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Income Tax Settlement Commission


Income Tax Settlement Commission

The Income Tax Settlement Commission is a premier Alternative Dispute Resolution (ADR) body in India. The Income Tax Settlement Commission is mandated with resolving income tax and wealth tax disputes between the Income Tax department and income tax assessees. The Income Tax Settlement Commission is required to pass the settlement order within 18 months of the date on which the taxpayer has filed the application. It has wide power of granting immunity from penalty and prosecution for the income tax assessee. The orders passed by the Commission are final and conclusive. The purpose of the present article is to explain the powers which are vested in the Income Tax Settlement Commission.

The Income Tax Settlement Commission was set up to allow a one-time tax evader or an unintending defaulter to make clean breast of his affairs. The Income Tax Settlement Commission allows taxpayers to disclose additional Income before it over and above what has been already disclosed before the Income Tax Department. The applicant has to pay the full amount of tax and interest on the additional income disclosed before the Commission, before filing the application. The Commission then decides upon the admissibility of the application and in case of admitted applications, carries out the process of settlement in a time-bound manner by giving an opportunity to both parties for being heard.

Power to Call for Record and Demand Further Report

The Income Tax Settlement Commission is authorized to send necessary information found in the annexure to the Principal Commissioner/ Commissioner along with the relevant statements and documents, and then call for records from those authorities, provided that the application is valid. Post examination of such records, if the Income Tax Settlement Commission feels the need for further inquiry or investigation, it may direct the authorities to conduct further investigation and inquiries and come up with a report containing details relevant to the case. The time limit for furnishing the report is said to be 90 days from the date of communication of the order. If the Principal Commissioner/Commissioner fails to furnish the return by the stipulated time, the Settlement Commission will draw its own conclusion based on available records.

Power to Order Provisional Attachment

During the pendency of proceedings, keeping in mind the interests of the revenue, the Income Tax Settlement Commission may, by order, provincially attach any property belonging to the applicant in the manner prescribed in the Second Schedule. The provisional attachment will be ineffective after a period of six months from the date of order. The Income Tax Settlement Commission may also extend the duration by recording the reasons for the same in writing.

Similar Powers to Income Tax Authorities

The Income Tax Settlement Commission has been vested with similar powers as that of the Income Tax Authority. If a settlement application has been made, the Settlement Commission is privileged with the rights of exclusive jurisdiction starting from the date of receipt of the application, until the time of passing of the order by the Commission, or until the time the application is rejected or declared invalid. The Income Tax Settlement Commission holds the power to regulate its own procedure and that of the benches. At present, there are Seven benches of the Commission located at New Delhi, Mumbai, Kolkata and Chennai.

Power to Grant Immunity

The Income Tax Settlement Commission may grant immunity to the person who has made the application, on the satisfaction of the following conditions:

  • Extended his/her co-operation with the Settlement Commission in the proceedings.
  • Made a complete and honest disclosure of his income, and the manner in which such income was derived.

The reasons for granting immunity must be disclosed in writing by the Settlement Commission. The immunity may be granted in the following manner:

  • From Prosecution for any offence-  Under Income Tax Act or the Wealth Act.
  • Waiving of penalties, either wholly or in part from the imposition of any penalty under the Income Tax Act, with respect to the case covered by the settlement.

Where Immunity is Void

The Income Tax Settlement Commission does not grant immunity in the following scenarios:

  • Where the proceedings for the prosecution of any offence have been instituted before the date of receipt of application.
  • If the application was made on or after 1/6/2007, immunity on prosecution shall not be granted under any law.
  • Any offence under the Indian Penal Code or Central Act.
  • Failure to pay any sum specified in the order of settlement within the specified/allowed time-limit.
  • If the person, during the course of settlement has concealed any vital particulars or had given false evidence.
  • Failure to comply with any other requisite conditions.