Will Settlement Commission be resuscitated?

By TIOL News Service

NEW DELHI, FEB 28, 2010: THE Settlement Commission, the only settlement mechanism for settling tax disputes has been lying in a moribund stage ever since Finance Act, 2007 clipped its wings. Its power to grant immunity was withdrawn. More importantly, search and seizure cases were taken out of its purview. It was also stipulated that proceedings before the commission would abate if the pending applications could not be disposed off before 31st March,2008 in terms of section 245 HA read with section 245D(4A) of the Income tax Act. Courts intervened and stayed the operation of the section and it seems that the Settlement Commission has been disposing off the pending cases.

No new cases were,however, being filed before the Commission since the same Finance Act, 2007 also contained a prohibition for the Settlement Commission from entertaining any application involving search and seizure as also cases which were reopened by the Department. The draft DTC contains no provision for settlement and TIOL did a story apprehending its demise. ( See Death Dance of DTC: After trimming CBDT's powers, Settlement Commission is proposed to be guillotined). It is a fact that most of the complicated cases relate to search and seizure and cases reopened consequent to search and seizure. It now seems that there may be a change in the attitude of the administration. The Finance Bill,2010 proposes amendments to the Income Tax Act reversing some of the provisions introduced by the Finance Act, 2007.

The definition of a "case" has been amended by deleting clauses (ii) and (iii) of the proviso which placed the embargo on the Commission from admitting cases relating to assessment or reassessment resulting from search and seizure. An amendment has also been made in section 245C with the result that now an application can be filed before the Commission only if the additional income disclosed exceeds fifty lakhs of rupees in place of the current limit of 3 lakhs. This is a sensible step as only serious cases will come before the Commission.

The time limit for passing a final order was curtailed to twelve months from the end of the month in which the application is made in respect of applications filed on or after 1st June 2007. Here also, a change has been made and it has been provided that in respect of applications filed between 1st June, 2007 and 1st June, 2010, the order should be passed within 12 months but in respect of applications received from 1st June, 2010, the time limit has been increased to a realistic period of 18 months.

These are therefore good signs that the expertise of a high powered body consisting of very experienced officers will continue to be utilised by the Department in a realistic manner. The need for a non adversarial mode of settlement of disputes particularly in complicated cases is a crying need. Unlike many other countries,the Tax department in India does not have any power to settle cases.In such circumstances, it would have been a shame if the only avenue available were to be disbanded without assigning any reason whatsoever.