ACQUAINTANCE

 A forum named as Settlement Commission was set up in 1976 on the basis of recommendations of Direct Taxes Enquiry Committee headed by the former Chief Justice of Supreme Court, Shri K. N. Wanchoo. It was estblished to ensure effective and speedy disposal of complex cases so as to minimize the litigation and to ensure speedy and early resolution of dispute. The relevant provisions were inserted by the Taxation Amendment Act, 1975 w.e.f. 01.04.1976 in the form of chapter XIX – A of the I.T. Act in sections 245A to 245L of the Income tax Act.

PRESENT SCHEME

The present scheme relating to Settlement Commission provides vide section 245C(1) that an assessee can make an application to the Settlement Commission at any stage of a case relating to him. The term case is defined vide clause (b) of section 245A providing that there should be pendency of proceedings on the date of filing the application before the Income Tax Authority.

PURPOSE

The purpose for forming Settlement Commission were as follows:

  1. Immunity, to the extent possible, from penalty and prosecution
  2. To enable an assessee to make a true and fair disclosure and at the same time get assured that he shall go through minimal litigation
  3. To restrict revenue to take the case to higher authorities when there is no sufficient merit in it.
  4. To ensure early collection of revenue.

ELIGIBLE PENDING CASES

i) Assessment Proceedings u/s 143(3)/144:

Cases where notice u/s 143(2)/ show cause notice u/s 144 has been issued for scrutiny assessment or best judgement assessment.

ii) Assessment / re-assessment proceeding u/s 147:

Proceeding shall be deemed to be have commenced

  1. from the date on which notice under section 148 is issued for any assessment year
  2. from the date of issuance of the notice referred to in sub-clause(a), for any other Assessment Year or Assessment Years for which a notice u/s 148 has not been issued, but such notice should have been issued on such date, if the return of income for the other Assessment Year or Assessment Years has been furnished u/s 139 or in response to a notice u/s 143

Note: The above paragraph (b) above is a recent amendment. This is a big relief, where the assessee was doubtful that the Assessing Officer would find out any undisclosed income ultimately but was not able to disclose under this section because notice was not issued, now can go ahead and disclose even for assessment years where such notice u/s 148 could have been issued.

iii)  Fresh Assessment Proceedings:

 Where fresh assessment is made pursuant to order passed u/s 254/263/264 cancelling the assessment and directing fresh assessment. Such fresh assessment proceedings shall be deemed to have been commenced on the date on which order u/s 254/263/264 cancelling the assessment was passed.

iv)  Assessment/re-assessment proceedings u/s 153A:

The proceeding u/s 153A for the six assessment years, prior to the assessment year relevant to the precious year in which search and seizure was made shall be deemed to commence on the date on which notice u/s 153A is issued. If in the four assessment years, preceding the six assessment years mentioned above the aggregate undisclosed income exceeds 50 lakhs then the assessment years covered in this section shall extent to them too.

v) Assessment proceedings of the previous year in which search is conducted:

These proceedings shall be deemed to have commenced from the date on which the return of income for that Assessment Year is furnished u/s 139 or in response to a notice serviced u/s 142.

 

ADDITIONAL INCOME TAX DISCLOSED

As per section 245C, an application can be filed before the Settlement Commission, only if the additional amount of income-tax payable on  the income disclosed in the application exceeds the specified limit.

  • Specified limit in search cases: Section 245A provides that the proceedings for assessment or reassessment resulting from search/requisition would fall within the definition of a “case” which can be admitted by the Settlement Commission. Consequently, section 245C provides that the additional amount of income-tax payable on income disclosed in the application should exceed ` 50 lakh, for an application to be made before the Settlement Commission in such

Therefore, if proceedings have been initiated against the applicant (hereinafter referred to as specified person) under section 153A or under  section 153C as  a  result of search or a requisition of books of account, an application can be made  before the Settlement Commission if the additional amount of income-tax payable on the income disclosed in the application exceeds Rs. 50 lakh.

