Indian Income Tax Settlement Commission-Amicable, Easy and Satisfactory Solution- without Harshment to Come out clean by offering Taxable income for Assessment: through: Income Tax Cases normally runs for 8to 10years :Proceedings with Assessing Officer results in Rounds of Income Tax Department and Harshment. After Assessment Order it is Ist Appeal and than 2nd Appeal with ITAT: Which can be saved by reference to Settlement Commission

Preamble:-   During Income Tax Raids what happens Cash,Jewellery, Undisclosed Investments, Recycling of Money are found. 

Search may result in a complete Mesh. It normally take place to Entire group more than One persons: Directors, Partners,Family Members, Friends, Associates: And at more than One Places, Business Establishments and Associate Establishments.

The Search Procedure may continue for Several Months. Load of Documents may be seized by the Department.

Past Transactions:-
During Search more than One type of transaction may be found as follows:-

1.  Recycling of Funds e.g. Withdrawal through Purchases and Recycled through Sales.
2. Payments released out of unaccounted Money is treated as payments without bills.
3. Recycling of Funds through Foreign Routes by way  of Gifts in the Individual Bank Accounts.
4. Undisclosed Commercial Transactions even though in the Interest of the Business In absence of supportings Assessing Officer may not be ready to allow such Expenditures and want to Tax it as undisclosed Income. Funds utilized for Business purposes only and not disclosed in Annual Income Tax Returns. As a Result Expenditure cannot be claimed.
5. Withdrawal by Individuals from Company's Funds.
6. Mixed Jewellery found and Seized that may include Ancestral Jewellery fondly called as HUF Jewellery, Jewellery  received as Gifts during Festivals, Family Functions and other occasions.
7. Evasion of More than One Tax like Central Excise, Violation of FEMA, State and Central Sales Tax are found. As a result notices from these Authorities are also expected.
8. Transactions beyond past Six Years period not taxable under Income Tax Act still being Taxed in the absence of proper detailing and explanation .
9. Bureaucratic Army is ready  Threatening and other coercive Means started  to reap  benefits of Such Search through corruption route.
10. On Additional Incomes the department is not ready to provide Income Tax Incentives which are available in Original Assessments. Denied on Search Assessments!Why?
11. Threat of Penalty and Imprisonment is continuing from concerned Assessing Officer..

To make a way  out of this Mesh: 'Settlement Commission' is Powerful Tool.


Essential Condition in Search Cases for Reference to Settlement Commission:-
In Search Cases the Reference to Settlement cannot be automatic.Ist a Notice under Section 153A of the Income Tax Act must be received.Notice would be for Six Assessment years. A search is carried out in Sept.2012 than all years starting from 1st April 2006 till 31st March 2013 would be covered.
In this case Assessment before Assessing Officer must be completed before 31st March 2015. Therefore a notice would be issued during F.Y.2012-13. 

• Four Essential Conditions to be satisfied before filing an application under Section 245-C:- 

1. Pendency of proceedings before the Assessing Officer for the relevant Assessment years.
2. The Additional amount of Income Tax payable on the income disclosed in the Settlement petition should be more than Rs50Lacs
3. There should be true and full disclosure of Income.
4. There should be complexity and complications involved

Settlement Commission is having Role of Arbitration between Assessee and Income Tax Department.

Therefore both the Parties have equal right to present their case well within the Procedures laid down,Restriction of time limits for submitting various replies. 

• Documents to be enclosed with Income Tax Settlement Application:- 

• Each and Every Page of Settlement application must be signed by the Assessee himself. 

• Form 34B is applicable, in which application need to be filed, In form 34B a full and true disclosure of Income which has not been disclosed before Assessing Officer: Thereafter their would be an hearing

• Copies of Search Panchnama along-with all Annexures.

• Copies of Income Tax Returns of Relevant period filed before Income Tax Authority.

• Income Tax on undisclosed income should exceed specified Amount:-

            As a result of Search or as a result of

            requisition of Books of Accounts or Other

            Documents                                               Rs.50Lacs

            To a related person of above                       Rs.10Lacs

             Any other Case                                         Rs.10Lacs

          Income Escaping Assessment under Section 147: Revision of Orders prejudicial to Revenue Sect.263 and Revision of other Order Sec.264.Orders of Tribunal Sec.254 cannot be referred to Settlement Commission.

• Application must be filed in Five copies along-with Fees of Rs.500/-

• There are Two portions of Settlement Commission Application:-

• Main Portion: 

• Full details of issue for which application for Settlement is made, the nature and Circumstances of the Case and complexities of Investigation involved must be indicated as required in Column no.10 of the Application.

