COMMISSIONER OF INCOME TAX, MUMBAI versus M/S. DAMANI BROTHERS

Citation: [2002] SUPP. 5 S.C.R. 424 · Decided: 17-12-2002 · Supreme Court of India · Bench: M.B. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
COMMISSIONER OF INCOME TAX, MUMBAI 
v. 
M/S. DAMAN! BROTHERS 
DECEMBER 17, 2002 
B [M.B. SHAH, ARIJIT PASAYA T AND D.M. DHARMADHIKARI, JJ.) 
Income Tax Act, 1961: 
Chapter XIX-A introduced by Taxation Laws (Amendment) Act, 1975; 
C Sections 220(2), 234 A, B, C, 245(c) and ~45 D: 
D 
Petition for Settlement filed by assessee-Assessment order by Income 
Tax authority during pendency of petition-Validity of-Held, as per 
provisions of law, income-tax authorities could proceed in the matter till 
Commission decides to proceed with the petition. 
Chapter XIX-A-Settlement Commission's power of settlement-Exercise 
of-Commission could exercise its power of settlement only after allowing the 
petition to be proceeded with-It must take notice of both the disclosed and 
undisclosed income to determine total income for the same assessment year. 
E 
Waiver/Reduction of interest-Power of Commission-Held, Commission 
in appropriate cases, on fulfilment of stipulated conditions by the assessee · 
aslper provisions of the Act, could direct waiver or reduction of interest. 
Levy of interest for non-payment of advance Tax and for delay in 
payment of interest-Held, Double levy of interest is not permissible for same 
F set of infractions-However, levying of interest in terms of Section 234A, B 
and C and 245(D) amounted to levy of interest for distinct infractions-
Hence separate 1evy of interest and does not amount to double levy. 
Revenue filed the present appeal against the order of Settlement 
Co_mmission. The appeal was earlier placed before a two-Judge Bench and it 
G was considered appropriate to place it before three-Judge Bench. The basic 
issue which arose in the appeal is whether the Settlement Commission could 
get itself substituted to income-tax authorities under the Income Tax Act, and 
if so, the purpose and extent of such substitution. 
H 
It was contended for the Revenue that the power of waiver of interest is 
424 
,. 
C.l.T. v. DAMAN! BROTHERS 
425 
not conferred on the Commission for the interest charged under Section A 
220(2) of the Income Tax Act. 
On behalf of the assessee, it was submitted that on receipt of a petition 
for settlement, the Commission gets jurisdiction to deal with the matter and 
it assumes powers of income-tax authorities till admission of the petition; that 
after admission of such petitions it functions as a Settlement Commission B 
exercising additional powers un~er the· provisions of the Income Tax Act; and 
that there could not be double levy of interest. 
Allowing the appeal, the Court 
HELD: 1.1. Settlement Commi~sion exercises power in respect of income C 
which was not disclosed before the authorities in any proceeding, but are 
disclosed in the petition under Section 245C of the Income Tax Act. It is not 
that any amount of undisclosed income can be brought to the notice of the 
Commission in the said petition. Commission exercises jurisdiction if the 
additional amount of tax on such undisclosed income is more than a particular D 
figure. The assessee must have in addition furnished the return of income 
which he is or was required to furnish under any of the provisions of the Act. 
(434-F,GI 
1.2. A new Chapter XIX-A was introduced by the Taxation Laws 
(Amendment) Act, 1975. The Commission is constituted by the Central E 
Government for the settlement of cases under Chapter XIX-A. Scheme of 
Chapter XIX-A shows that the filing of application by the assessee is a 
unilateral act, and the department may not be aware of the same. If an 
application for settlement is filed under Section 245C, it is not automatically 
admitted. Section 245D deals with procedure on receipt of an application under 
Section 245C. Under sub-section (I) thereof, the Commission after following F 
the prescribed procedure can allow the application to be proceeded with or 
rejected. Only after the Commission allows the petition to be proceeded with, 
it exercises the power of settlement. (434-H; 435-A, C, DJ 
1.3. Before the CommiSsion decides to proceed with the petition, it cannot G 
complete assessment in respect of a return which is pending before the 
assessing officer or even cannot act as an appellate or revisional authority. 
The return filed is in respect of disclosed income. Similar is the position vis-
a-vis the appellate and the revisional authority. The petition before the 
Commission is in respect of undisclosed income, therefore, the situation is 
different till the Commission decides to pr

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