Section 274 — Reference to Principal Commissioner or Commissioner in certain cases

(1) The Assessing Officer may make a reference to the Principal Commissi-
oner or Commissioner at any stage of the assessment or reassessment pro -
ceedings before him, if, having regard to the material and evidence available with
him, he considers that it is necessary to—
( a) declare an arrangement as an impermissible avoidance arrangement;
and
( b) determine the consequence of such an arrangement within the meaning
of Chapter XI.
(2) The Principal Commissioner or Commissioner shall, on receipt of a reference
under sub-section (1), if he is of the opinion that the provisions of Chapter XI are
required to be invoked,—
( a) issue a notice to the assessee, setting out the reasons and basis of such
opinion, for submitting objections, if any; and
( b) provide an opportunity of being heard to the assessee within such period,
not exceeding sixty days, as specified in the said notice.
(3) If the assessee fails to furnish any objection to the notice within the time spec-
ified in such notice issued under sub-section (2), the Principal Commissioner or
Commissioner shall issue such directions as he deems fit in respect of declaration
of the arrangement to be an impermissible avoidance arrangement.
(4) In case the assessee objects to the proposed action, and the Principal Commis-
sioner or Commissioner, after hearing the assessee in the matter, is not satisfied
with the explanation of the assessee, then, he shall make a reference in the matter
to the Approving Panel for the purpose of declaration of the arrangement as an
impermissible avoidance arrangement.
(5) If the Principal Commissioner or Commissioner is satisfied, after having heard
the assessee that the provisions of Chapter XI are not to be invoked, he shall by
an order in writing, communicate the same to the Assessing Officer with a copy to
the assessee.
(6) The Approving Panel, on receipt of a reference from the Principal Commissioner
or Commissioner under sub-section (4), shall—
( a) issue such directions, as it deems fit, in respect of the declaration of the
arrangement as an impermissible avoidance arrangement as per the
provisions of Chapter XI; and
( b) specify the tax year or years to which such declaration of an arrangement
as an impermissible avoidance arrangement shall apply.
(7) No direction under sub-section (6) shall be issued unless an opportunity of being
heard is given to the assessee and the Assessing Officer on such directions which
are prejudicial to the interest of the assessee or the interests of the revenue, as the
case may be.
(8) The Approving Panel may, before issuing any direction under sub-section (6),—
( a) if it is of the opinion that any further inquiry in the matter is necessary,
direct the Principal Commissioner or Commissioner to make such inquiry
or cause the inquiry to be made by any other income-tax authority and
furnish a report containing the result of such inquiry to it; or
( b) call for and examine such records relating to the matter as it deems fit;
or
( c) require the assessee to furnish such documents and evidence as it may
direct.
(9) If the members of the Approving Panel differ in opinion on any point, such point
shall be decided according to the opinion of the majority of the members.
(10) The Assessing Officer, on receipt of directions of the Principal Commissioner
or Commissioner under sub-section (3) or of the Approving Panel under sub-section
(6), shall proceed to complete the proceedings referred to in sub-section (1) as per
such directions and the provisions of Chapter XI.
(11) If any direction issued under sub-section (6) specifies that declaration of the
arrangement as impermissible avoidance arrangement is applicable for any tax
year other than the tax year to which the proceedings referred to in sub-section (1)
pertains, then,—
( a) the Assessing Officer while completing any assessment or reassessment
proceedings relevant to such other tax year shall do so as per such
directions and the provisions of Chapter XI; and
( b) it shall not be necessary for him to seek fresh direction on the issue for
such other tax year.
(12) No order of assessment or reassessment shall be passed by the Assessing
Officer without the prior approval of the Principal Commissioner or Commissioner,
if any tax consequences have been determined in the order under the provisions
of Chapter XI.
(13) The Approving Panel shall, subject to sub-sections (14) and (15), issue directions
under sub-section (6) within six months from the end of the month in which the
reference under sub-section (4) was received.
(14) In computing the period referred to in sub-section (13), the following shall be
excluded:—
( a) the period commencing from the date on which the Approving Panel
first directs the Principal Commissioner or Commissioner for getting
the inquiries conducted through the authority competent under an
agreement referred to in section 159 and ending with the date on which
the information so requested is last received by the Approving Panel or
one year, whichever is less;
( b) the period commencing on the date on which the proceeding of the
Approving Panel is stayed by an order or injunction of any court and
ending on the date on which certified copy of the order vacating the stay
was received by the Approving Panel.
(15) If immediately after the exclusion of the period as per sub-section (14), the
remaining period available to the Approving Panel for issue of directions is less than
sixty days, such remaining period shall be extended to sixty days and the period of
six months mentioned in sub-section (13) shall be deemed to have been extended
accordingly.
(16) The directions issued by the Approving Panel under sub-section (6) shall be
binding on—
( a) the assessee; and
( b) the Principal Commissioner or Commissioner and the income-tax
authorities subordinate to him.
(17) No appeal under the Act shall lie against directions issued by the Approving
Panel under sub-section (6), irrespective of anything contained in any other pro -
vision of the Act.
(18) The Central Government shall, for the purposes of this section, constitute one
or more Approving Panels as may be necessary and each panel shall consist of three
members including a Chairperson.
(19) The Chairperson of the Approving Panel shall be a person who is or has been
a judge of a High Court, and—
( a) one member shall be a member of Indian Revenue Service not below
the rank of Principal Chief Commissioner or Chief Commissioner of
Income-tax; and
( b) one member shall be an academic or scholar having special knowledge of
matters, such as direct taxes, business accounts and international trade
practices.
(20) The term of the Approving Panel shall ordinarily be for one year and may be
extended from time to time up to three years.
(21) The Chairperson and members of the Approving Panel shall meet, as and
when required, to consider the references made to the panel and shall be paid such
remuneration as may be prescribed.
(22) In addition to the powers conferred on the Approving Panel under this section,
the powers which are vested in the Board for Advance Rulings under section 387
shall apply mutatis mutandis to the Approving Panel.
(23) The Board shall provide to the Approving Panel such officials as may be neces-
sary for the efficient exercise of powers and discharge of functions of the Approving
Panel under this Act.
(24) The Board may make rules for the purposes of the constitution and efficient
functioning of the Approving Panel and expeditious disposal of the references re -
ceived under sub-section (4).