[ Filing Applications l Settlement of Cases l Scrutiny of Case Papers ]
 

Section 245F(7) empowers the Commission to regulate its own procedure and procedure of the Benches thereof in all matters arising out of exercise of its powers or discharge of its functions. In exercise of these powers, the Commission had notified the Income-tax Settlement Commission (Procedure) Rules, 1976 which were replaced by the Income-tax Settlement Commission (Procedure) Rules, 1997 w.e.f. 1.6.1997. The Rules, inter-alia, laid down the procedure for filing the settlement applications before the Commission which is briefly as under :-
 

The tax payer desirous of settling his case is required to make an application under section 245C(1) in form No.34B (Page - 111) prescribed under Rule 44C of the Income-tax Rules, 1962, duly signed and verified as prescribed therein. This application is to be made in quintuplicate and has to be accompanied by a fee of Rs. 500/-. The fee has to be paid (with a challan) in a branch of an authorised bank or a branch of State Bank Of India or a branch of Reserve Bank of India. Cheques, Drafts, Hundies or other negotiable instruments sent directly to the Commission, are not acceptable.
 

The settlement application shall be presented in person or by registered post to the Secretary or an authorised officer of the Bench within whose jurisdiction the case falls. A settlement application sent by post shall be deemed to have been presented on the day on which it is received in the office of the Commission.
 

1.4

On receipt of an application, it is diarised, seen by the A.O./Secretary and passed on to the Technical Assistant who verifies whether the application has been furnished in prescribed form giving the required particulars and has been properly verified and signed by the competent person and is accompanied with the prescribed fee of Rs. 500/-. In case there is any defect of the above nature, the application is returned to the applicant pointing out the defects, for re-submission after removing the same. While returning the application in original, one copy of it is retained for purposes of record and future reference. Such applications need not be entered in the register maintained for the purpose. If the application does not suffer from any of the defects mentioned above, the same is entered in the register and a distinctive file number (also called a registration No.) is allotted and the applicant is informed about it through letter. It is then closely scrutinised in accordance with the check-list devised for the purpose.

• Whether the applicant has furnished the return of income as required under part (a) of proviso to section 245C(1).
•  Whether the additional amount of tax payable on income disclosed exceeds Rs. 1,00,000/- as required under part (b) of proviso to section 245C(1).
• Whether calculation of additional tax payable as shown against column (2) of Annexure to the application is as given in the manner laid down in sub-sections (1B) to (1D) of section 245C.
• In a case of search u/s 132, whether the application has been filed after expiry of 120 days from the date of seizure.
• Whether there is a case pending before an Income-tax authority with in the meaning of section 245A(b).
• Whether the information against Column 10 of the application (Form No.34B) is provided separately or it is clubbed with the information given in the Annexure to the application. If it is clubbed, it should be called for separately.
• Whether the information relating to Column 11 of the application is given separately or it is incorporated in the application itself ? If incorporated, it should be called for separately.

• Whether the Annexure to the application is accompanied by full and true statement of facts regarding the issues to be settled including terms of the Settlement as required in Col. 3 of the Annexure ?

• Whether the manner in which the additional income disclosed has been derived is given as required in Col.4 of the Annexure ?
• Whether computation of total income for the year(s) for which the application is made, is given ?
• Whether copies of relevant accounts as required in Notes (i), (ii) and (iii) to the Annexure, are attached ?
• Whether full particulars of proceedings pending before income-tax authorities are given ?

Where the application suffers from any of the defects mentioned at Sr.Nos. (i) to (v) above, it is prima-facie non-maintainable. In such cases a letter is written to the applicant inviting his attention to the requirements laid down in section 245C(1) and asking him to show cause as to why his application be not held to be non-maintainable. If the applicant is unable to offer any cogent explanation and there is no doubt that the application suffers from any of the defects mentioned at Sr.Nos. (i) to (v) above, then the application is held to be non-maintainable. In cases of defects of the kind mentioned at Sr. Nos. (vi) and (vii) above, the applicant is required to remove the defects within a specified time and only after the necessary remedial action, the application is sent to the CIT for his report. In case of other defects mentioned at Sr. Nos. (viii) to (xii) above, which are of a minor nature, the application is sent to the CIT for his report under section 245D(1) and at the same time the applicant is also required to remove the defects by a specified date. A report regarding defects in an application / maintainability thereof etc. is submitted by the T.A. / A.O. to the Secretary . Only when an application is found to be prima facie maintainable, a copy thereof (other than the Annexure and the statements etc.) is forwarded to the concerned CIT as required under Rule 6 of the Income-tax Settlement Commission (Procedure) Rules, 1997 to furnish his report under sub section (1) of Section 245D within 45 days. A standard proforma has been devised for calling for the CIT's report which is sent to him alongwith the application . In this report, apart from other factual information, the CIT is required to comment as to whether any complexity of investigation is involved and the case is otherwise suitable for settlement.
 

