The question of scaling down of tax arrears - Income Tax - 1492/CBDT

INSTRUCTION NO. 1492/CBDT Dated : September 4, 1975 The question of scaling down of tax arrears were examined in 1975 and the decision taken thereon was communicated to you vide Instruction No. 873 [F.No. 385/86/71-IT(B)] dated the 4th Sept. 1975. A copy of the said Instruction is annexed for ready reference. 2. The powers to be exercised by the Commissioner of Income-tax for the scaling down of tax arrears were contained in para of the instructions referred to above. Where the arrears requiring scaling down exceed Rs. 1 lakh, the authorities exercising powers would be as under: Member, Board - Upto Rs. 5 lakhs. Full Board - Upto Rs. 10 lakhs. Minister - Above Rs. 10 lakhs. This may kindly be brought to the notice of all officers working under you. A Copy of the Board's letter F.No. 385/86/71-IT(B), dated 4-9-1975 instruction on 873 Subject : Power of scaling down of arrears- I am directed to refer to Board's letter of even number dated the 21st February, 1975, addressed to the Commissioner of Income-tax, Bombay City, and copy forwarded to all the Commissioners of Income-tax and to say that the question of scaling down of tax arrears was examined by the Board in detail after certain doubts were raised in this regard consequent upon the conferment of enhanced powers on the Commissioners of Income-tax in respect of the write off of irrecoverable demand in 1973. 2. After such examination the Board are of the view that just as for write off of demands, so also for scaling down there need not be any provision in the Income-tax Act. Every creditor, including the Government, has the in-herent right to give up a part or whole of the debt due to him. 3. Besides, there would be no over-lapping between the powers relating to scaling down of arrear demand and those of the Income-tax Settlement Commission to be constituted u/s 245B of the Income-tax Act. This is because the Income-tax Settlement Commission will have powers to settle the tax liability of an assessee where any proceedings in connection with his assessment or reassessment are pending before an Income-tax authority on the date of application. On the other hand, the scaling down pertains to the arrear demand in cases where assessment or re-assessment proceedings have become final but the assessees are not in a position to pay the full demand. As was laid down in Shri K.S.Sundara Rajan's D.O letter No. 160/9/56/-IT dated 21-1-1957, a settlement for scaling down is to be entered into only in a case in which the recovery in the normal course is difficult and the proposed settlement results in larger recovery than could be realised by recourse to enforced sale of assets or other modes of recovery. Further, such a settlement is to be made subject to the condition that the amount settled would be paid without delay and in case the settlements are required, adequate security would be furnished. Besides an affidavit is required to be taken from the assessee concerned declaring particulars of his assets as on the date of the settlement and each such settlements is to be made expressly subject to the condition that if at a future date, any assets come to the notice of the Department, which were not disclosed in the affidavit, the settlement would be treated as void and the Govt. would be free to go ahead with the recovery proceedings according to law. 4. It has also been decided that Commissioners of Income-tax will continue to exercise powers of scaling down where the aggregate arrear demand outstanding against an assessee is Rs. 1 lakh or less. Cases in which such aggregate demand exceeds Rs. 1 lakh would continue to be sent to the Board after the same have been scrutinised and recommended for scaling down by the appropriate Zonal Committee. 5. The Board expect that the above clarifications will expedite the process of the reduction of tax arrears. You are, accordingly, requested to take urgent steps to review and process all cases of scaling down of tax arrears.