settlement Commission under Chapter XIX-A of the Act to the extent indicated in the judgment. [para 16] 1.2 Levy of interest is incidental to the liability and computation of advance tax. Liability and computation of advance tax is done under section C of Chapter XVII. On the other hand, interest for defaults in payment of advance tax falls u/s 234-B, apart from ss.234-A and 234-C, in section F of Chapter XVII. It is significant to note that s.234-A(4) refers to the increase or reduction of interest subsequent to the Order of the Commission u/s 245-D(4) increasing or reducing the amount of tax payable and so also s.234-B(4). [para 9] 1.3 Chapter XIX-A deals with Settlement of Cases. The word “case” is defined u/s 245-A (b). It is an exhaustive definition, which makes it clear that an application for Settlement shall lie only when any proceedings for assessment or re-assessment or an appeal or revision in connection with such assessment or re-assessment is pending before the Income Tax Authority. [para 10] 1.4 An application for settlement made u/s 245-C(1) will not be maintainable without full and true disclosure of the income by the applicant, the manner in which such undisclosed income was derived and that the applicant had furnished his return of income and that the additional tax payable on such income exceeds the specified amount. This was the position prior to Finance Act of 2007. However, s.245-C(1A) inter alia provides that additional amount of income tax payable in respect of the income disclosed shall be calculated in accordance with the provisions of s.245-C(1B). [para 10] 1.5 Under sub-s. (1B) of s.245-C, if the applicant has furnished his return in respect of his total income and no assessment is made, the tax shall be calculated on the aggregate of the total income returned and the income disclosed in the application as if such aggregate was the total income. The words “regular assessment” are not there in s. 245-C (1B) (ii). However, u/s 245-C(1C)(b), it is provided that the additional tax calculated u/s 245-C (1B)(ii) shall be reduced by the aggregate of the tax deducted at source or tax paid in advance and the amount of tax paid u/s 140-A. The resultant amount is the additional tax payable by the assessee. Thus, s.245-C incorporates within it, the provisions of Chapters XVIIB, XVIIC and s.140-A of the Act. [para 10] 1.6 A careful analysis of the provisions of s. 245-D(1) and 245-D(4) indicates two distinct stages – one, allowing the application to be proceeded with (or rejected), and the other, of disposal of the application by appropriate orders being passed by the Settlement Commission. In between the two stages, there are provisions which require the applicant to pay the additional income tax and interest. Under s.245-D(4) on compliance of ss. 245D(2A) and (2C) and on examination of relevant records and reports, the Settlement Commission may pass such orders as it thinks fit on the matter covered by the application and any other matter relating to the “case” referred to in the report of the Commissioner of Income Tax. Even u/s 245-D (7), it is provided that where the settlement becomes void u/s 245-D(6) the proceedings with respect to the matters covered by the settlement shall be deemed to have revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the income tax authority may complete the proceedings within the period mentioned therein. Thus, s. 245-D(7) brings out the difference between s. 245-D(1) stage and s. 245-D(4) stage. Under s.245-D (6), it is laid down that every order u/s 245-D (4) shall provide for the Terms of Settlement including any demand by way of tax, penalty or interest. [para 10] 1.7 Under s. 245-F (1), in addition to the powers conferred on the Settlement Commission under Chapter XIX-A, it shall also have all the powers which are vested in the income tax authority under the Act. However, there is a significant difference between “procedure for assessment” under Chapter XIV and “procedure for settlement” under Chapter XIX-A (s.245-D). Under s. 245-F(4), it is clarified that nothing in Chapter XIX-A shall affect the operation of any other provision of the Act requiring the applicant to pay tax on the basis of self-assessment in relation to matters before the Settlement Commission. The point to be noted is that several provisions of the Act like s. 140A; furnishing of the return of income by the applicant as indicated in the proviso (a) to s. 245-C(1); provisions of the Act governing liability and computation to pay additional income tax as indicated by proviso (b) to s. 245-C(1); aggregation of total income inter alia in terms of ss. 143, 144 or 147 as indicated by s.245-C(1B)(iii); aggregation of total income as returned plus income disclosed in the application for settlement as indicated in s. 245-C(1B)(ii); the deductions in s. 245-C(1C); increase of interest u/s 215(3) pursuant to the orders of the Settlement Commission and the levy of interest u/s 234-A(4) and 234- B(4) all bring into Chapter XIX-A various provisions of the Act. Thus, while reading the provisions of ss. 245-C and 245-D one has to keep in mind various provisions of the Act and the concepts of self-assessment, assessment, regular assessment and computation of total income which have been engrafted in Chapter XIX-A. [para 10] 1.8 Though Chapter XIX- A is a self-contained Code, the procedure to be followed by the Settlement Commission u/ss 245-C and 245-D in the matter of computation of undisclosed income; in the matter of computation of additional income tax payable on such income with interest thereon; the filing of settlement application indicating the amount of income returned in the return of income and the additional income tax payable on the undisclosed income to be aggregated as total income shows that Chapter XIX- A indicates aggregation of incomes so as to constitute total income which indicates that the special procedure under Chapter XIX-A has inbuilt mechanism of computing total income which is nothing but assessment (computation of total income). The word `assessment’ can be used to cover the whole procedure to ascertain the liability and machinery for enforcement. [para 8 and 11] C.A. Abraham v. Income-Tax Officer, Kottayam and Another 1961 ( 2 ) SCR 765=1961) 41 ITR 425 (SC); and Modi Industries Limited, Modinagar and Others v. Commissioner of Income Tax, Delhi and Another 1995 (3) Supp. SCR 642= 216 ITR 759 – referred to. 1.9 Under the Act, tax is payable on the total income as computed in accordance with the provisions of the Act. Thus, s. 143(3) provision is sought to be incorporated in s.245-C. When Parliament uses the words “as if such aggregate would constitute total income”, it presupposes that under the special procedure the aggregation of the returned income plus income disclosed would result in computation of total income which is the basis for the levy of tax on the undisclosed income which is nothing but “assessment”, which takes place at s. 245-D(1) stage. However, in that computation, one finds that provisions dealing with a regular assessment, self-assessment and levy and computation of interest for default in payment of advance tax, etc. are engrafted. [ss.245-C (1B), 245-C (1C), 245-D(6), 245-F(3) in addition to ss. 215(3), 234-A(4) and 234-B(4)] [para 11] 1.10 In the case of Damani Brothers*, a 3- Judge Bench of this Court, while analyzing the scheme of Chapter XIX-A, has rightly held that s. 234-B, s. 245-D(2C) and s.245-D(6A) operate in different fields. Section 234-B comes into operation when there is default in payment of advance tax whereas liability to pay interest u/s 245-D(2C) arises when the additional amount of income tax is not paid within time specified u/s 245-D(2A). Section 245- D (6A), on the other hand, imposes liability to pay interest only when the tax payable in pursuance of an order of Settlement Commission u/s 245-D(4) is not made within the specified time. [para 10] *C.I.T. v. Damani Brothers 2002(5) Supp. SCR 424=259 ITR 475 – upheld. 2.1 The terminal point for the levy of interest u/s 234-B would be up to the date of the order u/s 245-D(1) and not up to the date of the Order of Settlement u/s 245-D(4). [para 16] 2.2 The proviso to s. 245-C(1), ss.245-C(1B), 245-C(1C), 245-D(4) and 245F(3) bring in the concepts of returned income, self-assessment, aggregation of income returned and income disclosed as if it is total income; levy of interest u/s 215(3) read with s. 245-D(4); increase of interest u/ss 234-A(4) and 234-B (4) read with s. 245-D(4) as also ss. 140A(1A) and (1B) read with ss. 234-A and 234-B. [para 12] 2.3 Section 245-C (1) is voluntary disclosure by the assessee of his undisclosed income. Under s. 245-C (1), the assessee has to mention in his settlement application the additional amount of tax payable by him on such undisclosed income. Under proviso (a), the application for settlement shall not be entertained till the assessee has furnished the return of income which he was required to file under the Act to the extent of his income. Under proviso (b), the assessee has to declare the additional amount of tax payable. Thus, the two provisos to s. 245-C (1) show that Chapter XIX-A, which prescribes a special procedure for assessment by settlement, contemplates a pre-assessment collection of tax. With the filing of the settlement application and after such application is allowed to be proceeded with u/s 245-D(1), intimation u/s 143(1), regular assessment u/ss 143(3)/144 and re-assessment u/s 147 lose their existence, as u/ss 245- C(1A) and (1B) it is only the income disclosed in the return of income before the A.O. alone which survives for consideration by the Settlement Commission for settling the amount of income which is not disclosed in the return. Under s. 245-C (1B)(ii), if the applicant has furnished a return in respect of the total income, whether or not assessment is made in pursuance of the return, the additional amount of income tax payable in respect of the total income disclosed shall be on the aggregate of the total income returned and the income disclosed in his application for settlement as if such aggregate was his total income. This is pre- assessment collection of tax. Such pre- assessment is based on the estimation of the current income and tax thereon by the applicant himself. [para 12] 2.4 When the Settlement Commission accepts the Voluntary Disclosure by the application for settlement, s. 234-B (2) steps in. It is significant that the assessee is liable to pay advance tax, he commits default