Power to 'settle' cases. - Income Tax - 1870/1990

INSTRUCTION NO. 1870/1990 Dated: December 10, 1990 Reference have been received from time to time whether Commissioners of Income-tax are vested with the power to "settle" cases. It has been suggested that if necessary such power should be conferred on the Commissioners in the Income-tax Act itself to enable them to determine the tax liability, reduce or waive penalty, compound offences and grant immunity from prosecution in suitable cases. 2. The issue has been considered by the Board and the following clarifications are issued in this regard (i) There is no power conferred by the Income-tax Act or other direct tax enactments on the Commissioners to "settle" cases; (ii) A separate machinery was created for settlement of cases by constituting the Settlement Commission; (iii) There is no necessity to confer similar power to settle cases on the Commissioners, as a high powered body has already been entrusted with this work; (iv) The powers vested under section 273A of the Income-tax Act are not powers for settlement, as wrongly conceived in some quarters, but are statutory powers authorising waiver or reduction of penalties and interest (penalty only with effect from assessment year 1989-90). An order waiving or reducing penalty or interest can be passed under section 273A only after the conditions mentioned in that section are fulfilled in the light of Board's instructions and circulars issued in this regard; (v) The question whether a particular income is to be assessed in a particular assessment year, the status under which such income should be brought to tax, whether deposits and other assets are to be spread over a period of years, etc. have to be decided by the assessing officers on the facts of each case and should be capable of being sustained on an inspection of the file in which the decision has been taken. 3 . In cases where evidence of tax evasion has been collected either in the course of the search or in the course of investigations, the objective should be to collect full facts and material with a view to levy penalty under section 271 (1) (c) for concealment and also to file prosecution complaints for the offence of tax evasion under section 276C, section 277 of the Income-tax Act or under the corresponding provisions of the Indian Penal Code. 4. It must be ensured that the above instructions are strictly followed by all the Income-tax authorities, if any decision, which is contrary to the provisions of the Act and which cannot be sustained on the basis of the facts, comes to notice, the Income-tax authority who has taken the decision would be held accountable.