My settlement application was admitted years before the Commission passed its final order — can it charge me section 234B interest for that whole period, and reopen the settled order later to add interest it forgot?
No to both. A Constitution Bench of the Supreme Court held on 21 October 2010 that sections 234A, 234B and 234C do apply to Settlement Commission proceedings, but only up to the order admitting the case under section 245D(1). Parliament did not extend the liability beyond the date of the settlement application, so no interest runs between admission and the final order under section 245D(4). Hindustan Bulk Carrier, which had taken the section 245D(4) date as the terminus, does not survive on that point. And the Commission cannot reopen its concluded proceedings under section 154 to levy interest it did not levy at the time, section 245I making its order final.
Decided by the Supreme Court (Supreme Court of India, Constitution Bench; S.H. Kapadia CJI, B. Sudershan Reddy, K.S. Radhakrishnan, Surinder Singh Nijjar and Swatanter Kumar JJ, judgment delivered by S.H. Kapadia CJI) on 2010-10-21, reported as Civil Appeals Nos. 516-527 of 2004 and connected matters, Supreme Court of India, decided 21 October 2010. It bears on section 234B, section 245D(1), section 245C, section 154, section 245I of the Income Tax Act 1961, in Demand, Recovery & Stay and Assessment & Scrutiny matters.
This is the Constitution Bench that settled two questions the earlier three-Judge decisions had left in conflict. It matters most for the terminal point: on the reasoning in Hindustan Bulk Carrier interest ran to the final settlement order, which in long-pending matters was ruinous; Brij Lal cuts it off at admission and adopts the view taken the same day in Damani Brothers. It matters equally for finality. The Court holds that an order under section 245D(4) is not an order of regular assessment, nor one under section 143(1), 143(3) or 144; Chapter XIX-A is a code of its own that begins with an application rather than a return, and the Commission, unlike the Tribunal under section 254(2), has no power of rectification. Ghaswala is confined to what it decided — that section 234B interest is mandatory and cannot be waived — and did not treat a settlement order as an assessment order.
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This is a reference to a Constitution Bench, not an appeal turned on its own facts. By referral orders of 14 December 2004 and 20 January 2005 three questions were referred: whether sections 234A, 234B and 234C apply at all to proceedings of the Settlement Commission under Chapter XIX-A; whether the Commission can reopen concluded proceedings under section 154 so as to levy interest it did not levy originally; and, there being no limitation prescribed for making a settlement order, whether the date of that order fixes the quantum of interest. After hearing counsel the Court reframed them as whether section 234B applies to Chapter XIX-A proceedings; if so, whether interest runs to the order under section 245D(1) or to the order under section 245D(4); and whether section 154 can be invoked to reopen. The reference was made because Anjum M.H. Ghaswala had held section 234B interest mandatory and unwaivable without deciding the terminal point, and because two three-Judge Benches had then differed on the same day — Hindustan Bulk Carrier taking the section 245D(4) date and Damani Brothers taking the section 245D(1) date. A batch of some thirty appeals and writ petitions was heard together.
The reference was answered in three conclusions and the matters disposed of. First, sections 234A, 234B and 234C apply to proceedings of the Settlement Commission under Chapter XIX-A, to the extent indicated in the judgment. Second, and following from the first, the terminal point for the levy of interest under section 234B is the date of the order under section 245D(1), not the date of the settlement order under section 245D(4). Third, the Settlement Commission cannot reopen its concluded proceedings by invoking section 154 so as to levy interest under section 234B, particularly in view of section 245I. The Court also recorded that the expression interest in section 245D(6A) fastens liability only where the tax payable under a section 245D(4) order is not paid within the specified time, which is a different levy from interest under section 234B or section 245D(2C).
The Court's route runs through the character of a settlement application. Sections 245C(1B) and 245C(1C) require the additional income tax to be computed on the aggregate of the returned income and the income disclosed, as if that aggregate were the total income; the application is therefore akin to a return, and since interest follows the computation of total income, sections 234A, 234B and 234C are engrafted into Chapter XIX-A at the section 245D(1) stage. Until the Commission admits the case the proceedings under the normal provisions remain open and the Assessing Officer's jurisdiction is not fettered; on admission, exclusive jurisdiction passes to the Commission. Parliament has not extended the liability to interest beyond the date of the application, and the Finance Act 2007 amendment, requiring interest to be paid for the application to be maintainable, confirms rather than displaces that. Section 140A, the analogous self-assessment scheme, likewise computes section 234B interest by reference to the tax on the income declared. Two distinct stages therefore exist under Chapter XIX-A, and the legislature contemplated no interest between them; section 245D(7), which revives proceedings from the stage of admission if the settlement is avoided for fraud, supports that reading. On rectification, the Court held Chapter XIX-A a code by itself: it begins with an application, not a return; it involves no order of assessment, notice of demand or the other steps of Chapter XIV; section 154 finds no mention in the computation provisions; and unlike the Tribunal under section 254(2) the Commission has no rectification power. Ghaswala decided only that the interest is mandatory.
