Application for Settlement of Cases [Section 245C] :
1. An assessee may, at any stage of a case relating to him, make an application in the prescribed form and manner, containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer [Sub-section (1)].
2. He should also disclose the following to the Settlement Commission for settlement of his case –
(i) the manner in which such income has been derived,
(ii) the additional amount of income-tax payable on such income and
(iii) other particulars as may be prescribed [Sub-section (1)].
3. As per section 245C, an application can be filed before the Settlement Commission, only if the additional amount of income-tax payable on the income disclosed in the application exceeds the specified limit.
4. Section 245A provides that the proceedings for assessment or reassessment resulting from search/requisition would fall within the definition of a “case” which can be admitted by the Settlement Commission. Consequently, section 245C provides that the additional amount of income-tax payable on income disclosed in the application should exceed Rs 50 lakh, for an application to be made before the Settlement Commission in such cases. In other cases, the additional amount of income-tax payable on income disclosed in the application should exceed Rs 10 lakh, for an application to be made before the Settlement Commission.
5. Such tax and interest thereon, which would have been payable had such income been disclosed in the return of income before the Assessing Officer on the date of application, should be paid on or before the date of making the application. Further, proof of such payment should be attached with the application.
6. Therefore, if proceedings have been initiated against the applicant (hereinafter referred to as specified person) under section 153A or under section 153C as a result of search or a requisition of books of account, an application can be made before the Settlement Commission if the additional amount of income-tax payable on the income disclosed in the application exceeds Rs 50 lakh.
7. An application can also be made, where the applicant is related to the specified person (mentioned in (6) above) and in whose case also proceedings have been initiated as a result of search, provided the additional income-tax payable on the income disclosed in the application exceeds Rs 10 lakh.
8. Therefore, the limit of Rs 50 lakh would be applicable to the tax payer who is the subject matter of search and the limit of Rs 10 lakh would be applicable to entities related to such a tax payer, who are also the subject matter of search.
9. The applicant, in relation to the specified person, means –
| Specified person | Related entity | ||
| (i) | Individual | (1) | Relative of the individual |
| (2) | Any person who has substantial interest in the business or profession of the individual. In addition, the following are also considered as related entity –
· If such person is an individual, any relative of such individual. · If such person is a company, any director of such company or any relative of such director. · If such person is a firm, any partner of such firm, or any relative of such partner. · If such person is an AOP or HUF, any member of the AOP or HUF, or any relative of such member. |
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| (3) | A company, whose director has a substantial interest in the business or profession of the individual;
Any director of such company; Any relative of such director. |
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| (4) | A firm, whose partner has a substantial interest in the business or profession of the individual;
Any partner of such firm; Any relative of such partner. |
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| (5) | An AOP, whose member has a substantial interest in the business or profession of the individual;
Any member of such AOP; Any relative of such member. |
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| (6) | A HUF, whose member has a substantial interest in the business or profession of the individual;
Any member of such HUF; Any relative of such member. |
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| (7) | Where the individual or his relative has a substantial interest in a business or profession carried on by any other person, the person who carries on such business or profession. | ||
| (ii)
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Company
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(1) | Director of the company or any relative of such director |
| (2) | Any person who has substantial interest in the business or profession of the company. In addition, the following are also considered as related entity –
· If such person is an individual, any relative of such individual. · If such person is a company, any director of such company or any relative of such director. · If such person is a firm, any partner of such firm, or any relative of such partner. · If such person is an AOP or HUF, any member of the AOP or HUF, or any relative of such member. |
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| (3)
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A company, whose director has a substantial interest in the business or profession of this company;
Any director of such company; Any relative of such director.
