WRITE-OFF AND

SCALING DOWN ARREAR

DEMANDS
 EFFORTS FOR RECOVERY OF TAX ARREARS BEFORE
CONSIDERING THE QUESTION OF WRITE OFF

The process of collection begins when a demand

notice u/s.156 of I.T. Act, 1961 is sent to the assessee, as
a result of order made by the Income-tax Officer or his
superiors.
In case the demand is not paid by the assessee, the
assessee is treated as a defaulter.
The recovery of outstanding tax from a defaulting tax
payer is governed by the provisions of Chapter XVII
read with Schedule II of the Income Tax Act, 1961.
 The various approaches available to the Income Tax
Department for obtaining taxpayers’s compliance can
broadly be categorized in two categories, viz
Persuasive measures for voluntary tax compliance.
Coercive measures,
 like levy of penal interest,
 levy of penalties,

 attachment of moveable and immovable assets and their

appropriation,
 garnishee proceedings u/s 226(3) etc. to meet the tax dues

owed by the assessee,

 vide the provisions of Section 220-232 read with Schedule 2

of Income Tax Act.

 Prosecution in a court of law for default in the payment of

tax dues is provided for in Sections 276 and 276-C of the

Income Tax Act.
Other measures adopted in keeping with specific
provisions of sections 65, 159, 167, 170, 171, 172, 173, 175,
176, 177, 178, 179, 189, 281, 281B & 287 of IT Act 1961.

The position of outstanding demand in the case of

defaulting tax payers is monitored from the level of
A.O upwards with the CBDT specifically monitoring
the cases having outstanding demand of Rs.3 crore or
more through the Directorate of Recovery (which is an
attached office of the Board) acting as a nodal agency.
 WRITE-OFF
WRITE-OFF AND
AND SCALING
SCALING DOWN
DOWN ARREAR
ARREAR DEMANDS
DEMANDS

 When tax demands remain irrecoverable inspite of exercise of the powers of recovery
conferred under the Act, the question of write off of arrears should be considered.
 There is no specific provision in the Income-tax Act or in any of other Direct Tax Acts for
writing off the tax arrears, which become irrecoverable
 Rule 31 of the General Financial Rules, 1963 provides that “a claim to revenue shall not be
remitted/abandoned save with the sanction of the Competent Authority”.
 It is in pursuance of this that powers to sanction write off of the revenue have been
delegated by the Central Government to the income-tax authorities.
 Rule 13 read with Schedule VII of the Delegation of Financial Powers Rule,1978
confers on the Commissioners of Income-tax full powers to write off irrecoverable
balances of income tax / wealth tax / gift / tax / expenditure-tax / estate duty
demands subject to a report to the next higher authority.
 It is also provided that the powers of write off may be exercised by a subordinate
authority provided that :-
 the loss does not disclose a defect in the rules or the procedure, the amendment of which
requires the orders of a higher authority in the Finance Ministry; and
 there has not been any serious negligence on the part of any Government servant which
may call for disciplinary action by a higher authority.
As per Instruction No. 14/2003 dated 06.11.2003 issued
by the CBDT in F.No.375/3/2002-IT(B), income-tax
authorities have been given powers to write off
irrecoverable tax arrears in the following manner.
With a view to removal of doubts, the CBDT issued
Instruction No.7/2004 on 19.08.04 in partial
modifications of earlier Instructions.
Accordingly, the monetary ceilings with respect to the
powers of various I.T. authorities to write-of
irrecoverable dues have been enhanced and the level
of authority whose administrative approval would be
required for write-off has been re-defined. Further, the
respective jurisdiction of the tree Committees over
write-off proposals has been re-delineated (फिर चित्रित)
Committee Constitution To be notified by order of write-off by monetary ceilings
for write-off
Local 3 officers of CCIT ITO/TRO Demand upto
Committee the level of Rs.5,000/-
Addl. CIT
DCIT/ACIT Demand over
Rs.5000/- and upto
Rs.25,000/-
Addl. CIT/JCIT Demand over
Rs.25,000/-
Sub-zonal 3 officers of Cadre Controlling CIT Subject to Demand over Rs.1
or regional the level of CCIT (under report to lakh and upto
CIT intimation to Board) the next higher Rs.10 lakhs
authority
Zonal 3 officers of CBDT CCIT Subject to Demand over
Committee the level of report to Rs.10 lakhs and
CCIT the next higher upto Rs.25 lakhs
authority
CCIT with the Demand over
approval of Rs.25 lakhs and
Full Board upto Rs.50 lakhs
CCIT with the Demand over
approval of Rs.25 lakhs
Full Board and the
Finance Minister
 PROCEDURE FOR WRITE OFF

