=SSCRIBD Search

PoWERS AND DUTIES OF INCOME TAX AUTHORITIES

INTRODUCTION

In India, the Central Government has been empowered by Entry 82 of the Union List

of Schedule VIl of the Constitution of India to levy tax on all income other than agricultural
income. The Income Tax Law comprises The Income Tax Act 1961, Income Tax Rules 1962.,

Notifications and Circulars issued by Central Board of Direct Taxes (CBDT), Annual
Finance Acts and Judicial pronouncements by Supreme Court and High Courts. The
Government of India imposes an income tax on taxable income of all persons including
individuals, Hindu Undivided Families (HUFs), companies, firms, association of persons,
body of individuals, local authority and any other artificial judicial person. Levy of tax is
separate on each of the persons. This levy is governed by the Indian Income Tax Act, 1961.

The Indian Income Tax Department is governed by CBDT and is part of the
Department of Revenue under the Ministry of Finance, Govt. of India. Income tax is a key
source of funds that the government uses to fund its activities and serve the public. The
Income Tax Department is the biggest revenue mobiliser for the Government.
The Income Tax authorities are required to exercise their powers and perform their
functions so as to prevent harassment of assesses, tax-evasion, unnecessary discrimination in

collection of tax. However, there have been a number of instances of misuse of these rule
making powers which have the effiect of contradicting statutory provisions that have been
given binding effect, displacing the authoritative pronouncements of the Higher Judiciary and
causing an erosion of the constitutionally-mandated effect of Supreme Court declarations
under Article 141. In this scenario, for the purpose of effective financial management it
becomes imperative to understand the functioning, the powers and the limitation on the
powers of these tax authorities. This paper talks about various tax authorities under the
Income Tax Act, appointment of income tax authorities, the Central Board of Direct Taxes
and it's powers, powers of other Income Tax authorities, jurisdiction of the Income-Tax
Authorities, and a conclusive analysis of the same.

VARIOUS TAX AUTHORITIES UNDER THE INCOME TAX

The Government of India has constituted a number of authorities to execute the

Income Tax Act and to control the Income Tax Department efficie
Download
following classes of income-tax authorities for the purposes of the Act as
given under Section
116, namely:
The Central Board of Direct Taxes
constituted under the Central Boards of Revenue
Act, 1963 (54 of 1963),
" Directors-General of Income-tax or Chief Commissioners of Income-tax,
. Directors of Income-tax or Commissioners of Income-tax or Commissioners of
Income-tax (Appeals),
Additional Directors of Income-tax or Additional Commissioners of Income-tax or
Additional Commissioners of Income-tax (Appeals),
Joint Directors of Income-tax or Joint
Commissioners of Income-tax.
Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy
Commissioners of Income-tax (Appeals).
Assistant Directors of Income-tax or Assistant
Commissioners of Income-tax,
Income-tax Officers,
Tax Recovery Officers,
Inspectors of Income-tax.

In this connection, it may be noted that under section 2(7A), the term
'Assessing Officer'
means

(a) The Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy

Director; or (b) The Income-tax Officer who is vested with the relevant jurisdiction by virtue
of directions or orders issued under section 120(1) or (2) or
any other provision of the Act;
and

(c) The Additional Commissioner or Additional Director or Joint Commissioner or Joint

Director who is directed under section 120(4) (b) to exercise or perform all or
any of the
powers and functions conferred on, or assigned to, an Assessing Officer.

APPOINTMENT OF INCOME TAX AUTHORITIES

The Central Government can appoint those persons whom it thinks are to become
Income Tax Authorities. The Central Government can authorize the Board or a Director
General., a Chief Commissioner or a Commissioner or a Director to appoint income tax
authorities below the ranks of a Deputy Commissioner or Assistant
Commissioner,

Download
According to the rules and regulations of the Central Government
of such posts.
controlling the conditions

