The Central Board of Direct Taxes (CBDT) on Tuesday said that taxpayers can now file application for settlement till 30th September. In a statement, the board said that in order to dispose off the pending settlement applications as on 31 January 2021, the central government has constituted Interim Board for Settlement. “The taxpayers, in the pending cases, have the option to withdraw their applications within the specified time and intimate the Assessing Officer about such withdrawal,” it said.

The deadline extension was announced on Tuesday, September 7.

The Income-tax Act of 1961 was changed by the Finance Act of 2021, which provided that the Income-tax Settlement Commission (ITSC) would cease to exist on February 1, 2021. While the new Finance Act states that no settlement applications can be filed on or after February 1, 2021, the government has established an Interim Board for Settlement to handle pending settlement applications. The assessee, on the other hand, can only file a settlement application within the extended time if he or she was qualified to file on January 31, 2021.

Talking about the reason for the extension, CBDT said, “It has been represented that a number of taxpayers were in advanced stages of filing their application for settlement before the ITSC as on 01.02.2021. Further, some taxpayers have approached High Courts requesting that their applications for settlement may be accepted. In some cases, the Hon’ble High Courts have given interim relief and directed acceptance of applications of settlement even after 01.02.2021. This has resulted in uncertainty and protracted litigation,”  CBDT added. 

Here’s what the latest decision by the CBDT means, in five points:

  • The CBDT took the decision in order to provide relief to the taxpayers who were eligible to file the settlement application as of January 31, 2021, but were unable to do so due to the cessation of the ITSC vide Finance Act, 2021. Therefore, these applicants shall have the option to file their settlements before the newly constituted Interim Board by September 30.
  • However, the taxpayers who have already filed their respective tax settlement applications on or after February 1, 2021, in line with the directions of the high courts in several states shall not be required to do so again.
  • Moreover, these applicants are also not eligible to avail the option of withdrawing their settlement applications as per provisions of Section 245M of the ITSC vide Finance Act.
  • Thus, the taxpayers who can avail the benefits of the extended deadline need to fulfill these conditions – that they were eligible to file the tax settlement application before January 31, 2021, and that their relevant assessment proceedings were still pending as of the date of filing the application for settlement.
  • Notably, the Finance Act, 2021, amended the provisions of the Income Tax Act, 1961, to provide that the Income Tax Settlement Commission (ITSC) shall cease to operate with effect from February 1, 2021.