B.S. Dhillon, J.
1. Brief facts giving rise to this petition are that the petitioner is a firm having eight partners who were also partners in other firms described in the petition. The I.T. Dept. suspected that the returns filed by the firms did not reflect the true income pertaining to the assessment years 1961-62 to 1968-69. On 17th January, 1970, an offer was submitted by the petitioner to the Commissioner of Income-tax, Delhi (Central), New Delhi, who was the competent Commissioner dealing with the case of the petitioner at that time, giving the basis for an overall settlement for all the tax liabilities including the penalties with respect to the concealed income of the petitioner relating to the years 1961-62 to 1968-69. Copy of the said application is annex. P-1 with the writ petition. In the said application, Clause 2(ix) is as follows :
'2. (ix) In regard to payment of taxes as a result of this settlement we undertake to pay Rs. 75,000 by the end of April, 1970, and the balance demand will be paid in instalments of Rs. 20,000 per month starting from May, 1970. We further undertake to dispose of our property at Bombay (namely, Maharaj Bhawan) as early as possible, the entire sale proceeds of which shall be paid towards the settlement demand. The title deeds in respect of this property are deposited.'
2. This proposal was accepted by the Commissioner, vide his letter dated 18th March, 1970, copy of which is annex. P-2 with the writ petition.
3. According to the settlement, five firms and four partners were to make the payment of Rs. 17,13,736 including the tax which would become due after filing the return, its interest under Sections 215 and 217 of the I.T. Act, 1961 (hereinafter referred to as 'the Act') and the penalties. In pursuance of the settlement, the assessment proceedings pertaining to the years in question were either reopened of the appeals had been accepted by the AAC, and thus the ITO passed orders in accordance with the provisions of the Act reflecting the income as settled in the settlement. It is also not disputed that the payments of the amounts as stipulated in Clause 2(ix) referred to above were made by the assessee as scheduled. However, the I.T. Dept. claimed interest on the balance of the tax due as thepayment of the tax due had not been made within 35 days of the service of notice under Section 156 of the Act. This interest is being claimed in view of the provisions of Section 220(2) of the Act. The grievance of the petitioner is that it is not liable to pay tax under Section 220(2) of the Act as, in view of Clause 2(ix) of the settlement, the Commissioner accepted the delayed payment of the tax being made and, therefore, the tax had not become due after the lapse of 35 days of the service of the notice under Section 156 of the Act.
4. After hearing the learned counsel for the parties, we are of the opinion that there is no merit in this petition. We have carefully scanned through the provisions of the Act and we find that the interest chargeable under Section 139(8) of the Act can be reduced or waived in view of the provisions of the Act read with Rule 117A of the I.T. Rules (hereinafter referred to as 'the Rules'). Similarly, the interest chargeable under the provisions of Sections 214, 215, 216 and 217 of the Act can be reduced and waived in view of the provisions of the Act read with Rule 40 of the Rules. The provisions of Section 220(2) of the Act are mandatory. Under the provisions of Sub-section (3) of Section 220 of the Act, even the ITO, who has power to fix the payment of the instalment to a deferred date on an application being made by the assessees within 35 days of the service of the notice, has no power to waite or reduce the interest. The provisions of Sub-section (3) of Section 220 of the Act are subject to the provisions of Sub-section (2) of Section 220 of the Act. Nothing could be pointed out by the learned counsel for the petitioner, Shri Sibal, that there was any power either with the ITO or with the Commissioner to waive or reduce the amount of interest which becomes due in view of the provisions of Sub-section (2) of Section 220 of the Act. That being so, if the authorities have no power to waive or reduce the interest, the Commissioner could not, under the settlement, impliedly or expressly, agree to any such condition as is sought to be construed. The power of the Commissioner for effecting a settlement is enacted in the provisions of Section 271(4A) of the I.T. Act, 1961 (unamended), which is equivalent to the provisions of Section 273A of the 1961 Act (amended with effect from 1st October, 1975). Nothing could be pointed out by the learned counsel for the petitioner to show that under this power, the Commissioner had any jurisdiction to waive the payment of interest becoming due under the provisions of Sub-section (2) of Section 220 of the Act.
5. It is in the background of the provisions mentioned above that Clause 2(ix) of the settlement has to be construed. The said clause merely postulates that the assessees undertook to pay a sum of Rs. 75,000 by the end of April, 1970, and the balance of demand by instalments of Rs. 20,000 per month starting from May, 1970. The assessee further undertook to dispose of their property at Bombay as early as possible and agree that the entire sale proceeds of the property would be paid towards the settlement demand. While construing this clause of the settlement, it cannot be successfully contended that the Commissioner agreed not to claim interest as postulated under Sub-section (2) of Section 220 of the Act. In view of the settlement arrived at, the ITO passed orders of assessment pertaining to the assessment years in dispute and served notice on the assessees for making the payment. After the service of the notice payment of tax became due and thus if the tax is not paid within 35 days of the service of the notice, the provisions of Sub-section (2) of Section 220 of the Act will become applicable. It is a different matter that, in view of Clause 2(ix) of the settlement, the department could not force the payment of the tax before the dates as stipulated therein but there is no provision in the settlement impliedly or expressly to show that the Commissioner agreed not to charge interest on the amount which fell due in accordance with law. The words used in Clause 2(ix) of the settlement, viz., ' the entire sale proceeds of which shall be paid towards the settlement demand' also point towards the conclusion that the demand which was created by the settlement had come into existence and in fact when the settlement was reflected in the orders of the ITO making the assessment and the same order having been served on the assessees, the demand became due and the tax became due for payment within 35 days of the service of the notice. If the assessees had approached the ITO for delayed payment of the tax by instalments, the ITO could also pass orders but he had no jurisdiction to waive the interest as observed earlier, The only possible construction which can be given to Clause 2fix) of the settlement is that the Commissioner agreed to receive the payment of the tax in the manner stipulated therein, but it cannot be successfully contended that there was any agreement that the interest due under Sub-section (2) of Section 220 of the Act will not be charged from the assessees.
6. For the reasons recorded above, there is no merit in this petition and the same is hereby dismissed. However, there will be no order as to costs.
S.S. Dewan, J.
7. I agree.