itsc application _ 25-03-15

INCOME TAXSETTLEMENT COMMISSION

All about filing of APPLICATION

Presented By :-

Deepak Ahuja.

[email protected]+91-8377-838-738

Deepak Ahuja

only for CA-Final students

I N D E XS.

No. Particulars Slide No.

1 S e t t l e m e n t v s A p p e a l 03

2A b o u t I n c o m e - t a x S e t t l e m e n t C o m m i s s i o n

04 – 07

3 L a w & Le g i s l a t u re 08 – 12

4 E l i g i b i l i t y 13 – 18

5 Ad v a n t a g e s 19 – 21

6 Pre p a r a t i o n f o r a p p l i c a t i o n 22 – 25

7 Pro c e d u re 26 – 32

8 A b a t e m e n t o f p ro c e e d i n g s 32 – 33

9 J u d g e m e n t o f s e t t l e m e n t 34 – 36

Deepak Ahuja

SETTLEMENT vs APPEAL

It is a resolution of dispute

between two parties about a legal

case.

The application for settlement can

be made only during the pendency

of the assessment proceedings.

Only assessee can approach the

settlement authority.

The proceedings are not open to

public.

A earnest request to higher

authority for revision in decision.

An appeal can be filed only after

conclusion of assessment

proceedings, against an order of

assessment.

Either of assessee or A.O. can

approach the appellate authority.

The proceedings may or may not

be open to public.3

Deepak Ahuja

It is a quasi judicial body (as per section 245L) and

is a premier Alternative Dispute Resolution (ADR) body in India.

Set up in 1976 as a result of recommendations made by

Direct Taxes Enquiry Committee (Wanchoo Committee).

Objective: to settle liabilities in complicated cases, &

avoiding prolonged litigation,

so as to allow a one-time tax evader or an unintending defaulter to make

clean breast of his affairs.

Settlement Commission

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The proceedings before the Settlement Commission under Chapter XIXA are

special proceedings aimed at simplifying the procedure for bringing within

the tax-net otherwise undisclosed income by an assessee with the temptation

to avoid prosecution and penalty. These special provisions, therefore, have

been made in the said Chapter in order to bring about an early end to such

settlement proceedings. Different stages envisaged after an assessee makes an

application for settlement of his case come with time limits. The proceedings

before the Settlement Commission have to be completed within the time frame

and various stages envisaged under section 245D also come with various time

frames. [Para 20]5

Settlement Commission

Unipon (India) Ltd. v. ITSC, 2014Gujrat HC

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Members• As many as

CG deems fit

Vice - Chairman• As many as

CG deems fit

Chairman• One

Settlement Commission - Composition

This commission comprises persons of integrity and outstanding ability, having special knowledge in field of direct taxation.

Section 245B

Currently:

Sh. G.C. Jain

(Addl. Charge)

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A bench shall comprise of Chairman / Vice-Chairman Two Members

At present, there are seven functioning benches Principal Bench – Delhi (presided by

Chairman)

Additional Benches – Delhi-I, Delhi-II, Mumbai-I,

Mumbai-II, Kolkata & Chennai

Settlement Commission - Benches Section

245BA

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Chapter XIX-A : Settlement of Cases

Income Tax Act, 1961View Sections

Income Tax Settlement Commission

(Procedure) Rules, 1997View Rules

Law & Legislature

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Section Description

245A Definitions

245B Income-tax Settlement Commission

245BA Jurisdiction and powers of Settlement Commission

245BB Vice-Chairman to act as Chairman or to discharge his functions in certain circumstances

245BC Power of Chairman to transfer cases from one Bench to another

245BD Decision to be majority

245C Application for settlement of cases

245D Procedure on receipt of an application under section 245C

245DD Power of Settlement Commission to order provisional attachment to protect revenue

245E Power of Settlement Commission to reopen completed proceedings

245F Powers and procedure of Settlement Commission

245G Inspection, etc., of reports9

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Section Description

245H Power of Settlement Commission to grant immunity from prosecution and penalty

245HA Abatement of proceeding before Settlement Commission

245HAA Credit for tax paid in case of abatement of proceedings

245I Order of settlement to be conclusive

245J Recovery of sums due under order of settlement

245K Bar on subsequent application for settlement

245L Proceedings before Settlement Commission to be judicial proceedings

245M Certain persons who have filed appeals to the Appellate Tribunal entitled to make applications to the Commission - Omitted

Rule Description

44C Form of application for settlement of case and intimation to the A.O.