  • Specified limit in other cases: An application can also be made, where the  applicant is related to the specified person, and in  whose  case also  proceedings  have been initiated as a result of search, provided the additional income-tax payable on the income disclosed in the application exceeds ` 10

 

APPLICATION BEFORE SETTLEMENT COMMISSION

  • Tax and interest to be paid before making application: Such tax and interest thereon,   which would have been payable had such income been disclosed in  the return of income  before the Assessing Officer on the date of application, should  be  paid  on or before the date  of making the application. Further, proof of such payment should be attached with the application.
  • Applicant, in relation to the Specified Person: The applicant, in relation to the specified person, means –

  Specified person   Related entity
(i) Individual (1) Relative of the individual
    (2) Where the individual or his relative has a substantial interest in
      a business or profession carried on by any other person, the
      person who carries on such business or profession.
(ii) HUF (1) Member of HUF or relative of such member
    (2) Where the HUF  or  its member or relative of such member has  a substantial interest in a business or profession carried on by any other person, the person who carries on such business or profession.
(iii) Company (1) Director of the company or any relative of such director

Any person who has substantial interest in the business or profession of the company. In addition, the following are also considered as related entity –

·          If such person is an individual, any relative of such individual.

·          If such person is a company, any director  of  such company or any relative of such director.

·          If such person is a firm, any partner of such firm, or any relative of such partner.

·          If such person is an AOP or HUF, any member of the AOP or HUF, or any relative of such member.

A company, whose director has a substantial interest in the business or profession of this company;

Any director of such company; Any relative of such director.

A firm, whose partner has a substantial interest in the business or profession of the company;

Any partner of such firm;

Any relative of such partner.

An AOP, whose member has a substantial interest in the business or profession of the company;

Any member of such AOP; Any relative of such member.

A HUF, whose member has a substantial interest in the  business or profession of the company;

Any member of such HUF;

    (2)
     

 

 

 

 

(3)

     

 

(4)

     

 

(5)

     

 

(6)

     

(7)

Any relative of such member.

Where the company or its director or relative of such director has a substantial interest in a business or profession carried on by any other person, the person who carries on such business  or profession.

(iv) Firm (1) Partner of the firm or any relative of such partner

Any person who has substantial interest in the business or profession of the firm. In addition, the following are also considered as related entity –

·          If such person is an individual, any relative of such individual.

·          If such person is a company, any director  of  such company or any relative of such director.

·          If such person is a firm, any partner of such firm, or any relative of such partner.

·          If such person is an AOP or HUF, any member of the AOP or HUF, or any relative of such member.

A company, whose director has a substantial interest in the business or profession of the firm;

Any director of such company; Any relative of such director.

A firm, whose partner has a substantial interest in the business or profession of this firm;

Any partner of such firm;

Any relative of such partner.

An AOP, whose member has a substantial interest in the business or profession of the firm;

Any member of such AOP; Any relative of such member.

A HUF, whose member has a substantial interest in the  business or profession of the firm;

Any member of such HUF; Any relative of such member.

Where the firm or its partner or relative or such partner has a substantial interest in a business or profession carried on by  any other person, the person who carries on such business or profession.

    (2)
     

 

 

 

 

(3)

     

 

(4)

     

 

(5)

     

 

(6)

     

 

(7)

(v) AOP (1) Member of AOP or any relative of such member

Any person who has substantial interest in the business or profession of the AOP. In addition, the following are also considered as related entity –

·          If such person is an individual, any relative of such individual.

·          If such person is a company, any director  of  such company or any relative of such director.

·          If such person is a firm, any partner of such firm, or any relative of such partner.

·          If such person is an AOP or HUF, any member of the AOP or HUF, or any relative of such member.

A company, whose director has a substantial interest in the business or profession of the AOP;

Any director of such company; Any relative of such director.

A firm, whose partner has a substantial interest in the business or profession of the AOP;

Any partner of such firm;

Any relative of such partner.

An AOP, whose member has a substantial interest in the business or profession of this AOP;

Any member of such AOP; Any relative of such member.

A HUF, whose member has a substantial interest in the  business or profession of the AOP;

Any member of such HUF; Any relative of such member.

Where the AOP or its member or relative of such member has a substantial interest in a business or profession carried on by any other person, the person who carries on such business or profession.

    (2)
     

 

 

 

 

(3)

     

 

(4)

     

 

(5)

     

 

(6)

     

 

(7)

Cases where a person shall be deemed to have a substantial interest in a business or profession:

 

  Case Condition
(i) Where the business or profession is carried on by a company Such person is, on the date of  search,  the  beneficial owner of shares (not being shares entitled to a fixed rate   of dividend, whether with or without a right to participate in profits) carrying not less than 20% of the voting power.