After all defects in an application under section 245C(1) are removed and CIT's report is received or where CIT's report is not received within the period of 45 days prescribed in second proviso to section 245D(1) and the Commission decides to proceed without report of the CIT, the Secretary prepares a note regarding prima facie admissibility of the case under section 245D(1) and puts up the matter before the Commission. In this note, the Secretary mentions inter-alia, as to whether - (a) any proceedings are pending, (b) the return of income has been furnished, (c) the additional amount of income-tax payable on the income disclosed exceeds Rs. 1 lakh. (d) any complexity of investigation is involved, (e) the disclosure is full and true and (f) the case is otherwise suitable for admission.
 

After considering the Secretary's note, report of the CIT and the case records, if the Commission is of the view that the application for settlement can be straight-away admitted u/s 245D(1), even without hearing the applicant or the CIT, an order to that effect is passed forthwith. In cases where the application is not so admitted, the application is directed by the Commission to be fixed for hearing. If the applicant requests for a copy of the CIT's report under section 245D, the same is supplied on payment of fee as prescribed under rule 44D of the Income-tax Rules 1962.
 

The cases are normally fixed for hearing in strict chronological order and the order under section 245D(1) is passed by the Commission after hearing both the applicant and the CIT. The case may be represented before the Commission either by the applicant or the CIT personally or through their authorised representatives. An authorised representative in relation to the applicant means a person who would be entitled to represent him before any Income-tax authority or the Appellate Tribunal under section 288 of the I.T.Act whereas in relation to the Commissioner, it means a person authorised by the Commissioner in writing or a person duly appointed by Government of India by notification in official gazette as authorised representative, to appear, plead or act for the Commissioner in any proceedings before the Commission. In practice, there are two CsIT appointed by the CBDT to function as CIT(DR) in each of the Benches. These persons put forward the Deptt's case at the hearings. They are of course briefed by the Deptt's officers before the cases are taken up by the Commission. All the pleadings before the Commission may, at the option of the applicant be in Hindi or in English. All orders and other proceedings of the Commission, may, at the option of the Commission be in Hindi or in English.
 

After hearing the applicant and the CIT, the Commission passes an order either allowing the application to be proceeded with or rejecting the same. Copies of all orders passed under section 245D(1), are sent, interalia, to the assessee and the CIT. Where in an order u/s 245D(1), an application for settlement is rejected, nothing further is required to be done at the Commission's end. The application, the CIT's report and the other case papers are consigned to record. Once an application for settlement is allowed to be proceeded with, a copy of the Annexure to the settlement application together with a copy of the statements and other documents accompanying such annexure, are sent to the CIT for a further report to be sent in quadruplicate within 90 days of receipt of the Commission's letter.
 

In respect of applications filed on or after 1.10.1984, the Commission in its order passed under section 245D(1) allowing the application to be proceeded with, directs the applicant to pay, within 35 days of receipt of a copy of the order, the additional amount of receipt income tax payable on the income disclosed in the application and to furnish proof of such payment to the Commission and the A.O. having jurisdiction, within fifteen days of such payment. If an assessee is unable to pay the additional amount of Income-tax for good and sufficient reasons, he may apply to the Commission for allowing payment of such income-tax in instalments and the Commission may extend the time for payment or grant suitable instalments subject to the assessee furnishing adequate security. In any case, if payment of the additional tax is delayed beyond 35 days of the date of receipt by the applicant, a copy of the order of the Commission allowing the application to be proceeded with, the assessee shall be required to pay interest on such delayed payment as prescribed under section 245D(2C). In case of default on the part of the applicant, the assessing officer may be directed by the Commission to recover the remaining unpaid amount together with interest payable thereon under sub-section 2(C) of section 245D of Income-tax Act, 1961, and with any penalty imposed in accordance with the provisions of section 245D(2D) and under Chapter XVII of the Income-tax Act, 1961.
 

In a case where the application is partly allowed to be proceeded with, the Commission writes to the applicant to submit a fresh Annexure together with the Statements and other documents accompanying such Annexure, after excluding the information in respect of the assessment years not admitted .

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