Section 245HA — Abatement of Proceeding Before Settlement Commission
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Provides for abatement of the settlement proceeding in specified contingencies (including non-disposal within the prescribed time), whereupon the Assessing Officer (or other authority) disposes of the case under the Act as if no application had been made, with provision for exclusion of time and the use/non-use of material produced before the Commission; with the corresponding rules where a firm's registration is cancelled.
Heading: Abatement of proceeding before Settlement Commission.
Finance Act, 2026: Not amended.
Authorities digested: 2 (the constitutional challenge to the abatement provision and its read-down).
A. SECTION COMMENTARY
1. The mischief and the challenge
The Finance Act, 2007 recast Chapter XIX-A and provided, in section 245HA, for the abatement of pending settlement proceedings in certain contingencies — notably where the Commission did not dispose of the application within the prescribed time. The vice complained of was that an applicant could lose the settlement, and have the case revert to the Assessing Officer, for delay not attributable to him — a result said to be arbitrary and violative of Article 14, because the abatement consequence followed regardless of fault.
2. The read-down solution
The Bombay High Court in Star Television News read section 245HA(1)(iv) down rather than striking it: the provision was construed to mean that the proceeding abates only where the application could not be disposed of for reasons attributable to the applicant. So read, the provision is not arbitrary, and an applicant is not penalised for the Commission's delay. On the Revenue's appeal, the Supreme Court found the judgment well-considered and declined to interfere.
3. Consequences of abatement
On abatement, the Assessing Officer disposes of the case as if no settlement application had been made, with the statutory exclusion of time, and subject to the restriction (the proviso) on using the material produced before the Commission except as permitted. The credit for tax and interest paid during the settlement is preserved by section 245HAA.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
245HA.
(1) Where— (i) an application made under section 245C on or after the 1st day of June, 2007 has been rejected under sub-section (1) of section 245D; or (ii) an application made under section 245C has not been allowed to be proceeded with under sub-section (2A) or further proceeded with under sub-section (2D) of section 245D; or (iii) an application made under section 245C has been declared as invalid under sub-section (2C) of section 245D; or (iiia) in respect of any application made under section 245C, an order under sub-section (4) of section 245D has been passed not providing for the terms of settlement; or (iv) in respect of any other application made under section 245C, an order under sub-section (4) of section 245D has not been passed within the time or period specified under sub-section (4A) of section 245D, the proceedings before the Settlement Commission shall abate on the specified date.
Explanation.—For the purposes of this sub-section, "specified date" means— (a) in respect of an application referred to in clause (i), the day on which the application was rejected; (b) in respect of an application referred to in clause (ii), the 31st day of July, 2007; (c) in respect of an application referred to in clause (iii), the last day of the month in which the application was declared invalid; (ca) in respect of an application referred to clause (iiia), the day on which the order under sub-section (4) of section 245D was passed not providing for the terms of settlement; (d) in respect of an application referred to in clause (iv), on the date on which the time or period specified in sub-section (4A) of section 245D expires.
(2) Where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other income-tax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under section 245C had been made.
(3) For the purposes of sub-section (2), the Assessing Officer, or, as the case may be, other income-tax authority, shall be entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it, as if such material, information, inquiry and evidence had been produced before the Assessing Officer or other income-tax authority or held or recorded by him in the course of the proceedings before him.
(4) For the purposes of the time-limit under sections 149, 153, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or 244 or, as the case may be, section 244A, for making the assessment or reassessment under sub-section (2), the period commencing on and from the date of the application to the Settlement Commission under section 245C and ending with "specified date" referred to in sub-section (1) shall be excluded; and where the assessee is a firm, for the purposes of the time-limit for cancellation of registration of the firm under sub-section (1) of section 186, the period aforesaid shall, likewise, be excluded.
Words/sub-sections omitted by amendment carry the marker [***].
C. AUTHORITIES
Two linked decisions: the read-down of the abatement provision and its affirmance.
Cluster 1 — Read-down of the abatement provision
Star Television News Ltd. v. Union of India, (2009) 317 ITR 260 (Bom)
Citation: (2009) 317 ITR 260 (Bom); decided 7 August 2009.
Facts: Challenge to section 245HA(1)(iv) and 245HA(3), as inserted by the Finance Act, 2007, as violative of Article 14 because a pending settlement could abate for delay not attributable to the applicant.
Held: The Court read down section 245HA(1)(iv) to mean that abatement follows only where the application could not be disposed of for reasons attributable to the applicant; so construed, the provision survives the Article 14 challenge.
Relevance: The leading authority on the construction of the abatement provision; protects diligent applicants from abatement for the Commission's delay.
Union of India v. Star Television News Ltd., (2015) (SC)
Held: The Bombay High Court's judgment reading down section 245HA was a well-considered one that did not call for interference; the Revenue's appeal was dismissed.
Relevance: Apex affirmance of the read-down construction of section 245HA.
