Catholics understand that John 20:22-23 as the scriptural support of Sacrament of Reconciliation or Penance. And when he had said this, he breathed on them [the apostles], and said to them, “Receive the Holy Spirit. If you forgive the sins of any, they are forgiven; if you retain the sins of any, they are retained.” We look at the testimony of two early Christians, Ambrose and John Chrysostom, on how they interpreted these verses.
Ambrose (c. 338 to 397 AD) was bishop of Milan, Italy from 374 to 397 AD. In one of his works, Concerning Repentance, he wrote commentary on John 20:22-23 (English translation from Nicene and Post Nicene Fathers or NPNF, Series II, Vol. 10):
Consider, too, the point that he who has received the Holy Ghost has also received the power of forgiving and of retaining sin. For thus it is written: “Receive the Holy Spirit: whosesoever sins ye forgive, they are forgiven unto them, and whosesoever sins ye retain, they are retained. So, then, he who has not received power to forgive sins has not received the Holy Spirit. The office of the priest is a gift of the Holy Spirit, and His right it is specially to forgive and to retain sins. How, then, can they claim His gift who distrust His power and His right?
Ambrose, Concerning Repentance, Book I, Chapter 2: 7 to 8
Echoing the same view, John Chrysostomos (c. 347 to 407AD), bishop of Constantinople wrote (English translation from Nicene and Post Nicene Fathers or NPNF, Series I, Vol. 9 with added emphasis):
For if any one will consider how great a thing it is for one, being a man, and compassed with flesh and blood, to be enabled to draw nigh to that blessed and pure nature, he will then clearly see what great honor the grace of the Spirit has vouchsafed to priests; since by their agency these rites are celebrated, and others nowise inferior to these both in respect of our dignity and our salvation. For they who inhabit the earth and make their abode there are entrusted with the administration of things which are in Heaven, and have received an authority which God has not given to angels or archangels. For it has not been said to them, “Whatsoever ye shall bind on earth shall be bound in Heaven, and whatsoever ye shall loose on earth shall be loosed in Heaven. They who rule on earth have indeed authority to bind, but only the body: whereas this binding lays hold of the soul and penetrates the heavens; and what priests do here below God ratifies above, and the Master confirms the sentence of his servants. For indeed what is it but all manner of heavenly authority which He has given them when He says, “Whose sins ye remit they are remitted, and whose sins ye retain they are retained?” What authority could be greater than this? “The Father hath committed all judgment to the Son?” But I see it all put into the hands of these men by the Son. For they have been conducted to this dignity as if they were already translated to Heaven, and had transcended human nature, and were released from the passions to which we are liable. Moreover, if a king should bestow this honor upon any of his subjects, authorizing him to cast into prison whom he pleased and to release them again, he becomes an object of envy and respect to all men; but he who has received from God an authority as much greater as heaven is more precious than earth, and souls more precious than bodies, seems to some to have received so small an honor that they are actually able to imagine that one of those who have been entrusted with these things will despise the gift. Away with such madness! For transparent madness it is to despise so great a dignity, without which it is not possible to obtain either our own salvation, or the good things which have been promised to us. For if no one can enter into the kingdom of Heaven except he be regenerate through water and the Spirit, and he who does not eat the flesh of the Lord and drink His blood is excluded from eternal life, and if all these things are accomplished only by means of those holy hands, I mean the hands of the priest, how will any one, without these, be able to escape the fire of hell, or to win those crowns which are reserved for the victorious?
John Chrysostom, On the Priesthood, Book 3, Chapter 5
In contrast Reformer John Calvin, in his commentary on the Gospel of John, denied that the authority to forgive sin was given to the apostles.
While Christ enjoins the Apostles to forgive sins, he does not convey to them what is peculiar to himself. It belongs to him to forgive sins. This honor, so far as it belongs peculiarly to himself, he does not surrender to the Apostles, but enjoins them, in his name, to proclaim the forgiveness of sins, that through their agency he may reconcile men to God. In short, properly speaking, it is he alone who forgives sins through his apostles and ministers.
Calvin, Commentary on John 20:22-23
Following Calvin, Protestants generally interpret those verses as commandment to preach Gospel.
Most absurdly do the Papists, on the other hand, torture this passage, to support their magical absolutions. If any person do not confess his sins in the ear of the priest, he has no right, in their opinion, to expect forgiveness; for Christ intended that sins should be forgiven through the Apostles, and they cannot absolve without having examined the matter; therefore, confession is necessary. Such is their beautiful argument. But they fall into a strange blunder, when they pass by the most important point of the matter; namely, that this right was granted to the Apostles, in order to maintain the credit of the Gospel, which they had been commissioned to preach. For Christ does not here appoint confessors, to inquire minutely into each sin by means of low mutterings, but preachers of his Gospel, who shall cause their voice to be heard, and who shall seal on the hearts of believers the grace of the atonement obtained through Christ. We ought, therefore, to keep by the manner of forgiving sins, so as to know what is that power which has been granted to the apostles.
Calvin, Commentary on John 20:22-23
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