Section 245D - Procedure on receipt of an application under section 245C - Income-tax Act, 1961

Procedure on receipt of an application under section 245C. 245D. 1 [ (1) On receipt of an application under section 245C, the Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the applicant, the Settlement Commission shall, within a period of fourteen days from the date of the application, by an order in writing, reject the application or allow the application to be proceeded with: Provided that where no order has been passed within the aforesaid period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded with. ] (1A) 2 [Omitted by the Finance (No. 2) Act, 1991, w.e.f. 27-9-1991.] (2) A copy of every order under sub-section (1) shall be sent to the applicant and to the 15 [Principal Commissioner or] Commissioner. 3 [ (2A) Where an application was made under section 245C before the 1st day of June, 2007, but an order under the provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, has not been made before the 1st day of June, 2007, such application shall be deemed to have been allowed to be proceeded with if the additional tax on the income disclosed in such application and the interest thereon is paid on or before the 31st day of July, 2007. Explanation .-In respect of the applications referred to in this sub-section, the 31st day of July, 2007 shall be deemed to be the date of the order of rejection or allowing the application to be proceeded with under sub-section (1). (2B) The Settlement Commission shall,- (i) in respect of an application which is allowed to be proceeded with under sub-section (1), within thirty days from the date on which the application was made; or (ii) in respect of an application referred to in sub-section (2A) which is deemed to have been allowed to be proceeded with under that sub-section, on or before the 7th day of August, 2007, call for a report from the 15 [Principal Commissioner or] Commissioner, and the 15 [Principal Commissioner or] Commissioner shall furnish the report within a period of thirty days of the receipt of communication from the Settlement Commission. (2C) Where a report of the 15 [Principal Commissioner or] Commissioner called for under sub-section (2B) has been furnished within the period specified therein, the Settlement Commission may, on the basis of the report and within a period of fifteen days of the receipt of the report, by an order in writing, declare the application in question as invalid, and shall send the copy of such order to the applicant and the 15 [Principal Commissioner or] Commissioner: Provided that an application shall not be declared invalid unless an opportunity has been given to the applicant of being heard: Provided further that where the 15 [Principal Commissioner or] Commissioner has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the 15 [Principal Commissioner or] Commissioner. 17 [Provided also that where in respect of an application, an order, which was required to be passed under this sub-section on or before the 31st day of January, 2021, has not been passed on or before the 31st day of January, 2021, such application shall deemed to be valid. ] (2D) Where an application was made under sub-section (1) of section 245C before the 1st day of June, 2007 and an order under the provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st day of June, 2007, but an order under the provisions of sub-section (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st day of June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007. ] 4 [ (3) The Settlement Commission, in respect of- (i) an application which has not been declared invalid under sub-section (2C); or (ii) an application referred to in sub-section (2D) which has been allowed to be further proceeded with under that sub-section, may call for the records from the 15 [Principal Commissioner or] Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the 15 [Principal Commissioner or] Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case, and the 15 [Principal Commissioner or] Commissioner shall furnish the report within a period of ninety days of the receipt of communication from the Settlement Commission: Provided that where the 15 [Principal Commissioner or] Commissioner does not furnish the report within the aforesaid period, the Settlement Commission may proceed to pass an order under sub-section (4) without such report. (4) After examination of the records and the report of the 15 [Principal Commissioner or] Commissioner, if any, received under- (i) sub-section (2B) or sub-section (3), or (ii) the provisions of sub-section (1) as they stood immediately before their amendment by the Finance Act, 2007, and after giving an opportunity to the applicant and to the 15 [Principal Commissioner or] Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the 15 [Principal Commissioner or] Commissioner. (4A) The Settlement Commission shall pass an order under sub-section (4),- (i) in respect of an application referred to in sub-section (2A) or sub-section (2D), on or before the 31st day of March, 2008; (ii) in respect of an application made on or after the 1st day of June, 2007, 12 [but before the 1st day of June, 2010] within twelve months from the end of the month in which the application was made. ] 13 [(iii) in respect of an application made on or after the 1st day of June, 2010, within eighteen months from the end of the month in which the application was made.] 5 [(5) Subject to the provisions of section 245BA, the materials brought on record before the Settlement Commission shall be considered by the Members of the concerned Bench before passing any order under sub-section (4) and, in relation to the passing of such order, the provisions of section 245BD shall apply.] (6) Every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of 6 [tax, penalty or interest], the manner in which any sum due under the settlement shall be paid and all other matters to make the set tlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Settlement Commission that it has been obtained by fraud or misrepresenta tion of facts. 7 [(6A) Where any tax payable in pursuance of an order under sub-section (4) is not paid by the assessee within thirty-five days of the receipt of a copy of the order by him, then, whether or not the Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by instalments, the assessee shall be liable to pay simple interest at 8 [ one and one-fourth per cent for every month or part of a month ] on the amount remaining unpaid from the date of expiry of the period of thirty-five days aforesaid.] 