Income-tax Act, 1961 | Chapter XIX-A

Section 245K: Bar on Subsequent Application for Settlement

Section 245K of the Income-tax Act, 1961 restricts repeated applications for settlement of income-tax cases. The provision historically operated both where specified misconduct occurred and where an application made on or after 1 June 2007 was allowed to proceed. Its practical operation must now be read alongside the discontinuance of fresh settlement applications from 1 February 2021.

Meaning and purpose of Section 245K

The provision prevents a taxpayer from repeatedly seeking the special settlement mechanism after the circumstances specified in the section arise. In certain cases, the restriction extends to a related person, a defined expression covering specified closely controlled entities or individuals.

Section 245C governed applications for settlement; Section 245D prescribed the procedure, including admission and settlement orders. A settlement order under Section 245D(4) is different from an order merely allowing an application to proceed under Section 245D(1).

Section 245K(1): circumstances triggering the bar

Under subsection (1), the applicant and a related person were disqualified from applying under Section 245C in relation to another matter where any of the following occurred:

Concealment penalty: a settlement order under Section 245D(4) imposed a penalty on the applicant for concealment of particulars of income.
Conviction: after the settlement order, the applicant was convicted of an offence under Chapter XXII of the Act in relation to that case.
Historical remand: the Settlement Commission sent the applicant's case back to the Assessing Officer on or before 1 June 2002.

These are distinct statutory triggers. A mere allegation of concealment is not equivalent to a settlement order imposing the penalty described in clause (i).

Section 245K(2): one-time settlement restriction

Where an application under Section 245C was made on or after 1 June 2007 and allowed to be proceeded with under Section 245D(1), the applicant and any related person were barred from subsequently making another application under Section 245C. This rule does not require a finding of concealment or a conviction. The relevant milestone is permission to proceed with the application.

Explanation: who is a related person?

The Explanation to Section 245K, introduced with effect from 1 June 2015, identifies the following relationships:

Original applicant	Related person for Section 245K
Individual	A company in which the individual holds more than 50% of shares or voting rights at any time; a firm, association of persons or body of individuals in which the individual is entitled to more than 50% of profits at any time; or a Hindu undivided family of which the individual is karta.
Company	An individual who held more than 50% of shares or voting rights at any time before the company's application to the Settlement Commission.
Firm, AOP or BOI	An individual entitled to more than 50% of profits at any time before the applicant entity's application.
Hindu undivided family	The karta of that HUF.

The statutory thresholds are more than 50%, not 50% or more. The relevant time test varies according to the applicant's legal form.

Position after the Finance Act, 2021

The Income-tax Settlement Commission ceased operating with effect from 1 February 2021. Section 245C(5) generally prohibited new settlement applications on or after that date. Interim Boards for Settlement under Section 245AA were established to deal with qualifying pending applications. A limited CBDT relaxation permitted certain eligible applications to be filed before 30 September 2021, subject to its stated conditions; that was a historical exception, not an ongoing window for fresh applications.

Accordingly, Section 245K remains important when interpreting older settlement proceedings and the effect of earlier applications, but should not be presented as a currently available route for making a fresh settlement application. The later income-tax legislative framework and any applicable savings or transitional provisions should be checked for a live dispute.

Practical illustrations

Example 1: An application filed in 2018 was allowed to proceed under Section 245D(1). Subsection (2) imposed a bar on a subsequent settlement application by the applicant and a related person, even without a concealment penalty.

Example 2: A company incurred a concealment penalty in its settlement order. An individual who met the Explanation's more-than-50% ownership test before the company's application could fall within the related-person restriction.

Example 3: A taxpayer considering a fresh settlement application in 2026 cannot rely on the former procedure under Section 245C; the 2021 discontinuance is independently relevant.

Legislative history

Section 245K was substituted with effect from 1 June 2007 by the Finance Act, 2007. The Finance Act, 2015 extended the relevant disqualifications to related persons and inserted the definition in the Explanation, effective 1 June 2015. The Finance Act, 2021 subsequently discontinued the Settlement Commission and introduced the Interim Board arrangement for pending cases.

Official statutory references

Frequently asked questions

Can a person apply for settlement a second time?

Section 245K imposed a one-time restriction in the circumstances described above. Separately, fresh applications under the former settlement mechanism were generally discontinued from 1 February 2021.

Does the bar apply to family members automatically?

No. The related-person definition specifies particular ownership, profit-sharing and HUF-karta relationships. Ordinary family relationship alone is not the statutory test.

Does a settlement order need to impose a penalty for the bar to apply?

Not always. Section 245K(1)(i) concerns a concealment penalty, but subsection (2) separately addresses applications made on or after 1 June 2007 that were allowed to proceed.

This article explains the historical provision and its transitional context. For pending litigation, verify the applicable assessment year, statutory amendments and current procedural remedies.