 

(ii) In any other case Such person is, on the date of search, beneficially entitled to not less than 20% of the profits of such business or profession.

Such beneficial ownership/beneficial entitlement  may  be at any time during the previous year.

  • Manner of calculation of additional amount of income-tax: The additional amount of income-tax has to be calculated in the following manner as  provided in sub-section (1B)  read with sub-section (1C), in  a case 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. Tax should be calculated on the income disclosed in the application as if such income is the total income. Such tax represents the additional amount of income-tax.
(ii) If the applicant has furnished a return in respect of the total income of that year. The tax should be calculated on the aggregate of total income returned and the income disclosed in the application i.e. as if the aggregate represents the total income. The additional amount of income-tax is the amount calculated on such aggregate as  reduced  by the amount of tax calculated on the total  income returned for that year.

Where the income disclosed in the application relates to more than one previous year, then the above procedure is to be adopted in respect of each previous year and the aggregate of tax payable is to be calculated [Sub-section (1D)].

  • Prescribed fees [Section 245C(2)]: Every settlement application made under sub-section(1) should be accompanied by the prescribed fees of  Rs. 500.
  • Withdrawal not permissible [Section 245C(3)]: The settlement application made under sub-section (1) cannot be withdrawn by the applicant [Sub-section (3)].
  • Intimation to Assessing Officer [Section 245C(4)]: The assessee should also intimate to the Assessing Officer in the prescribed manner that he has made an application to the Settlement Commission. Such intimation should be made on the same date when he makes an application to the Settlement

PROCEDURE ON RECEIPT OF APPLICATION [SECTION 245D]

Admission of Petition [Section 245D(1)]

  • On receipt of the settlement application, the Settlement Commission shall issue a notice to the applicant, requiring him to explain as to why the application made by him be allowed to be proceeded with, within 7 days from the date of receipt of application.
  • After hearing the applicant, the Settlement Commission shall pass an order either rejecting or allowing the application to be proceeded with  within 14 days from the  date of
  • Application not disposed off within 14 days shall be treated as
  • Copy of every order under section 245D(1) has to be sent to the applicant and to the Principal Commissioner or Commissioner [Sub-section (2)].

Time limit for furnishing report by Principal Commissioner or Commissioner and passing order by the Settlement Commission [Section 245D(2B) & (2C)]

  • The Settlement Commission shall call for a report from the Principal Commissioner or Commissioner within 30 days from the date of
  • The Principal Commissioner or Commissioner is required to furnish the report within 30 days from the receipt of communication from the Settlement
  • The Settlement Commission can also pass an order declaring the application as invalid on the basis of the report of the Principal Commissioner or
  • Such order should be passed in writing within 15 days of the receipt of report after giving the applicant an opportunity of being
  • A copy of the order should be sent to  the applicant and the Principal Commissioner  or
  • However, in a case where the Principal Commissioner or Commissioner has not furnished the report within the prescribed time, the Settlement Commission shall proceed further in the matter without the report of the Principal Commissioner or

Proceedings after admission [Section 245D(3)]

  • The Settlement Commission may call for records from the Principal Commissioner or Commissioner in respect of an application which has not been declared invalid under sub-section (2C) or an application which has been allowed to be further proceeded with under sub-section (2D).
  • After examination of such records, the Settlement Commission may require the Principal Commissioner or Commissioner to make further enquiry  or  investigation and furnish a report on the matters covered by the application and any other matter relating to the
  • The Principal Commissioner or Commissioner shall furnish the report within a period of 90 days of the receipt of communication from the Settlement
  • If the Principal Commissioner or Commissioner fails to furnish the report within the said period of 90 days, the Settlement Commission may proceed to pass an order under sub-section (4) without such

Final order of settlement [Section 245D(4) and (4A)]

  • The Settlement Commission may 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 Principal Commissioner or
  • Such order should be passed by the Settlement Commission after –
    • examining the records and report of the Principal Commissioner or Commissioner, if any, received at the time of admission or on investigation or enquiry conducted as per the instructions of the Settlement Commission;
    • giving an opportunity of being heard to the applicant and the Principal Commissioner or Commissioner;
    • examining such further evidence as may be placed before it or obtained by
  • The time limit for passing such order is –