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| (4) | A firm, whose partner has a substantial interest in the business or profession of the company;
Any partner of such firm; Any relative of such partner. |
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| (5) | An AOP, whose member has a substantial interest in the business or profession of the company;
Any member of such AOP; Any relative of such member. |
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| (6) | A HUF, whose member has a substantial interest in the business or profession of the company;
Any member of such HUF; Any relative of such member. |
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| (7) | Where the company or its director or relative of such director has a substantial interest in a business or profession carried on by any other person, the person who carries on such business or profession. | ||
| (iii) | Firm | (1) | Partner of the firm or any relative of such partner |
| (2) | Any person who has substantial interest in the business or profession of the firm. In addition, the following are also considered as related entity –
· If such person is an individual, any relative of such individual. · If such person is a company, any director of such company or any relative of such director. · If such person is a firm, any partner of such firm, or any relative of such partner. · If such person is an AOP or HUF, any member of the AOP or HUF, or any relative of such member. |
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| (3) | A company, whose director has a substantial interest in the business or profession of the firm;
Any director of such company; Any relative of such director. |
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| (4) | A firm, whose partner has a substantial interest in the business or profession of this firm;
Any partner of such firm; Any relative of such partner. |
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| (5) | An AOP, whose member has a substantial interest in the business or profession of the firm;
Any member of such AOP; Any relative of such member. |
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| (6) | A HUF, whose member has a substantial interest in the business or profession of the firm;
Any member of such HUF; Any relative of such member. |
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| (7) | Where the firm or its partner or relative or such partner has a substantial interest in a business or profession carried on by any other person, the person who carries on such business or profession. | ||
| (iv) | AOP | (1) | Member of AOP or any relative of such member |
| (2) | Any person who has substantial interest in the business or profession of the AOP. In addition, the following are also considered as related entity –
· If such person is an individual, any relative of such individual. · If such person is a company, any director of such company or any relative of such director. · If such person is a firm, any partner of such firm, or any relative of such partner. · If such person is an AOP or HUF, any member of the AOP or HUF, or any relative of such member. |
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| (3) | A company, whose director has a substantial interest in the business or profession of the AOP;
Any director of such company; Any relative of such director. |
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| (4) | A firm, whose partner has a substantial interest in the business or profession of the AOP;
Any partner of such firm; Any relative of such partner. |
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| (5) | An AOP, whose member has a substantial interest in the business or profession of this AOP;
Any member of such AOP; Any relative of such member. |
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| (6) | A HUF, whose member has a substantial interest in the business or profession of the AOP;
Any member of such HUF; Any relative of such member. |
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| (7) | Where the AOP or its member or relative of such member has a substantial interest in a business or profession carried on by any other person, the person who carries on such business or profession. | ||
| (v)
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HUF
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(1) | Member of HUF or relative of such member |
| (2) | Any person who has substantial interest in the business or profession of the HUF. In addition, the following are also considered as related entity –
· If such person is an individual, any relative of such individual. · If such person is a company, any director of such company or any relative of such director. · If such person is a firm, any partner of such firm, or any relative of such partner. · If such person is an AOP or HUF, any member of the AOP or HUF, or any relative of such member. |
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| (3) | A company, whose director has a substantial interest in the business or profession of the HUF;
Any director of such company; Any relative of such director. |
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| (4)
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A firm, whose partner has a substantial interest in the business or profession of the HUF;
Any partner of such firm; Any relative of such partner. |
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| (5) | An AOP, whose member has a substantial interest in the business or profession of the HUF;
Any member of such AOP; Any relative of such member. |
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| (6) | A HUF, whose member has a substantial interest in the business or profession of this HUF;
Any member of such HUF; Any relative of such member. |
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| (7) | Where the HUF or its member or relative of such member has a substantial interest in a business or profession carried on by any other person, the person who carries on such business or profession. |
10. A person shall be deemed to have a substantial interest in a business or profession, if –
(i) in a case where the business or profession is carried on by a company, such person is , on the date of search, the beneficial owner of shares (not being shares entitled to a fixed rate of dividend, whether with or without a right to participate in profits) carrying not less than 20% of the voting power.
(ii) in any other case, such person is, on the date of search, beneficially entitled to not less than 20% of the profits of such business or profession.
Such beneficial ownership/beneficial entitlement may be at any time during the previous year.
11. The additional amount of income-tax has to be calculated in the following manner as provided in sub-section (1B) read with sub-section (1C), in a case where the income disclosed in the application relates to only one previous year–
| (i) | If the applicant has not furnished a return in respect of the total income of that year. | Tax should be calculated on the income disclosed in the application as if such income is the total income. Such tax represents the additional amount of incometax. |
| (ii) | If the applicant has furnished a return in respect of the total income of that year. | The tax should be calculated on the aggregate of total income returned and the income disclosed in the application i.e. as if the aggregate represents the total income. The additional amount of income-tax is the amount calculated on such aggregate as reduced by the amount of tax calculated on the total income returned for that year. |
12. Where the income disclosed in the application relates to more than one previous year, then the above procedure is to be adopted in respect of each previous year and the aggregate of tax payable is to be calculated [Sub-section (1D)].
13. Every settlement application made under sub-section (1) should be accompanied by the prescribed fees of Rs 500 [Sub-section (2)].
14. The settlement application made under sub-section (1) cannot be withdrawn by the applicant [Sub-section (3)].
15. The assessee should also intimate to the Assessing Officer in the prescribed manner that he has made an application to the Settlement Commission. Such intimation should be made on the same date when he makes an application to the Settlement Commission [Sub-section (4)].