in payment to the extent of the undisclosed income but he offers to pay additional income tax then interest has to be calculated in accordance with ss. 207, 208 and 234-B(2) up to the date on which such tax is paid. This is not the interest which assessee has to pay after assessment u/s 245-D (4). Under ss. 245-C (1B) and (1C) the additional amount of income tax payable on the undisclosed income shall be on the total income as calculated under s. 245- C(1B). On computation of total income u/ss 245-C (1B) and (1C), interest follows such computation. It is important to note that interest follows computation of total income. Once such computation takes place u/s 245- C(1B) then s. 234-B(2) applies. The said sub-section deals with the situation where before determination of total income u/s 143(1) or 143(3) tax is paid u/s 140A or otherwise interest shall be calculated in accordance with s. 234-B(1) up to the date on which tax is so paid. In that sense an application u/s 245-C (1) is a return. Section 245-C (1) deals with computation of “total income”. Thus, ss. 234-A, 234-B and 234-C are applicable upto the stage of s.245-D(1) order passed by the Settlement Commission, i.e. admission of the case. [para 12 and 14] 2.5 Besides, Chapter XIX-A refers to procedure of settlement (s. 245-D (1)). Section 245-D (1) provides for expeditious recovery of tax by way of pre-assessment collection. Interest on default in payment of advance tax comes u/ss 234-A, 234-B, 234-C, which fall in Chapter XVII which deals with collection and recovery of tax. It is important to note that interest follows computation of additional payment of income tax u/ss 245-C (1B) and (1C). This is how ss. 234-A, 234-B and 234-C get engrafted into Chapter XIX-A at the stage of s. 245-D (1). Till the Settlement Commission decides to admit the case u/s 245-D (1), the proceedings under the normal provisions remain open. But, once the Commission admits the case after being satisfied that the disclosure is full and true then the proceedings commence with the Settlement Commission. In the meantime, applicant has to pay the additional amount of tax with interest without which the application for settlement would not be maintainable. Thus, interest u/s 234-B would be payable up to the stage of s. 245-D (1). This 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. [para 12] 2.6 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, s. 140-A is attracted. When an assessee has paid interest u/ss. 234-A, 234-B and 234-C in self-assessment u/s. 140-A, which is similar to the scheme of s.245-C (1), and once the Settlement Commission admits the application for settlement, one finds that even u/s 140-A(1B) interest payable u/s. 234-B 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-s. (1B) of s.140-A interest payable u/s. 234-B 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 u/s.140A (dealing with self- assessment) to charge interest beyond the date of application for settlement after the same is admitted by the Commission u/s.245-D(1). [para 14] 2.7 Moreover, under the Act, there is a difference between assessment in law [regular assessment or assessment u/s 143(1)] and assessment by settlement under Chapter XIX-A. The order u/s.245-D(4) is not an order of regular assessment. It is neither an order u/s. 143(1) or 143(3) or 144. The making of the order of assessment is an integral part of the process of assessment. [ss. 139 to 158] 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 u/ss. 143(1), 143(3) and 144 is different from the orders of the Settlement Commission u/s 245-D(4). [para 14] 2.8 Further, 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). After making an application for settlement the applicant is not allowed to withdraw it [s. 245C(3)]. Once the case stands admitted, the Settlement Commission shall have exclusive jurisdiction to exercise the powers of the Income Tax Authority. The order of Settlement Commission u/s 245D(4) shall be final and conclusive u/s 245I subject to two qualifications under which it can be recalled, viz., fraud and misrepresentation but even here it is important to note that u/s 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 the view that there are two distinct stages under Chapter XIX-A and that the Legislature has not contemplated the levy of interest between order u/s 245D(1) stage and s.245D(4) stage. Thus, interest u/s 234B will be chargeable till the order of the Settlement Commission u/s 245D(1), i.e., admission of the case. [para 14] Commissioner of Income Tax v. Anjum M.H. Ghaswala and others 2001(4) Supp. SCR 303=252 ITR 1 – referred to. 2.9 Lastly, the expression “interest” in s. 245-(6A) fastens the liability to pay interest only when the tax payable in pursuance of an order u/s 245- D(4) is not paid within the specified time and which levy is different from liability to pay interest u/s 234-B or u/s 245-D(2C). [para 14] C.I.T. v. Damani Brothers 2002(5) Supp. SCR 424=259 ITR 475 – referred to. 3.1 The Settlement Commission cannot re-open its concluded proceedings by invoking s. 154 of the Act so as to levy interest u/s 234-B, particularly, in view of s. 245-I. Invocation of s.154 (held to be inapplicable to Chapter XIX-A proceedings) cannot be justified. Descriptively, it can be stated that assessment in law is different from assessment by way of settlement. A reading of s.245-D (6) with s. 245-I makes it clear that every order of settlement passed u/s 245-D (4) shall be final and conclusive as to the matters contained therein and that the same shall not be re-opened except in the case of fraud and misrepresentation. [para 10, 15 and 16] 3.2 Proceedings before Settlement Commission are similar to arbitration proceedings. It contemplates assessment by settlement and not by way of regular assessment or assessment u/s 143(1) or u/s 143(3) or u/s 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. Under the Act, procedure for assessment falls in Chapter XIV (in which s. 154 falls) which is different from procedure for settlement in Chapter XIX-A in which ss. 245-C and 245-D fall. Provision for levy of interest for default in payment of advance tax u/s 234-B falls in Chapter XVII [Section F] which deals with collection and recovery of tax which is incidental to the liability to pay advance tax u/s 207 (which is also in Chapter XVII) and to the computation of total income in the manner indicated under Chapter XIX-A vide ss. 245-C(1B) and 245-C(1C) read with the provisos to s. 245-C(1) on the additional income tax payable on the undisclosed income. Further, if one examines the provisions of ss. 245-C(1B) and 245-C(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 return, if he has filed but orders of assessment are not passed or if the proceedings are pending for re-assessment u/s 147 (again in Chapter XIV) or by way of appeal or revision in connection with such re-assessment and the applicant has not furnished his return of total income in which case tax has to be calculated on the aggregate of total income as assessed in the earlier proceedings for assessment u/s 143 or u/s. 144 or u/s 147 [s. 245-C(1B)]. The point to be noted is that in computation of additional income tax payable by the assessee, there is no mention of s. 154. On the contrary, u/s 245-I the order of the Settlement Commission is made final and conclusive on matters mentioned in the application for settlement except in the two cases of fraud and misrepresentation in which case the matter could be re-opened by way of review or recall. [para 15] 3.3 Like ITAT, the Settlement Commission is a quasi-judicial body. Under s. 254(2), the ITAT is given the power to rectify, but no such power is given to the Settlement Commission. Thus, the Settlement Commission cannot reopen its concluded proceedings by invoking s. 154 of the Act. [para 15] 3.4 Lastly, one must keep in mind the difference between review/recall of the order and rectification u/s 154. The Schedule of Chapter XIX-A does not contemplate invocation of s. 154 otherwise there would be no finality to the assessment by settlement which is different from assessment under Chapter XIV where there is an appeal, revision, etc. Settlement of liability and not determination of liability is the object of Chapter XIX- A. Even otherwise, invocation of s. 154 on facts of this batch of cases is not justified. [para 15] Commissioner of Income Tax v. Anjum M.H. Ghaswala and others 2001(4) Supp. SCR 303= 252 ITR 1; and CIT v. Hindustan Bulk Carrier 2002 (5) Suppl. SCR387 =(2003) 259 ITR 449 – referred to. Case Law Reference: 1995(3) Supp. SCR 642 referred to para 7 1961 (2) SCR765 referred to para 7 2002 (5) Suppl. SCR387 referred to para 7 2002(5) Supp. SCR 424 upheld para 10 2001(4) Supp. SCR 303 referred to para 14 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 516-527 of 2004. From the Judgment & Order dated 07.03.2003 of the Income Tax Settlement Commission (IT & WT), Kolkata in Settlement Applications Nos. 1/J/297/89- IT, 1/J/295/89-IT, 1/J/294/89-IT, 1/J/299/89-IT, 1/J/296/89-IT, 1/J298/89- IT, 1/J/302/90-IT, 1/J/307/90-IT, 1/J/305/90-IT, 1/J/305/90-IT, 1/J/304/90- IT, 1/J/301/90-IT. With C.A. Nos. 280-286 of 2005, 8324-8328 of 2004, 603, 990, 925, 924 of 2005, Writ Petition (C0 Nos. 556, 555 of 2004, C.A. Nos. 2247-2250, 923, 995, 994 of 2005, Writ Petition (C) Nos. 63, 61, 62, 60 of 2005, C.A. Nos. 2246, 3231-3232 of 2005, 3091, 3087, 3092, 4599-4601, 528-531 of 2004, Writ Petition (C) Nos. 325, 324, 326 of 2004, C.A. Nos. 992 of 2007, 9174 of 2010, 532 of 2004, 604 of 2005. Gopal Subramanium, SG, C.S. Aggarwal, Parus F. Kaka, R.P. Bhat, O.S. Bajpai, Rajiv K. Garg, Vivek Verma, Ashish Garg, Vineet Garg, A.D.N. Rao, Preetesh Kapur, G.S. Pikale, E.C. Agarwala, Mahesh Agarwal, Rishi Agrawala, Amit Kumar Sharma, Rohma Hameed, Rajiv Tyagi, Vijay Verma, Chanchal Biswal, Asha Gopalan Nair, Balaji Subramanium, Aman Ahluwalia, B.V. Balaram Das,Subramonium Prasad, Ajay Majithia, Manish Kanth, Rajesh Kumar, Dr. Kailash Chand, Chirag M. Shroff, Dattatray Vyas, Ajay Vohra, Kavita Jha, Amit Sachdeva, Prem Malhotra, Rachna Gupta, C.S. Jain, Y. Raja Gopala Rao, Krishna, V.N. Jha, V.N. Raghupathy, Ajay Jain, Rajiv Tyagi, R.K. Raghavan, Chanchal Biswal, Manjit Singh, Kamal Mohan Gupta, Santosh Aggarwal, Bhargava V. Desai, Rahul Gupta, Nikhil Sharma, Vivek Verma, Pallavi Mohan, Pankaj Jain, Abhay Jain, Rakesh Jain, Manish Kr. Choudhary, Namita Chaudhary, S. K. Verma, Mohit Chaudhary, Ashok Kulkarni, Puja Sharma, A. Das, Rituraj Chaudhary fof the appearing parties.