(1) In respect of an application made on or after 1.6.2010 Within 18 months from the end of the month in which the application was made.
(2) In respect of an application made between 1.6.2007                         and 31.5.2010. Within 12 months from the end of the month in which the application was made.
  • Order of Settlement Commission to express views of majority [Section 245D(5)]:  Before passing any order and subject to the provisions dealing with the jurisdiction of Settlement Commission, the various materials brought on record before the Settlement Commission must be considered by the members of the concerned Bench and in cases where there is any difference of opinion among the members, the opinion of the majority   shall prevail and the order of the Settlement Commission must also be  expressed in  terms  of the views of the
  • Order to provide for terms of Settlement [Section 245D(6)]: All the orders passed by the Settlement Commission under section 245D(4) must provide for the terms of the settlement including any demand by way of tax, penalty, the manner in which any amount due as a  result of the settlement should be paid and all other matters which are essential to make the settlement of the case
  • Order to be void if obtained by fraud or misrepresentation [Section 245D(6)/(7)]: The order should also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that the settlement order was obtained by fraud or any misrepresentation of facts by the applicant. In  cases  where the settlement becomes void,  the proceeding, in respect of which the settlement order was passed, must 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 complete  the proceedings for assessment or re-assessment of income or the levy of  penalty, fine,   etc., at any time before the completion of two years from the end of  the financial year in  which the settlement becomes void.
  • Interest leviable if tax not paid within prescribed time [Section 245D(6A)]: Where the tax payable in pursuance of an order passed by the Settlement Commission is not paid by the assessee within 35 days of receipt of a copy of final order, the assessee shall be liable to pay simple interest @ 1¼% for every month or part of a month  on  the outstanding amount from  the date of expiry of 35 days. Such liability will arise even in cases where the Commission extended the time allowed for such payment or permitted payment by
  • Time limit for amendment of Settlement Order [Section 245D(6B)]: The Settlement Commission may amend any order passed by it under section 245D(4) to rectify  any  mistake apparent from the

The Settlement Commission may, with a view to rectifying any mistake apparent from the record, amend any order passed by it under section 245D(4), at any time within a period of  six months from the end of month in which –

  • the order was passed; or
  • an application for rectification has been made by the Principal Commissioner or Commissioner or the applicant, as the case may

However, no application for rectification can be made by the Principal Commissioner or the Commissioner or the applicant after the expiry of 6 months from the end of the month in  which an order under section 245D(4) is passed by the Settlement Commission.

  • Time limit under section 153 not applicable in respect of Settlement Order [Section 245D(8)]: The time limit for completion of assessments and re-assessments contained in section 153 shall have no application to any order passed by the Settlement Commission or to any order of assessment or re-assessment or recomputation required to be made by the Assessing Officer in pursuance of any directions contained in an order passed by the Settlement

POWER OF SETTLEMENT COMMISSION TO ORDER PROVISIONAL ATTACHMENT TO PROTECT REVENUE [SECTION 245DD]

  • Under section 245DD, the Settlement Commission is empowered to provisionally attach the property belonging to the applicant for protecting the interest of the revenue. The manner in which such provisional attachment is to be effected is provided in the Second Schedule. Such provisional attachment is valid for a period of 6 months, after which it ceases to have effect.
  • The Settlement Commission may, for reasons to be recorded in writing,  extend  the  aforesaid period by such further period or period as it thinks.

The Settlement Commission shall not have any power to reopen the proceedings in respect of an application made on or after 1.6.2007.

JURISDICTION AND POWERS OF THE SETTLEMENT COMMISSION [SECTION 245BA]

The jurisdiction, powers and authority of the Settlement Commission may be exercised by benches thereof.

  • Constitution of Benches: A bench shall be presided over by the Chairman or a Vice- chairman and shall consist of two other

The bench for which the Chairman is the presiding officer shall be the  principal  bench and the other benches shall be known as additional benches.

The Chairman may authorise the Vice-chairman or other Member appointed to one bench to discharge also the functions of the Vice-chairman or other member of another bench.

The Vice-chairman has been empowered to act as chairman and discharge his functions under certain circumstances as vacancy, death, resignation etc.

