Settlement Commission

A. Provisions as applicable to new applications filed on or after date 1-6-2007

1. Definition of case

An application for settlement of a ‘case’ can be filed by the assessee. Clause (b) of S. 245A defined case to mean any proceedings for assessment or reassessment or appeal or revision in pursuance of assessment or reassessment pending before an Income Tax Authority. Therefore, for an assessment year, application could have been filed any time before the CIT(A) decided the appeal against the assessment. The assessment could be assessment order u/s. 143(3) or an order u/s. 147 r. w. s. 143(3) or even an assessment order on set aside by ITAT, CIT(A) or CIT for de novo assessment.

The definition of ‘case’ is further expanded w.e.f. 1-6-2010 to include such cases of search or requisition of books etc. It is provided that proceedings for assessment or reassessment for any relevant assessment shall be deemed to have commenced on the date of issue of notice initiating such proceedings and concluded on the date on which assessment is made.

The scope is further expanded from 1-10-2014 to include such cases where the proceedings for assessment or reassessment u/s. 147 shall be deemed to have commenced from the date on which such notice u/s. 148 is issued. Further amendment is made w.e.f. 1-6-2015 that the assessee can approach the Settlement Commission for other assessment years as well even if notice under section 148 has not been issued for such years/other years. However, a return of income for such other assessment years should have been furnished u/s. 139 of the Act or in response to notice under section 142 of the Act. Similarly, proceedings for making fresh assessment in pursuant to order u/s. 254 or u/s. 263 or u/s. 264 shall be deemed to have commenced on the date of which such order, setting aside or cancelling an assessment was passed and also in cases where returns have been submitted u/s. 139 or in response to notice u/s. 142.

2. Additional tax payable

Section 245C(1) provides that an application should make a true and full disclosure of income. In first proviso thereto it was provided that additional tax payable on income so declared has to be in excess of 50 lakh in cases of search and requisition of books etc. and to 10 lakh in all other cases.

In case where the applicant is related to the person who is searched or requisition of the books is made and proceedings under sections 153A, 153B or 153C are initiated against such specified person and in such case additional income tax payable shall be 10 lakh. Specified person has been defined.

3. Payment of additional tax and interest thereon

Proviso to S. 245C(1) provides that tax along with interest has to be paid along with application itself and proof of payment has to be attached. Interest has to be computed as if such income has been disclosed in return of income and date of filing application for settlement is date of filing return for the purpose of calculation of interest.

4. Confidentiality

Sub-section (4) of 245C requires that an intimation in prescribed format shall be furnished to Assessing Officer on the same date as of filing of application with ITSC.

5. Admission of application

Section 245D(1) provides that a notice be issued by the ITSC to the applicant within 7 days of filing of application, to explain as to why his application be allowed to be proceeded with. Within 14 days of filing an application, ITSC has to decide whether to admit the application or to reject the same. If no order is passed within 14 days, application shall be deemed to be admitted.

In the second stage of admission of an application for settlement, S. 245D(2B) provides that if application is allowed to be proceeded with in first stage, a report has be called for from the CIT within 30 days of filing of application and CIT has to furnish report within 30 days of receipt of communication. If report u/s. 245D(2B) is received within time, then on the basis of report, the ITSC may declare the application as invalid in accordance with S. 245D(2C). Such an order has to be on the basis of the report and within 15 days of receipt of the report. Opportunity of being heard is to be allowed to applicant if application is to be declared as invalid. If report is not received within specified time, the ITSC is to proceed without the report.

6. Time limit for passing final order u/s. 245D(4) – Section 245D(4A)

Final order u/s. 245D(4) has to be passed within eighteen months from the end of month in which application is made. If order is not passed within prescribed time, provisions of s. 245HA would be attracted.

7. Interest u/s. 245D(6A) for delay in payment of amount due as per order u/s. 245D(4) r. w. s. 245D(6)

S. 245D(6A) provides that if amount due in pursuance of order u/s. 245D(4) r. w. s. 245D(6) is not paid within 35 days, interest is payable @ 1.25% p.m.

8. Rectification of order passed under Section 245D(4)

The Settlement Commission can rectify any mistake apparent from record within a period of six months from the of end of the month in which such application was made

9. 245H – Immunities

In respect of application filed on or after 1-6-2007, ITSC cannot grant immunity from prosecution except in respect of provisions of IT Act or WT Act. It has power to grant immunity or waiver of penalties chargeable under the Act. The Settlement Commission while granting immunity to any person shall record the reason in writing in the order passed by it..

10. 245K – Bar on making application

In respect of application allowed to be proceeded with u/s. 245D(1), assessee shall not be entitled to make an application ever again. Also, any person related to the person who has already approached the Settlement Commission once, also cannot approach Settlement Commission subsequently. The definition of related persons has also been expanded. Irrespective of whether the application is subsequently declared invalid, or abates, or final order passed, the disqualification shall apply.

11. Adjustment of Assets seized u/s. 132 or requisition u/s. 132A

The assets seized u/s. 132 or requisition u/s. 132A may also be adjusted against the amount of liability arising on an application made before the Settlement Commission u/s. 245C(1) of the Act.