The Income Tax Settlement Commission is a statutory body, instituted in the year 1976, per Section 245B of the Income Tax Act and Section 22B of the Wealth Tax Act. It has its Principal Bench in New Delhi and three other Benches in Mumbai, Kolkata and Chennai. The Settlement Commission manages all settlement applications filed by assesses in an assessment year.
The constitution of the Commission is such that the Principal Bench comprises one Chairman alongside 2 members. The three additional benches consist of 1 Vice Chairman and two members each.
The prime agenda of setting up this body is to resolve income tax and wealth-related disputes between assesses and the Income Tax (IT) Department. For a brief overview of the role of the Income Tax Settlement Commission and its power, read on.
As an assessee, you can approach the Commission during any proceeding stage regarding any assessments that have been pending before an Assessment Officer (AO). An AO plays a crucial role in reviewing your tax returns and checking discrepancies, if any.
There are certain prescribed conditions you need to abide by before approaching the Settlement Commission. One of the main conditions is that for all income tax applications, the additional tax payable to you must exceed ₹10 Lakhs.
Additionally, you can have the case settled by disclosing your total income or wealth not disclosed previously before the AO. If you fail to disclose how you have generated the income, you can pay additional interest and tax on the undisclosed income.
Make sure to attach original copies of payment receipts along with your application to the Income Tax Settlement Commission. You can initiate this process to resolve your case by presenting your application in the prescribed format.
Either you or your agent can send the application to the Secretary at the Principal Bench in Delhi. You may also send it via registered post to another additional bench in the jurisdiction where your case belongs.
The Income Tax Settlement Commission holds power to grant any assessee the power from prosecution for any offence related to the Income or Wealth Tax Acts. The Commission also has the power to withdraw any kind of penalty imposed as a part of the Act.
Here are the steps you need to follow:
Complete the application Form 34B
Pay ₹500 to fill in your details in the application form
Attach the proof of additional tax payment along with your application
Add ‘Statement of Facts’ as supporting evidence to claim that your disclosure is right
You need to fill in Form 34B to submit your application. Make sure to sign the application before sending it to the concerned Bench by registered post or visiting personally. Attach copies of additional tax and interest payment proof per Section 234B and 234C.
When submitting your application, you also need to provide self-attested copies of tax payment challans. Apart from this, you may also have to submit the payment proof of the prescribed fee. This ensures that you have already paid the required amount of ₹500.
Before filing an application to the Income Tax Settlement Commission, ensure that no assessment order has been passed by the concerned IT authority during a particular assessment year.
Another critical point is that you need to check if the statutory timeframe for passing the assessment order is not complete. In case the timeline has lapsed, you cannot file an application.
It is essential that you disclose the additional income tax amount to the Commission. Note that the interest chargeable on such amounts can be exempted from disclosure.
Here is how you can calculate your additional income tax.
In instances where you do not disclose returns, the total tax will be calculated based on the income disclosed in your application. This will be your additional tax over and above the income tax payable.
The Tax Settlement Commission can reject your application during the proceeding within a timeline of 14 days if you do not abide by the requisite conditions. If the Commission does not reject your application within this span of time, it simply means that the Settlement Commission has accepted it.
After admitting your application, the Commission can request the Commissioner’s report per Section 245D (2B). There is a timeframe of 30 days to receive this report. It is crucial for the Commission to hear the plea of an assessee before deeming an application invalid.
The Income Tax Settlement Commission has the power to send necessary information pertaining to income or wealth tax proceedings. Similarly, the body has the right to demand certain records from the Commissioner or concerned authorities after your application is deemed valid.
In instances where further enquiry is required, the Commission can direct specific authorities to conduct investigations. A total timeframe of 90 days is granted by the Commission to furnish such reports and other records.
The Commission has powers similar to the Income Tax Authority. This means once you forward an application to the Commission, the entity has rights of exclusive jurisdiction until it is rejected or deemed invalid.
Here is a quick snapshot of reasons when immunity becomes invalid or void:
If an assessee commits any offence per the Indian Penal Code
If an assessee tries to conceal any particular details during the settlement process
If an assessee submits false evidence
If an assessee fails to comply with prescribed conditions set by the Income Tax Settlement Commission
If the proceedings have been instituted prior to the date mentioned in the application
If the assessee fails to pay a specific sum within the given timeline
Consequently, the immunity of the Commission stands null and void. Hence, as an assessee, it is crucial to abide by the specific set of rules fixed by the Settlement Commission. Remember that this Commission is a premier ADR (Alternative Dispute Resolution) body in the country.
Now that you are familiar with the working and role of the Income Tax Settlement Commission, make sure to abide by the set rules. Be well-informed and file your returns accurately for an assessment year to avoid any discrepancies.
It can be challenged in a court of law after filing a writ petition when there is a violation of natural justice.
Yes, the Income Tax Settlement Commission can grant immunity if an assessee has declared his income accurately and honestly.
Yes, it is compulsory that the Income Tax Settlement Commission discloses the reasons for granting immunity in writing. The immunity may be granted by waiving penalties or avoiding prosecution.
The Commission was instituted to allow an unintending tax defaulter or a one-time tax evader to disclose their additional income, which was not disclosed to the Income Tax Authority.