Instruction No.7/2004 of 19th August, 2004 has clarified

that existing procedures for write off, other than those
mentioned therein, would continue to remain in
operation. The existing procedure is elaborated as
follows:
a. Regular procedure for write off
b. Ad- hoc procedure for write off
c. Summary write off
As per the delegation of Financial Power Rules S.O. No. 1469
dated 29.05.1990 the Chief Commissioner of Income Tax is
competent to recommend write off of irrecoverable demand
upto Rs.15 lakh subject to the report to the next higher
authority. The competent authority has further raised to
Monetary ceilings in such cases from Rs.15 lakhs to 25 Lakh
for CCIT subject to the report to the next higher authority.
(Instruction no. 2/2010 dated 18.03.2010)
REGULAR PROCEDURE FOR WRITE OFF
Only tax arrears that are over three years old and have become
“clearly irrecoverable” can be considered for write off. Tax arrears
may become irrecoverable on account of any one of the following
reasons:-
i.  the assessee has died
ii. he has become insolvent
iii. he is not traceable
iv. he has left India
v. the company has gone into liquidation
vi. the firm is dissolved and its business has discontinued
vii. the assessee has no attachable assets.
viii. when all the modes of recovery in accordance with the rules laid
down in the Second Schedule including the recourse to civil
imprisonment of the defaulter are exhausted and the arrears still
remain.
Before recommending a case for write off,
A.O/Jt.CIT/Addl.CIT/Local Committee/Regional
Committee/Zonal Committee should satisfy themselves as to
whether adequate and timely steps for recovery were taken in
the case.
 And if not, whether it is a case of negligence on the part of any
official(s) requiring disciplinary action.
This criterion has been recommended in numerous
instructions of CBDT including Instruction No.1560
(F.No.385/83-IT(B) of 4.5.84).
This aspect should be brought out in the report by the.
A.O./Jt.CIT/Addl.CIT/Local Committee/Regional
Committee/Zonal Committee.
However, the write off need not be held up till the
responsibility of negligence is fixed and suitable departmental
action is taken.
If, after scrutinising the records and conducting
enquiries, the AO is satisfied that it is a fit case for
write off, a self- explanatory note indicating the steps
taken for recovery and justifying the need for write off
should be prepared.
A certificate of irrecoverability should also be taken
from the TRO.
If the arrears have to be written off by the authorities
other than the ACIT or ITO, Form B (Annexure I)
should be filled in and submitted to the CIT/ Addl.
CIT with a self explanatory brief. Tax arrears upto Rs.
25,000 can be written off by the CIT without
examination by the Local Committee.
The CBDT through its numerous instructions issued
from time to time, has emphasized the imperative
“that all efforts should be made to recover the
outstanding demand by exercising the powers given in
the Income Tax Act”.
The question of writing off the arrear demands would
normally arise only when the amount remains
irrecoverable inspite of the exercise of the powers
given under the Act.
[Instruction No.1670 (F.No.375/25/85-IT(B) dated
5.12.1985) These include all measures laid down in the
Second Schedule to the Income Tax Act including the
following:
(a)Attachment and sale of assessee’s movable property.
(b)Attachment and sale of assessee’s immovable
property.
(c)Arrest of the assessee and his detention in prison.
(d)Appointing a receiver for the management of the
assessee’s movable or immovable properties.
The action taken in this regard may be brought out in
the minutes of the Zonal Committee, which considers
the proposal for write off. If for any reason any mode of
recovery could not be resorted to in any particular
case, the reason therefore may also be recorded, in the
said minutes.
The assessment records should be scrutinised by the AO and he/she
should make the list of all the assets likely to be available with the
assessee. The AO should ascertain the present source of income of the
assessee, if any. Enquiries should also be made on the following
points:­
(i) Whether the assessee has transferred any assets to his near relatives
or any other person with a view to defraud the revenue and
wherever called for, immediate action against him under section
281-B of the Income-tax Act, 1961, should be taken by the AO;
(ii) In all cases where an assessee, according to the information
available with the department, does not own any tangible assets but
is living in style, enquiries should be made about his secreted
wealth, if any. Sometimes it is claimed by an assessee that he/she is
being supported by his relatives. In such cases, it is necessary to
enquire about the build up of the wealth in the hands of such
relatives as it may be that a part of their wealth represents the
secreted assets of the assessee
(iii.) In the cases of private limited companies which have
wound up after the commencement of Income-tax Act,
1961, and where any write off of arrears of Income-tax
demand is being recommended, it should be specifically
mentioned as to whether the provisions of section 179 are
applicable or not.