• Confidential Portion.

• Assessee wise application need to be filed.

• Combined Application for Several years can be filed provided Assessment year-wise details are mentioned in the application.

• Confidential Portion: In the Confidential Portion Income is declared before Settlement Commission.

• Full and True disclosure of Income is declared as well as Income Tax is paid along with Interest of Section 234

•  Report would be called from Income Tax Department invariably: if they have any objection in Assessee is approaching Settlement Commission?

• If Settlement Commission agrees then the Assessee need to deposit Income Tax with Interest as per rates mentioned in Section 234B of Income Tax Act.

• BENCHESTHERE ARE FOUR BENCHES OF SETTLEMENT COMMISSION; One in Each Metropolitan Delhi(Northen Bench),Mumbai(Western Bench), Chennai(Southern Bench) and Kolkata (Eastern Bench)

• IN CASE OF SEARCH IF ANY CASH IS SEIZED THE SAME MUST BE ADJUSTED AGAINST ADVANCE TAX THROUGH AN APPLICATION to the concerned Assessing Officer mostly in search cases is Central Circle. This is must to ensure that the Funds deposited are utilized for payment of Taxes . 

• Income Tax.Adjustment of Cash seized against Tax dues is not automatic: An application need to be filed with the Department for adjustment against Advance.

• Therefore in Search Cases While filing Revised Returns under Section 153A, with Income Tax Department no additional Income need to be declared only gaps need to be filled up.   

• One of the Important Condition of approaching Settlement Commission is that the Assessee must estimate entire Income(net of Income already declared by Assessing Officer) of Each Assessment year to be declared before Settlement Commission and Income Tax with Interest as per prevailing Rates applicable is paid on the Estimated Income. Therefore whatever Income Disclosed before Assessing Officer cannot be considered for Settlement purpose.The overall Income declared in One Group of Cases must be above  Rs.50 Lacs. Declaration would be Assessment year-wise. 

• The above is must. If in any Assessment year Income Tax is not paid, such year cannot stand before Settlement Commission.  

• In most of the Cases Settlement Commission grants immunity from Penalty,Criminal  Prosecution including  Imprisonment. This is One of the biggest advantage to the Assessee. He is saved from unnecessary harshment.

• Once filed settlement Application simultaneous intimate concerned Assessing Officer in Form no.34BA to update his record and need not to proceed further in the matter of Assessment proceedings at AO level.

Procedure at Settlement Commission:-

• Within 7days of receipt of Application a Notice must be sent to the Assessee to explain why his application not allowed to be proceeded with?

• An Order to the Assessee within 14days from The date of Application to allow or to reject must be issued by the Settlement Commission.

• First Report from Commissioner of Income tax(Rule-6 under Section 245(1) Report):- within 30days from the Date of Application Settlement Commission must ask for report from Commissioner of Income Tax. This Report would decide Validity or Invalid of the Assess's Application. The Commissioner at this Juncture would decide whether Section 263,264,254,147 is applicable to the Case

• In case Report is not submitted by Income Tax Commissioner within 30days the Settlement Commission can automatically proceeded with.

• A Second Report popularly known as Rule 9report is called by Settlement Commission from Commissioner by sending following Documents:-

       Annexures

    

       Statements made before Settlement Commission and other Documents.

        A copy of this Report to be marked to the Assessee for his comments.

• Reply from Commissioner must be received within 45 to 90 days from the date of receipt. 

Other advantages of Settlement Commission are as under:- 

•          One of the biggest advantage of Settlement Commission is that the Assessee is completely saved from  Bureaucratic Army and Red-tapism.

•           Therefore the Settlement Commission order would be Issue based and Rationality

•           Discretion of Assessing Officer is totally ruled out:  possibility of high pitched assessment is   completely ruled out.

•           Once the Application is accepted, Self Assessment Tax with Interest is paid the role of Local                      Income Tax Authorities is completely of-opposite party to Arbitration.

•         In case of Regular Assessment their is One Assessing Officer and Two Appellate Authorities, Comm.-Appeals and Income Tax Appellate Tribunal. It may require more time in Comparison to Settlement Commission

        Settlement is equivalent to Tribunal: therefore Three Stages Final                  Order is received from One Authority: with far lesser efforts, Lower             Expenditure and in Equal time. 

•        As usual Settlement Commission also need to pass Order within 24 Months from the end of the Assessment year in which Application is finally accepted.

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