THE CENTRAL BOARD OF DIRECT

TAXES AND IT'S POWERS
The Central Board of Direct Taxes is
statutory body constituted under the Central
Board of Revenue Act, 1963. It consists of a
number of members appointed by the Central
Government for the performance of such duties, as may be entrusted to the
Board from time
to time. It is functioning under the
jurisdiction of the Ministry of Finance. The Central Board
of Direct Taxes, besides being the
highest executive authority, exercises control and
supervision over all officers of the Income-tax Department and is
authorised to exercise
certain powers conferred upon it by the Income-tax Act,
1961. In particular, has the
powers, subject to the control and approval of the Central
Government to make any rules,
from time to time for the proper administration of the
provisions of the Income-tax Act, 1961.
All the rules under the Act are framed by the
Board under section 295 of the ITA, 1961 and
placed before the Parliament. In addition to the general
power of making rules and of
superintendence, the Board has been given specific powers on several matters.
The important powers of the Board and the relevant
sections granting them have been
detailed below.

POWERS OF THE BOARD

The Board has been empowered under Section I19 to issue instructions and circulars
to itssubordinates for the proper administration of the Act. Under Section 118, CBDT shall
control all the Income Tax Authorities subject to an overall
framework of Central
Government. It is, in addition, obligatory for the various authorities and all
other persons
employed in the execution of the Act to observe and follow such
orders, instructions and
directions of the Board. However, the Board is not
empowered to issue orders, instructions or
directions in such a way as to -

1. Require any income-tax authority to make the assessmnent of

a particular case in a
particular manner, or
2. Interfere with the discretion of the Commissioner
(Appeals) in the exercise of his
appellate functions.

Download
=SCRIBD Search

However, if the Board thinks it is necessary for public

interest to do so the Board can
publish and circulate the document in the
prescribed manner. Also, the Board, to avoid
genuine hardship in any case or classes of cases, may by
general or specific order authorise
any income tax authority, to admit an
application or claim for any exemption, deduction,
refund or any other relief under the Act after the expiry of the
period specified under the Act
and deal with the same on merits in
accordance with law. However, such order cannot be
issued to a Commissioner
(Appeals).
The Board, in addition, can relax any
requirement contained in Sections 14 to 59 and
80A to 80U where the assessee has failed to
comply with any requirement. However, such
default in the requirement was due to
circumstances beyond their control or if
the assessee has complied with such a
requirement before the completion of assessment in
relation to the previous year in which such deduction is claimed.
Every such order is to be
laid before each House of Parliament.

Rule- Making Powers of the Board under Section 119 of the

Income Tax Act
The scope of the rule-making powers of the Board have been discussed below with
respect to their binding value on the Revenue Department, the assesses, the Courts/ Tribunals
and the nature of the circulars.

With Respect to Binding Value of Circulars on the

Revenue
The present view is that all circulars issued by the
CBDT under Section 119 of ITA,
196| would be binding upon the department even if they
deviate from the provisions of the
Parent Act. An earlier case decided by the Supreme Court which dealt with the
binding value
of circulars on the Revenue was that of KP. Varghese.
The assessee had entered into a bona
fide transaction for the sale of a house, earning no
profit, as it was a related party transaction.
Despite the fact that there had been no underestimation of its value, the
Revenue sought to
tax the assessee on the basis of the fair market value of the
house. The assessee argued on the
basis of a circular issued by the CBDT, stating that the
purpose of using fair market value in
certain circumstances was to prevent tax evasion through the understatement of the full value
of consideration on the transfer of a capital asset. It came to the notice of the CBDT that
several Income Tax Officers were, in violation of Section 119 of the Income Tax Act, 1961.
taxing bona fide transactions based on their fair market value.

K.P. Verghese v. ITO 1981 AIR 1922.

Download
= SCRIBD Search

Thus, it became necessary for the Board to issue another circular, clarifying that
Board circulars shall be binding on all Officers in view of the decisions of the Supreme Court
in Navnitlal Javeri' and Ellerman Lines'. In view of these decisions, the Division Bench in
this case held the circulars to be binding on the Revenue, even if they deviate from the
statute, holding that fair market value must only be used in cases where consideration has
been understated.