If after scrutinizing the records and after taking action as
indicated above, the AO comes to the conclusion that it is
a fit case for write off, a self-explanatory note indicating
the various recovery steps taken and justifying the need
for write off should be prepared.
A certificate of irrecoverability should also be taken from
the TRO. Form No. B should be filled in and self-
explanatory brief in each case placed before the
CIT/Addl.CIT/Jt. CIT.
While sending the proposal to the Board through DIT
(Recovery),
the CIT should personally look into the enclosures to
be sent with the minutes of the meeting of the Zonal
Committee.
As per the Board’s letter of 19th June, 1989
(F.No.375/10/89-IT(B),complete assessment
records, together with the Recovery folders,
should be sent to the Board, and the following
statements should be enclosed with the proposal:­
(i) Original minutes of the meeting of the Zonal Committee duly signed by
the members of the Committee;
(ii) Self-explanatory brief of the AO/TRO along with the recommendations
of the Jt./Addl.CIT/CIT on that brief; 
(iii) Complete details of the demand outstanding against the assessee;
(iv) Nature of demands raised, date of service of demand notice;
(v) Nature of additions made, if any;
(vi) Copy of the assessment order of the A.O, appeal orders, if any, etc. if
they are not available in the assessment records of the assessee;
(vii) Irrecoverability certificate of the TRO;
(viii)Copies of the report of the Inspector/AO/TRO regarding the availability
of the assets with the assessee, if any;
(ix) Form No. B (given in Annexure-XV) giving complete replies to all the
questions indicated.
(x) A mention should be made whether the assessee is a wealth-tax
assessee. If so, complete details of the assets which have been/are being
disposed of should be sent. The complete wealth-tax records may also be
sent;
(xi) Any other relevant material.
a. It may also be ensured that the proposal contains a brief
chronological history of the case. Moreover, in every proposal the
total amount of tax arrears should be worked out after including
the interest under section 220 (2) of the Income Tax Act,
chargeable for the late payment of tax upto the end of the month
preceding the month in which the proposal is considered by the
Zonal Committee.
b. Attention in this connection is also invited to the instructions
contained in Board’s Instruction No.1560 dated 4/5/84 Annexure-XIII
and 1670 dated 5/12/85 (given in Annexure-XIV). As required in
Instruction No.1560, the minutes of the Local Committee/Zonal
Committee should contain a finding to the effect whether the case has
disclosed any defects in departmental systems and procedures or in
their actual implementation resulting in non-recovery of arrears. As
per Instruction No.14/2003 (given in Annexure-X), these conditions
remain unchanged for procedure which will be followed by the
Regional committees also.
c. After the detailed scrutiny of the proposal with
reference to the assessment records of the assessee and
other information available in the recovery folders, if it
is found that the case is fit for writing off of the tax
arrears as irrecoverable, the administrative approval of
the Board will be communicated to the CCIT. W.e.f.
19th August 2004, the said approval would be
conveyed to the CCIT, as only demands needing
approval at the level of the CCIT now go to the Board
for approval. The CCIT, after having received the
approval of the Board, should proceed to pass an order
sanctioning the write off of tax arrears as irrecoverable.
The order should be passed in the proforma.
After passing the order for write off, the AO should
ensure that the arrears are actually struck off from
the Demand and Collection Registers. Wherever
recovery certificates have been issued, intimation
should be sent to the TRO so that recovery certificates
could be withdrawn.
Each competent authority, while passing the order for
writing off the tax arrears as irrecoverable, should add
the following words at the appropriate place:­-
“The above write-off will not lead to release or waiver by the
Government of its claim but will be written off in the
departmental books. The Government will have the right, at any
time, during the next 30 years (thirty years) from the date of the
claim to recover the amount if it appears to the Government that
the defaulter has assets or means to pay”.
Through its Instruction No. 339 dt. 24.12.1971 (F. No.
83/108/69-IT(B) the Board instructed that the
Department should go ahead with the publication of
names of assessees whose cases involved write-off of
amounts above Rs. 1 lacs. However, alongwith the
publication of such lists the following remarks may
also be published in the form of a Note:-
 “NOTE:- The statement that the tax due from a person has been
written off only means that in the opinion of the Income-tax
Department it cannot on the date of publication be realized from the
known assets of the assessee. The publication does not imply that the
amount is irrecoverable in law or that the assessee is discharged from
his liability to pay the amount in question.”
 FORMATION OF COMMITTEE
NAME OF THE CONSTITUTION OF TO BE TO BE
COMMITTEE COMMITTEE CONSTITUTED NOTIFIED BY
BY