Settlement of liability and not determination of liability is the object of Chapter XIX-A.
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Handle my notice → Ask a CA on WhatsAppNo to both. A Constitution Bench of the Supreme Court held on 21 October 2010 that sections 234A, 234B and 234C do apply to Settlement Commission proceedings, but only up to the order admitting the case under section 245D(1). Parliament did not extend the liability beyond the date of the settlement application, so no interest runs between admission and the final order under section 245D(4). Hindustan Bulk Carrier, which had taken the section 245D(4) date as the terminus, does not survive on that point. And the Commission cannot reopen its concluded proceedings under section 154 to levy interest it did not levy at the time, section 245I making its order final. This was decided by the Supreme Court (Supreme Court of India, Constitution Bench; S.H. Kapadia CJI, B. Sudershan Reddy, K.S. Radhakrishnan, Surinder Singh Nijjar and Swatanter Kumar JJ, judgment delivered by S.H. Kapadia CJI) and bears on section 234B, section 245D(1), section 245C, section 154, section 245I of the Income Tax Act 1961. It is reported as Civil Appeals Nos. 516-527 of 2004 and connected matters, Supreme Court of India, decided 21 October 2010. This is the Constitution Bench that settled two questions the earlier three-Judge decisions had left in conflict. It matters most for the terminal point: on the reasoning in Hindustan Bulk Carrier interest ran to the final settlement order, which in long-pending matters was ruinous; Brij Lal cuts it off at admission and adopts the view taken the same day in Damani Brothers. It matters equally for finality. The Court holds that an order under section 245D(4) is not an order of regular assessment, nor one under section 143(1), 143(3) or 144; Chapter XIX-A is a code of its own that begins with an application rather than a return, and the Commission, unlike the Tribunal under section 254(2), has no power of rectification. Ghaswala is confined to what it decided — that section 234B interest is mandatory and cannot be waived — and did not treat a settlement order as an assessment order. If it applies to you, the first step is this: Compute the interest under sections 234A, 234B and 234C only up to the date of the order under section 245D(1) admitting the application, and object to any demand covering the period from admission to the final order.
This is a reference to a Constitution Bench, not an appeal turned on its own facts. By referral orders of 14 December 2004 and 20 January 2005 three questions were referred: whether sections 234A, 234B and 234C apply at all to proceedings of the Settlement Commission under Chapter XIX-A; whether the Commission can reopen concluded proceedings under section 154 so as to levy interest it did not levy originally; and, there being no limitation prescribed for making a settlement order, whether the date of that order fixes the quantum of interest. After hearing counsel the Court reframed them as whether section 234B applies to Chapter XIX-A proceedings; if so, whether interest runs to the order under section 245D(1) or to the order under section 245D(4); and whether section 154 can be invoked to reopen. The reference was made because Anjum M.H. Ghaswala had held section 234B interest mandatory and unwaivable without deciding the terminal point, and because two three-Judge Benches had then differed on the same day — Hindustan Bulk Carrier taking the section 245D(4) date and Damani Brothers taking the section 245D(1) date. A batch of some thirty appeals and writ petitions was heard together. The matter was decided on 2010-10-21 by the Supreme Court (Supreme Court of India, Constitution Bench; S.H. Kapadia CJI, B. Sudershan Reddy, K.S. Radhakrishnan, Surinder Singh Nijjar and Swatanter Kumar JJ, judgment delivered by S.H. Kapadia CJI). On those facts the Supreme Court held as follows. The reference was answered in three conclusions and the matters disposed of. First, sections 234A, 234B and 234C apply to proceedings of the Settlement Commission under Chapter XIX-A, to the extent indicated in the judgment. Second, and following from the first, the terminal point for the levy of interest under section 234B is the date of the order under section 245D(1), not the date of the settlement order under section 245D(4). Third, the Settlement Commission cannot reopen its concluded proceedings by invoking section 154 so as to levy interest under section 234B, particularly in view of section 245I. The Court also recorded that the expression interest in section 245D(6A) fastens liability only where the tax payable under a section 245D(4) order is not paid within the specified time, which is a different levy from interest under section 234B or section 245D(2C).
The Court's route runs through the character of a settlement application. Sections 245C(1B) and 245C(1C) require the additional income tax to be computed on the aggregate of the returned income and the income disclosed, as if that aggregate were the total income; the application is therefore akin to a return, and since interest follows the computation of total income, sections 234A, 234B and 234C are engrafted into Chapter XIX-A at the section 245D(1) stage. Until the Commission admits the case the proceedings under the normal provisions remain open and the Assessing Officer's jurisdiction is not fettered; on admission, exclusive jurisdiction passes to the Commission. Parliament has not extended the liability to interest beyond the date of the application, and the Finance Act 2007 amendment, requiring interest to be paid for the application to be maintainable, confirms rather than displaces that. Section 140A, the analogous self-assessment scheme, likewise computes section 234B interest by reference to the tax on the income declared. Two distinct stages therefore exist under Chapter XIX-A, and the legislature contemplated no interest between them; section 245D(7), which revives proceedings from the stage of admission if the settlement is avoided for fraud, supports that reading. On rectification, the Court held Chapter XIX-A a code by itself: it begins with an application, not a return; it involves no order of assessment, notice of demand or the other steps of Chapter XIV; section 154 finds no mention in the computation provisions; and unlike the Tribunal under section 254(2) the Commission has no rectification power. Ghaswala decided only that the interest is mandatory. In the words reproduced by the source cited on this page: "Settlement of liability and not determination of liability is the object of Chapter XIX-A."