Other cases have also reiterated that it is not open to the Revenue to argue against
circulars issued by it: 'It cannot but urge the point of view made binding by the...circular'.
Similarly, in Mahavir Aluminium, the Supreme Court held the CBEC circular exempting
agricultural mechanical appliances from the pa yment of duty to be binding on the Board.
The most recent case that deals with the question of whether circulars issued by the
CBEC shall be binding on the Department is India Cements. The Supreme Court, in 2011,
held that circulars issued for the purpose of providing sales tax deferral (to increase the
production levels of industries in the State of Tamil Nadu) that are not contrary to the
provisions of the Tamil Nadu General Sales Tax Act, 1959 would be binding on the
Department. In the instant case, the circular did not conflict with either the statute or the
scheme contemplated there under, and the question of whether they shall be binding was thus
inconsequential.°

While the relevant provisions of various taxing statutes all suggest that circulars
issued by taxing authorities shall be binding on Department authorities, arguments are made
that the extent to which these instructions and directions shall be binding must be restricted in
certain circumstances. Thus, the assessee can challenge the issuance of circulars, and
adjudicatory authorities are also afforded the flexibility to use their independent
interpretations which may deviate from Department circulars.
With Respect to Binding Nature of Circulars on A
ssesses

While the position regarding the binding nature of circulars upon the Revenue is well
settled, a related question that arises for consideration whether circulars shall be binding
on assessee. It is well-established that circulars issued by the CBDT do not bind assessee.
2Navnit Lal C Javeri v. K.K.Sen, AAC(1965) S6 1TR 198.
Ellerman Lines Ltd vs C.I.T. West Bengal, Clcutta (1972) AIR 524.
1bid.
SCommissioner Of Central Excise, ... vs M/S Mahavir Aluminium Ltd Appeal (civi
6 State Of Tamil Nadu & Anr vs India Cements Ltd. & Anr Appeal (civil) 4233 of Download
 correctness of a circular before a quasi
Thus, the assessee has the right to challenge the
if it confers greater burden than the
judicial authority constituted under the relevant statute
statue permits.

A Full Bench in Uco Bank' considered the

effect of a certain circular issued under
the interest payable on
Section 119 of the Income Tax Act, 1961 exempting from income
included in the profit and loss
*sticky loans', whose recovery is doubtful and has not been
way of relaxation of any of
account of the assessee. It stated: 'Such instructions may be by
otherwise.
the provisions of the sections specified there or
of the law and ensurea
The Board thus has power, inter alia, to tone down the rigour
exercise of its statutory powers
fair enforcement of its provisions, by issuing circulars in
binding on the authorities in the
under Section 119 of the Income-tax Act which are
administration of the Act. Under Section 119(2)(a), however, the circulars as contemplated
therein cannot be adverse to the assesses. Therefore, the settled position of law with regard
adverse impact on them that
to assesses is that they can challenge the circular if it has an
deviates from the statutory position.

With Respect to Binding Effect of on Courts and Tribunals

be
According to the present position taken by the Courts, CBEC circulars shall
binding on the Courts as the interpretation of the statue will supersede the interpretation given
issued by
by Courts. According to the earlier point of view held by the Courts, notifications
the Government are, the opinion of the Court, mere understandings of statutory provisions,
and cannot be used to usurp the jurisdiction of the courts in interpreting statutory provisions.

Thus, Bengal Iron suggests that quasi-judicial authorities shall be bound only by
'law', which does not include administrative instructions, opinions, clarifications and
circulars. Nevertheless, the same Court in Kirloskar Oil Engines' held that while trade notices
issued by the CBEC generally have no binding value, in the absence of other evidence, the
court must consider trade notices in deciding disputes. The argument that CBEC circulars
shall not bind adjudicatory authorities was raised in Paper Products, wherein the orders of the
Customs Excise and Gold (Control) Appellate Tribunal (CEGAT) were challenged by
an assessee who argued that the circulars exempting certain products of the printing industry

7UCO Bank v. CIT (|999) 237 ITR O889.

SBengal Iron Corporation v. CTO, (1993) 90 STC 47, 56 (SC).
9Kirloskar Oil Engines Ltd vs Union Of India And Ors l1995 (1) Suppl. SCR 90.

