An Interplay- Income Tax Search and Seizure and Income Tax Settlement Commission

An Interplay- Income Tax Search and Seizure and Income Tax Settlement Commission

Introduction:

Chapter XIX-A of the Act pertains to the settlement of cases. Under sub-section (1) of section 245C of the Act, an assessee at any stage of a case relating to him can make an application for settlement in the prescribed manner.

The term ‘case’ has been defined in clause(b) of section 245A as to mean any proceedings of assessment under the Act of a person in respect of any assessment year or assessment years which may be pending before an Assessing Officer on the date on which an application under sub-section(1) of section 245C of the Act is made. Finance Act 2010 w.e.f. 01-06-2010 inserted Explanation clause (iiia) to Section 245A(b) which as under:

” a proceeding for assessment or reassessment for any of the assessment years referred to in clause (b) of sub-section (1) of section 153A in case of a person referred to in section 153A or section 153C, shall be deemed to have commenced on the date of issue of the notice initiating such proceeding and concluded on the date on which the assessment is made;”

Therefore the issue of conclusion of an assessment as mandated in Explanation clause (iiia) to Section 245A(b) is of wide import as an assessee can only file an application for settlement at any stage of a case relating to him though during the pendency of such case. Thus, if the case is concluded, the pendency of the case ends and the doors of the Settlement Commission are closed for an assessee. In other words, if a case as defined in clause (b) of section 245A has concluded, application for settlement would not be maintainable. As per the explanation (iiia) above, the definition of the term ‘case’, the assessment under section 153A would be deemed to conclude on the date on which the assessment is made.

The issue under consideration:

Whether merely “the passage” or “only service” of an assessment order shall oust the pendency of a case thereby closing the doors of Income Tax Settlement Commission

Now a very vital question arises, as to whether merely the passage of the assessment order shall oust the pendency of such a case

or

the Only service of assessment order shall oust the pendency of such a case.

This is a very controversial issue owing to conflicting judgments of the courts.

Let us understand the moot issue with help of an illustration. Lets us assume that in pursuance of a search in case of Mr. X on 20-02- 2018, notices were issued for A.Y.’s 12-13 to 18-19. The assessments for the abovementioned years have to be framed on or before 31-12-2019 u/s 153A r.w.s 153B. Now, Mr. X being desirous to approach the ITSC, informed the AO on 01-12-2019 to keep the assessment proceedings in abeyance as he is desirous to approach the ITSC for prompt settlement of its cases. Owing to the time limitation of the assessment orders which have to be passed before 31-12-2019, the AO has passed the assessment orders on 22-12-2019, however, the copy of the order was received by the assessee only on 29-12-2019. The assessee meanwhile on 26-12- 2019 had filed an application to the ITSC and intimated the AO.

Now considering the factual matrix of this illustration, a question arises as to whether the pendency in the cases of Mr. X has ousted since the orders have been passed before the date of filing the application. Or to the contrary, since the assessment orders have not been yet received by Mr.X on the date of filing of the application before ITSC, therefore can it be said that pendency very much exists and has not been ousted.

The illustration laid down above can be said to be a classic example of what sometimes happens in the central circles. This is more likely due to the fact that as to whether to approach ITSC or not is a long drawn decision process as far as an assessee is concerned. He has to weigh both pros and cons, arrange funds for the pre-payment of taxes which runs against the time limitation in which the assessment orders have to be framed u/s 153A r.w.s. 153B of the act. The AO on the other hand cannot keep the assessment proceedings in abeyance unless and until the assessee files an intimation before him on prescribed Form 34BA on having made an Application to ITSC u/s 245C.

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