The government is planning to revive and strengthen the Income-Tax Settlement Commission through amendments to the Finance Act in the upcoming Budget.
It could be given the mandate to take up cases currently handled by other dispute settlement bodies.
The move is aimed at freeing up about Rs 3 lakh crore (Rs 3 trillion) in tax value locked up in appeal.
To broaden its scope, the finance ministry could relax the eligibility criteria of taxpayers wishing to approach the ITSC. The distinction between search & seizure and other cases is likely to be eliminated.
Settlement application is also proposed for when additional tax payable on income disclosed is more than Rs 10 lakh in the case of businesses, and Rs 500,000 for professionals like lawyers, doctors and chartered accountants.
In the last Budget, the government had increased the cut-off limit for additional tax payable to Rs 50 lakhs (Rs 5 million) for a search & seizure case and Rs 10 lakhs (Rs 1 million) for other cases from the earlier threshold of Rs 300,000.
This did not result in a significant increase in the number of applications before the commission.
Because of the high cut-off limit, many people found ITSC out of reach and preferred alternate redress mechanisms.
"Because of the high cut-off, the present system caters only to a small number of taxpayers in the very high income bracket.
"A more effective commission will reduce litigation with taxpayers and quickly resolve complicated tax disputes.
"People can go to the ITSC instead of going to court or income-tax appellate tribunal," said a government official.
ITSC was formed in 1971 as a quasi-judicial body to settle cases of taxpayers wanting to pay their dues without penalty.
It had powers to give tax evaders immunity from prosecution, provided they came clean.
In 2007, the government stripped the commission of its powers and took many cases out of its purview, including search & seizure cases, appeared cases, and reopened cases.
Search & seizure cases were returned to ITSC in the last Budget.
The finance ministry now wants to also return appeared and reopened cases.
It is also planning to create additional benches in Delhi, Mumbai, Ahmadabad, Bengaluru, Chandigarh, Hyderabad and Pune.
At a recent review meeting chaired by Finance Minister Pranab Mukherjee, it was proposed that ITSC be made available for a broad category of taxpayers and its effectiveness enhanced.
"The finance ministry has supported strengthening the commission.
"Currently, we have ITSC, authority for advance rulings and dispute resolution panels to settle various disputes. There can be just one body to settle all disputes," said another finance ministry official.
The Direct Taxes Code Bill, which has been tabled in Parliament, had also proposed that every order of ITSC should be conclusive and not reopened in any proceedings.