  • Constitution of Special Bench: Where the presiding officer or other member of a bench is unable to discharge his functions owing to absence, illness or any other cause or where a vacancy occurs in the office of the presiding officer or a member the remaining two persons may function as the bench and if the presiding officer is not one of the members, the senior member will be the presiding However, if it is felt that the case is such that it should be heard by a  bench of  three members the chairman has powers to  transfer the case to  such a bench. The chairman for the disposal of a particular  case,  constitute  a  Special Bench consisting of more than three members.
  • Benches to sit at notified places: The places at which the Principal Bench and the Additional Benches shall ordinarily sit shall be notified by the Central Government. The Central Government has specified that New Delhi is the place where the  Principal Bench  and Bombay, Calcutta and Madras as the places where Additional Benches of  the  Settlement Commission shall ordinarily
  • Transfer of cases: On the application of the assessee or the Principal Commissioner or Commissioner and after notice to them and hearing, the chairman may transfer any case pending before one bench, for disposal, to another
  • Decision based on opinion of majority members: If the members of a bench differ in opinion on any point the point shall be decided according to the opinion of the If  they are equally divided they shall state the point on which they differ and make a reference  to the chairman who shall either hear the point himself or refer the point  to  one or  more of the other members and such point shall be decided according to the opinion of  the majority  of the members who have heard the case including those who first heard it.
  • Exclusive Jurisdiction of Settlement Commission: The Settlement  Commission  has been vested with all the powers which are vested in an Income-tax authority under the Income-tax Act,

Accordingly, in cases where an application made by the assessee under section 245C has been allowed by the Settlement Commission to be proceeded with under section 245D, the Settlement Commission is empowered to exercise exclusively the jurisdiction and powers  and perform the functions allotted to an Income-tax authority under the Income-tax Act until  an order for settlement of the case is passed.

Such exclusive jurisdiction would begin with the date of filing of application with the Settlement Commission.

The exclusive jurisdiction of the Settlement Commission would end on –

  • the date of passing an order under section 245D(4); or
  • the date of passing the order rejecting the application under section 245D(1); or
  • the date on which the application is not allowed to be proceeded with under section 245D(2A); or
  • the date on which the application is declared invalid under section 245D(2C); or
  • Certain provisions of Income-tax Act, 1961 to apply in the absence of contrary directions by the Settlement Commission: However, in the absence of any express direction to the contrary by the Settlement Commission, the operation of any other provision of the Income-tax Act, 1961 requiring the applicant to pay the tax on the basis of self- assessment shall continue to be applicable in relation to matters which are before the Settlement Commission for Further, in the absence of any express directions by the Settlement Commission to the contrary, the provisions of sections 245A to  245L  would not affect the operation of any other provision of the Income-tax Act, 1961 insofar as those provisions relate to any matters other than those covered by the case before the Settlement Commission.

  • Settlement Commission to regulate its own procedure: The Commission shall subject to the provisions of this Chapter have power to  regulate its own procedure and the procedure of benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions including the places at which the Board shall hold their
  • Inspection of reports: According to section 245G, no person is  entitled  to  inspect  or obtain copies of any reports made by any Income-tax authority to the  Settlement   Commission in relation to the case, but, the Settlement Commission may, in its discretion, furnish copies thereof to any person or receipt of an application made to it in this behalf and  on payment of the prescribed fee. However, in order to enable any person whose case is under consideration to rebut any evidence which has been brought on record against him in any such report, the Settlement Commission shall, on receipt of an application in this behalf and on payment of the prescribed fee, furnish to the applicant, a certified copy of any such report or particular thereof which may be relevant for the

POWER TO GRANT IMMUNITY FROM PROSECUTION AND PENALTY [SECTION 245H]

  • Recording of reasons in order granting immunity: The Settlement Commission may, if it is satisfied that any person who made the application for settlement under section 245C has co-operated with the Settlement Commission in the conduct  of  the proceedings before  it  and has made a true disclosure of his income, and the manner in which such income has been derived, grant to such person immunity from prosecution for any offence under the Income-tax Act, 1961 or under the Wealth-tax Act, However, the Settlement Commission, while granting immunity to any person from prosecution shall record the  reasons in writing in the order passed by it.

Such an immunity may also be granted in the matter of imposition of any penalty under the Income-tax Act, 1961 in respect of the case which is covered by the settlement.