44D Fee for furnishing copy of report10

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Income-tax Settlement Commission (Procedure) Rules, 1997

Rule Description

1 Short title and commencement

2 Definitions

3 Language of the Commission

4 Signing of notices, etc

5 Procedure for filing settlement application

6 Report of the Commissioner under sub-section (2B) of Section 245D

7 Preparation of paper books, etc

8 Filing of affidavit

9 Commissioner's further report

9A Applicant's Comments on Commissioner's report under rule 9

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Income-tax Settlement Commission (Procedure) Rules, 1997

Rule Description

10 Date and place of hearing of application to be notified

11 Sitting of Bench

12 Powers of Bench

13 Constitution of Special Bench

14 Filing of authorisation

15 Verification of additional facts

16 Proceedings not open to the public

17 Publication of orders of the Special Bench

18 Adjournment of hearings

19 Special provisions in respect of settlement applications made before 1st day of October, 1984

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E l ig ibi l i ty

to file an

Application for settlement

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An applicant can approachIncome-tax Settlement Commission, if

EL IG IB I L ITY

sec 245C (1)

An applicant can approach the Income Tax Settlement

Commission in respect of a particular assessment year only if

there is assessment proceedings is pending against him

before an Assessing Officer on the date of filing of application,

i.e no assessment order is passed by the A.O. and the statutory

time-limit for passing of assessment order for that year has not

lapsed.CIT v. Income-tax Settlement Commission, 2012

Delhi HC

C o n d i t i o n - 1

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EL IG IB I L ITY

For the purpose of section 245C (1),

Section Assessment Proceedings

Deemed to be initiated from

147Income Escaping

Assessment

Assessment or

Reassessment or Re-

computation

Date of issue of

notice u/s 148

254Case before Appellate

TribunalFresh Assessment

Date of Order,

setting aside or

cancelling previous

assessment263 /

264

Revision of assessments by

[Principal] Commissioner

153A

Assessment in case of

search or requisition /

related persons

Assessment or

Reassessment for years

mentioned u/s 153A(1)(b)

Date of issue of

notice u/s 153(1)(a)

Any other than aboveAssessment or

Reassessment

First day of the

assessment year

Explanation to Sec 245A (b)

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EL IG IB I L ITY

Proviso to sec 245C (1)

The additional amount of income tax on the income that the

applicant intends to disclose before the Commission for all the

assessments years included in the application exceeds Rupees

10 lakhs.

Whereas, cases involving Search and seizure or requisition

assessment proceedings, this amount shall exceed Rupees 50

lakhs.

C o n d i t i o n - 2

Aggregation should be income and not offering of loss.CIT vs Express Newspapers Ltd, 1994

Supreme Court

Such tax & interest thereon shall be paidbefore filing of application.

Proof shall be attached.

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EL IG IB I L ITY

For the purpose of proviso to section 245C (1),

Additional Tax-payable shall be calculated as follows :-

sec 245A (1A) to (1D)

In case the applicant has not furnished return prior to date of

application,

tax shall be calculated on the income disclosed in the application as if

it is the total income and such tax shall be the additional amount of

income tax payable.

In case applicant has furnished a return prior to date of application,

additional income shall be calculated as under :

Total Income returned A

Add: Income disclosed in settlement application B .

TOTAL C

Additional amount of Income-tax = ( Tax on C - Tax on A )

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EL IG IB I L ITY

C o n d i t i o n - 3sec 245K (2)

Where a person has already made application u/s 245C (1), and

His application has not been rejected u/s 245D (1),

He shall be barred from filing subsequent application for

settlement.

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Advantage

of filing an


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ADVANTAGE

Settlement Commission holds the power, to grant immunity under : -

Income-tax Act, 1961 , and

Wealth-tax Act, 1957,

If applicant fulfils all of the following conditions:-

1. co-operates with the proceedings of the commission,

2. makes true and full disclosure of his income,

3. the manner in which such income has been derived

Subject to conditions, the commission may think fit

from :-1. Prosecution for any offence

(which have not been instituted before the date of application)

2. Imposition of penalty

sec 245H (1)

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ADVANTAGE

Such immunity shall stand withdrawn if : -

The person fails to pay

any sum specified in the order of settlement u/s

245D (4)

within the time specified in such order

sec 245H (1A)

sec 245H (2)

The commission is satisfied that

the person during the course of proceedings had :-

1. concealed matters, material to settlement, or

2. given any false statement21

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PreparatioN

for an


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A person desirous of settling his case is required to file an application in form prescribed in six copies.

sec 245C (1)

sec 245C (2)

Application shall be accompanied with the fees prescribed.