Zonal Committee Permanent Member consisting CBDT CBDT

of three Chief Commissioners.

Regional Permanent Members consisting Cadre Controlling Cadre Controlling

Committee of three Commissioners. The CCIT CCIT
CIT concerned shall be co-opted (copy to be sent
as Member for presenting his to CBDT)
case where he is not a
permanent member

Local Committee Permanent Members consisting CCIT CCIT

of three Addl. CIT/JCIT. The (copy to be sent
Addl. CIT/JCIT concerned shall to CBDT)
be co-opted as Member for
presenting his case where he is
not a permanent member
Local Committee and Zonal Committee
In case of tax arrears exceeding Rs 5,000 but below Rs. 1 lakh, the proposal
for write off of such demand will have to be referred to the Local Committee
consisting of the three officers of the rank of the Addl. CIT and the AO
within the CIT’s charge. And the CCIT will notify the committee.
 Where the tax arrears exceed Rs. 1 lakh to 10 lakh in any case, a Sub-Zonal
or Regional Committee is to be formed consisting of the CIT concerned
and 2 other Commissioners of Income tax of the same zone will have to
scrutinize the proposal for write off of tax arrears with suitable
recommendations. The same will be notified by the Pr. CCIT/ Cadre
Controlling CCIT (under intimation to Board)
Where the tax arrears exceed Rs. 10 lakh to 25 lakh in any case, a Zonal is to
be formed consisting of the three CCIT level officers will have to scrutinize
the proposal for write off of tax arrears with suitable recommendations. The
same will be notified by the CBDT.
 In cases of the tax arrears exceeding Rs. 25 lakhs, reference has to be made
to the Board through the DIT(Recovery) for according administrative
proposal. Comments of the concerned Chief CIT should be sent along with
the recommendations of the Zonal Committee. Complete assessment
records together with the recovery folders should be sent to the Board.
 ADHOC PROCEDURE FOR WRITE OFF
Besides the regular procedure under which tax arrears can be
written off, arrears of tax may also be written off under the
adhoc procedure. The CBDT OM vide F.No.375/01/2015-IT(B)
dated 10.08.2017 has revised the monetary limit for Ad hoc
Write Off. Which is as under:
The monetary ceiling for the ad-hock procedure of write off of
irrecoverable arrear demand is raised to Rs.10,000/-
The age of irrecoverable arrear demand is reduced to at lest
three years.
The recoverability certificate from TRO is no longer required
and
It has been prescribed that any information regarding the
assessee should not be available in AIR or 26AS statements of at
least 3 years and no return of income should have been filed for
at least 3 years and no return of income should have been filed
for at least 3 years for consideration of arrear demand to be
written off under Ad-hoc Procedure.
The following conditions should however, be
satisfied before such write off is effected by the
JCIT and AO within their existing powers :
a.the demand has been outstanding for at least
three years preceding the financial year in
which the same is to be written off and that there
has been no recovery during the said three years.
b. the address of the assessee has not been
available for the said three years in the records
