The Income Tax Settlement Commission is a premier Alternative Dispute Resolution body set up by the Government of India to resolve tax disputes between Income Tax Department and taxpayers.
This Institution was set up in 1976 on the recommendations of the Direct Taxes Enquiry Committee (1971) headed by Justice K.N. Wanchoo, retired Chief Justice of the Supreme Court of India, which proposed creation of a mechanism under which a tax defaulter may be provided a once in a life time opportunity to come clean and make clean breast of his affairs. At present apart from the principal Bench, which is situated at New Delhi there are six more Benches of the Commission located at New Delhi, Mumbai, Kolkata and Chennai. The Benches of the Commission are manned by officers with a long and wide ranging experience in resolution of tax disputes.
The settlement mechanism allows the taxpayers to disclose additional Income before the Commission over and above what has been already disclosed before the Income tax Department. The applicant has to pay full amount of tax and interest on the additional income disclosed before the Commission before filing the application. The Commission then decides upon the admissibility of the application and in case of admitted applications, it carries out the process of settlement in a time bound manner providing the required opportunity to both parties.
Under the existing laws, the Commission is required to pass the settlement order within 18 months of filling of the application. As the commission has wide power of granting immunity from penalty and prosecution under the Income tax Act, the orders passed by the Commission are final and conclusive. The Settlement Commission is thus able to provide a quick and final resolution of all the tax disputes in a given case thus saving the taxpayer from protracted litigation. The resolution of tax disputes under settlement proceedings also helps in reducing the pressure on the Income tax department’s manpower resources and in collection of tax dues in a time bound manner.
At present the benefit of the settlement mechanism can be availed by a taxpayer only once in life-time.