Download
include his products of manufacture. The Revenue argued
that the impugned circulars, though
binding on the Department, would not bind the CEGAT. The
Supreme Court, in deciding that
the circulars were binding on the
Department, ultimately held that the Department does not
have the option of making arguments contrary to the
impugned circulars. Unfortunately, it
did not actually address this validity of the
Revenue's contention.
In
Hindustan Aeronautics Ltd.", however, a conclusive
decision on this point was
made. A government-owned company aggrieved by the
Revenue's disallowance of certain
deductions for its manufacture of aeroplanes filed a
revision petition before the
Commissioner of Income Tax. Since the order disallowing the
deduction had been made the
subject of a separate appeal before the Appellate Tribunal, the
Commissioner dismissed the
petition. This decision was
challenged by the assessee, who
used Navnitlal Javeri"" and Ellerman Lines' to argue that
the circular requiring the
Commissioner to examine the revision of the assessee on merits would
bind him. The
Revenue, on the other hand, argued that while it is
unquestionable that circulars shall be
binding on the Revenue, the Judiciary cannot direct that a
circular shall be given effect to
rather than the Supreme Court or High Courts
interpretation of the law in question. The
Division Bench agreed with the Revenue's
contention that a circular shall not bind
adjudicatory bodies.
In 2002, this decision was effectively overruled by a Constitution Bench requested
in Dhiren Chemicals. Here, a notification had been issued by the CBEC exempting
certain
products from excise duty, where duty was 'already paid' on the raw
materials used in their
manufacture, thus preventing the payment of double duty. The construction of this
exemption
had, for some time, been the subject of controversy, raising the
question whether imported
of
raw materials which are either not liable to excise duty,
or have the benefit of nil duty
payable, shall be included within the ambit of this notification. The
CBEC had, consequently.
issued a number of circulars clarifying that the benefit shall not
apply unless excise duty
had actually been paid on the raw materials utilised.

10 Hindustan Aeronautics Limited vs State Of Karnataka (1984) AIR

744.
Supra note 2.
12 Supra note 3.
13 Collector of Central Excise, Vadodara v. Dhiren
Chemical Industries (2002) (139) E.L.T. 3(S.C.).

Download
 Un the other hand, a Full Bench of the
Supreme Court had already, in Usha Mart1n,
decided that the notification would apply even when a nil rate of
duty was applicable. Thus,
the Court in Dhiren Chemicals was
required to choose whether to follow the precedent set by
its Full Bench earlier, or the
interpretation rendered by the CBEC circular issued in this
regard. The Court ultimately held: "We need to make it clear that,
regardless of the
interpretation that we have placed on the said phrase, if there are circulars which have been
issued by the Central Board of Excise and Customs which
place a different interpretation
upon the said phrase, that interpretation will be binding on the
revenue.'
This decision was the first to reflect a marked shift in the
Judiciary's perspective on
the extent to which circulars issued by the CBEC shall be
binding. In effect, by holding the
Department strictly to the position adopted by it in the circulars it issues, the Court
unwittingly weakened the impact of its own decisions by disregarding the interpretation of
the Full Bench in Usha Martin in favour of the
interpretation rendered by the CBEC in the
impugned order. This precedent-setting statement, negating the impact of the decision
rendered by a weaker bench earlier in Hindustan Aeronautics Ltd., was
subsequently
followed in 2004 in Maruti Foam, when the Supreme Court reaffirmed that CBEC circulars
shall be binding notwithstanding their conflict with the judgment rendered in Usha Martin.

With Respect to Benevolent Cireulars

Benevolent circulars issued by the Board even if they deviate from the legal position
are required to be followed by the department since such circulars would go to the assistance
of the assessee. Apart from the fact that the circulars issued by the Board are binding on the

department, the department is precluded from challenging the correctness of the said circulars
even on the ground of the same being inconsistent with the statutory provision.