16 [(6B) The Settlement Commission may, with a view to rectifying any mistake apparent from the record, 18 [ amend any order passed ] under sub-section (4)- (a) at any time within a period of six months from the end of the month in which the order was passed; or (b) at any time within the period of six months from the end of the month in which an application for rectification has been made by the Principal Commissioner or the Commissioner or the applicant, as the case may be: Provided that no application for rectification shall be made by the Principal Commissioner or the Commissioner or the applicant after the expiry of six months from the end of the month in which an order under sub-section (4) is passed by the Settlement Commission: Provided further that an amendment which has the effect of modifying the liability of the applicant shall not be made under this sub-section unless the Settlement Commission has given notice to the applicant and the Principal Commissioner or Commissioner of its intention to do so and has allowed the applicant and the Principal Commissioner or Commissioner an opportunity of being heard.] (7) Where a settlement becomes void as provided under sub-section (6), the proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage at which the application was allowed to be proceeded with by the Settlement Commission and the income-tax authority concerned, may, notwithstanding anything contained in any other provision of this Act, complete such proceedings at any time before the expiry of two years from the end of the financial year in which the settlement became void. 9 [(8) For the removal of doubts, it is hereby declared that nothing contained in section 153 shall apply to any order passed under sub-section (4) or to any order of assessment, reassessment or recomputation required to be made by the 10 [Assessing] Officer in pursuance of any directions contained in such order passed by the Settlement Commission 11 [and nothing contained in the proviso to sub-section (1) of section 186 shall apply to the cancellation of the registration of a firm required to be made in pursuance of any such directions as aforesaid.]] 19 [ (9) On and from the 1st day of February, 2021, the provisions of sub-sections (1), (2), (2B), (2C), (3), (4), (4A), (5), (6) and (6B) shall apply to pending applications allotted to Interim Board with the following modifications, namely: (i) for the words Settlement Commission , wherever they occur, the words Interim Board shall be substituted; (ii) for the word Bench , the words Interim Board shall be substituted; (iii) for the purposes of this section, the date referred to in sub-section (2) of section 245M shall be deemed to be date on which the application was made under section 245C and received by the Interim Board; 20 [ (iv) where the time-limit for amending any order or filing of rectification application under sub-section (6B) expires on or after the 1st day of February, 2021, but before the 1st day of February, 2022, such time-limit shall be extended to the 30th day of September, 2023. ] (10) On and from the 1st day of February, 2021, the provisions of sub-sections (6A) and (7) shall have effect as if for the words Settlement Commission , the words Settlement Commission or Interim Board of Settlement had been substituted. (11) The Central Government may by notification in the Official Gazette, make a scheme, for the purposes of settlement in respect of pending applications by the Interim Board, so as to impart greater efficiency, transparency and accountability by- (a) eliminating the interface between the Interim Board and the assessee in the course of proceedings to the extent technologically feasible; (b) optimising utilisation of the resources through economies of scale and functional specialisation; (c) introducing a mechanism with dynamic jurisdiction. (12) The Central Government may, for the purposes of giving effect to the scheme made under sub-section (11), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the said notification: Provided that no such direction shall be issued after the 31st day of March, 2023. (13) Every notification issued under sub-section (11) and sub-section (12) shall, as soon as may be after the notification is issued, be laid before each House of Parliament. ] ------------------------ Notes :- 1. Substituted by the Finance Act, 2007, w.e.f. 1-6-2007. Prior to its substitution, sub-section (1), as amended by the Finance Act, 1995, w.e.f. 1-7-1995, Finance Act, 1979, w.e.f. 1-4-1979, Finance (No. 2) Act, 1991, w.e.f. 27-9-1991 and Finance Act, 2002, w.e.f. 1-6-2002, read as under : (1) On receipt of an application under section 245C, the Settlement Commission shall call for a report from the Commissioner and on the basis of the materials contained in such report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein, the Settlement Commission, shall, where it is possible, by order, reject the application or allow the application to be proceeded with within a period of one year from the end of the month in which such application was made under section 245C : Provided that an application shall not be rejected under this sub-section unless an opportunity has been given to the applicant of being heard : Provided further that the Commissioner shall furnish the report within a period of forty-five days of the receipt of communication from the Settlement Commission in case of all applications made under section 245C on or after the 1st day of July, 1995 and if the Commissioner fails to furnish the report within the said period, the Settlement Commission may make the order without such report. 2. Prior to omission, sub-section (1A) was inserted by the Finance Act, 1979, w.e.f. 1-4-1979 and amended by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1984. 