CBDT Extends Time to File Application for Settlement

The Central Board of Direct Taxes (CBDT) extended the time for taxpayers to file applications for settlement till 30.09.2021. The taxpayers eligible to file settlement applications as of 31.01.2021 but could not file the same due to cessation of the Income Tax Settlement Commission (ITSC) operations through Finance Act, 2021 can file it before 30.09.2021.

The Finance Act, 2021 amended the Income Tax Act, 1961 provisions to cease the ITSC operations from 01.02.2021. The Finance Act also provided that the taxpayers cannot file the settlement application on or after 01.02.2021.  The Finance Bill, 2021, was laid down before the Lok Sabha on 01.02.2021.  

The Central Government constituted the interim board of settlement (interim board) on 10.08.2021 to dispose of the pending settlement applications as of 31.01.2021. The taxpayers whose cases are pending before the ITSC have an option to withdraw their applications by intimating the same to the Assessing Officer within the specified time. 

Several taxpayers were in the advanced stages of filing applications for settlement before the ITSC as of 01.02.2021. Some taxpayers approached the High Courts requesting to accept their applications for settlement. In some cases, the High Courts have given interim relief and directed acceptance of settlement applications even after 01.02.2021, resulting in uncertainty and protracted litigation. 

To provide relief to the taxpayers and avoid protracted litigation, the CBDT decided that the taxpayers eligible to file applications as of 31.01.2021 can file settlement applications with the interim board before 30.09.2021. The taxpayers are eligible to apply for settlement if the following conditions are satisfied:

  • The assessee was eligible to file a settlement application on 31.01.2021 for the assessment years the assessee seeks to apply, i.e. relevant assessment years.
  • All the relevant assessment proceedings of the assessee are pending as of the date of filing the settlement application.

Under Section 245A of the Income Tax Act, the above applications will be deemed to be pending applications. The interim board will dispose of such applications as per the provisions of the Act. However, the taxpayers who have filed such applications will not have an option to withdraw them as per Section 245M of the Income Tax Act.

The eligible taxpayers who have filed applications for settlement after 01.02.2021 as per the direction of various High Courts will not be required to file such applications again. In the meantime, the government plans to propose legislative amendments to extend the filing date of application for settlement in due course.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in

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