Section 245HA: Abatement of Proceedings Before the Settlement Commission
Section 245HA sets out the events that terminate a settlement proceeding, the consequences for the underlying income-tax case, the treatment of information gathered during settlement, and exclusions from specified statutory time limits.
What does abatement mean under Section 245HA?
Abatement is the statutory termination of a proceeding before the former Settlement Commission without its continuing to a valid settlement. It does not, by itself, extinguish the tax dispute, cancel the underlying assessment proceeding, or establish a final tax liability. The competent income-tax authority resumes or disposes of the case under the applicable law.
The provision should be read with section 245C (application for settlement) and section 245D (procedure and settlement orders).
Section 245HA(1): When does a settlement proceeding abate?
| Statutory circumstance | Relevant date or consequence |
|---|---|
| Application filed on or after 1 June 2007 rejected under section 245D(1) | Date of rejection |
| Application not allowed to proceed under section 245D(2A), or not allowed to proceed further under section 245D(2D) | 31 July 2007, under the historical transitional rule |
| Application declared invalid under section 245D(2C) | Last day of the month in which invalidity was declared |
| Order under section 245D(4) passed without providing terms of settlement | Date of that order |
| No settlement order under section 245D(4) within the applicable section 245D(4A) deadline | Expiry of the applicable statutory period |
The expression specified date is defined in the Explanation to section 245HA(1) separately for each circumstance. The 2007 dates are historical transitional rules, not current filing deadlines.
Sections 245HA(2) and (3): What happens after abatement?
The underlying case returns to the tax authority
Under sub-section (2), the Assessing Officer or other income-tax authority before whom the proceeding was pending when the settlement application was made disposes of the case in accordance with the Act as if no application under section 245C had been made. The case must still be decided according to the applicable evidence, procedural safeguards and law.
Settlement materials may be used
Under sub-section (3), the authority may use material and information produced by the taxpayer before the Settlement Commission, as well as inquiry results and evidence recorded in that process, as if those materials had been produced or recorded before that authority. Abatement therefore does not automatically make disclosures or evidence confidential or unusable for subsequent proceedings.
Where the taxpayer disputes a proposed addition or adverse inference, the applicable assessment procedures and principles of natural justice remain important.
Section 245HA(4): Exclusion of time from statutory limits
For the limitation provisions expressly identified in sub-section (4), the period starting with the section 245C settlement application and ending on the specified abatement date is excluded when calculating the relevant time limit. The provision historically names sections 149, 153, 153B, 154, 155, 158BE and 231, together with interest provisions 243, 244 and 244A, and a former firm-registration provision in section 186.
Several listed provisions have been amended, replaced, omitted or rendered inapplicable over time. They should not be treated as universally operative in 2026. For a live dispute, identify the relevant assessment year, date of application, date of abatement, the statutory version applicable to that proceeding and any transitional savings.
Illustration: Abatement and resumed assessment
Suppose a taxpayer filed a valid historical settlement application while an assessment was pending, but the application was later declared invalid under section 245D(2C). Under the historical section 245HA framework, the settlement proceeding abates on the last day of the month in which it was declared invalid. The appropriate tax authority then deals with the underlying matter, may use material from the settlement proceeding and must calculate the relevant limitation period after applying any statutory exclusion. The actual result depends on the dates and law applicable to the particular case.
How is abatement different from a completed settlement?
A completed settlement ordinarily involves an order containing settlement terms under section 245D(4) and (6). Abatement under section 245HA, by contrast, ends the settlement process without such an effective settlement outcome. It is also distinct from a settlement subsequently becoming void for fraud or misrepresentation under section 245D(6) and (7), which has its own consequences.
Original Section 245HA statutory text and amendment notes
The following text is preserved from the original webpage for historical legal reference. Editorial footnote markers and earlier provisions should be checked against the official text for the relevant date.
Read the original statutory text and legislative notes
1(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
2 (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;
2 (ca) in respect of an application referred to clause (iiia), the day on which the order under subsection (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 incometax 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.
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1. Ins. by Act 22 of 2007, s. 69 (w.e.f. 1-6-2007). Earlier section 245HA was inserted by Act 11 of 1987, s. 65 (w.e.f. 1-6- 1987) which was amended by Act 4 of 1988, s. 2 (w.e.f. 1-4-1988) and later on omitted by Act 20 of 2002, s. 96 (w.e.f. 1- 6-2002).
2 Ins. by Act 20 of 2015, s. 61 (w.e.f. 1-6-2015).
Frequently asked questions
What is abatement under Section 245HA?
Abatement means termination of the settlement proceeding on a specified statutory event, with the underlying tax case returning to the competent income-tax authority.
Can the Assessing Officer use disclosures made before the Settlement Commission?
Yes. Section 245HA(3) permits use of material, information, inquiry results and evidence from the settlement proceeding in the resumed tax case.
Does the period spent before the Settlement Commission count towards assessment limitation?
Section 245HA(4) excludes the specified settlement-pendency period for the enumerated statutory limitation and interest purposes, subject to the law applicable to the proceeding.
Can a fresh settlement application be filed in 2026?
No. The former Income-tax Settlement Commission route stopped accepting fresh applications from 1 February 2021; transitional treatment of existing matters is governed by the relevant savings and Interim Board provisions.
Does an abated settlement case automatically mean that tax is payable?
No. Abatement ends the settlement process; the competent tax authority must determine the case under the applicable substantive and procedural provisions.
Official legal sources
For the statutory text, legislative amendments and transitional provisions, consult the Income Tax Department, India Code, e-Gazette of India and Income Tax e-Filing Portal. Check the Finance Act, 2021 and the Income-tax Act, 2025 for the rules applicable to saved or transitional proceedings.
Legal information for general reference; statutory applicability depends on the relevant facts, dates and amendments.