available with the AO or the TRO. Even where
the last address is available, the assessee has not
been available at that address during the last
three years.
c. In case the demand outstanding is Rs.10,000 or
less in each case, the certificate of recoverability
from the TRO need not be obtained.
Demands under the adhoc procedure should not
be written off on account of loss of records unless
the following details have been collected :-
 Name of the assessee
 Address
 Date of issue of recovery certificate.
 Amount of demand
 Amount recovered by the TRO
 Balance
 Present whereabouts of the assessee.
Attempts should be made to fix the responsibility
and take necessary action against the defaulting
officials.
These instruction are contained in Board’s letter
No. 16-C/4/64-IT dated 18-1-1964.
The Board, vide Instruction No. 930 dt. 4.3.1976,
expressed its deep concern
“at the situation in which assessment/recovery records of
some of the assesses become untraceable.
You are requested to take stringent measures to ensure
that the assessment records are not purloined.
Security arrangements in this behalf should be
strengthened and officials should be held accountable even
when the assessment records move from person to person.
As far as possible and, in any case, in cases not covered
under the ad-hoc procedure for write off of tax arrears,
attempts should be made to re-construct the files from
registers or from the reports sent to higher authorities or
on the basis of certificates/correspondence with the T.R.O.
etc.
Further, responsibility should be fixed and action taken,
where possible, against persons concerned.”
 SUMMARY PROCEDURE
The monetary ceiling under this procedure has
been raised from the earlier level of Rs.25 to
Rs.1,000 since 06.11.2003. However, as per para
4.1 of the Instruction No.14/2003 dated
6.11.2003, “All other conditions and requirements
under the Summary Procedure would remain
unchanged”.
Small demands not exceeding Rs.1,000/- in each
case, can be summarily written off by the
Assessing Officer without any further enquiry if
the following three conditions are satisfied :-
 the amount outstanding is Rs.1,000/- or less in each
case;
  the amount is outstanding for more than 5 years;
 the amount does not relate to any live case.
The following remarks should be made against the relevant
entries in the D & C Register where arrears are written off
summarily:
"Ignored, as obviously irrecoverable”
TRO should be immediately informed about such
write off and the relevant recovery certificate should
be withdrawn.
PROCEDURE FOR WRITING OFF THE TAX ARREARS OF
RS.500/- AND BELOW (EXCLUDING THOSE FALLING
UNDER SUMMARY WRITE OFF):

Where a demand in any case is outstanding for more

than 8 years,
An Inspector of Income-tax may be deputed to enquire
into the assets of the defaulter and chances of recovery.
In case, his report indicates that the demand has become
irrecoverable, the AO may straight away write off the
demand without waiting for a normal certificate of
irrecoverability from the Tax Recovery Officer.
TRO should be immediately informed about such write
off and the relevant recovery certificate withdrawn.
 EFFECT OF WRITE OFF

Writing off of irrecoverable demands is purely an administrative act.