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 245HA — Abatement of Proceeding Before Settlement Commission
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Provides for abatement of the settlement proceeding in specified contingencies (including non-disposal within the prescribed time), whereupon the Assessing Officer (or other authority) disposes of the case under the Act as if no application had been made, with provision for exclusion of time and the use/non-use of material produced before the Commission; with the corresponding rules where a firm's registration is cancelled.
Heading: Abatement of proceeding before Settlement Commission.
Finance Act, 2026: Not amended.
Authorities digested: 2 (the constitutional challenge to the abatement provision and its read-down).
A. SECTION COMMENTARY
1. The mischief and the challenge
The Finance Act, 2007 recast Chapter XIX-A and provided, in section 245HA, for the abatement of pending settlement proceedings in certain contingencies — notably where the Commission did not dispose of the application within the prescribed time. The vice complained of was that an applicant could lose the settlement, and have the case revert to the Assessing Officer, for delay not attributable to him — a result said to be arbitrary and violative of Article 14, because the abatement consequence followed regardless of fault.
2. The read-down solution
The Bombay High Court in Star Television News read section 245HA(1)(iv) down rather than striking it: the provision was construed to mean that the proceeding abates only where the application could not be disposed of for reasons attributable to the applicant. So read, the provision is not arbitrary, and an applicant is not penalised for the Commission's delay. On the Revenue's appeal, the Supreme Court found the judgment well-considered and declined to interfere.
3. Consequences of abatement
On abatement, the Assessing Officer disposes of the case as if no settlement application had been made, with the statutory exclusion of time, and subject to the restriction (the proviso) on using the material produced before the Commission except as permitted. The credit for tax and interest paid during the settlement is preserved by section 245HAA.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
245HA.
(1) Where— (i) an application made under section 245C on or after the 1st day of June, 2007 has been rejected under sub-section (1) of section 245D; or (ii) an application made under section 245C has not been allowed to be proceeded with under sub-section (2A) or further proceeded with under sub-section (2D) of section 245D; or (iii) an application made under section 245C has been declared as invalid under sub-section (2C) of section 245D; or (iiia) in respect of any application made under section 245C, an order under sub-section (4) of section 245D has been passed not providing for the terms of settlement; or (iv) in respect of any other application made under section 245C, an order under sub-section (4) of section 245D has not been passed within the time or period specified under sub-section (4A) of section 245D, the proceedings before the Settlement Commission shall abate on the specified date.
Explanation.—For the purposes of this sub-section, "specified date" means— (a) in respect of an application referred to in clause (i), the day on which the application was rejected; (b) in respect of an application referred to in clause (ii), the 31st day of July, 2007; (c) in respect of an application referred to in clause (iii), the last day of the month in which the application was declared invalid; (ca) in respect of an application referred to clause (iiia), the day on which the order under sub-section (4) of section 245D was passed not providing for the terms of settlement; (d) in respect of an application referred to in clause (iv), on the date on which the time or period specified in sub-section (4A) of section 245D expires.
(2) Where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other income-tax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under section 245C had been made.
(3) For the purposes of sub-section (2), the Assessing Officer, or, as the case may be, other income-tax authority, shall be entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it, as if such material, information, inquiry and evidence had been produced before the Assessing Officer or other income-tax authority or held or recorded by him in the course of the proceedings before him.
(4) For the purposes of the time-limit under sections 149, 153, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or 244 or, as the case may be, section 244A, for making the assessment or reassessment under sub-section (2), the period commencing on and from the date of the application to the Settlement Commission under section 245C and ending with "specified date" referred to in sub-section (1) shall be excluded; and where the assessee is a firm, for the purposes of the time-limit for cancellation of registration of the firm under sub-section (1) of section 186, the period aforesaid shall, likewise, be excluded.
Words/sub-sections omitted by amendment carry the marker [***].
C. AUTHORITIES
Two linked decisions: the read-down of the abatement provision and its affirmance.
Cluster 1 — Read-down of the abatement provision
Star Television News Ltd. v. Union of India, (2009) 317 ITR 260 (Bom)
Citation: (2009) 317 ITR 260 (Bom); decided 7 August 2009.
Facts: Challenge to section 245HA(1)(iv) and 245HA(3), as inserted by the Finance Act, 2007, as violative of Article 14 because a pending settlement could abate for delay not attributable to the applicant.
Held: The Court read down section 245HA(1)(iv) to mean that abatement follows only where the application could not be disposed of for reasons attributable to the applicant; so construed, the provision survives the Article 14 challenge.
Relevance: The leading authority on the construction of the abatement provision; protects diligent applicants from abatement for the Commission's delay.
Union of India v. Star Television News Ltd., (2015) (SC)
Citation: Supreme Court (affirming (2009) 317 ITR 260 (Bom)).
Held: The Bombay High Court's judgment reading down section 245HA was a well-considered one that did not call for interference; the Revenue's appeal was dismissed.
Relevance: Apex affirmance of the read-down construction of section 245HA.
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.