Budget 2021- It is proposed to discontinue Income-tax Settlement Commission (ITSC) and to constitute Interim Board of settlement for pending cases. The various amendments proposed are as under:

  • ITSC shall cease to operate on or after 1st February, 2021
  • No application under section 245C of the Act for settlement of cases shall be made on or after 1st February, 2021;
  • All applications that were filed under section 245C of the Act and not declared invalid under sub-section (2C) of section 245D of the Act and in respect of which no order under section 245D(4) of the Act was issued on or before the 31st January, 2021 shall be treated as pending applications.
  • Where in respect of an application, an order, which was required to be passed by the ITSC under section 245(2C) of the Act on or before the 31st day of January, 2021 to declare an application invalid but such order has not been passed on or before 31st January, 2021, such application shall be deemed to be valid and treated as pending application.
  • The Central Government shall constitute one or more Interim Board for Settlement (hereinafter referred to as the Interim Board), as may be necessary, for settlement of pending applications. Every Interim Board shall consist of three members, each being an officer of the rank of Chief Commissioner, as may be nominated by the Board. If the Members of the Interim Board dif-fer in opinion on any point, the point shall be decided according to the opinion of majority.
  • On and from 1st February, 2021, the provisions related to exercise of powers or performance of functions by the ITSC viz. provisional attachment, exclusive jurisdiction over the case, inspection of reports and power to grant immunity shall apply mutatis mutandi to the Interim Board for the purposes of disposal of pending applications and in respect of functions like rectification of orders for all orders passed under sub-section (4) of section 245D of the Act. However, where the time-limit for amending any order or filing of rectification application under section 245(6B) of the Act expires on or after 1st February, 2021, in computing the period of limitation, the period commencing from 1st February, 2021 and ending on the end of the month in which the Interim Board is constituted shall be excluded and the remaining period shall be extended to sixty days, if less than sixty days.
  • With respect to a pending application, the assessee who had filed such application may, at his option, withdraw such application within a period of three months from the date of commencement of the Finance Act, 2021 and intimate the Assessing Officer, in the prescribed manner, about such withdrawal.
  • Where the option for withdrawal of application is not exercised by the assessee within the time allowed, the pending application shall be deemed to have been received by the Interim Board on the date on which such application is allotted or transferred to the Interim Board.
  • The Board may, by an order, allot any pending application to any Interim Board and may also transfer, by an order, any pending application from one Interim Board to another Interim Board.
  • Where the pending application is allotted to an Interim Board or transferred to another Interim Board subsequently, all the records, documents or evidences, with whatever name called, with the ITSC shall be transferred to such Interim Board and shall be deemed to be the records be-fore it for all purposes.
  • Where the assessee exercises the option to withdraw his application, the proceedings with respect to the application shall abate on the date on which such application is withdrawn and the Assessing Officer, or, as the case may be, any other income-tax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under section 245C of the Act had been made. However, for the purposes of the time-limit under sections 149, 153, 153B, 154 and 155 and for the purposes of payment of interest under section 243 or 244 or, as the case may be, section 244A, for making the assessment or reassessment, the period commencing on and from the date of the application to the ITSC under section 245C of the Act and ending with the date on which application is withdrawn shall be excluded. Further, the income-tax authority shall not be entitled to use the material and other information produced by the assessee before the ITSC or the results of the inquiry held or evidence recorded by the ITSC in the course of proceeding before it. However, this restriction shall not apply in relation to the material and other information collected, or results of the inquiry held or evidence recorded by the Assessing Officer, or, as the case may be, other income-tax authority during the course of any other proceeding under this Act irrespective of whether such material or other information or results of the inquiry or evidence was also produced by the assessee or the Assessing officer before the ITSC.
  • The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of settlement in respect of pending applications by the Interim Board, so as to impart greater efficiency, transparency and accountability by eliminating the interface between the Interim Board and the assessee in the course of proceedings to the extent technologically fea-sible; optimising utilisation of the resources through economies of scale and functional specialisa-tion; and introducing a mechanism with dynamic jurisdiction. The Central Government may, for the purposes of giving effect to the said scheme, by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. However, no such direction shall be issued after the 31st March, 2023. Every such notification issued shall, as soon as may be after the notification is issued, be laid before each House of Parliament.

These amendments will take effect from 1st February, 2021.

[Clauses 54 to 65]

Text of the Relevant Clause of the Finance Bill 2021

Clause 54 of the Bill seeks to amend the Chapter XIX-A of the Income-tax Act relating to settlement of cases by the Income-tax Settlement Commission (ITSC).

It is proposed to amend section 245A of the said Act to define various expressions such as “Interim Board” shall mean Interim Board for settlement constituted under section 245AA, “Member of the Interim Board” shall mean a Member of the Interim Board and “Pending Application” shall mean an application which was filed under section 245C and which was not declared invalid under sub-section (2C) of section 245D and no order under sub-section (4) of section 245D was issued on or before the 31st day of January, 2021 with respect to such application for the purposes of this Chapter.

This amendment will take effect retrospectively from 1st February, 2021.

Clause 55 of the Bill seeks to insert a new section 245AA of the Income-tax Act so as to provide for constitution of one or more Interim Board for settlement of pending applications and to provide that every Interim Board shall consist of three members, each being an officer of the rank of Chief Commissioner. If the members of the Interim Board differ in opinion on any point, the point shall be decided according to the opinion of majority.