It does not preclude the department from recovering the amount so
written off by exercising the powers under the Income-tax Act.
The recovery can also be effected by filing a civil suit. The civil suit
cannot however be filed after the expiry of 30 years from the date
on which the tax had become payable, in view of Art.112 of the
Schedule to the Limitation Act, 1963.
In accordance with the instructions of the Comptroller and Auditor
General of India, audit has to scrutinise the orders sanctioning write
off of outstanding demands.
Hence as per Board’s letter F.No.61-1/64/IT dated 17-2-1964, copies of
the individual orders sanctioning write off of income-tax demands of
Rs.10000 and above should invariably be endorsed to the respective
Directors of Audit.
 ORDERS OF WRITE OFF – COMMUNICATION
TO THE HIGHER AUTHORITY
Individual cases sanctioning write off of Income- tax
(including corporation tax) arrears, in cases exceeding
Rs.10,000/- and upto Rs.25 lakhs should also be endorsed to
the Board.
All orders of write off passed by the Commissioners of
Income-tax without requiring the approval of the Board i.e.
in cases upto Rs.10 lakhs (for scaling down, such limit
is the total outstanding demand being upto Rs.1 lakh
in each case), brief reasons for the write off should also be
indicated. For this purpose, the proforma of Commissioner
of Income-tax’s order writing off the irrecoverable tax
arrears given at Annexure-XV should be amended suitably.
With regard to the tax arrears written off by the
Jt.CIT/Addl.CIT/A.O, copies of the individual orders
will be endorsed by them to the respective
Commissioners of Income-tax who may see,
through a broad test check, that the orders have been
passed in accordance with the prescribed procedure.
It may also be mentioned that Instruction
No.14/2003 dated 6.11.2003 and the Instruction
No.7/2004 dated 19.8.2004 have reiterated that
Write-off by CCIT and CIT are “subject to report to
the next higher authority
REGISTER OF IRRECOVERABLE DEMAND & SUBMISSION OF STATISTICAL RETURNS

The AO is required to keep a register of irrecoverable demands, in a

prescribed proforma.
Every demand written off wholly or partly or scaled down should be
entered in this Register.
On the basis of information contained in this register, a quarterly
statement regarding the amount written off by the Jt.CIT/Addl.
CIT/AOs as in a prescribed proforma and Appendix C should be
sent to the CIT.
The statement should be sent to the concerned Commissioner of
Income Tax by the 15th of month following the end of every quarter.
The CsIT are required to carry out a test check of the entries in this
statement to see that the tax arrears have been written off on the
prescribed manner as required under the Delegation of Financial
Power Rules as well as instructions of the Board
An annual statement regarding remission or
abandonment of claims to revenue like other
statements should be furnished by all Commissioners
to the Director of Inspection (Research, Statistics &
Public Relations) by 30th June as per revised
precribed proforma.
DI (RSP&PR) is required to compile the statistical data
every year and furnish the consolidated information to
the Board by 31st July every year.
A half yearly report as per showing progress of
Recovery of the amount kept alive in cases of partial
write off should also be furnished by all
Commissioners to the Central Board of Direct Taxes.
ORDERS OF WRITE OFF – COMMUNICATION TO THE COMPTROLLER & AUDITOR
GENERAL OF INDIA

In accordance with the instruction of the Controller

and Auditor General of India, audit has to scrutinize
the orders sanctioning write off of outstanding
income-tax demands.
It is, therefore, required vide Board’s letter F.No.61-
1/64/IT dated 17/2/1964 that a copy of individual
orders sanctioning write off of Income-tax demands of
Rs.10,000/- and above should invariably be
endorsed to Director of Audit.
 SCALING DOWN OF ARREARS
Just as for write off of demands, so also for scaling down, there is no
specific provision given in the Income-tax Act.
However, every creditor, including the Government, has the
inherent right to give up a part or whole of the debt due to him.
Scaling down pertains to the arrear demand in a case where an
assessment or assessment proceedings have become final but the
assessee is not in a position to pay the full demand.
As was laid down in Shri K.S. Sundararajan’s DO Letter no. 16-
C/9/56-IT dated 31.01.1957, a settlement for scaling down is to be
entered into only in a case in which the recovery in the normal
course is difficult and the proposed settlement results in a
higher recovery than could be realised by recourse to forced sale
of assets or other modes of recovery.
There may also be cases where forced sales and auctions may not
find a ready purchaser.
In all such cases, if the department could, though a settlement,
recover larger amount of tax arrears than could be realized by
enforced sale of the assets or by other methods of recovery, the CIT
may endeavour to reach a settlement with the assessee.
With the approval of the Cabinet, conditions for scaling down of
demand were laid down in para 4 of D.O. letter No.16-C/9/56-IT
dated 31st January, 1957.
The Board issued Instruction No. 1492 dt. 4.9.75 to further clarify the
questions regarding scaling down of tax arrears.
It clarified that there would be no over-lapping between the powers
related to scaling down on arrear demand and those of the Income
Tax Settlement Commission, because the said Commission will have
powers to settle the tax liability of an assessee where any proceedings
in connection with his assessment or reassessment are pending before
an Income Tax authority on the date of application, while, on the
other hand, the scaling down pertains to the arrear demand in cases
where assessment or re-assessment proceedings have become final
but the assesses are not in a position to pay the full demand.
 CONDITIONS FOR SCALING DOWN OF ARREARS