Title: "No, No! Not That Way" Locati...

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 REPORTABLE

 IN THE SUPREME COURT OF INDIA
 CIVIL APPELLATE/ORIGINAL JURISDICTION
 CIVIL APPEAL Nos. 516-527 OF 2004

Brij Lal & Ors. ... Appellants

 versus

Commissioner of Income Tax, Jalandhar ...
Respondents

 with

 Civil Appeal Nos. 280-286/2005, Civil Appeal
 No. 8324/2004, Civil Appeal Nos.8325-
 8328/2004, Civil Appeal No. 603/2005, Civil
 Appeal No. 990/2005, Civil Appeal No.
 925/2005, Civil Appeal No.
 924/2005, Writ Petition (C) No. 556/2004,
 Writ Petition(C)No. 555/2004, Civil Appeal
 Nos. 2247-2250/2005, Civil Appeal No.
 923/2005, Civil Appeal No. 995/2005,
 Civil Appeal No. 994/2005, Writ Petition (C)
 No. 63/2005, Writ Petition (C) No.
 61/2005, Writ Petition (C) No. 62/2005,
 Writ Petition (C) No. 60/2005, Civil Appeal
 No. 2246/2005, Civil Appeal Nos. 3231-
 3232/2005, Civil Appeal No. 3091/2004, Civil
 Appeal No. 3087/2004, Civil Appeal No.
 3092/2004, Civil Appeal Nos.4599-
 4601/2004, Civil Appeal Nos. 528-531/2004, Writ
 Petition (C) No. 325/2004, Writ Petition (C)
 No. 324/2004, Writ Petition (C) No.
 326/2004, Civil Appeal No. 992/2007,
 Civil Appeal No.9174/2010 @ SLP (C) No.
 20373/2009, Civil Appeal No.
 532/2004, and Civil Appeal No. 604/2005.

 JUDGMENT

S.H. KAPADIA, CJI
 2

1. Leave granted.

2. Vide referral orders dated 14.12.2004 and 20.1.2005

the following questions have been referred to the Constitution

Bench of this Court:

 (i) Whether sections 234A, 234B and 234C
 of the Income Tax Act, 1961 (for short
 "the Act") are at all applicable to
 proceedings of the Settlement
 Commission under Chapter XIX-A of the
 Act?

 (ii) Whether the Settlement Commission can
 reopen its concluded proceedings by
 having recourse to section 154 of the Act
 so as to levy interest under sections
 234A, 234B and 234C of the Act, though
 it was not so done in the original
 proceedings?

 (iii) Whether in the absence of period of
 limitation prescribed for making the order
 of the Settlement, the relevant date for
 determining the quantum of interest
 could be the date of the said order?

3. For the sake of convenience, after hearing learned

counsel on both sides, we reframe the above questions.
 3

 (I) Whether section 234B applies to
 proceedings of the Settlement
 Commission under Chapter XIX-A of the
 said Act?

 (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 245D(1)
 or up to the date of the Order of the
 Commission under section 245D(4)?

 (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 234B,
 though it was not so done in the original
 proceedings?

Relevant provisions of the Income Tax Act, 1961:
4. In order to answer the reframed questions, quoted
above, it would be necessary for us to cite the relevant
provisions of the Act and the Income Tax Rules, as they stood
at the material time, which are as under:

 Definitions

 2(40) "regular assessment" means the
 4

assessment made under sub-section (3) of
section 143 or section 144 ;

2(45) "total income" means the total
amount of income referred to in section 5,
computed in the manner laid down in this Act;

 Chapter XIV - Procedure for Assessment
Self-assessment
140A. (1) Where any tax is payable on the
basis of any return required to be furnished
under section 139 or section 142 or as the case
may be, section 148, after taking into account
the amount of tax, if any, already paid under
any provision of this Act, the assessee shall be
liable to pay such tax together with interest
payable under any provision of this Act for any
delay in furnishing the return or any default or
delay in payment of advance tax, before
furnishing the return and the return shall be
accompanied by proof of payment of such tax
and interest.

Explanation.--Where the amount paid by the
assessee under this sub-section falls short of
the aggregate of the tax and interest as
aforesaid, the amount so paid shall first be
adjusted towards the interest payable as
aforesaid and the balance, if any, shall be
adjusted towards the tax payable.

(2) After a regular assessment under section 143
or section 144 has been made, any amount paid
under sub-section (1) shall be deemed to have
been paid towards such regular assessment.

Assessment
143. (1)(a) Where a return has been made
 5

under section 139, or in response to a notice
under sub-section (1) of section 142, -
 (i) if any tax or interest is found
due on the basis of such return, after
adjustment of any tax deducted at source, any
advance tax paid and any amount paid
otherwise by way of tax or interest, then,
without prejudice to the provisions of sub-
section (2), an intimation shall be sent to the
assessee specifying the sum so payable, and
such intimation shall be deemed to be a notice
of demand issued under section 156 and all
the provisions of this Act shall apply
accordingly;

*** *** ***

Provided also that an intimation for any tax or
interest due under this clause shall not be
sent after the expiry of two years from the end
of the assessment year in which the income
was first assessable.

(b)Where as a result of an order made under
sub-section (3) of this section or section 144 or
section 147 or section 154 or section 155 or
section 250 or section 254 or section 260 or
section 262 or section 263 or section 264, or
any order of settlement made under sub-
section (4) of section 245D relating to any
earlier assessment year and passed
subsequent to the filing of the return referred
to in clause (a), there is any variation in the
carry forward loss, deduction, allowance or
relief claimed in the return, and as a result of
which, -
(i)if any tax or interest is found due, an
intimation shall be sent to the assessee
specifying the sum so payable, and such
intimation shall be deemed to be a notice of
 6

demand issued under section 156 and all the
provisions of this Act shall apply accordingly,
and
(ii)if any refund is due, it shall be granted to
the assessee:

Provided that an intimation for any tax or
interest due under this clause shall not be
sent after the expiry of four years from the end
of the financial year in which any such order
was passed.

