Settlement
Chapter XIX-A of the Income Tax Act, 1961 (‘Act’ for short) provides the settlement procedure. Section 245B (1) provides for the constitution of ‘Income Tax Settlement Commission’ for settlement of the cases. The Central Government constituted the ‘Income Tax Settlement Commission’. But the said settlement commission ceased to operate on or after 01.02.2021 as amended by the Finance Act, 2021. From 01.02.2021 no application could be filed for settlement before the Settlement Commission.
Interim Board
Section 245AA was newly inserted by Finance Act, 2021 which came into effect from 01.02.2021. According to Section 245AA the Central Government shall constitute one or more ‘interim boards’ in the place of Settlement Commissions, for settlement as may be necessary for settlement of pending applications with the Department for settlement as on 01.02.2021.
Settlement Scheme
Section 245D (11) of the Act provides that 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-
- eliminating the interface between the Interim Board and the assessee in the course of proceedings to the extent technologically feasible;
- optimizing utilization of the resources through economies of scale and functional specialization;
- introducing a mechanism with dynamic jurisdiction.
Section 245D(12) of the Act provides that the Central Government may 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. No such direction shall be issued after the 31st day of March, 2023.
e-Settlement Scheme
By virtue of the powers given under Section 245D (11) and (12), the Central Government made a scheme called as ‘e-Settlement Scheme’ vide Notification No. 129/2021, dated 01.11.2021. This scheme came into effect from 01.11.2021. Under this scheme the settlement is to be done electronic mode that means any communication by way of an e-mail, video-telephony or video conferencing or any other electronic media.
Scope of the scheme
This Scheme shall be applicable to pending applications in respect of which the applicant has not exercised the option under section 245M (1) of the Act and which has been allotted or transferred by Central Board of Direct Taxes to an Interim Board. Section 245M(1) of the Act provides that the assessee who had filed such application for settlement may, at his option, withdraw such application within a period of three months from the date of commencement of the Finance Act, 2021 and intimate the Assessing Officer, in the prescribed manner, about such withdrawal. If the assessee did not for withdrawal it shall be deemed to have been received by the Interim Board on the date on which such application is allotted or transferred to the Interim Board.
The Interim Board shall conduct e-settlement of pending applications allocated or transferred to it. The Interim Board shall have such income-tax authority, ministerial staff, executive or consultant to assist the members of the Interim Board, as considered necessary by Central Board of Direct Taxes.
Allocation of pending applications
The Principal Director General of Income-tax (Systems) or the Director General of Income tax (Systems), shall, with the approval of Central Board of Direct Taxes, devise a process to randomly allocate or transfer the pending applications to the Interim Boards.
Procedure for settlement
After allotment of the pending application to the Interim Board, the following procedure is adopted by the Interim Board in settlement-
Proceedings not open to public
- The proceedings before the Interim Board shall not be open to the public and no person (other than the applicant, his employee, the concerned officers of the Interim Board or the Income-tax authority or the authorized representatives) shall, without the permission of the Interim Board, remain present during such proceedings, even on video conferencing or video telephony.
Language
- All pleadings before the Interim Board may, at the option of the applicant, be in Hindi or in English.
- All orders and other proceedings of the Interim Board may, at the option of the Interim Board, be in Hindi or in English
Intimation
- The Interim Board shall intimate the applicant about the allocation or transfer of his case to it.
Calling records
- The Interim Board may call for the records from the Principal Commissioner or the Commissioner and may forward the necessary information, document, evidence, report and additional facts to the Principal Commissioner or the Commissioner and direct it to make or cause to be made further enquiry or investigation and furnish a report in accordance with and within a period of 90 days.
Verification of Additional facts
- Where in the course of any proceedings before the Interim Board any facts not contained in the settlement application (including the annexure and the statements and other documents accompanying such annexure) are sought to be relied upon, they shall be submitted to the Interim Board in writing and shall be verified in the same manner as provided for in the settlement application.
Furnishing report
- Where the Principal Commissioner or the Commissioner fails to furnish the report within the time, the Interim Board may proceed to pass the order, without waiting for that report;
- Where the report has been furnished by the Principal Commissioner or the Commissioner, the Interim Board shall forward such report to the applicant and request the applicant to submit written response to such report within the date and time specified or such extended date and time as may be allowed on the basis of an application made in this behalf.
- If the applicant fails to furnish the response within the specified time, or within the extended time, the Interim Board may proceed to pass the order without waiting for that response.
Opportunity
- The opportunity shall be provided by the Interim Board through video conferencing or video telephony.
- The opportunity shall be facilitated by any Income-tax Authority as authorized by the Interim Board, who will provide the link and password to the applicant and concerned parties in advance.
- All communication of the Interim Board inward and outward shall be carried out by any Income-tax Authority as authorized by the Interim Board.
- The Interim Board shall before providing opportunity, forward the response if received from the applicant, to the Principal Commissioner or the Commissioner.
No personal appearance
- The applicant shall not be required to appear either personally or through authorized representative in connection with any proceedings under this Scheme before the Interim Board or before any Income-tax Authority or ministerial staff posted with the Interim Board.
- Central Board of Direct Taxes shall establish suitable facilities for video conferencing including telecommunication application software which supports video telephony at such locations as may be necessary, so as to ensure that the applicant, or his authorized representative, is not denied the benefit of this Scheme merely on the ground that such applicant or his authorized representative, or any other person does not have access to video conferencing at his end.
Communications
- All communications between the Interim Board and the applicant, or his authorized representative, shall be exchanged by electronic mode;
- All communications between the Interim Board and the Principal Commissioner or the Commissioner shall be exchanged by electronic mode.
- If any application received in a mode other than electronic mode by the Interim Board may be forwarded to the Principal Commissioner or the Commissioner electronically, to the extent technologically feasible.
- Every notice or order or any other electronic communication under this Scheme from the Interim Board shall be delivered to the addressee, being the applicant by sending an e-mail to the registered email address of the applicant or his authorized representative.
- The applicant or the authorized representative shall file his response to any notice or order or any other electronic communication, under this Scheme, to the Interim Board through his registered email address.
- The Principal Commissioner or the Commissioner shall file his response to any notice or order or any other electronic communication, under this Scheme, to the Interim Board through official electronic mail facility.
Authorized representative
- An authorized representative appearing for the applicant at the time of hearing of an application shall file before the commencement of the hearing a document authorizing him to appear for the applicant.
- If he is a relative of the applicant, the document shall state the nature of his relationship with the applicant.
- If he is a person regularly employed by the applicant, the capacity in which he is employed at that point in time.
Adjournment
- The Interim Board may, on such terms as it thinks fit and at any stage of the proceedings, adjourn the hearing of the application or any matter arising there from.
Authentication of electronic records
- an electronic record shall be authenticated by–
- the Interim Board, the Principal Commissioner or the Commissioner, by affixing its digital signature;
- the applicant or his authorized representative, by affixing his digital signature if he is required under the Rules to furnish his return of income under digital signature, and in any other case, by communicating through his registered e-mail address.
Order
- After hearing the applicant and the Principal Commissioner or the Commissioner, through video conferencing or video telephony, and after examination of all the information, document, record, report and evidence with it, the Interim Board shall pass order.
- The order passed shall be delivered to the applicant vide the registered e-mail address along with a copy to the Principal Commissioner or the Commissioner.
- The Interim Board, at its discretion, directs the publication of orders or portions containing the rulings of the Interim Board with such modifications as to names and other particulars therein, as it may deem fit.
Rectification
- The order passed may be rectified by the Interim Board either suo motu or on an application made by the applicant or the Principal Commissioner or the Commissioner;
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