The settlement should result in larger recovery than could

be realized by recourse to enforced sale of assets and by
other modes of recovery;
The amount settled should be paid by the assessee
without delay after the finalization of the settlement
and in case installments are required, adequate security
should be furnished;
 An affidavit should be taken from the assessee concerned
declaring particulars of his assets as on the date of the
settlement and each such settlement should be made
expressly subject to the condition that if, at a future date,
any assets come to the notice of the department, which were
not disclosed in the affidavit the settlement would be
treated as void and the Government would be free to go
ahead with the recovery proceedings.
 POWERS OF SCALING DOWN OF TAX ARREARS
Commissioners of Income tax are authorized to exercise powers of
scaling down where the aggregate arrear demand outstanding
against an assessee is Rs. 1 lakh or less.
Cases in which aggregate demand exceeds Rs. 1 lakh should be sent
to the Board after the same have been scrutinised and recommended
for scaling down by the Zonal Committee.
Authorities exercising power of scaling down in cases where the
amount exceeds Rs. 1 lakh:
Individual Member of the Board upto Rs. 5 lakhs
Full Board upto Rs. 10 lakhs
Minister Above Rs. 10 lakhs

 The AO or the JC / Addl. CIT has no power to scale down any demand
 PROCEDURE FOR SCALING DOWN
While sending the proposal for scaling down, the CIT should
ensure that the following details are enclosed along with
the minutes of the meeting of the Zonal Committee.
The assessee’s scaling down petition.
The AO’s report briefly mentioning the facts of the case.
The assessee’s affidavit showing his wealth.
Information on the points referred to in Form No A (a copy of
which is at Annexure III including CIT’s observations and
recommendations)
Original minutes of the meeting of the Zonal Committee duly
signed by all the members of the Zonal Committee and
Any other document relevant to the case, such as, whether the
assessee is a wealth tax assessee or if he has died whether any
action under the Estate Duty Act was taken. If the assessee is a
wealth tax assessee or if any action has been taken under the
Estate Duty Act, all the relevant records have to be enclosed.
No recovery of the scaled down amount can be made
once a settlement is reached unless the affidavit
showing the asset is found to be false.
Hence, it is necessary to ask the defaulter to mention
in the affidavit, in the case of each settlement, that the
settlement would be void and the Government would
be free to go ahead with the recovery proceedings
according to law if, at a future date, any assets come to
the notice of the department which were not disclosed
in the affidavit.
 PROCEDURE REGARDING PARTIAL WRITE OFF OF TAX ARREARS
Partial write off of tax demand may be sanctioned only if there
are no chances of recovering more than 25% of the total
outstanding demand or in other words, where at least  75%
of the total demand is definitely not recoverable. The
procedure to be followed is the same as laid down for complete
write off of tax arrears.
In cases in which less than 75% of the outstanding demand is
not recoverable even legally, the precondition that at least 75% of
the demand should be irrecoverable before a case can be
considered for partial write off is not applicable .
 For the portion of the demand to be kept alive for future
recovery, in addition to the entry in the demand and collection
register, an entry must be made in a separate part of the
irrecoverable demand register maintained by every AO so that a
close watch can be kept on the recovery of such demand.
While proposing a portion of tax arrears to be kept alive
for future recovery, the Zonal Committee should mention
the assets against which such amount has been proposed
to be kept alive. The CIT should ensure that the market
value as per the Departmental Valuer is ( obtained by the
AO/ JC/ Addl. CIT) reported to the Board.
In all cases of partial write off, the amount which has been
written off should also be mentioned in the remarks
column of the demand and collection register so that if at
a subsequent date, some recoveries become possible in a
case, the amount written off earlier is not lost sight of.
In a case where the tax arrears have been written off
partially with the approval of the Board, the balance
demand to be kept alive for future recovery may be written
off, partially or fully subsequently, if found irrecoverable.
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