(4) Where a regular assessment under sub-
section (3) of this section or section 144 is made,
--
 (a) any tax or interest paid by
the assessee under sub-section (1) shall be
deemed to have been paid towards such
regular assessment ;

Rectification of mistake.
154. (1) With a view to rectifying any mistake
apparent from the record an income-tax
authority referred to in section 116 may,--
 (a) amend any order passed by it
under the provisions of this Act ;
 (b) amend any intimation sent
by it under sub-section (1) of section 143. or
enhance or reduce the amount of refund
granted by it under that sub-section.
(1A) Where any matter has been considered
and decided in any proceeding by way of
appeal or revision relating to an order referred
to in sub-section (1), the authority passing
such order may, notwithstanding anything
contained in any law for the time being in
force, amend the order under that sub-section
in relation to any matter other than the matter
 7

which has been so considered and decided.
(2) Subject to the other provisions of this
section, the authority concerned--
 (a) may make an amendment
under sub-section (1) of its own motion, and
 (b) shall make such amendment
for rectifying any such mistake which has been
brought to its notice by the assessee, and
where the authority concerned is the Deputy
Commissioner (Appeals), or the Commissioner
(Appeals) by the Assessing Officer also.
(3) An amendment, which has the effect of
enhancing an assessment or reducing a refund
or otherwise increasing the liability of the
assessee, shall not be made under this section
unless the authority concerned has given
notice to the assessee of its intention so to do
and has allowed the assessee a reasonable
opportunity of being heard.

 Chapter XVII - Collection and Recovery of
 Tax

Liability for payment of advance tax.

207. Tax shall be payable in advance during
any financial year, in accordance with the
provisions of sections 208 to 219 (both
inclusive), in respect of the total income of the
assessee which would be chargeable to tax for
the assessment year immediately following the
financial year, such income being hereafter in
this Chapter referred to as "current income".

Computation of advance tax.

209. (1) The amount of advance tax payable by
an assessee in the financial year shall, subject
 8

to the provisions of sub-sections (2) and (3), be
computed as follows, namely:--
(a) where the calculation is made by the
assessee for the purposes of payment of
advance tax under sub-section (1) or sub-
section (2) or sub-section (5) or sub-section (6)
of section 210, he shall first estimate his
current income and income-tax thereon shall
be calculated at the rates in force in the
financial year;

Payment of advance tax by the assessee of
his own accord or in pursuance of order of
Assessing Officer.

210. (1) Every person who is liable to pay
advance tax under section 208 (whether or not
he has been previously assessed by way of
regular assessment) shall, of his own accord,
pay, on or before each of the due dates
specified in section 211, the appropriate
percentage, specified in that section, of the
advance tax on his current income, calculated
in the manner laid down in section 209.
(2) A person who pays any instalment or
instalments of advance tax under sub-section
(1), may increase or reduce the amount of
advance tax payable in the remaining
instalment or instalments to accord with his
estimate of his current income and the
advance tax payable thereon, and make
payment of the said amount in the remaining
instalment or instalments accordingly.

Interest payable by assessee.

215. (1) Where, in any financial year, an
assessee has paid advance tax under section
 9

209A or section 212 on the basis of his own
estimate (including revised estimate), and the
advance tax so paid is less than seventy-five
per cent of the assessed tax, simple interest at
the rate of fifteen per cent per annum from the
1st day of April next following the said
financial year up to the date of the regular
assessment shall be payable by the assessee
upon the amount by which the advance tax so
paid falls short of the assessed tax:
Provided that in the case of an assessee, being
a company, the provisions of this sub-section
shall have effect as if for the words "seventy-
five per cent', the words "eighty-three and one-
third per cent" had been substituted.
(2) Where before the date of 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 provision up to the date on
which the tax is so paid; and
(ii) thereafter, interest shall be calculated at
the rate aforesaid on the amount by which the
tax as so paid (in so far as it relates to income
subject to advance tax) falls short of the
assessed tax.
(3) Where as a result of an order under section
147 or 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 interest was payable under sub-section
(1) 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
 1

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.]
(4) In such cases and under such
circumstances as may be prescribed, the
Assessing Officer may reduce or waive the
interest payable by the assessee under this
section.
(5) In this section and sections 217 and 273,
"assessed tax" means the tax determined on
the basis of the regular assessment (reduced
by the amount of tax deductible in accordance
with the provisions of sections 192 to 194,
section 194A, section 194C, section 194D,
section 195 and section 196A so far as such
tax relates to income subject to advance tax
and so far as it is not due to variations in the
rates of tax made by the Finance Act enacted
for the year for which the regular assessment
is made.
(6) Where, in relation to an assessment year,
an assessment is made for the first time under
section 147, the assessment so made shall be
regarded as a regular assessment for the
purposes of this section and sections 216, 217
and 273.

Interest for defaults in furnishing return of
income.
234A. (1) Where the return of income for
any assessment year under sub-section (1) or
sub-section (4) of section 139, or in response to
a notice under sub-section (1) of section 142, is
furnished after the due date, or is not
furnished, the assessee shall be liable to pay
simple interest at the rate of two per cent for
every month or part of a month comprised in
the period commencing on the date
 1

immediately following the due date, and,--
 (a) where the return is furnished
after the due date, ending on the date of
furnishing of the return; or
 (b) where no return has been
furnished, ending on the date of completion of
the assessment under section 144,
on the amount of the tax on the total income
as determined under sub-section (1) of section
143 or on regular assessment as reduced by
the advance tax, if any, paid, and any tax
deducted or collected at source;

Explanation 1.--In this section, "due date"
means the date specified in sub-section (1) of
section 139 as applicable in the case of the
assessee.
Explanation 2.--In this sub-section, "tax on
the total income as determined under sub-
section (1) of section 143" shall not include the
additional income-tax, if any, payable under
section 143.
Explanation 3.--Where, in relation to an
assessment year, an assessment is made for
the first time under section 147, the assessment
so made shall be regarded as a regular
assessment for the purposes of this section.

Explanation 4. - In this sub-section, "tax on
the total income as determined under sub-
section (1) of section 143 or on regular
assessment" shall, for the purposes of
computing the interest payable under section
140A, be deemed to be tax on total income as
declared in the return.

 (2) The interest payable under sub-section (1)
shall be reduced by the interest, if any, paid
 1

under section 140A towards the interest
chargeable under this section.
*** *** ***
(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 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, 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.

Interest for defaults in payment of advance
tax.
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 two per cent for every month or
 1

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.
 Explanation 1.--In this section, "assessed tax"
means
(a) for the purposes of computing the interest
payable under section 140A the tax on the
total income as declared in the return referred
to in that section;
(b) in any other case, the tax on the total
income determined under sub-section (1) of
section 143 or on regular assessment, as
reduced by the amount of 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.
Explanation 2.--Where, in relation to an
assessment year, an assessment is made for
the first time under section 147, 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.
(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
 1

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, the amount on which interest was payable
under sub-section (1) is increased, the
assessee shall be liable to pay simple interest
at the rate of two per cent for every month or
part of a month comprised in the period
commencing on the day 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, 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 interest was payable under
sub-section (1) or sub-section (3) has been
increased or reduced, as the case may be, the
 1

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.

Interest for deferment of advance tax.
234C. (1) Where in any financial year,--
 (a) the company which is liable
to pay advance tax under section 208 has failed
to pay such tax or--
 (i) the advance tax paid by
the company on its current income on or
before the 15th day of June is less than fifteen
per cent of the tax due on the returned income
or the amount of such advance tax paid on or
before the 15th day of September is less than
forty-five per cent of the tax due on the
returned income or the amount of such
advance tax paid on or before the 15th day of
December is less than seventy-five per cent of
the tax due on the returned income, then, the
company shall be liable to pay simple interest
at the rate of one and one-half per cent per
month for a period of three months on the
amount of the shortfall from fifteen per cent or
forty-five per cent or seventy-five per cent, as
the case may be, of the tax due on the
 1

returned income;
 (ii) the advance tax paid by
the company on its current income on or
before the 15th day of March is less than the
tax due on the returned income, then, the
company shall be liable to pay simple interest
at the rate of one and one-half per cent on the
amount of the shortfall from the tax due on the
returned income:
Explanation.--In this section, "tax due on the
returned income" means the tax chargeable on
the total income declared in the return of
income furnished by the assessee for the
assessment year commencing on the 1st day of
April immediately following the financial year
in which the advance tax is paid or payable, as
reduced by the amount of tax deductible or
collectible 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;
(2) 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.

 Chapter XIX-A - Settlement of Cases
Definitions
245A. In this Chapter, unless the context
otherwise requires,--
 (b) "case" means any proceeding
under this Act for the assessment or re-
assessment of any person in respect of any
year or years , or by way of appeal or revision
in connection with such assessment or re-
assessment, which may be pending before an
Income Tax Authority on the date on which an
application under sub-section (1) of section
 1

245C is made:
Provided that where any appeal or application
for revision has been preferred after the expiry
of the period specified for the filing of such
appeal or application for revision under this
Act and which has not been admitted, such
appeal or revision shall not be deemed to be a
proceeding pending within the meaning of this
clause;

Application for settlement of cases.
245C. (1) An assessee may, at any stage of a
case relating to him, make an application in
such form and in such manner as may be
prescribed, and containing a full and true
disclosure of his income which has not been
disclosed before the Assessing Officer, the
manner in which such income has been
derived, the additional amount of income-tax
payable on such income and such other
particulars as may be prescribed, to the
Settlement Commission to have the case
settled and any such application shall be
disposed of in the manner hereinafter
provided:

Provided that no such application shall be
made unless,--
(a) the assessee has furnished the return
of income which he is or was required to
furnish under any of the provisions of this Act;
and
(b) the additional amount of income tax
payable on the income disclosed in the
application exceeds one hundred thousand
rupees.