The fees prescribed is Rupees 500/- : Rule 44c (3)

The form prescribed is Form 34B. : Rule 44c (1)

sec 245C (3)

Once an application is made, it can not be withdrawn by applicant.

sec 245C (4)

On the date of making application, A.O. shall be intimated in form prescribed. The form prescribed is Form 34BA. : Rule 44c (4)

Each page of application & annexures thereto shall be signed by the applicant. : Rule 44c (2)

PREPARAT ION

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PAPER BOOK

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If the applicant submits any documents or statements or other papers,

to rely on,

He shall submit in the form of Paper – Book..

Such documents & papers shall be

Printed : or type-written in double space,

Attested : by the applicant as true copy..

Paper Book containing such papers shall be properly

Indexed : giving brief description & the authority before whom filed,

Numbered : in continuation to the previous paper book, if any,

Binded : the preferred binding is spiral..

Such paper book shall be submitted in seven copies.

Rule 7

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Where a fact, which is not borne out by or is contrary to the

record relating to the case, is alleged in the settlement

application (including the annexure and the statement or

other documents accompanying such annexure), it shall be

stated clearly and concisely and supported by a duly sworn

affidavit.

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Filing of Affidavit

Rule 8

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Procedure

to file an


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PROCEDURE

Rule 5

Application can be made Date of application

In person by

• Applicant, or

• His Authorised representative

Same date

By PostDate on which,received in the office of commission

Application shall be addressed to :-

The Secretary,Income-tax Settlement Commission,Floor -IV, Lok Nayak Bhawan,MCD Complex, Khan Market,New Delhi – 110 002

or The Bench(Within whose jurisdiction his case falls)

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APPL ICANT

ASSESS ING OFF ICER

Files Applicationin form 34B

On the very same day

Intimates A.O.in form 34BA

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Image source: www.pixgood.com

Image source: www.clipartguide.com

Image source: www.pixgood.com

Applicationmade to ITSC

Show Cause Notice

Rejection / Acceptance

of Application

within 7 days

within 14 days

ITSC calls for Commissioner

’s Report

Commissioner’s Report

Invalidation/ Validation of

application after comments of

Applicant

within 30 days

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within 15 days

sec 245D (1) sec 245D (1) sec 245D (1)

sec 245D (2B) sec 245D (2B) sec 245D (2C)

within 30 days

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Rule 9

Once the application has been held as valid

ITSC Commissioner

for further inquiryhands over the confidential part of application

Commissioner then, within 45 days, presents the records and his opinions in the form of a report, popularly known as “Rule 9

Report”

Fu r the r Repor t

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Before the commencement of hearing,the applicant shall file, an authorisation.

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Authorised Representation

Rule 14

Applicant can authorise any person to appear before commission.

(in form of Power of Attorney)

If relative state the nature of relationship

If regular employee

state the capacity in which employed

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Abatement

of proceedings of an


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What will happen of tax already paid,if proceedings are abated?

sec 245HAA

Where proceedings for an application made u/s 245C(1) are abated as follows :-

Section Reason of Abatement Date of Abatement

245D (1) Rejection of application made u/s 245C (1) Same day

245D (2C)

Rejection of application on report of Commissioner u/s 245D (2B) Last day of month

245D (4A)

Order of settlement is not passed within prescribed period

Day of expiry of period

The Assessing Officer shall allow the credit of Tax & Interest paid :-

1) On or Before the date of application.

2) During the pendency of case before commission.

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Judgement

for an


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JUDGEMENT

sec 245D (4)

sec 245D (4A)

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The order of settlement commission is passed under this (sub)

section, in writing. The settlement order provides for

the terms of settlement (including amount of additional tax and

interest thereon)

the manner of payment

levy of penalty, or waiver from penalty under the Income Tax

Act or the Wealth Tax Act

The settlement commission shall pass an order u/s 245D (4)

within :-

18 Months from end of the month of application

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sec 245I

The order of settlement commission is deemed to be conclusive.

The matters stated therein can not be reopened in any

proceedings

under IT Act or any another act in force.

JUDGEMENT

Challenging the order of Settlement Commission

It can be challenged in court of law by filling a writ petition only when

Principles of natural justice violated, or

Mandatory procedural requirements of law were not complied with.

Deepak Ahuja

THANK YOU

So think before filing an applicationbecause your acceptance of committing a felony may have

repercussions.

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Also, do pay regard to each and every provision so as to settle your dues once and for all

Deepak Ahuja

Note: The proposed amendments by Finance Bill, 2015 have not been incorporated.Please contact the author for amended presentation after the Finance Bill, 2015 gets Honorable President’s assent.

itsc application _ 25-03-15

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