Steps to be taken by departmental authorities where settlement application filed by assesseebefore settlement commission. - Income Tax - 1853/1990

INSTRUCTION NO. 1853/1990 Dated: August 30, 1990 Board's Instruction No.1222, dated 12th December, 1978 issued from F.No.282/06/77-IT (INV.III) lays down the steps to be taken by the Departmental authorities when settlement applications are filed by the assessees under Chapter XIXA of the Income-tax Act before the Settlement Commission. As per para 3 of the said instruction, the Settlement Commission gets exclusive jurisdiction to exercise the powers and perform the functions of an Income-tax/Wealth-tax authority in relation to the case only after the application made under section 245C of the Income-tax Act/22C of the Wealth-tax Act has been allowed to be proceeded with. Till an order is passed by the Settlement Commission allowing the case to be proceeded with, the assessing officer has to deal with the case and complete the relevant assessments or other proceedings that may be getting time barred during this period. 2. Instances have, however, come to the notice of the Board where assessments have been allowed to get barred by limitation under the mistaken impression that the extended time under sub-clause(v) of Explanation 1 to section 153 becomes automatically available on the mere filing of an application under sub-section (i) of section 245C before the Settlement Commission. Such action by the assessing officers contravenes the Board's instructions referred to above. 3. Explanation 1(v) to section 153 provides that where an assessee makes an application under section 245C to the Settlement Commission and the Commission either rejects it or does not allow it to be proceeded with, the period commencing from the date on which such application is made by the assessee and ending with the date on which the order passed by the Settlement Commission under section 245D(1) is received by the Commissioner of Income-tax is to be excluded for the purpose of computing the period of limitation under section 153. Mere filing of an application by an assessee before the Settlement Commission, would not, as indicated above, extend the date of limitation. Clause (v) of Explanation 1 to section 153 operates only when the application filed is rejected or is not allowed to be proceeded with by the Settlement Commission in an order passed by it under sub-section (1) of section 245D. Instances have been brought to the notice of the Board where applications have been rejected in limine by the Settlement Commission. In such cases, the bar of limitation is not extended by clause (v) of Explanation 1. To avoid assessments getting barred by limitation in such or other similar cases, it is essential that time barring proceedings under the Income-tax Act and Wealth-tax Act should, in no circumstances, be kept in abeyance merely on the ground that an application has been filed before the Settlement Commission. 4. It has also been brought to the notice of the Board that individual references are received by the Settlement Commission from assessing officers enquiring as to whether any Settlement application has been filed in a particular case and, if so, what orders have been passed thereon. Obviously such references are made with a view to postpone the assessment proceedings taking recourse to Explanation 1 (v) to section 153. This action on the part of the assessing officers is incorrect as explained above but otherwise also is not proper as they are not competent to correspond directly with Settlement Commission. References to the Settlement should always be made by the concerned Commissioner of Income-tax and by no other authority below him. 5. The above instructions of the Board may please be followed scrupulously and be brought to the notice of all concerned officers in your charge.