(1A) For the purposes of sub-section (1) of this
 1

section and sub-section (2A) to (2D) of Section
245D, the additional amount of income-tax
payable in respect of the income disclosed in
an application made under sub-section (1) of
this section shall be the amount calculated in
accordance with the provisions of sub-sections
(1B) to (1D).
 (1B) Where the income disclosed in the
application relates to only one previous year,--
 (i) if the applicant has not
furnished a return in respect of the total
income of that year (whether or not an
assessment has been made in respect of the
total income of that year), then, except in a
case covered by clause (iii), tax shall be
calculated on the income disclosed in the
application as if such income were the total
income;
 (ii) if the applicant has furnished
a return in respect of the total income of that
year (whether or not an assessment has been
made in pursuance of such return), tax shall
be calculated on the aggregate of the total
income returned and the income disclosed in
the application as if such aggregate were the
total income;
(iii) if the proceeding pending before the
income-tax authority is in the nature of a
proceeding for reassessment of the applicant
under section 147 or by way of appeal or
revision in connection with such
reassessment, and the applicant has not
furnished a return in respect of the total
income of that year in the course of such
proceeding for reassessment, tax shall be
calculated on the aggregate of the total income
as assessed in the earlier proceeding for
assessment under section 143 or section 144
or section 147 and the income disclosed in the
application as if such aggregate were the total
 1

 income.

 FORM NO. 34B
 [See rules 44C and 44CA]
 Form of application for settlement of case under section 245C(1) of the
 Income-tax Act, 1961
IN THE SETTLEMENT COMMISSION.................................................
Settlement application No. .............................19.......-19..........

1. Full name and address of the applicant .........................

2. Permanent Account Number ........................
3. Status [See Note 4] ........................
4. The Commissioner having jurisdiction over the
 applicant ........................
5. Assessment year(s) in connection with which the
 application for settlement is made ........................
6. Date of filing the return of income for
 assessment year(s) referred to in column 5 ........................
7. Proceedings to which application for settlement
 relates, the date from which the proceedings are
 pending and the income-tax authority before
 whom the proceedings are pending [See Note 6] ........................
8. Where any appeal or application for revision has
 been preferred after the expiry of the period
 specified for the filing of such appeal or
 application for revision, as the case may be,
 whether such appeal or revision has been
 admitted. ........................
9. Date of seizure, if any, under section 132 of the
 Income-tax Act ........................
10. Particulars of the issues to be settled, nature
 and circumstances of the case and complexities
 of the investigation involved [See Note 7] ........................
11. Full and true disclosure of income which has not
 been disclosed before the Assessing Officer, the
 manner in which such income has been derived
 and the additional amount of income-tax ........................
 payable on such income [See Notes 9 and 10]

 .......................
 Signed
 (Applicant)
 Verification
I, ................................, son/daughter/wife of .................................. do
hereby solemnly declare that to the best of my knowledge and belief,
 2

what is stated above and in the Annexure [including the statement(s) and
documents accompanying such Annexure] is correct and complete. I
further declare that I am making this application in my capacity as ......
...........(designation) and that I am competent to make this application
and to verify it.

Verified today the ...................................... day of ....................19

Place .............. .......................
 Signed
 (Applicant)

 Procedure on receipt of an application
 under section 245C.
 245D. (1) On receipt of an application under
 section 245C, the Settlement Commission shall
 call for a report from the Commissioner and on
 the basis of the materials contained in such
 report and having regard to the nature and
 circumstances of the case or the complexity of
 the investigation involved therein, the
 Settlement Commission may, by order, allow
 the application to be proceeded with or reject
 the application:
 Provided that an application shall not be
 rejected under this sub-section unless an
 opportunity has been given to the applicant of
 being heard:
 Provided further that the Commissioner shall
 furnish the report within a period of forty-five
 days of the receipt of communication from the
 Settlement Commission in case of all
 applications made under Section 245C on or
 after the 1st day of July, 1995 and if the
 Commissioner fails to furnish the report within
 the said period, the Settlement Commission
 may make the order without such report.
 (2B) If the Settlement Commission is satisfied,
 on an application made in this behalf by the
 2

assessee, that he is unable for good and
sufficient reasons to pay the additional
amount of income tax referred to in sub-
section (2A) within the time specified in that
sub-section, it may extend the time for
payment of the amount which remains unpaid
or allow payment thereof by instalments if the
assessee furnishes adequate security for the
payment thereof.
(2C) Where the additional amount of income-
tax is not paid within the time specified under
sub-section (2A), then, whether or not the
Settlement Commission has extended the time
for payment of the amount which remains
unpaid or has allowed payment thereof by
instalments under sub-section (2B), the
assessee shall be liable to pay simple interest
at fifteen per cent per annum on the amount
remaining unpaid from the date of expiry of
the period of thirty-five days referred to in sub-
section (2A).

(4) After examination of the records and the
report of the Commissioner, received under
sub-section (1), and the report, if any, of the
Commissioner received under sub-section (3),
and after giving an opportunity to the
applicant and to the Commissioner to be
heard, either in person or through a
representative duly authorised in this behalf,
and after examining such further evidence as
may be placed before it or obtained by it, the
Settlement Commission may, in accordance
with the provisions of this Act, pass such order
as it thinks fit on the matters covered by the
application and any other matter relating to
the case not covered by the application, but
referred to in the report of the Commissioner
under sub-section (1) or sub-section (3).
 2

(6) Every order passed under sub-section (4)
shall provide for the terms of settlement
including any demand by way of tax, penalty
or interest, the manner in which any sum due
under the settlement shall be paid and all
other matters to make the settlement effective
and shall also provide that the settlement shall
be void if it is subsequently found by the
Settlement Commission that it has been
obtained by fraud or misrepresentation of
facts.
(6A) Where any tax payable in pursuance of an
order under sub-section (4) is not paid by the
assessee within thirty-five days of the receipt
of a copy of the order by him, then, whether or
not the Settlement Commission has extended
the time for payment of such tax or has
allowed payment thereof by instalments, the
assessee shall be liable to pay simple interest
at fifteen per cent per annum on the amount
remaining unpaid from the date of expiry of
the period of thirty-five days aforesaid.
(7) Where a settlement becomes void as
provided under sub-section (6), 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 and the
income-tax authority concerned, may,
notwithstanding anything contained in any
other provision of this Act, complete such
proceedings at any time before the expiry of
two years from the end of the financial year in
which the settlement became void.

Power of Settlement Commission to reopen
completed proceedings.
245E. If the Settlement Commission is of the
 2

opinion (the reasons for such opinion to be
recorded by it in writing) that, for the proper
disposal of the case pending before it, it is
necessary or expedient to reopen any
proceeding connected with the case but which
has been completed under this Act by any
income-tax authority before the application
under section 245C was made, it may, with the
concurrence of the applicant, reopen such
proceeding and pass such order thereon as it
thinks fit, as if the case in relation to which
the application for settlement had been made
by the applicant under that section covered
such proceeding also :

Powers and procedure of Settlement
Commission.
245F. (1) In addition to the powers conferred
on the Settlement Commission under this
Chapter, it shall have all the powers which are
vested in an income-tax authority under this
Act.
(2) Where an application made under section
245C has been allowed to be proceeded with
under section 245D, the Settlement Commission
shall, until an order is passed under sub-
section (4) of section 245D, have, subject to the
provisions of sub-section (3) of that section,
exclusive jurisdiction to exercise the powers
and perform the functions of an income-tax
authority under this Act in relation to the case
:
(3) Notwithstanding anything contained in
sub-section (2) and in the absence of any
express direction to the contrary by the
Settlement Commission, nothing contained in
this section shall affect the operation of any
other provision of this Act requiring the
applicant to pay tax on the basis of self-
 2

 assessment in relation to the matters before
 the Settlement Commission.
 (4) For the removal of doubt, it is hereby
 declared that, in the absence of any express
 direction by the Settlement Commission to the
 contrary, nothing in this Chapter shall affect
 the operation of the provisions of this Act in so
 far as they relate to any matters other than
 those before the Settlement Commission.

