Union Budget 2016: Providing Time limit for disposing applications made by assessee under section 273A, 273AA or 220(2A)

Sub-section (2) of section 220 provides for levy of interest at the rate of 1 per cent for every month or part of month for the period during which the default continues. Sub-section (2A) of said section inter-alia, empowers the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner to reduce or waive the amount of interest paid or payable under sub-section (2) of the said section.

Sub-section (4) of section 273A, inter alia, provides that the Principal Commissioner or the Commissioner may, on an application made by an assessee, reduce or waive the amount of any penalty payable by the assessee or stay or compound any proceeding for recovery of the penalty amount in certain circumstances.

Section 273AA inter alia, provides that the Principal Commissioner or the Commissioner may grant immunity from penalty, if penalty proceedings have been initiated in case of a person who has made application for settlement before the settlement commission and the proceedings for settlement had abated under the circumstances contained in section 245HA of the Act

Under the existing provisions no time limit has been provided regarding the passing of orders either under section 220 or sections 273A or 273AA. Further, these provisions do not specifically mandate that assessee be given an opportunity of being heard in case such application is rejected by an authority. Therefore, in order to rationalise the provisions and provide for specific time-line, amendment to the existing provisions have been proposed.

It is proposed to amend section 220 to provide that an order accepting or rejecting application of an assessee shall be passed by the concerned Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner within a period of twelve months from the end of the month in which such application is received.

It is further proposed to amend section 273A and section 273AA to provide that an order accepting or rejecting the application of an assessee shall be passed by the Principal Commissioner or Commissioner within a period of twelve months from the end of the month in which such application is received.

It is also proposed to provide that no order rejecting the application of the assessee under section 220 or 273A, 273AA shall be passed without giving the assessee an opportunity of being heard. However, in respect of applications pending as on 1st day of June, 2016, the order under said sections shall be passed on or before 31st May, 2017.

These amendments will take effect from 1stJune, 2016.

Clause 88 of Finance Bill 2016

Clause 88 of the Bill seeks to amend section 220 of the Income-tax Act relating to when tax payable and when assessee is deemed in default.

The aforesaid section provides for an assessee to be deemed to be in default and its consequences in case of failure on the part of the assessee to pay the amount of tax due. Sub-section (2) of the said section provides for levy of interest at the rate of one per cent. for every month or part of month for the period during which the default continues. Sub-section (2A) of the said section, inter alia, empowers the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner to reduce or waive the amount of interest paid or payable under sub-section (2) of the said section.

It is proposed to amend sub-section (2A) of the said section so as to provide that an order accepting or rejecting the application of an assessee shall be passed by the concerned Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner within a period of twelve months from the end of the month in which such application is received. It is further proposed to provide that no order shall be passed without giving the assessee an opportunity of being heard. However, in respect of the applications pending as on 1st day of June, 2016, the order shall be passed on or before 31st May, 2017.

These amendments will take effect from 1st June, 2016.

Clause 104 of Finance Bill 2016

Clause 104 of the Bill seeks to amend section 273A of the Income-tax Act relating to power to reduce or waive penalty, etc., in certain cases.

Sub-clause (i) of the said clause seeks to amend sub-section (1) of the said section.

Clause (ii) of sub-section (1) of section 273A provides for reduction or waiver of penalty imposed or imposable under clause (iii) of sub-section (1) of section 271. Explanation to the said sub­section clarifies that if the nature of income assessed over the returned income is such that it does not attract provisions of clause (c) of sub-section (1) of section 271, then, the person shall be deemed to have made full and true disclosure for the purposes of sub-section (1) of the said section 271.

Further, clause (b) of sub-section (2) of section 273A provides for condition, wherein penalty shall not be waived and reducedunder sub-section (1) of section 273A.

It is proposed to make a reference of section 270A in clause (ii) and in the Explanation to sub-section (1) and in clause (b) of sub­section (2) of section 273A, owing to insertion of a new section 270A which provides for levy of penalty for under-reporting or misreporting of income and ceasing of operation of section 271, for the assessment year commencing on or after 1st April, 2017.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent years.

Sub-clause (ii) of the said clause seeks to insert a new sub­section (4A) in the said section so as to provide that an order accepting or rejecting application of an assessee shall be passed by the concerned Principal Commissioner or Commissioner within a period of twelve months from the end of the month in which such application is received. It is further proposed to provide that no order shall be passed without giving the assessee an opportunity of being heard. However, in respect of applications pending as on 1st day of June, 2016, the order shall be passed on or before 31st May, 2017.

This amendment will take effect from 1st June, 2016.

Clause 105 of Finance Bill 2016

Clause 105 of the Bill seeks to amend section 273AA of the Income-tax Act relating to power of Principal Commissioner or Commissioner to grant immunity from penalty.

The aforesaid section, inter alia, provide that the Principal Commissioner or the Commissioner may grant immunity from penalty, if penalty proceedings have been initiated in case of a person who has made application for settlement before the settlement commission and the proceedings for settlement had abated under the circumstances contained in section 245HA of the Act.

It is proposed to amend the said section to provide that an order accepting or rejecting the application of an assessee shall be passed by the concerned Principal Commissioner or Commissioner within a period of twelve months from the end of the month in which such application is received.

It is further proposed to provide that no order shall be passed without giving the assessee an opportunity of being heard. However, in respect of applications pending as on 1st day of June, 2016, the order shall be passed on or before 31st May, 2017.

This amendment will take effect from 1st June, 2016.

[Clause 88, 104 & 105]

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