The Telangana High Court has asked the Income Tax Settlement Commission to accept an application of settlement under Section 245 (C) of the Income Tax Act.

The order comes in a Writ Petition filed by Green City Dukes Estates which contended that while the section continues in the Income Tax Act, the Income Tax Settlement Commission has stopped receiving applications.

This comes in the backdrop of the Finance Bill, 2021, which proposed that the Income-tax Settlement Commission shall cease to operate on or after February 1, 2021. It has also proposed to amend section 245C of the Act so as to provide that no application shall be made under this section on or after February 1, 2021.

The Bill has proposed that the amendments will take effect retrospectively from February 1, 2021.

“...just because the bill is introduced that will not have enforceability of law, unless it is passed by the Parliament and notification issued to that effect,” the counsel for Green City Dukes Estates contended.

The respondents to the Writ Petition include the Department of Revenue, Ministry of Finance, Assistant Commissioner of Income Tax, Central Wing, Hyderabad and lncome Tax Settlement Commission (ITSC), Chennai Bench.

“In the present case nothing has happened and the statute remains on the statute book. The third respondent (ITSC) is obligated to receive the application as long as the statute is valid and subsisting,” the High Court said in its order.

The case is listed for hearing on April 12.

Dispute resolution panel

The Union Budget 2021-22 has proposed setting up a Dispute Resolution Committee to reduce litigation and give an impetus to the dispute resolution for small taxpayers. It has accordingly, proposed discontinuing the ITSC.

“However, the pending cases shall be decided by an Interim Board if opted by the applicant,” the Annex to the Budget Speech had proposed.

Many tax experts have also raised concerns over the issue.

The Income Tax Bar Association, Calcutta has sent a representation to Finance Minister Nirmala Sitharaman noting that discontinuing the ITSC will result in a spurt of litigations and delayed collection of revenue.

“As far as direct tax is concerned, any amendment is made effective from the passing of the Finance Act or from a particular date usually from the beginning of a financial year,” the representation said, adding that assesses searched on or before March 31, 2021 should be allowed to file their settlement applications within a stipulated time frame.

It has also said the filing of fresh cases of settlement before the ITSC (as it exists on January 31, 2021) may also be extended up until the date on which the Finance Act, 2021 takes effect.

“The intent and rationale behind this unprecedented move remain unsupported, since no such object and/or reasons behind the introduction to Clauses 54 to 65 to the Finance Bill, 2021 stand provided,” said SK Tulsyan, President, ITBA Calcutta.

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