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Income Tax Issues – How to Settle?

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Income tax issuesIf you did no effort in settling your prior Income Tax issues, here is a chance to close it. Individual and company have the right to appeal to a third party over and above the Income Tax department for settlement of disputes. This is done with the help of Income Tax Settlement Commission (ITSC). This commission discusses matter that is a cause of tussle between the two aggrieved parties. The two parties are Income Tax Department and the Assessee. This benefit is only available once in the entire life of the taxable person. Therefore, the option should be utilized for grave matters of concern.


ITSC acts as a mediator and solution provider. This is the dispute resolution body of India. The areas covered by this authority are the Income Tax and Wealth tax. The authority has the power to ask the assessee to deposit taxes and interest in lieu of matters pertaining to the disputed year. Meanwhile, it can also grant tax waiver to the applicant, if his appeal is genuine. However, if the commission later on finds that the facts were concealed, or the evidence given was untrue, such waiver can be taken back.

Application for tax dispute resolution:

The application for resolution of tax dispute can be made between the assessment proceedings. However, for filing an application, you will have to disclose the income not revealed by you earlier. The onus of filing income tax for all such income is also on the applicant. Applicant can ask for settlement relating to dispute only when no assessment order is being passed by the Income Tax authorities and the time limit is not lapsed. The application fee is Rs 500.  Also remember, that an application once filed here cannot be withdrawn. The consideration and acceptance of the application, is made within 14 days. An order in this regard is passed under Section 245D (2C).

Common misconception:

A common misconception is that ITSC is the part of Income Tax Department. It is in fact an independent quasi judicial authority. Another misconception is that the application can be made again. It cannot be; this is once in a life time opportunity. If you have filed the appeal with ITSR once, next time you will have to follow Income Tax Act, 1961. This means that you will be able to appeal against Assessing officer of IT Department to Commissioner Appeals.

Settlement Procedure:

In case, application is held valid, than the ITSC will ask the Commission Income Tax to submit his report within 45 days. The commission also shares the portion of application with the Commissioner. This confidential report copy is also shared with the assessee. Hearings are fixed on suitable dates and the judgment is passed within 18 months from the date of application. Generally, within the time frame the decision is made, if it is not, then the abatement of the case to Income Tax takes place.

Additional Tax Burden:

The applicant is required to file additional tax for filing the settlement application. In case, where the return was not furnished on the total income of the year, tax will be on income disclosed by the applicant. If the number of years is higher, income tax is calculated on the income disclosed for all additional years. The person is also liable on the amount of income disclosed as per the provision of Section 208. If he was eligible to pay advance tax, but failed to do so, then a penalty of 1% on the tax shall be paid for each month starting from 1st April. The advance tax paid should be 30% before 15th September, 60% from 15th September to 15th December, and 100% thereof.

Genuine assesses who are not satisfied with the orders of Income Tax authorities should proceed to file the case with ITSC. The unbiased approach is the biggest advantage to sit on the negotiating table this time.

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