Income Tax

Difference between ITD and ITSC

ITD and ITSC are different in respect of their functions. ITSC comes under the ITD, but it works independently from ITD.

In the article, we will discuss the difference between ITD and ITSC. The ITD and ITSC are different from each other in respect of their functions, features, and procedures.

Definition and objective of ITD and ITSC

In the next segment we will learn about the ITD and ITSC in detail; its definition, objective, features.

What is an ITD?

ITD is Income Tax Department is a government agency mostly responsible to monitor the income tax collection in India. The inflow of various taxes is taken care by ITD & their subsequent collection on behalf of Government of India. The ITD comes under the Department of Revenue of the Ministry of Finance.

ITD is being controlled by CBDT (Central Board of Direct Taxes) and is responsible for managing Direct taxes under the ITD. It is a government body headed by the Chairman & comprises of 6 members (ex-officio members Special Secretary of Government).

The aim of ITD (Income Tax Department) is to partner the nation building through progressive tax policy, effective tax administration and improved compliance.

The objectives of ITD are:

• ITD make compliance easy
• To formulate tax policies
• Enforcement of tax laws with fairness already in place
• To deliver quality services
• To upgrade skills
• To build a professional & motivated workforce

What is an ITSC?

ITSC stands for Income Tax Settlement Commission. It is a quasi judicial body set up under the Income Tax Act, 1961^[1]. The primary purpose of ITSC is to resolve the tax liabilities in complicated cases and to avoid endless & prolonged litigation.

A taxpayer can come to ITSC during the pendency of the assessment proceedings, subject to certain conditions. In order to make an application to ITSC, the tax & interest on additional income disclosed before the ITSC has to be paid. The order passed by the ITSC is binding and no appeal can be made to any authority against that order.

ITSC was established in the year 1976 to settle the disputes related to income tax, on the advice of Direct Tax Enquiry Committee lead by Shri K.N. Wanchoo, former Chief Justice of India. The motive behind the committee is to provide a machinery to resolve the tax related disputes and a speedy settlement of disputes.

The ITD and ITSC are different from each other in respect of their functions, features, and procedures. The following are the features of ITSC:

The features of ITSC (Income Tax Settlement Commission) are as follows:

• Under Section 245L of the Income Tax Act, 1961 deals with ITSC.
• It is a quasi judicial body. Also, it is a premier ADR (Alternate Dispute Resolution) body in India.
• The application for the settlement can only be made during the pendency of the assessment proceedings.
• Only the assesse can approach the ITSC.
• Although, it is a part of Tax Department, but is an independent authority used for settlement of tax liability disputes only.
• All the proceedings in ITSC are confidential.
• The order of the settlement commission is not answerable to audit, executive or parliament.
• ITSC is empowered to grant immunity from the prosecution for any offence.
• It can also grant immunity from the imposition of any penalty under the laws relating to Income Tax & Wealth Tax.
• The orders of ITSC are final & are not appealable. Such orders can only be subject to judicial review under Article 136 & 226 of the Constitution of India.
• The Central Government constitutes ITSC, it consists of “persons of integrity and outstanding ability, having special knowledge of, and experience in, problems relating to direct taxes and business accounts” as per the Act.

The objectives of ITSC (Income Tax Settlement Commission) are as follows:

The primary objective of ITSC is to provide an opportunity to the errant taxpayers to approach the commission in case of a dispute.

The other objectives are:

• To provide a machinery for taxpayers in default to come clean.
• To offer speedy settlement.
• To reduce litigation.
• To collect speedy collection of tax at low cost.
• To resolve the complicated cases.        

What are the powers of ITSC?

• It has all the powers of the Income Tax Authorities in relation of the proceedings pending before it.
• As per Section 245E of the Income Tax Act, 1961 ITSC can reopen the case.
• ITSC has an inherent jurisdiction to correct any error committed, in case when such an error is prejudicial to a party for that party is not responsible.
• The commission can grant immunity from prosecution & penalty.
• ITSC can send a case back to the AO (Assessing officer) in case where assesse doesn’t co operate.
• ITSC may waive interest permitted under the IT Act, 1961.

What is the Settlement process at ITSC?

The procedure is:

• The application is to be filed in Form 34B along with the prescribed fees.
• The intimation of filing application before ITSC to be given in Form 34BA to the AO (Assessing Officer). The proof of intimation needs to be submitted before the Commission.
• Proof of payment of additional tax (including the interest) in respect of the additional income disclose before the Commission.
• Full disclosure of the income and the manner of deriving of such income has been made.

Conclusion

ITD is Income Tax Department is a government agency mostly responsible to monitor the income tax collection in India. It takes care of the inflow of various taxes & their subsequent collection on behalf of Government of India.

ITSC is Income Tax Settlement Commission setup under the Income Tax Act, to resolve the tax liabilities in complicated cases and to avoid endless & prolonged litigation.

Therefore, ITD and ITSC are different in respect of their functions. ITSC comes under the ITD but it works independently from ITD. ITSC is a settlement commission setup specifically to resolve the tax liabilities in complicated cases and to avoid endless & prolonged litigation.

Read our article: How to manage Income Tax notices?