It was decided by the Supreme Court on 2010-10-21 and is reported as Civil Appeals Nos. 516-527 of 2004 and connected matters, Supreme Court of India, decided 21 October 2010. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 234B, section 245D(1), section 245C, section 154, section 245I, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The reference was answered in three conclusions and the matters disposed of. First, sections 234A, 234B and 234C apply to proceedings of the Settlement Commission under Chapter XIX-A, to the extent indicated in the judgment. Second, and following from the first, the terminal point for the levy of interest under section 234B is the date of the order under section 245D(1), not the date of the settlement order under section 245D(4). Third, the Settlement Commission cannot reopen its concluded proceedings by invoking section 154 so as to levy interest under section 234B, particularly in view of section 245I. The Court also recorded that the expression interest in section 245D(6A) fastens liability only where the tax payable under a section 245D(4) order is not paid within the specified time, which is a different levy from interest under section 234B or section 245D(2C). It arises in Demand, Recovery & Stay and Assessment & Scrutiny matters, on section 234B, section 245D(1), section 245C, section 154, section 245I of the Income Tax Act 1961, and was decided by Supreme Court of India, Constitution Bench; S.H. Kapadia CJI, B. Sudershan Reddy, K.S. Radhakrishnan, Surinder Singh Nijjar and Swatanter Kumar JJ, judgment delivered by S.H. Kapadia CJI. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Pay the additional tax with interest before making the settlement application; without it the application is not maintainable, and the Finance Act 2007 amendment made that explicit. If the Commission seeks to rectify a concluded order under section 154 to add interest, take the point that Chapter XIX-A does not contemplate section 154 at all and that section 245I makes the order final and conclusive. Keep the distinction between review or recall on fraud or misrepresentation under section 245D(7), which remains available, and rectification, which does not.
Still good law. A citator search on the judgment returns 99 later decisions citing it, as would be expected of a Constitution Bench. The cut-off it fixed is applied directly by the Delhi High Court in Commissioner of Income Tax v Income Tax Settlement Commission (12 September 2024), which records that interest, if chargeable, is charged up to the date of the order under section 245D(1). The Madras High Court applied it in CIT-IV v M.A. Jacob and Company (15 September 2020), remitting the interest question to the Settlement Commission to be decided on it, and in Principal Commissioner of Income Tax v S. Chandralekha (3 March 2021), directing that interest be finalised strictly in accordance with the decision; the Delhi Bench applied it in Maharashtra Feeds P Ltd v ACIT (6 February 2024). Nothing overruling or doubting it was found, and nothing below five Judges could. The Settlement Commission has since been discontinued and replaced by the Interim Board for Settlement, so the practical reach is now limited to pending and legacy matters. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested text is clipped: about 29,200 characters from the middle are missing. That stretch carried the remainder of the statutory extracts, the parties' arguments, and the Court's answer to the first reframed question. What survives is the reference and the reframed questions, the long reproduction of sections 140A, 143, 154, 207 to 215 and 234A to 234C, and then the Court's reasoning on the terminal point and on section 154 through to the three conclusions and the order. The first conclusion is recorded in the words the Court used, but the reasoning supporting it is only partly visible. The batch line gave the year as 2011; the judgment is dated 21 October 2010 and the decided_on field follows the judgment. The source printed no reporter citations, so the case numbers are used, and the judgment does not set out the facts, years or amounts of any of the individual matters in the batch. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The reference was answered in three conclusions and the matters disposed of. First, sections 234A, 234B and 234C apply to proceedings of the Settlement Commission under Chapter XIX-A, to the extent indicated in the judgment. Second, and following from the first, the terminal point for the levy of interest under section 234B is the date of the order under section 245D(1), not the date of the settlement order under section 245D(4). Third, the Settlement Commission cannot reopen its concluded proceedings by invoking section 154 so as to levy interest under section 234B, particularly in view of section 245I. The Court also recorded that the expression interest in section 245D(6A) fastens liability only where the tax payable under a section 245D(4) order is not paid within the specified time, which is a different levy from interest under section 234B or section 245D(2C).
TaxSphere, “Brij Lal v CIT”, https://taxnotice.vittsphere.com/caselaw/case/brij-lal-v-cit/ (validity last checked 2026-08-29)
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