Section 245G and Section 245H of Income Tax Act, 1961
Section 245G governs inspection and supply of reports made by income-tax authorities in settlement proceedings. Section 245H deals with the power to grant immunity from prosecution and penalty in qualifying settlement cases.
Section 245G - Inspection of reports
As a general rule, a person is not entitled to inspect or obtain copies of reports made by an income-tax authority to the Settlement Commission. The settlement authority may, however, in its discretion furnish copies on an application and payment of the prescribed fee.
Right to obtain material needed to rebut evidence
Where a report contains evidence brought on record against a person whose case is under consideration, Section 245G protects the opportunity to rebut that material. On an application and payment of the prescribed fee, a certified copy of the relevant report or relevant part must be furnished for that purpose.
Interim Board from 1 February 2021
The Finance Act, 2021 inserted a further proviso providing that on or after 1 February 2021 the functions of the Settlement Commission under Section 245G are performed by the Interim Board, and the section applies to the Interim Board with necessary modifications.
Section 245H - Immunity from prosecution and penalty
Section 245H historically empowered the Settlement Commission to grant immunity, subject to statutory conditions, where the applicant had co-operated in the settlement proceedings and had made a full and true disclosure of income and the manner in which that income was derived. Reasons for granting immunity were required to be recorded in writing.
Scope of immunity before the 2021 transition
The provision permitted immunity from prosecution for an offence under the Income-tax Act and, subject to statutory restrictions, certain other Central laws, together with full or partial immunity from penalty under the Income-tax Act in respect of the case covered by the settlement.
Important restrictions
- Immunity could not be granted where prosecution proceedings for the relevant offence had already been instituted before receipt of the Section 245C application.
- For an application under Section 245C made on or after 1 June 2007, the Settlement Commission could not grant immunity from prosecution for an offence under the Indian Penal Code or under a Central Act other than the Income-tax Act and the Wealth-tax Act, 1957.
- The grant of immunity could be made subject to conditions considered appropriate under the section.
Withdrawal of immunity under Section 245H
Under Section 245H(1A), immunity stands withdrawn where the person fails to pay a sum specified in the settlement order within the permitted time or fails to comply with another condition subject to which immunity was granted. The Income-tax Act then applies as if the immunity had not been granted.
Section 245H(2) also permits withdrawal where the settlement authority is satisfied that the person concealed particulars material to the settlement or gave false evidence during the settlement proceedings. The consequences may include prosecution for the offence for which immunity had been granted or another connected offence, as well as exposure to applicable penalty.
Interim Board power under Section 245H(3)
From 1 February 2021, Section 245H(3) provides that the power of the Settlement Commission under Section 245H is exercised by the Interim Board, and the provisions of the section apply to the Interim Board with necessary modifications.
| Provision | Meaning |
|---|---|
| Section 245G | Inspection and supply of reports made by income-tax authorities in settlement proceedings. |
| Section 245G proviso | Certified copy of relevant adverse material must be supplied for rebuttal on application and payment of the prescribed fee. |
| Section 245H(1) | Power to grant qualifying immunity from prosecution and full or partial immunity from penalty. |
| Section 245H(1A) | Automatic withdrawal for specified non-payment or breach of conditions. |
| Section 245H(2) | Withdrawal for concealment of material particulars or false evidence in settlement proceedings. |
| Section 245H(3) | Interim Board exercises Section 245H power from 1 February 2021. |
Position before Bharatiya Sakshya Adhiniyam, 2023
For the historical legal position before commencement of the Bharatiya Sakshya Adhiniyam, 2023, references in Section 245H to prosecution under the Indian Penal Code, 1860 are relevant subject to the statutory limitations described above. Questions concerning evidence in proceedings from that period must be considered under the evidence law then applicable, while the substantive settlement and immunity powers arise from the Income-tax Act, 1961.