Analysis of the Budget, 2015 proposals relating to the provisions of Settlement Commission

March 09,2015
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Aseem Chawla(Partner)&Thangadurai Punithan(Associate),MPC Legal

Ever since the recommendations of Justice K.N. Wanchoo were incorporated in to the Income Tax Act, 1961 (the Act), the provisions with respect to the Settlement Commission have undergone a sea of change.

Earlier, the tax payers were eligible to apply to the settlement commission in almost all the proceedings, be it an assessment proceeding or an appeal proceeding. However, Finance Act, 2007 curbed the purview of the settlement commission considerably by debarring the proceedings initiated under Section 148, search and seizure proceedings as well as the appellate proceedings from the jurisdiction of settlement commission, which effectively left only the proceedings which are pending at the assessment level within the scope of the settlement commission.

The result was evident from the drop in the number of cases being entertained by the settlement commission. As per the 87th Report of Public Accounts Committee 2013-14, the number of cases pending before the settlement commission in the year 2007-08 was 2064. However, subsequent to the incorporation of Finance Act, 2007, the cases entertained by the settlement started to decline consistently in the succeeding years. As on 2008-09, the number of cases pending before the settlement commission dropped to 1310 and it was further reduced to 1235 cases and 1061 cases in the year 2009-10 and 2010-11 respectively.

Sensing the extinction, the government added little more teeth to the settlement commission by bringing back the search and seizure proceedings within the ambit of settlement commission vide Finance Act, 2010. Finance Act, 2014 further enhanced the scope by including the orders passed under Section 254, 263 and 264 for initiation fresh assessments within the boundary of settlement commission.

It is also worthwhile to note that the proposed Direct Tax Code, 2013 attempted to do away with the concept of settlement commission for good, on the reasoning that it had not achieved its intended purpose and further reduced the efficacy of search and seizure actions.

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