Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Constitutes the Income-tax Settlement Commission; provides for a Chairman, Vice-Chairmen and Members appointed by the Central Government from persons of integrity and outstanding ability with special knowledge of and experience in problems relating to direct taxes and business accounts; and bars a Member who is a Board member from continuing on the Board.
Heading: Income-tax Settlement Commission.
Finance Act, 2026: Not amended.
Operational status: The Commission ceased to operate for applications made on or after 1 February 2021; its residual functions are discharged by the Interim Board (section 245AA).
Authorities digested: 2 (candour rule — a constitutional/structural provision on appointment and composition; not a litigated charging or machinery section).
A. SECTION COMMENTARY
1. Constitution and qualifications
Section 245B establishes the Settlement Commission as an independent quasi-judicial body and prescribes the calibre of its members — “persons of integrity and outstanding ability, having special knowledge of, and experience in, problems relating to direct taxes and business accounts”. The composition (a Chairman, Vice-Chairmen and Members) and the bar on a serving Board member continuing in that capacity underline that the Commission, though manned largely by senior Revenue officers, was intended to function with detachment from the assessing hierarchy.
2. Significance for judicial review
The expert, high-level composition of the Commission is the doctrinal reason the courts have accorded its factual conclusions a wide margin and confined judicial review to the legality of the process (see Jyotendrasinhji under section 245-I). The qualifications in section 245B thus indirectly shape the standard of review applied to settlement orders.
3. Candour note
Appointment and composition provisions of this kind are challenged, if at all, by way of service or constitutional litigation rather than tax appeals, and no reported decision turning specifically on section 245B's merits has been traced. The provision is digested for completeness, with the structural authorities noted.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
245B.
(1) The Central Government shall constitute a Commission to be called the Income-tax Settlement Commission for the settlement of cases under this Chapter:
Provided that the Income-tax Settlement Commission so constituted shall cease to operate on or after the 1st day of February, 2021.
(2) The Settlement Commission shall consist of a Chairman and as many Vice-Chairmen and other members as the Central Government thinks fit and shall function within the Department of the Central Government dealing with direct taxes.
(2A) [***]
(3) The Chairman, Vice-Chairman and other members of the Settlement Commission shall be appointed by the Central Government from amongst persons of integrity and outstanding ability, having special knowledge of, and, experience in, problems relating to direct taxes and business accounts:
Provided that, where a member of the Board is appointed as the Chairman, Vice-Chairman or as a member of the Settlement Commission, he shall cease to be a member of the Board.
C. AUTHORITIES
Structural provision; the authorities are those that explain why the Commission's expert composition matters to the scope of review.
Cluster 1 — Composition and the standard of review
Jyotendrasinhji v. S.I. Tripathi, (1993) 201 ITR 611 (SC)
Citation: (1993) 201 ITR 611 (SC).
Held / relevance: The Court linked the limited scope of interference with settlement orders to the nature and composition of the Commission as a high-powered expert body — the very feature that section 245B secures. Full digest under section 245-I.
Candour — challenge to constitution
Position: No reported tax decision has been traced striking at the constitution or qualifications under section 245B. Any such challenge belongs to constitutional/service jurisdiction. Stated candidly.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (text as printed in the local Act, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; three asterisks (***) denote words or a provision omitted by amendment and retained only to mark the omission. The Income-tax Settlement Commission ceased to operate for applications made on or after 1 February 2021 (Finance Act, 2021); pending applications stand transferred to the Interim Board for Settlement (section 245AA). Finance Act, 2026 makes no change to any section of Chapter XIX-A. Citations are stated as reported; orders of the Tribunal and High Courts are flagged as such. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.
CHAPTER XIX-A — SETTLEMENT OF CASES
Section 245B — Income-tax Settlement Commission
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Constitutes the Income-tax Settlement Commission; provides for a Chairman, Vice-Chairmen and Members appointed by the Central Government from persons of integrity and outstanding ability with special knowledge of and experience in problems relating to direct taxes and business accounts; and bars a Member who is a Board member from continuing on the Board.
Heading: Income-tax Settlement Commission.
Finance Act, 2026: Not amended.
Operational status: The Commission ceased to operate for applications made on or after 1 February 2021; its residual functions are discharged by the Interim Board (section 245AA).
Authorities digested: 2 (candour rule — a constitutional/structural provision on appointment and composition; not a litigated charging or machinery section).
A. SECTION COMMENTARY
1. Constitution and qualifications
Section 245B establishes the Settlement Commission as an independent quasi-judicial body and prescribes the calibre of its members — “persons of integrity and outstanding ability, having special knowledge of, and experience in, problems relating to direct taxes and business accounts”. The composition (a Chairman, Vice-Chairmen and Members) and the bar on a serving Board member continuing in that capacity underline that the Commission, though manned largely by senior Revenue officers, was intended to function with detachment from the assessing hierarchy.
2. Significance for judicial review
The expert, high-level composition of the Commission is the doctrinal reason the courts have accorded its factual conclusions a wide margin and confined judicial review to the legality of the process (see Jyotendrasinhji under section 245-I). The qualifications in section 245B thus indirectly shape the standard of review applied to settlement orders.
3. Candour note
Appointment and composition provisions of this kind are challenged, if at all, by way of service or constitutional litigation rather than tax appeals, and no reported decision turning specifically on section 245B's merits has been traced. The provision is digested for completeness, with the structural authorities noted.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
245B.
(1) The Central Government shall constitute a Commission to be called the Income-tax Settlement Commission for the settlement of cases under this Chapter:
Provided that the Income-tax Settlement Commission so constituted shall cease to operate on or after the 1st day of February, 2021.
(2) The Settlement Commission shall consist of a Chairman and as many Vice-Chairmen and other members as the Central Government thinks fit and shall function within the Department of the Central Government dealing with direct taxes.
(2A) [***]
(3) The Chairman, Vice-Chairman and other members of the Settlement Commission shall be appointed by the Central Government from amongst persons of integrity and outstanding ability, having special knowledge of, and, experience in, problems relating to direct taxes and business accounts:
Provided that, where a member of the Board is appointed as the Chairman, Vice-Chairman or as a member of the Settlement Commission, he shall cease to be a member of the Board.
C. AUTHORITIES
Structural provision; the authorities are those that explain why the Commission's expert composition matters to the scope of review.
Cluster 1 — Composition and the standard of review
Jyotendrasinhji v. S.I. Tripathi, (1993) 201 ITR 611 (SC)
Citation: (1993) 201 ITR 611 (SC).
Held / relevance: The Court linked the limited scope of interference with settlement orders to the nature and composition of the Commission as a high-powered expert body — the very feature that section 245B secures. Full digest under section 245-I.
Candour — challenge to constitution
Position: No reported tax decision has been traced striking at the constitution or qualifications under section 245B. Any such challenge belongs to constitutional/service jurisdiction. Stated candidly.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the Income-tax Act, 1961 (text as printed in the local Act, base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; three asterisks (***) denote words or a provision omitted by amendment and retained only to mark the omission. The Income-tax Settlement Commission ceased to operate for applications made on or after 1 February 2021 (Finance Act, 2021); pending applications stand transferred to the Interim Board for Settlement (section 245AA). Finance Act, 2026 makes no change to any section of Chapter XIX-A. Citations are stated as reported; orders of the Tribunal and High Courts are flagged as such. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.