Income Tax Settlement Commission

The Income Tax Settlement Commission is India’s leading Alternative Dispute Resolution (ADR) body. The Income Tax Settlement Commission is responsible for resolving income tax and wealth tax disputes between the Income Tax Department and income tax assessees. The Income Tax Settlement Commission must issue the settlement order within 18 months of the taxpayer applying. It has broad authority to grant immunity from penalty and prosecution to income tax assessees. The Commission’s orders are final and conclusive. The goal of this article is to explain the powers granted to the Income Tax Settlement Commission.

  • The Income Tax Settlement Commission was established to allow a one-time tax evader or unintentional defaulter to come clean about his affairs. 
  • The Income Tax Settlement Commission allows taxpayers to disclose additional income before it is over and above what has already been disclosed to the Income Tax Department. Before applying, the applicant must pay the full amount of tax and interest on the additional income disclosed to the Commission. 
  • The Commission then decides on the admissibility of the application and, in the case of admitted applications, conducts the settlement process promptly by allowing both parties to be heard.

Possibility Of Requesting Records And Demanding Additional Reports

  • If the application is valid, the Income Tax Settlement Commission is authorized to send the necessary information found in the annexure to the Principal Commissioner/Commissioner, along with the relevant statements and documents, and then request records from those authorities. 
  • Following an examination of such records, if the Income Tax Settlement Commission determines that additional inquiry or investigation is required, it may direct the authorities to conduct additional investigation and inquiries and produce a report containing details relevant to the case.
  •  The deadline for submitting the report is said to be 90 days from the date of the order’s communication. If the Principal Commissioner/Commissioner fails to submit the return within the time frame specified, the Settlement Commission will reach its conclusion.

Possession Of The Authority To Order Provisional Attachment

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

Income Tax Authorities Have Similar Authority

The Income Tax Settlement Commission has been given similar powers as the Income Tax Authority. If a settlement application is filed, the Settlement Commission is granted exclusive jurisdiction beginning with the date of receipt of the application and continuing until the Commission issues an order, or until the application is rejected or declared invalid. The Income Tax Settlement Commission has the authority to regulate its own and the benches’ procedures. The Commission currently has seven benches in New Delhi, Mumbai, Kolkata, and Chennai.

Income Tax Settlement Commission

Immunity Granting Authority

The Income Tax Settlement Commission may grant immunity to the person who applied if the following conditions are met:

  • In the proceedings, he/she extended his/her cooperation with the Settlement Commission.
  • He provided a complete and honest disclosure of his income and how it was obtained.

The Settlement Commission must provide written reasons for granting immunity. Immunity can be granted in the following ways:

  • Prosecution for any offence under the Income Tax Act or the Wealth Act
  • Waiver of penalties, either entirely or partially, from the imposition of any penalty under the Income Tax Act about the case covered by the settlement.

Where Immunity Is Null And Void

  • The Income Tax Settlement Commission does not grant immunity in the following situations: Where proceedings for the prosecution of any offence have been instituted before the date of application receipt.
  • Immunity from prosecution is not granted under any law if the application is made on or after 1/6/2007.
  • Any offence is punishable by the Indian Penal Code or the Central Act.
  • Failure to pay any sum specified in the order of settlement within the time limit specified/allowed.
  • If the person withheld any vital information or provided false evidence during the settlement.
  • Failure to meet any other necessary conditions.