3. Sub-sections (2A), (2B), (2C) and (2D) substituted by the Finance Act, 2007, w.e.f. 1-6-2007. Prior to their substitution, sub-sections (2A), (2B), (2C) and (2D), as amended by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984, Finance Act, 1985, w.r.e.f. 1-10-1984 and Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, read as under : (2A) Subject to the provisions of sub-section (2B), the assessee shall, within thirty-five days of the receipt of a copy of the order under sub-section (1) allowing the application to be proceeded with, pay the additional amount of income-tax payable on the income disclosed in the application and shall furnish proof of such payment to the Settlement Commission. (2B) If the Settlement Commission is satisfied, on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income-tax referred to in sub-section (2A) within the time specified in that sub-section, it may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments if the assessee furnishes adequate security for the payment thereof. (2C) Where the additional amount of income-tax is not paid within the time specified under sub-section (2A), then, whether or not the Settlement Commission has extended the time for payment of the amount which remains unpaid or has allowed payment thereof by instalments under sub-section (2B), the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty-five days referred to in sub-section (2A). (2D) Where the additional amount of income-tax referred to in sub-section (2A) is not paid by the assessee within the time specified under that sub-section or extended under sub-section (2B), as the case may be, the Settlement Commission may direct that the amount of income-tax remaining unpaid, together with any interest payable thereon under sub-section (2C), be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered, in accordance with the provisions of Chapter XVII, by the Assessing Officer having jurisdiction over the assessee. 4. Sub-sections (3), (4) and (4A) substituted by the Finance Act, 2007, w.e.f. 1-6-2007. Prior to their substitution, sub-sections (3), (4) and (4A) as inserted by the Finance Act, 2002, w.e.f. 1-6-2002, read as under : (3) Where an application is allowed to be proceeded with under sub-section (1), the Settlement Commission may call for the relevant records from the Commissioner and after examination of such records, if the Settlement Commission is of the opinion that any further enquiry or investigation in the matter is necessary, it may direct the Commissioner to make or cause to be made such further enquiry or investigation and furnish a report on the matters covered by the application and any other matter relating to the case. (4) After examination of the records and the report of the Commissioner, received under sub-section (1), and the report, if any, of the Commissioner received under sub-section (3), and after giving an opportunity to the applicant and to the Commissioner to be heard, either in person or through a representative duly authorised in this behalf, and after examining such further evidence as may be placed before it or obtained by it, the Settlement Commission may, in accordance with the provisions of this Act, pass such order as it thinks fit on the matters covered by the application and any other matter relating to the case not covered by the application, but referred to in the report of the Commissioner under sub-section (1) or sub-section (3). (4A) In every application allowed to be proceeded with under sub-section (1), the Settlement Commission shall, where it is possible, pass an order under sub-section (4) within a period of four years from the end of the financial year in which such application was allowed to be proceeded with. 5. Inserted by the Finance Act, 1987, w.e.f. 1-6-1987. Original sub-section (5), as amended by the Finance Act, 1982, w.e.f. 1-4-1982, was omitted by the Taxation Laws (Amendment Miscellaneous Provisions) Act, 1986, w.e.f. 10-9-1986. 6. Substituted for tax or penalty by the Finance Act, 1987, w.e.f. 1-6-1987. Earlier tax or penalty was substituted for tax, penalty or interest by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984. 7. Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984. 8. Words one and one-fourth per cent for every month or part of a month shall be substituted for fifteen per cent per annum by the Finance Act, 2007, w.e.f. 1-4-2008. 9. Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984. 10. Substituted for Income-tax by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 . 11. Inserted by the Finance Act, 1987, w.e.f. 1-6-1987. 12. In sub-section (4A), in clause (ii), after the words, figures and letters the 1st day of June, 2007 , the words, figures and letters but before the 1st day of June, 2010 has been inserted vide Finance Act, 2010 w.e.f. 01.04.2010. 13. After clause (ii), the clause (iii) has been inserted vide Finance Act, 2010 w.e.f. the 01.06.2010. 14. Inserted vide Finance Act, 2011 w.e.f. 1.6.2011 15 . Inserted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of June, 2013. 16. Substituted vide THE FINANCE ACT, 2015 w.e.f. 1st day of June, 2015, before it was read as, 14 [(6B) The Settlement Commission may, at any time within a period of six months from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (4): Provided that an amendment which has the effect of modifying the liability of the applicant shall not be made under this sub-section unless the Settlement Commission has given notice to the applicant and the 15 [Principal Commissioner or] Commissioner of its intention to do so and has allowed the applicant and the 15 [Principal Commissioner or] Commissioner an opportunity of being heard.] 17. Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-02-2021 Provided also that where in respect of an application, an order, which was required to be passed under this sub-section on or before the 31st day of January, 2021, has not been passed on or before the 31st day of January, 2021, such application shall deemed to be valid. 18. Substituted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-02-2021 before it was read as amend any order passed by it 19. Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-02-2021 20. Substituted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-02-2021 before it was read as, (iv) where the time-limit for amending any order or filing of rectification application as per sub-section (6B) expires on or after the 1st day of February, 2021, in computing the period of limitation, the period commencing from the 1st day of February, 2021 and ending on the end of the month in which the Interim Board is constituted shall be excluded and where immediately after exclusion of such period, the remaining period available to the Interim Board for amending the order or to the Principal Commissioner or Commissioner or the applicant for filing of application is less than sixty days, such remaining period shall be extended to sixty days and the period of limitation shall be deemed to have been extended accordingly.