 Order of settlement to be conclusive.
 245-I. Every order of settlement passed under
 sub-section (4) of section 245D shall be
 conclusive as to the matters stated therein and
 no matter covered by such order shall, save as
 otherwise provided in this Chapter, be
 reopened in any proceeding under this Act or
 under any other law for the time being in force.
5. At this stage, it may be noted that section 245C stood

substituted by Finance Act, 2007, w.e.f. 1.6.2007. Prior to its

substitution, the proviso to section 245C(1), as substituted by

the Finance Act, 1987, w.e.f. 1.6.1987 and later on amended

by Finance Act, 1995, w.e.f. 1.7.1995, read as under:

 "Provided that no such application shall be
 made unless,--
 (a) the assessee has furnished the return
 of income which he is or was required to
 furnish under any of the provisions of this Act;
 and
 (b) the additional amount of income tax
 payable on the income disclosed in the
 application exceeds one hundred thousand
 rupees."
6. Section 245C(1) read with the proviso thereto, as
 2

substituted by Finance Act, 2007 w.e.f. 1.6.2007, reads as

under:

 245C. (1) An assessee may, at any stage of a
 case relating to him, make an application in
 such form and in such manner as may be
 prescribed, and containing a full and true
 disclosure of his income which has not been
 disclosed before the Assessing Officer, the
 manner in which such income has been
 derived, the additional amount of income-tax
 payable on such income and such other
 particulars as may be prescribed, to the
 Settlement Commission to have the case
 settled and any such application shall be
 disposed of in the manner hereinafter
 provided:

 Provided that no such application shall be
 made unless,--
 (i)the additional amount of income tax
 payable on the income disclosed in the
 application exceeds three lakh rupees;
 and
 (ii) such tax and the interest thereon,
 which would have been paid under
 the provisions of this Act had the
 income disclosed in the application
 been declared in the return of
 income before the Assessing Officer
 on the date of application, has been
 paid on or before the date of making
 the application and the proof of
 such payment is attached with the
 application.
Analysis of the Act
 2

7. Liability to pay advance tax arises under section 207.

The said section is based on the principle "pay as you earn". It

requires tax to be paid during the financial year. It has to be

in respect of the total income of the assessee which would be

chargeable to tax under the Act. The said total income is not

as understood in section 2(45) but it is equated to "current

income" for the purposes of Chapter XVII. After the Amending

Act of 1987, advance tax is to be paid on the current income

which would be chargeable to tax for the assessment year

immediately following the financial year. Section 210 casts

the responsibility of payment of advance tax on the assessee

without requiring the assessee to submit his estimate of

advance tax payable. Provision for payment of advance tax is

mode of quick collection of tax. Thus, section 207 defines

liability to pay advance tax in respect of incomes referred to in

section 208. However, advance tax paid is adjustable towards

the tax due. Advance tax is collected even before the income

tax becomes due and payable. By its very nature, advance tax

is pre-assessment collection of taxes either by deduction of tax

at source or by payment of advance tax which has to be

adjusted towards income tax levied on the total income. The
 2

above two methods of realization even before any assessment

is authorized by section 4(2) are incorporated in Chapter XVII

which deals with "collection and recovery". In fact, section

190(1) clarifies that this method of payment of tax will not

prejudice the charge of tax under section 4(1) nor will it modify

the liability of the assessee to pay income tax pursuant to an

assessment order. [See Modi Industries Limited, Modinagar

and Others v. Commissioner of Income Tax, Delhi and

Another, 216 ITR 759 at 780] At one point of time, section

209(1)(a)(iii) (relating to computation of advance tax) provided

that the income tax calculated on the total income with

reference to which the demand for advance tax was made

should be reduced by the amount of income tax deductible in

accordance with sections 192 to 194, 194A and 195 on any

income included in the total income. The levy of interest

under section 215 is part of the process of assessment. If the

income tax liability on the first day of the assessment year is

larger than the amount of advance tax standing to the credit of

the assessee then interest will have to be paid under section

215 on 75% of the deficit amount of tax from the first day of
 2

the assessment year to the date of computation of total income

vide assessment order. Interest under section 215 is

chargeable from the first day of April next following the

financial year wherein the advance tax was paid up to the date

of regular assessment, if no tax has been paid under section

140A or otherwise. However, section 215(2) provides that

where advance tax paid is less than 75% of the "assessed tax",

but the assessee has paid tax under section 140A or otherwise

before the date of completion of regular assessment then the

interest shall be limited to the interest on the shortfall between

the "assessed tax" and the advance tax paid for the period

from the first April next following the financial year up to date

of payment under section 140A plus interest on the shortfall

between "assessed tax" and "total tax paid" for the period from

the day following the date of such payment under section

140A up to the date of regular assessment. Coming to section

140A, as a result of the amendment of section 140A(1) by

Direct Tax Laws Amendment Act, 1987 w.e.f. 1.4.1989 and

vide Finance Act of 1999, the assessee is required to calculate

the tax payable on the basis of the return to be furnished

under section 139 or under section 142 or under section 148
 2

after taking into account the amount of tax paid under the

Act; to calculate also interest payable under section 234A or

under section 234B/234C for any default or delay in payment

of advance tax; to pay such tax with interest before the

assessee furnishes his return. The Explanation to section

140A(1) inter alia provides that where the amount paid by the

assessee under section 140A(1) falls short of the aggregate of

the tax and interest thereon the amount so paid is first

adjusted towards interest payable and the balance, if any, is

adjusted towards the tax payable. Thus, amount(s) paid

under section 140A is deemed to have been paid towards

regular assessment.

8. The liability to pay income tax is founded on sections

4 and 5 which are the charging sections. Sections 143, 144

and 147 are machinery sections to determine the amount of

tax payable. Thus, whereas section 143(3) signifies

computation of income, section 147 signifies computation of

escaped income. As held in the case of C.A. Abraham v.

Income-Tax Officer, Kottayam and Another [(1961) 41 ITR

425 (SC)], the expression "assessment" in a given provision
 3

must be determined on an examination of the relevant

provisions in question and the fact that it is used in the

narrower sense elsewhere will not mean that it is so used in

the provision under examination. The word can be used to

cover the whole procedure to ascertain the liability and the

machinery for enforcement. Prior to 1.6.1999, section

143(1A)(a) inter alia provided that where the total income as a

result of any adjustments made exceeded the total income

declared in the return by any amount then it was open to the

A.O. to increase the amount of tax payable under section

143(1) by additional income tax calculated at the specified

rate. In brief, section 143(1A) provided for the levy of

additional income tax of an amount equal to 20% of the tax

payable on the amount of difference between the total income

determined under section 143(1) and total income declared in

the return. Where the additional income tax was increased,

the A.O. had to serve a notice under section 156. Even under

section 143(1B), as it stood before 1.6.1999, where an

assessee furnished a revised return under section 139(5) after

service of intimation, the assessee was liable to pay additional

income tax in relation to adjustments made under section
 3

143(1)(a) read with the proviso.

9. Now, Chapter XVII deals with "collection and

recovery". It covers Tax Deduction at Source and Advance

Payment of taxes (see section 190). Section C deals with

advance payment of taxes. Section 207 refers to liability to

pay advance tax whereas section 209 deals with computation

of advance tax. Section 215 refers to interest payable by the

assessee. Section 210(1) inter alia provides that every person

who is liable to pay interest under Section 208, shall of his

own accord pay, on each of the due dates specified in section

211, the appropriate percentage of advance tax on his current

income calculated in the manner under section 209. Under

section 209(1)(a), the amount of advance tax payable by the

assessee in any financial year is as follows:

 (a) where calculation is made by the assessee for the

purposes of payment of advance tax under section 209(1), he

shall first estimate his current income and the tax shall be

computed at the rates in force in the financial year. Thus,

liability and computation of advance tax is done under section

C of Chapter XVII. On the other hand, interest for defaults in

payment of advance tax falls under section 234B, apart from
 3

sections 234A and 234C, in section F of Chapter XVII. Thus,

levy of interest is incidental to the liability and computation of

advance tax. It is interesting to note that section 234A(4) in

turn refers to the increase or reduction of interest subsequent

to the Order of the Commission under section 245D(4)

increasing or reducing the amount of tax payable and so also

section 234B(4). Under section 234B, where in any financial

year an assessee who is liable to pay advance tax under

section 208 fails to pay such tax or where the advance tax

paid under section 210 is less than 90% of the assessed tax

the assessee shall pay interest from the first day of April next

following such financial year to the date of determination of

total income under section 143(1) or to the date of regular

assessment on the amount equal to the assessed tax which

has been defined in Explanation 1 to mean tax on the total

income as determined under section 143(1) as reduced by the

amount of tax deducted at source in accordance with Chapter

XVII on income which is subject to deduction and which is

taken into account in computing total income. By Explanation

3, it is clarified that for default of short payment interest will

be charged on the difference between "assessed tax" (as
 3

defined) and the advance tax paid by the assessee and that for

the above purpose "additional income tax" if any payable

under section 143 is not to be taken into account. However,

section 234B(2) covers a situation where, before the date of

determination of total income under section 143(1) or

completion of regular assessment, tax is paid by the assessee

under section 140A or otherwise, interest shall be calculated

under section 234B(1) up to the date on which tax was so paid

and reduced by the interest, if any, paid under section 140A

towards interest chargeable under section 234B.

