Section 245E of the Income-tax Act, 1961: Power to Reopen Completed Proceedings
Section 245E historically empowered the Income-tax Settlement Commission to reopen certain completed income-tax proceedings connected with a pending settlement case. The power was conditional, and a decisive statutory restriction made it unavailable for applications filed on or after 1 June 2007.
What did Section 245E provide?
The provision concerned a completed proceeding under the Income-tax Act, 1961 that was connected with a case pending before the Settlement Commission but was not itself included in the original settlement application under Section 245C. Where the statutory conditions were met, the Commission could reopen that proceeding and make an appropriate order as though the settlement case also covered it.
The power was not an ordinary reassessment power available to an Assessing Officer. It belonged to the Settlement Commission and depended on the existence of a qualifying pending settlement case.
Conditions for reopening under Section 245E
| Requirement | Meaning |
|---|---|
| Pending settlement case | The related case had to be pending before the Settlement Commission. |
| Connected completed proceeding | The proceeding proposed to be reopened had already been completed by an income-tax authority before the Section 245C application. |
| Necessity or expediency | The Commission had to consider reopening necessary or expedient for proper disposal of the pending case. |
| Written reasons | The reasons for the Commission's opinion had to be recorded in writing. |
| Applicant's concurrence | The applicant had to agree to the reopening. |
| Nine-year outer limit | Reopening was prohibited where the period between the end of the relevant assessment year and the settlement application exceeded nine years. |
| Application date restriction | No proceeding could be reopened under Section 245E where the Section 245C application was made on or after 1 June 2007. |
Meaning of key legal expressions
Completed proceeding: An income-tax proceeding that the relevant authority had already concluded before the settlement application was made. Concurrence: The applicant's agreement to the proposed reopening. Proper disposal: The Commission's effective resolution of the matters before it, subject to statutory requirements. Assessment year: The year used by income-tax law for assessing income of the corresponding previous year.
Section 245E: historical statutory text
If the Settlement Commission is of the opinion (the reasons for such opinion to be recorded by it in writing) that, for the proper disposal of the case pending before it, it is necessary or expedient to reopen any proceeding connected with the case but which has been completed under this Act by any income-tax authority before the application under section 245C was made, it may, with the concurrence of the applicant, reopen such proceeding and pass such order thereon as it thinks fit, as if the case in relation to which the application for settlement had been made by the applicant under that section covered such proceeding also:
First proviso: No proceeding shall be reopened if the period between the end of the assessment year to which the proceeding relates and the date of the settlement application exceeds nine years.
Second proviso: No proceeding shall be reopened under this section where an application under section 245C is made on or after 1 June 2007.
The text above is presented in cleaned form for historical reference, with the obsolete amendment-marker notation removed. Consult the official statute and amendments for authoritative wording.
Legislative amendment history
- Finance Act, 1984 (Act 67 of 1984), section 42: Omitted the historical reference to proceedings under the Indian Income-tax Act, 1922, effective 1 October 1984.
- Finance Act, 1987 (Act 11 of 1987), section 62: Substituted the first proviso, effective 1 June 1987.
- Finance Act, 2007 (Act 22 of 2007), section 66: Inserted the second proviso, effective 1 June 2007, prohibiting reopening for settlement applications filed on or after that date.
Legal status after 2007, 2021 and 2026
From 1 June 2007: reopening power barred for new applications
The second proviso is central to the interpretation of Section 245E. Even when a proceeding was connected to the case and the applicant consented, a settlement application made on or after 1 June 2007 could not support reopening under this section. The nine-year limit did not override this later, absolute application-date bar.
From 1 February 2021: Settlement Commission discontinued
The Finance Act, 2021 ended the settlement-application regime before the Income-tax Settlement Commission with effect from 1 February 2021 and introduced transitional arrangements, including Interim Boards for Settlement, for specified pending applications. These arrangements should not be mistaken for a revival of Section 245E's already-restricted reopening power. See related provisions on the Settlement Commission, settlement procedure, and the official statutory materials.
From 1 April 2026: Income-tax Act, 2025
The Income-tax Act, 2025 replaced the 1961 Act for the periods governed by the new law, subject to repeal, saving and transitional rules. Historical disputes and orders may still require examining the law applicable to the relevant period. Section 245E should not be cited as an active, general power to reopen completed assessments.
Illustration: when the 2007 bar applies
Suppose an assessee applied for settlement on 15 July 2008 and asked the Commission to reopen an older completed assessment connected with the settlement case. Even if the applicant consented and the Commission considered reopening helpful, Section 245E could not be used, because the settlement application was made after 1 June 2007.
By contrast, a historical application made before 1 June 2007 would have required examination of the remaining statutory conditions, including written reasons, concurrence, the nine-year period and the law applicable to that case. This is an illustration of the historical framework, not a present-day filing option.
Official law and government resources
- India Code: Central Acts and statutory texts (search for the Income-tax Act, 1961 and Income-tax Act, 2025).
- Income Tax Department: legislation, circulars and tax guidance.
- e-Gazette of India: Finance Acts and official notifications.
- Income Tax e-Filing portal.
Government links are reference sources, not website navigation items. Always check the relevant amendment, commencement and saving provisions before relying on an older settlement case.
Frequently asked questions
Can Section 245E be used for a settlement application filed after 1 June 2007?
No. The second proviso expressly bars reopening under Section 245E where the application under Section 245C was made on or after 1 June 2007.
Was the applicant's consent required?
Yes. Under the historical main provision, the Settlement Commission needed the applicant's concurrence and had to record reasons in writing.
What was the nine-year limit?
The first proviso barred reopening if more than nine years elapsed between the end of the relevant assessment year and the date of the settlement application.
Can a new application be filed with the Settlement Commission now?
No. The Settlement Commission was discontinued with effect from 1 February 2021. Transitional arrangements for eligible pending applications were made through Interim Boards.
This article provides general legal information and historical context; it is not a substitute for advice on the facts of a particular proceeding.