Section 245M — Option to Withdraw Pending Application
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Gives an assessee with a pending application the option to withdraw it within three months of the commencement of the Finance Act, 2021, intimating the Assessing Officer; failing withdrawal, the application is deemed received by the Interim Board on allotment/transfer; the Board provides for allotment/transfer of pending applications; on withdrawal the proceeding abates and the case reverts to the Assessing Officer, with exclusion of time and restriction on use of material produced before the Commission.
Heading: Option to withdraw pending application.
Inserted by: Finance Act, 2021, with effect from 1 February 2021 — the bridge from the Settlement Commission to the Interim Board.
Finance Act, 2026: Not amended.
Authorities digested: 2 (candour rule — a 2021 transitional provision; the relevant authority is on the transitional access to the Interim Board).
A. SECTION COMMENTARY
1. The bridge provision
Section 245M is the mechanism by which the existing stock of settlement applications was handled when the Commission was discontinued. An applicant with a pending application was given a one-time, three-month option to withdraw it and have the case revert to the Assessing Officer; if he did not withdraw, the application was deemed to have been received by the Interim Board on its allotment/transfer, and the Board took over its disposal under the powers of the erstwhile Commission. The provision protects the applicant's accrued position — on withdrawal, time is excluded and the material produced before the Commission is, in general, not to be used against him.
2. Election between two forums
The section presents the applicant with an election: continue before the Interim Board (and obtain a settlement on the disclosed terms) or withdraw and contest the assessment before the Assessing Officer with the benefit of the protective provisos. The choice is consequential, because once the Board disposes of the application its order is conclusive under section 245-I, whereas withdrawal reopens the ordinary assessment and appellate route.
3. Transitional access
Section 245M operates on “pending applications”, and the question of which applications were validly pending was settled by the Jain Metal Rolling Mills line (read-down of the 1 February 2021 cut-off to 31 March 2021), affirmed by the Supreme Court's dismissal of the Revenue's SLP. That jurisprudence delimits the universe of applications eligible for the section 245M option and for Interim Board disposal.
4. Candour note
Section 245M is a 2021 transitional provision and has generated no direct merits authority of its own; the relevant decisions concern access to the Interim Board, digested here and under section 245AA/245C. Stated candidly.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
245M.
(1) With respect to a pending application, the assessee who had filed such application may, at his option, withdraw such application within a period of three months from the date of commencement of the Finance Act, 2021 and intimate the Assessing Officer, in the prescribed manner, about such withdrawal.
(2) Where the option under sub-section (1) is not exercised by the assessee within the time allowed under that sub-section, the pending application shall be deemed to have been received by the Interim Board on the date on which such application is allotted or transferred to the Interim Board under sub-section (3).
(3) The Board may, by an order, allot any pending application to any Interim Board and may also transfer, by an order, any pending application from one Interim Board to another Interim Board.
(4) Where the pending application is allotted to an Interim Board under sub-section (3) or transferred to another Interim Board subsequently, all the records, documents or evidences, by whatever name called, with the Settlement Commission shall be transferred to such Interim Board and shall be deemed to be the records before it for all purposes.
(5) Where the assessee exercises the option under sub-section (1) to withdraw his application, the proceedings with respect to the application shall abate on the date on which such application is withdrawn and 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:
Provided that for the purposes of the time-limit under sections 149, 153, 153B, 154 and 155 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 this sub-section, the period commencing on and from the date of the application to the Settlement Commission under section 245C and ending with the date referred to in this sub-section shall be excluded:
Provided further that the income-tax authority shall not be entitled to use 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 proceedings before it:
Provided also that nothing contained in the first proviso shall apply in relation to the material and other information collected, or results of the inquiry held or evidence recorded by the Assessing Officer, or as the case may be, other income-tax authority during the course of any other proceeding under this Act irrespective of whether such material or other information or results of the inquiry or evidence were also produced by the assessee or the Assessing Officer before the Settlement Commission.
Words/sub-sections omitted by amendment carry the marker [***].
C. AUTHORITIES
Transitional bridge provision; the governing authority is on access to the Interim Board.
Cluster 1 — Transitional access to the Interim Board
Jain Metal Rolling Mills v. Union of India, (2023) 156 taxmann.com 513 / (2024) 461 ITR 423 (Mad)
Held: Read down the retrospective 1 February 2021 cut-off to 31 March 2021, defining the pending/eligible applications that pass to, and may be disposed of by, the Interim Board — the universe on which section 245M operates.
Relevance: The governing authority on the pool of ‘pending applications’ for section 245M.
Position: No reported decision construing the section 245M withdrawal/allotment mechanism on its merits has been traced. It is transitional machinery; the contested question (which applications were validly pending) is answered by the Jain Metal Rolling Mills line. 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 245M — Option to Withdraw Pending Application
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Provision: Gives an assessee with a pending application the option to withdraw it within three months of the commencement of the Finance Act, 2021, intimating the Assessing Officer; failing withdrawal, the application is deemed received by the Interim Board on allotment/transfer; the Board provides for allotment/transfer of pending applications; on withdrawal the proceeding abates and the case reverts to the Assessing Officer, with exclusion of time and restriction on use of material produced before the Commission.