10. Coming to Chapter XIX-A which deals with Settlement

of Cases, it may be stated that the word "case" is defined

under section 245A(b). It is an exhaustive definition. The

definition makes it clear that an application for Settlement

shall lie only when any proceedings for assessment or re-

assessment is pending or an appeal or revision in connection

with such assessment or re-assessment is pending before the

Income Tax Authority. Under section 245C(1), such

application for settlement will not be maintainable without full

and true disclosure of the income by the applicant, the

manner in which such undisclosed income was derived and
 3

that the applicant had furnished his return of income and that

the additional tax payable on such income exceeds the

specified amount. This was the position prior to Finance Act

of 2007. However, section 245C(1A) inter alia provides that

additional amount of income tax payable in respect of the

income disclosed shall be calculated in accordance with the

provisions of section 245C(1B). Under sub-section (1B) if the

applicant has furnished his return in respect of his total

income and no assessment is made, the tax shall be calculated

on the aggregate of the total income returned and the income

disclosed in the application as if such aggregate was the total

income. The words "regular assessment" are not there in

section 245C(1B)(ii). However, under section 245C(1C)(b), it is

provided that the additional tax calculated under section

245C(1B)(ii) shall be reduced by the aggregate of the tax

deducted at source or tax paid in advance and the amount of

tax paid under section 140A. The resultant amount is the

additional tax payable by the assessee. Thus, section 245C

incorporates within it the provisions of Chapters XVIIB, XVIIC

and section 140A of the Act. It may be noted that section

245C(1B)(iii), as it stood before 1.6.1987, required income tax
 3

to be calculated on the aggregate of the total income as

assessed plus the income disclosed in the application as if

such aggregate was the total income. But after 1.6.1987, the

tax is required to be worked out on the returned total income

plus the income disclosed in the application as if the aggregate

is the total income. Under section 245D(2A) the applicant is

required to pay the additional amount of income tax payable

on the income disclosed in the application within 35 days of

the receipt of the copy of the order passed by the Settlement

Commission under section 245D(1) allowing such application

to be proceeded with. Under section 245D(2A) the applicant

shall, within 35 days of the receipt of the order under section

245D(1) allowing the application to be proceeded with, pay the

additional amount of income tax payable on the income

disclosed. Under section 245D(4) on compliance of sections

245D(2A) and (2C) and on examination of relevant records and

reports, the Settlement Commission may pass such orders as

it thinks fit on the matters covered by the application and any

other matter relating to the "case" referred to in the report of

the Commissioner of Income Tax. If one carefully analyses the

provisions of sections 245D(1) and 245D(4), one finds two
 3

distinct stages - one allowing the application to be proceeded

with (or rejected) and the other of disposal of the application

by appropriate orders being passed by the Settlement

Commission. In between the two stages, we have provisions

which require the applicant to pay the additional income tax

and interest. Even under section 245D(7) it is provided that

where the settlement becomes void under section 245D(6) the

proceedings with respect to the matters covered by the

settlement shall be deemed to have revived from the stage at

which the application was allowed to be proceeded with by the

Settlement Commission and the income tax authority may

complete the proceedings within the period mentioned therein.

Thus, section 245D(7) brings out the difference between

section 245D(1) stage and section 245D(4) stage. Under

section 245D(6), it is laid down that every order under section

245D(4) shall provide for the Terms of Settlement including

any demand by way of tax, penalty or interest. In the case of

C.I.T. v. Damani Brothers reported in 259 ITR 475, a 3-

Judge Bench of this Court, while analyzing the scheme of

Chapter XIX-A, has held that section 234B, section 245D(2C)

and section 245D(6A) operate in different fields. Section 234B
 3

comes into operation when there is default in payment of

advance tax whereas liability to pay interest under section

245D(2C) arises when the additional amount of income tax is

not paid within time specified under section 245D(2A). Section

245D(6A), on the other hand, imposes liability to pay interest

only when the tax payable in pursuance of an order of

Settlement Commission under section 245D(4) is not made

within the specified time. Consequently, section 234B, section

245D(2C) and section 245D(6A) in Chapter XIX-A operate in

different fields. To this extent, we agree with the view

expressed in Damani Brothers case (supra). Descriptively, it

can be stated that assessment in law is different from

assessment by way of settlement. If one reads section 245D(6)

with section 245I, it becomes clear that every order of

settlement passed under section 245D(4) shall be final and

conclusive as to the matters contained therein and that the

same shall not be re-opened except in the case of fraud and

misrepresentation. Under section 245F(1), in addition to the

powers conferred on the Settlement Commission under

Chapter XIX-A, it shall also have all the powers which are

vested in the income tax authority under the Act. In this
 3

connection, however, we need to keep in mind the difference

between "procedure for assessment" under Chapter XIV and

"procedure for settlement" under Chapter XIX-A (see section

245D). Under section 245F(4), it is clarified that nothing in

Chapter XIX-A shall affect the operation of any other provision

of the Act requiring the applicant to pay tax on the basis of

self-assessment in relation to matters before the Settlement

Commission. The point to be noted on the basis of the above

analysis is that several provisions of the Act like section 140A;

furnishing of the return of income by the applicant as

indicated in the proviso (a) to section 245C(1); provisions of

the Act governing liability and computation to pay additional

income tax as indicated by proviso (b) to section 245C(1);

aggregation of total income inter alia in terms of sections 143,

144 or 147 as indicated by section 245C(1B)(iii); aggregation of

total income as returned plus income disclosed in the

application for settlement as indicated in section 245C(1B)(ii);

the deductions in section 245C(1C); increase of interest under

section 215(3) pursuant to the orders of the Settlement

Commission and the levy of interest under sections 234A(4)

and 234B(4) all bring into Chapter XIX-A various provisions of
 3

the Act. Thus, when we read the provisions of Sections 245C

and 245D one has to keep in mind various above provisions of

the Act and the concepts of self-assessment, assessment,

regular assessment and computation of total income which

have been engrafted in Chapter XIX-A.

(I) Whether Sections 234A, 234B and 234C are
 applicable to Chapter XIX-A proceedings?

11. Our detailed analysis shows that though Chapter XIX-

A is a self-contained Code, the procedure to be followed by the

Settlement Commission under sections 245C and 245D in the

matter of computation of undisclosed income; in the matter of

computation of additional income tax payable on such income

with interest thereon; the filing of settlement application

indicating the amount of income returned in the return of

income and the additional income tax payable on the

undisclosed income to be aggregated as total income shows

that Chapter XIX-A indicates aggregation of incomes so as to

constitute total income which indicates that the special

procedure under Chapter XIX-A has inbuilt mechanism of

computing total income which is nothing but assessment

(computation of total income). To elaborate, under section
 4

245C(1B), if the applicant has furnished a return in respect of

his total income, tax shall be calculated on the aggregate of

total income returned and the income disclosed in the

settlement application as if such aggregate were total income.

Under the Act, tax is payable on the total income as computed

in accordance with the provisions of the Act. Thus, section

143(3) provision is sought to be incorporated in section 245C.

When Parliament uses the words "as if such aggregate would

constitute total income", it presupposes that under the special

procedure the aggregation of the returned income plus income

disclosed would result in computation of total income which is

the basis for the levy of tax on the undisclosed income which

is nothing but "assessment". Similarly, section 245C(1C)

provides for deductions from the total income computed in

terms of section 245C(1B). Thus, the special procedure under

sections 245C and 245D in Chapter XIX-A shows that a

special type of computation of total income is engrafted in the

said provisions which is nothing but assessment which takes

place at section 245D(1) stage. However, in that computation,

one finds that provisions dealing with a regular assessment,

self-assessment and levy and computation of interest for
 4

default in payment of advance tax, etc. are engrafted. [See

sections 245C(1B), 245C(1C), 245D(6), 245F(3) in addition to

sections 215(3), 234A(4) and 234B(4)]

(II) Terminal point for the levy of interest - Whether

 interest is payable under Chapter XIX-A up to the date of

 the order under section 245D(1) or up to the date of the

 order under section 245D(4)?