  • Grant of partial immunity: The Commission can grant partial immunity from imposition of penalty to the
  • Immunity to be subject to conditions: The power of the Settlement Commission to grant immunity from prosecution and the imposition is, however, subject to such conditions as the Commission may think fit to impose in the circumstances of the
  • No immunity if prosecution proceedings have been initiated before receipt of application: No such immunity shall be granted by the Commission in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of the application for
  • Restriction on power to grant immunity: Under section  245H,  the  Settlement Commission may grant immunity from prosecution for any offence under the Indian Penal Code, Income-tax Act, 1961 and any other Central Act.  This power has now been restricted in respect of application made under section 245C on or after 1.6.2007. In respect of such cases, the Settlement Commission shall not grant immunity from  prosecution  for  any  offence under the Indian Penal Code or under any Central Act other  than  the  Income-tax Act, 1961 and Wealth-tax Act, 1957. However, in respect of applications pending as on 1.6.2007, the Settlement Commission has the power to grant immunity from prosecution for any offence under the Indian Penal Code and other Central Acts also.

Withdrawal of immunity:

  • An immunity granted under this section shall stand withdrawn if such person fails to pay any sum specified in the order of settlement within the time specified in the order or within such further time as may be allowed by the Commission or fails to comply with any other condition subject to which the immunity was granted and thereupon   the provisions of this Act shall apply as if such immunity had not been
  • An immunity granted by the Settlement Commission to any person may, at any time, be withdrawn by it in cases where it is satisfied that the person concerned had, in the course of the settlement proceedings concerned may be tried for the offence with respect to which the immunity was granted or  for any  other offence in respect of  which he has been found guilty in connection with the
  • After the withdrawal of the immunity from prosecution,  the  person concerned may also become liable to the imposition of the penalty under the Income-tax Act, 1961 to which he would otherwise have been liable in the absence of the immunity given to  him under section

ABATEMENT OF PROCEEDING BEFORE THE SETTLEMENT COMMISSION [SECTIONS 245HA & 245HAA]

  • Specified date of abatement in different cases: In the following cases, the proceedings before the Settlement Commission shall abate on the specified date as given below –

  Case Specified date
(i) where an application made to the Settlement Commission on or  after 1.6.2007 has been rejected under section 245D(1). The date on which the application was rejected.
(ii) where an application has been declared invalid under section 245D(2C). The last day of the month in which the application was declared invalid.
(iii) Where an order under section 245D(4) has The day on which the order under

  been passed not providing for the terms of settlement. section      245D(4)      was     passed                 not providing for the terms of settlement.
(iv) Where an order under section 245D(4) has not been passed within the time allowed under section 245D(4A). The date on which the time or period specified in section 245D(4A) expires.
  • Cases to revert to jurisdictional Assessing Officer: On abatement of proceedings, the case would revert back to the Assessing Officer having jurisdiction or any other income-tax authority before whom the proceedings were pending at the time of making the Such income-tax authority shall dispose of the case in accordance with the provisions of the Act.
  • Assessing Officer entitled to use the material, information and results of enquiry: For completing the proceedings, the Assessing Officer or other Income-tax authority shall be entitled to use the material and information produced by the assessee before  the   Settlement Commission as if such material and information had been produced before the Assessing Officer or other income-tax authority. Similarly, the Assessing Officer or other Income-tax authority shall be entitled to use the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it, as  if   such inquiry or evidence had been held or recorded by him in the course of the proceedings before
  • Exclusion of time period: The period from the date on which the application was made before the Commission up to the date on which proceedings get abated shall be excluded from the time limit for completion of proceedings by the Assessing Officer and  for payment  of interest under section 243, 244 or
  • Credit for tax and interest paid [Section 245HAA]: In case of abatement of settlement proceedings, the Assessing Officer is required to give credit for the tax and interest paid on  or before the date of making the application or during the pendency of the case before the  Settlement

ORDER OF SETTLEMENT COMMISSION TO BE CONCLUSIVE [SECTION 245-I]

Section 245-I provides that every order of the Settlement Commission passed under  section 245D(4) shall be conclusive in respect of the matters contained therein. Consequently, no matter covered by the Settlement Order shall be liable to be reopened in any proceeding under the Income-tax Act or under any other law for the time being in force. The only exception is the  reopening of the case by the Settlement Commission itself under section 245D(7) where the settlement becomes void.

However, the Supreme Court has held in CIT vs. B.N. Bhattacharjee (1979) 118 ITR  461  that  Article 136 of the Constitution was wide enough to bring within the Supreme Court’s jurisdiction orders passed by the Settlement Commission.