Heading: Option to withdraw pending application.
Inserted by: Finance Act, 2021, with effect from 1 February 2021 — the bridge from the Settlement Commission to the Interim Board.
Finance Act, 2026: Not amended.
Authorities digested: 2 (candour rule — a 2021 transitional provision; the relevant authority is on the transitional access to the Interim Board).
A. SECTION COMMENTARY
1. The bridge provision
Section 245M is the mechanism by which the existing stock of settlement applications was handled when the Commission was discontinued. An applicant with a pending application was given a one-time, three-month option to withdraw it and have the case revert to the Assessing Officer; if he did not withdraw, the application was deemed to have been received by the Interim Board on its allotment/transfer, and the Board took over its disposal under the powers of the erstwhile Commission. The provision protects the applicant's accrued position — on withdrawal, time is excluded and the material produced before the Commission is, in general, not to be used against him.
2. Election between two forums
The section presents the applicant with an election: continue before the Interim Board (and obtain a settlement on the disclosed terms) or withdraw and contest the assessment before the Assessing Officer with the benefit of the protective provisos. The choice is consequential, because once the Board disposes of the application its order is conclusive under section 245-I, whereas withdrawal reopens the ordinary assessment and appellate route.
3. Transitional access
Section 245M operates on “pending applications”, and the question of which applications were validly pending was settled by the Jain Metal Rolling Mills line (read-down of the 1 February 2021 cut-off to 31 March 2021), affirmed by the Supreme Court's dismissal of the Revenue's SLP. That jurisprudence delimits the universe of applications eligible for the section 245M option and for Interim Board disposal.
4. Candour note
Section 245M is a 2021 transitional provision and has generated no direct merits authority of its own; the relevant decisions concern access to the Interim Board, digested here and under section 245AA/245C. Stated candidly.
B. STATUTORY POSITION (verbatim text)
The text of the section, as it stands in the Act (FA-2025 base), is set out below.
245M.
(1) With respect to a pending application, the assessee who had filed such application may, at his option, withdraw such application within a period of three months from the date of commencement of the Finance Act, 2021 and intimate the Assessing Officer, in the prescribed manner, about such withdrawal.
(2) Where the option under sub-section (1) is not exercised by the assessee within the time allowed under that sub-section, the pending application shall be deemed to have been received by the Interim Board on the date on which such application is allotted or transferred to the Interim Board under sub-section (3).
(3) The Board may, by an order, allot any pending application to any Interim Board and may also transfer, by an order, any pending application from one Interim Board to another Interim Board.
(4) Where the pending application is allotted to an Interim Board under sub-section (3) or transferred to another Interim Board subsequently, all the records, documents or evidences, by whatever name called, with the Settlement Commission shall be transferred to such Interim Board and shall be deemed to be the records before it for all purposes.
(5) Where the assessee exercises the option under sub-section (1) to withdraw his application, the proceedings with respect to the application shall abate on the date on which such application is withdrawn and 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:
Provided that for the purposes of the time-limit under sections 149, 153, 153B, 154 and 155 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 this sub-section, the period commencing on and from the date of the application to the Settlement Commission under section 245C and ending with the date referred to in this sub-section shall be excluded:
Provided further that the income-tax authority shall not be entitled to use 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 proceedings before it:
Provided also that nothing contained in the first proviso shall apply in relation to the material and other information collected, or results of the inquiry held or evidence recorded by the Assessing Officer, or as the case may be, other income-tax authority during the course of any other proceeding under this Act irrespective of whether such material or other information or results of the inquiry or evidence were also produced by the assessee or the Assessing Officer before the Settlement Commission.
Words/sub-sections omitted by amendment carry the marker [***].
C. AUTHORITIES
Transitional bridge provision; the governing authority is on access to the Interim Board.
Cluster 1 — Transitional access to the Interim Board
Jain Metal Rolling Mills v. Union of India, (2023) 156 taxmann.com 513 / (2024) 461 ITR 423 (Mad)
Citation: (2023) 156 taxmann.com 513 / (2024) 461 ITR 423 (Mad); SLP dismissed, (2024) 467 ITR 169 (SC).
Held: Read down the retrospective 1 February 2021 cut-off to 31 March 2021, defining the pending/eligible applications that pass to, and may be disposed of by, the Interim Board — the universe on which section 245M operates.
Relevance: The governing authority on the pool of ‘pending applications’ for section 245M.
Candour — direct authority on section 245M
Position: No reported decision construing the section 245M withdrawal/allotment mechanism on its merits has been traced. It is transitional machinery; the contested question (which applications were validly pending) is answered by the Jain Metal Rolling Mills line. 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.