12. In our view the answer to the above question lies in

the provisions of the proviso to Sections 245C(1), 245C(1B)

and 245C(1C), 245D(4) and 245F(3) which bring in the

concepts of returned income, self-assessment, aggregation of

income returned and income disclosed as if it is total income;

levy of interest under section 215(3) read with section 245D(4);

increase of interest under sections 234A(4) and 234B(4) read

with section 245D(4) as also sections 140A(1A) and (1B) read

with sections 234A and 234B. For example, section 140A

deals with self-assessment which is different from regular

assessment. Under section 140A(1) where tax is payable on

the basis of any return furnished by the assessee [see proviso

(a) to section 245C(1)], after taking into account tax paid, the

assessee shall be liable to pay such tax with interest payable
 4

for default under section 234B in payment of advance tax

before furnishing the return. This position is clarified by

sections 140A(1A) and (1B) under which inter alia interest

payable for default in payment of advance tax under section

234A shall be computed on the amount of tax on the total

income as declared in the return minus the advance tax paid.

Similarly, it is clarified vide sub-section (1B) to section 140A

that interest payable under section 234B for default in

payment of advance tax shall be computed on an amount

equal to the assessed tax [same words are used in section

234B(1)] or on the amount by which the advance tax falls

short of the assessed tax. However, what is "assessed tax" for

the purposes of section 140A is explained by Explanation. It

says that assessed tax will be tax on the total income as

declared in the return minus the amount of tax deducted at

source or collected at source in accordance with the provisions

of Chapter XVII (which covers sections 207, 209 and 215 of

the Act). Now, section 245C(1) is voluntary disclosure by the

assessee of his undisclosed income. Under section 245C(1),

the assessee has to mention in his settlement application the

additional amount of tax payable by him on such undisclosed
 4

income. Under proviso (a), the application for settlement shall

not be entertained till the assessee has furnished the return of

income which he was required to file under the Act to the

extent of his income. Under proviso (b), the assessee has to

declare the additional amount of tax payable. Thus, the two

provisos to section 245C(1) show that Chapter XIX-A, which

prescribes a special procedure for assessment by settlement,

contemplates a pre-assessment collection of tax. With the

filing of the settlement application and after such application

is allowed to be proceeded with under section 245D(1),

intimation under section 143(1), regular assessment under

sections 143(3)/144 and re-assessment under section 147 lose

their existence as under sections 245C(1A) and (1B) it is only

the income disclosed in the return of income before the A.O.

alone which survives for consideration by the Settlement

Commission for settling the amount of income which is not

disclosed in the return. Under section 245C(1B)(ii), if the

applicant has furnished a return in respect of the total

income, whether or not assessment is made in pursuance of

the return, the additional amount of income tax payable in

respect of the total income disclosed shall be on the aggregate
 4

of the total income returned and the income disclosed in his

application for settlement as if such aggregate was his total

income. This is pre-assessment collection of tax. Such pre-

assessment is based on the estimation of the current income

and tax thereon by the applicant himself. Now, when the

Settlement Commission accepts the Voluntary Disclosure vide

the application for settlement, section 234B(2) steps in. It is

important to remember that the assessee is liable to pay

advance tax, he commits default in payment to the extent of

the undisclosed income but he offers to pay additional income

tax then interest has to be calculated in accordance with

sections 207, 208 and 234B(2) up to the date on which such

tax is paid. This is not the interest which assessee has to pay

after assessment under section 245D(4). Under sections

245C(1B) and (1C) the additional amount of income tax

payable on the undisclosed income shall be on the total

income as calculated under section 245C(1B). On

computation of total income under sections 245C(1B) and

(1C), interest follows such computation. It is important to

note that interest follows computation of total income. Once

such computation takes place under section 245C(1B) then
 4

section 234B(2) applies. The said sub-section deals with the

situation where before determination of total income under

section 143(1) or 143(3) tax is paid under section 140A or

otherwise interest shall be calculated in accordance with

section 234B(1) up to the date on which tax is so paid. In that

sense an application under section 245C(1) is a return.

Section 245C(1) deals with computation of total income. There

is one more way of looking at the Act. Chapter XIX-A refers to

procedure of settlement (see section 245D(1)). As stated

above, section 245D(1) provides for expeditious recovery of tax

by way of pre-assessment collection. Interest on default in

payment of advance tax comes under sections 234A, 234B,

234C, which fall in Chapter XVII which deals with collection

and recovery of tax. It is important to note that interest

follows computation of additional payment of income tax

under sections 245C(1B) and (1C). This is how sections 234A,

234B and 234C get engrafted into Chapter XIX-A at the stage

of section 245D(1). As stated, till the Settlement Commission

decides to admit the case under section 245D(1) the

proceedings under the normal provisions remain open. But,

once the Commission admits the case after being satisfied that
 4

the disclosure is full and true then the proceedings commence

with the Settlement Commission. In the meantime, applicant

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
 4

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

has filed but orders of assessment are not passed or if the

proceedings are pending for re-assessment under section 147

(again in Chapter XIV) or by way of appeal or revision in

connection with such re-assessment and the applicant has not

furnished his return of total income in which case tax has to

be calculated on the aggregate of total income as assessed in

the earlier proceedings for assessment under section 143 or

under section 144 or under section 147 [see section

245C(1B)]. The point to be noted is that in computation of

additional income tax payable by the assessee, there is no

mention of section 154. On the contrary, under section 245I

the order of the Settlement Commission is made final and

conclusive on matters mentioned in the application for

settlement except in the two cases of fraud and
 5

misrepresentation in which case the matter could be re-

opened by way of review or recall. Like ITAT, the Settlement

Commission is a quasi-judicial body. Under section 254(2),

the ITAT is given the power to rectify but no such power is

given to the Settlement Commission. Thus, we hold that

Settlement Commission cannot reopen its concluded

proceedings by invoking section 154 of the Act. Lastly, one

must keep in mind the difference between review/ recall of the

order and rectification under section 154. The Schedule of

Chapter XIX-A does not contemplate invocation of section 154

otherwise there would be no finality to the assessment by

settlement which is different from assessment under Chapter

XIV where there is an appeal, revision, etc. Settlement of

liability and not determination of liability is the object of

Chapter XIX-A. Even otherwise, invocation of section 154 on

facts of this batch of cases is not justified. In this batch of

cases, the situation which prevailed when the Settlement

Commission waived or reduced interest chargeable under

sections 234A and 234B was that a debate was on as to

whether the Settlement Commission has the power to reduce

or waive interest. It is only after Ghaswala's case that the law
 5

got settled that the nature and the character of the interest

was compensatory and mandatory and that the Commission

had no such power. But even in Ghaswala, the question as to

whether such interest under section 234B should run up to

the order under section 245D(1) or up to the date of the order

under section 234D(4) was not decided. In fact, that was the

reason for the Orders of Reference to the Constitution Bench

of this Court vide orders dated 14.12.2004 and 20.1.2005.

There is one more reason for this Reference. In the case of

CIT v. Hindustan Bulk Carrier [(2003) 259 ITR 449], a 3-

Judge Bench of this Court, by majority, held that where, upon

the Order of the Settlement Commission under section

245D(4), there arises a deficit in the payment of advance tax

under section 208, the end point or the terminus of the period

for which interest has to be paid under section 234B on the

deficit is the date on which the Settlement Commission passes

the order under section 245D(4). This decision was delivered

on 17.12.2002 after the judgment of this Court in Ghaswala

(supra). On the same day, the same Bench in the case of

Damani Brothers (supra) held that interest charged under
 5

section 234B becomes payable on the income disclosed in the

return and the income disclosed before the Settlement

Commission; that, such interest is chargeable till the

Commission acts in terms of section 245D(1) and that after

the Settlement Commission allows the application for

settlement to be proceeded with there will be no further charge

of interest under section 234B. Thus, even on the question of

terminus there was lot of controversy and in the

circumstances, we are of the view that invocation of section

154 (held to be inapplicable to Chapter XIX-A proceedings)

cannot be justified.

Conclusions :

16. (1) Sections 234A, 234B and 234C are applicable

to the proceedings of the Settlement Commission under

Chapter XIX-A of the Act to the extent indicated hereinabove.

 (2) Consequent upon conclusion (1), the terminal point

for the levy of interest under section 234B would be up to the

date of the order under section 245D(1) and not up to the date

of the Order of Settlement under section 245D(4).

 (3) The Settlement Commission cannot re-open its

concluded proceedings by invoking section 154 of the Act so
 5

as to levy interest under section 234B, particularly, in view of

section 245I.

17. Accordingly, Reference to the Constitution Bench vide

orders dated 14.12.2004 and 20.1.2005 stands duly answered

and the matters are accordingly disposed of.

 .................................CJI
 (S. H. Kapadia)

 ...................................J.
 (B. Sudershan Reddy)

 ...................................J.
 (K.S. Radhakrishnan) ...................................J.
 (Surinder Singh Nijjar) ...................................J.
 (Swatanter Kumar)
New Delhi;
October 21, 2010.
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