RECOVERY OF SETTLED AMOUNT [SECTION 245J]

According to section 245J, any amount specified in an order of settlement passed  by  the  Settlement Commission under section 245D(4), may be recovered and any penalty for default in making the payment may be imposed and recovered  from  the person concerned in  accordance  with the provisions of the Income-tax Act,  1961. The power for making the recovery if any, as may be specified by the Settlement Commission in the order passed by it. The right of recovery may be exercised by the Assessing Officer having jurisdiction over the person who has made  the  application for settlement under section 245C.

BAR ON SUBSEQUENT APPLICATION FOR SETTLEMENT [SECTION 245K]

  • In the event of occurrence of any of the following, the person concerned or any person  related to such person shall not be entitled to apply for settlement in relation to any other matter –
    • the order of settlement passed under section 245D(4) provides for imposition of penalty for concealment of income; or
    • after the passing of order under section 245D(4) in relation to a case, the person is convicted of an offence under Chapter XXII in relation to that case; or
  • The case of such person was sent back to the Assessing Officer by the Settlement Commission on or before 6.2002.
  • Further, with effect from 1.6.2007, the option of going to the Settlement Commission would be available only once in the lifetime of a person. Therefore, where an application for settlement is made on or after 1.6.2007 and such application has been allowed to be proceeded with, then such person will not be subsequently entitled to make any application under section

Note – Any person related to the person who has already approached the Settlement Commission once, also cannot approach the Settlement Commission subsequently. The related person with respect to a person means –

Person Related person
Individual ·          any company in which such person holds more than 50%  of  the shares or voting rights at any time; or

·          any firm or AOP or BOI in which such person is entitled to

  more than 50% of the profits at any time; or

·          any HUF in which such person is a karta

Company ·          any individual who held more than 50% of the shares or voting rights in such company at any time before the date of application before the Settlement Commission by such person
Firm or AOP or BOI ·          any individual who was entitled to more than 50% of the profits in such firm, AOP or BOI, at any time before the date of application before the Settlement Commission by such person
HUF ·          The karta of that HUF

The restriction of not approaching the Settlement Commission again was so far applicable only to  the concerned person. Therefore, an individual who has approached the Settlement Commission once can subsequently approach again through an entity controlled by him. This defeats  the  purpose of restricting the opportunity of approaching the Settlement Commission only once for any person. Therefore, section 245K has been amended with effect from 1st June, 2015 to apply the restriction to the related persons as well.

PROCEEDINGS TO BE JUDICIAL PROCEEDINGS [SECTION 245L]

All the proceedings under the Income-tax Act, 1961 before the Settlement Commission shall be deemed to be judicial proceedings within the meaning of sections 193, 196 and 228 of the Indian Penal Code.

LATEST IN JUDICIARY

  • Commissioner of Income Tax Vs Anjum M.H. Ghaswala & Ors, 2001, Supreme Court:

Section 245D does not empower the Settlement Commission to waive or reduce the statutory interest payable u/s 234A, 234B or 234C. Interest u/s 234A, 234B and 234C are mandatory interest and Settlement Commission cannot waive or reduce such interests. Settlement Commission has the same power as conferred by the Income-tax Act on Income-tax Authorities. Therefore, Settlement Commission can waive/reduce the interest under section 234A/B/C to the extent it can be waived by CCIT/Director General(Investigation) as permitted by the Board’s circular.

  • Lakshmansa And Co. Vs. Commissioner of Income Tax, 2017, Supreme Court:

The issue which aroused was that if an assessee receiving refund consequent to waiver of interest under section 234A to 234C of the Income-tax Act, 1961 by the Settlement Commission, also entitled to interest on such refund under section 244A ?

The assessee had approached the Settlement Commission for waiver of interest under sections 234A to 234C of the Income-tax Act, 1961. The said interest has already been paid by the assessee. The Settlement Commission waived the interest but refused to grant interest on refund on the ground that sectin 244A does not provide for payment of interest in such cases. Further, the Settlement Commission’s power to waive interest does not enable the Commission to provide for payment of interest under section 244A.

The Supreme Court held that under section 244A, it is enough if the refund becomes due under the Income-tax Act,1961 in which case the assessee shall, subject to the provisions of that section, be entitled to receive simple interest. It does not matter that the interest being waived is discretionary in nature. The moment that discretion is exercised and refund becomes due consequently, a right to claim interest springs into being in favour of the assessee. The Supreme Court held that the assessee has a right to interest on refund under section 244A.

                               The author is an advocate and can be reached at pkshillong@gmail.com

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s