This amendment will take effect retrospectively from 1st February, 2021.

Clause 56 of the Bill seeks to amend section 245B of the said Act so as to provide that the Income tax Settlement Commission shall cease to operate on or after the 1st day of February, 2021.

This amendment will take effect retrospectively from 1st February, 2021.

Clause 57 of the Bill seeks to amend section 245BC of the said Act so as to provide that the existing provisions of the said section shall not apply on or after the 1st day of February, 2021.

This amendment will take effect retrospectively from 1st February, 2021.

Clause 58 of the Bill seeks to amend section 245BD of the said Act so as to provide that the existing provisions of the said section shall not apply on or after the 1st day of February, 2021.

This amendment will take effect retrospectively from 1st February, 2021.

Clause 59 of the Bill seeks to amend section 245C of the said Act so as to provide that no application shall be made under this section on or after 1st day of February, 2021.

This amendment will take effect retrospectively from 1st February, 2021.

Clause 60 of the Bill seeks to amend section 245D of the said Act so as to provide that where an order was required to be passed on an application made under sub-section (2C) of the said section on or before the 31st day of January, 2021 and has not been passed till such date, such application shall be deemed to be valid. It is further proposed to amend sub-section (6B) to provide that any order passed under sub-section (4) may be amended and specific reference to any amendment made by Settlement Commission be omitted. It is further proposed to insert sub-section (9) to provide that on and from the 1st day of February, 2021, the provisions of sub-sections (1), (2), (2B), (2C), (3), (4), (4A), (5), (6) and section (6B) shall apply to pending applications allotted to the Interim Board. Further, for the purposes of the said section the date referred to in sub-section (2) of section 245M shall be taken as the date on which the application was made and received under section 245C and where the time-limit for amending any order or filing of rectification application as per sub­section (6B) of the said section expires on or after the 1st day of February, 2021, the period of limitation shall exclude the period commencing from the 1st February, 2021 and ending on the end of the month in which the Interim Board is constituted. However, in cases where the remaining period is less than sixty days the same shall be deemed to have been extended to sixty days. It is also proposed to insert sub-section (10) so as to provide that the provisions of sub-sections (6A) and (7) shall have effect as if for the words “Settlement Commission”, the words “Settlement Commission or Interim Board of Settlement”.

It is also proposed to insert sub-sections (11), (12) and (13) in the said section so as to, inter alia, provide for a scheme, by notification in the Official Gazette, for the disposal of pending applications by the Interim Board. Proposed sub-section (11) provides that the Central Government may make a scheme, by notification in the Official Gazette, for the purposes of settlement in respect of pending applications by the Interim Board, so as to impart greater efficiency, transparency and accountability by eliminating the interface between the Interim Board and the assessee in the course of proceedings to the extent technologically feasible, optimising utilisation of the resources through economies of scale and functional specialisation and introducing a mechanism with dynamic jurisdiction. Proposed sub-section (12) provides that the Central Government may, for the purposes of giving effect to the scheme made under sub-section (11), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification provided no direction shall be issued after the 31st day of March, 2023. Proposed sub-section (13) provides that every notification issued under sub-section (11) and sub-section (12) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.

This amendment will take effect retrospectively from 1st February, 2021.

Clauses 61, 62, 63 and 64 of the Bill seeks to amend sections 245DD, 245F, 245G and 245H of the Income-tax Act so as to provide that the powers and functions of Settlement Commission under the said sections shall be exercised or performed by the Interim Board on or after the 1st day of February, 2021 and all the provisions of the said sections shall mutatis mutandis apply to Interim Board as they applied to Settlement Commission.

These amendments will take effect retrospectively from 1st February, 2021.

Clause 65 of the Bill seeks to insert new section 245M in the Income-tax Act so as to provide that the assessee an option to withdraw his application made under section 245C. Proposed sub-section (1) thereof, inter alia, provides that the assessee who had filed an application which is pending before the Interim Board has the option to withdraw such application within three months from the date of commencement of Finance Act, 2021 and intimate the Assessing Officer about such withdrawal in the manner prescribed. However, if such option is not exercised by the assessee within the time allowed, the pending application shall be deemed to have been received by the Interim Board on the date on which it is allotted or transferred to it. The Board may, by an order, allot or transfer any pending application from one Interim Board to another and upon allotment or transfer of a pending application to an Interim Board, all records, documents or evidences with the Settlement Commission, shall be deemed to be the records before such Interim Board.

Proposed sub-section (5) of the said section provides that where an assessee withdraws his application, the proceedings with respect to such application shall abate on the date of withdrawal and the Assessing Officer or any other income-tax authority before whom the proceedings were pending prior to the application shall dispose the case in accordance with the provisions of the said Act and in such case, for the purposes of the time-limit under sections 149, 153, 153B, 154 and 155 and for the purposes of payment of interest under section 243 or 244 or 244A, for making the assessment or re-assessment, the period commencing on and from the date of the application to the Settlement Commission under section 245C and ending with the date of withdrawal of application shall be excluded. It is also proposed to provide that the income-tax authority shall not be entitled to use the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of proceedings before it and the preceding conditions shall not apply in relation to the material and other information collected, or results of the inquiry held or evidence recorded by income-tax authority during the course of any other proceeding under this Act irrespective of whether such material or other information or results of the inquiry or evidence were also produced by the assessee or such income-tax authority before the Settlement Commission.

This amendment will take effect retrospectively from 1st February, 2021.

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