Wanchoo Committee's recommendation in regard to settlement of cases. - Income Tax - 968/CBDT

INSTRUCTION NO. 968/CBDT Dated : July 6, 1976 Section(s) Referred: 245D Statute: Income - Tax Act, 1961 The Settlement Commission, both for income-tax and wealth-tax has been constituted with effect from 1st April, 1976. This is a new measure taken by the Government in the light of the Wanchoo Committee's recommendation in regard to settlement of cases. 2. Section 245D of the Income-tax Act provides that, on receipt of a settlement application u/s 245C, the Settlement Commission shall call for a report from the Commissioner and the decision as to whether the application should be allowed to be proceeded with or rejected shall be taken by the Commission on the basis of the materials contained in the Commissioner's report and having regard to the nature and circumstances of the case or the complexity of the investigation involved therein. The second proviso to sub-section (1) of section 245D provides futher that a settlement application shall not be allowed to be proceeded with if the Commissioner raises an objection in that behalf "on the ground that concealment of particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax or other sum chargeable or imposable under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, has been established or is likely to be established by any income-tax authority, in relation to the case." 3. Some doubts have been expressed regarding the correct import and scope of the expression "concealment....... or perpetration of fraud.....has been established or is likely to be established". The provision does not contemplate the Commissioner to object to a settlement application being allowed to be proceeded with in every case where a concealment of income or perpetration with in every case where a concealment of income or perpetration of fraud for tax evasion is suspected or even where an income-tax authority may have merely subjective satisfaction in that regard. Although the provision covers not only cases where concealment of income or tax fraud has already been established but extends also to cases where it is likely to be established, the use of the verb 'establish', as against the language of clause (c) of sub-section (1) of section 271, is significant. According to the Oxford Dictionary, 'establish' means 'place beyond dispute'. In judging whether a tax fraud or a concealment of income is 'established' or 'is likely to be established', a realistic view has therefore to be taken, having due regard to the concealment or fraud being established before the final appellate/other authorities in which the ultimate authority vests, in the light of the law on the subject, the evidence in the Department's possession and the past experience of other cases. 4. The Board, accordingly, desire that except in cases where adequate justification as explained in the preceding paragraph exists, objections should not be raised under the second proviso to sub-section (1) of section 245D. This applies equally to applications for settlement made u/s 22C(1) of the Wealth-tax Act, 1957. It is hoped that your decisions in the matter will be such that the objectives underlying the provision in setting up the Settlement Commission will be fully achieved.