In Navnitlal Javeri'", a Constitution Bench of the Supreme Court addressed the

question of whether a circular issued by the Board of Revenue, granting an exemption from
income tax on genuine loans advanced by companies to their shareholders, would be binding
on the Board, notwithstanding that its contents violated the parent statute. Section 2(6A) of
the Income Tax Act, 1961 made no distinction between bona fide transactions and devices
used for tax avoidance (by providing shareholders tax-free loans instead of taxable

HCommissioner of Central Excise Vs. Usha Martin Industries [(1997) 7SCC 47].
15 Collector Of Central Excise, ... vs Maruti Foam (P) Ltd. 2004 (92) ECC 498.
l6 Supra note 2.

SCRIBD Download

Trusted by over l million members

dividends). The Court held that since the circular was conferring a benefit upon assessee and
diluting the stringent requirements of the Act, the Board was required to comply with its own
instructions, and could not itself contend that the circular could not be enforced.

The decision in Navnitlal Javeri was affirmed by the Division Bench

in Ellerman Lines, in which the impugned notification laid down the principles to be
followed in assessing the Indian income of foreign shipping companies.
Accordingly, Ellerman Lines, a British shipping company, was by the said notif+ication
assessed by way of a certificate issued by U.K. authorities (declaring the income of the
company), allowing an investment allowance which had been recognised by the Revenue in
India as equivalent to the development rebate made available under the Income Tax Act,
1922.

Interestingly, the Court recognised the difficulties faced by shipping companies in complying
strictly with the income tax provisions of various countries in which they operate, and, as a
result, considered the notification, waiving strict compliance with the requirements of the
Act, to be valid and binding on the Revenue. Further, benevolent circulars have to be applied
in a sympathetic as well as in a broad and liberal manner."

With respect to Earlier Orders

Where a circular is issued after the date on which the particular order is passed, the

later issued circular can have no application to the earlier passed order unless there is
something in the circular making it applicable even retrospectively.
With Respect to With drawn Circulars

Sometimes a circular is withdrawn or the section concerned is amended. In the case

of Ellerman Lines Ltd. vs CIT, the Supreme Court held that instructions issued by the
Board prior to the amendment of a section will hold good even if they are not strictly in
accordance with the related section but merely lay down certain just and fair methods of
approach to a difficult problem. In Tata Iron and SteelCo. Ltd. v Upadhyaya 9, it was made
clear that the withdrawal of a circular, subsequent to an assessment or any other action in

pursuance of the same, will not affect the legal position.

I" cIT v. K.T.M.S.Mohamed (1981) 128 1TR 580 (Mad.).

IS Supra note 3.
19 1974 96 ITR IBom.

Download
POWERS OF OTHER INCOME TAX AUTHORITIES

Powers of the Income Tax Authorities vary with the nature of the position acquired.
Given below are the various tax authorities along with the powers they hold under that
position.

Director General Director

The Director General/ Director, appointed by the Central Government, are required to
perform such functions as maybe assigned by the Central Government of Direct Taxes. This
position enjoys the following powers under different provisions of the Act:
a To give instructions to the Income-Tax officers
b
To enquire or investigate into concealment
C. To search and seizure
d. To requisite books of account
e To survey
f To make any enquiry

Commissioners of Income Tax

Commissioners are appointed by the Central Government. Generally, they are

appointed to head income-tax administration of a specified area. As the head of
administration, a Commissioner of income-tax enjoys certain administrative as well as
judicial powers. A commissioner may exercise powers of an assessing officer. It has the
power to transfer any case from one or more assessing officers to any other as sessing officer.
It can grant approval for an order issued by the assessing officer. Prior approval is required
for reopening of an assessment. Its, also, has the power to revise an order passed by an
assessing officer in addition to many other powers as given in the Income Tax Act, 1961.

Commissioner (Appeals)
Commissioners of Income-Tax (Appeals) are appointed by the Central Government. It is
an appellate authority vested with the following judicial powers:

a
Power regarding discovery, production of evidence etc.
b Power to call information.

C. Power to inspect registers of companies.

Download
 d. Power to set off refunds against tax
remaining payable.
e. Power to dispose of appeals.
f Power to impose penalty.
Joint Commissioners

Joint Commissioners are appointed by the Central

Government. The main function of
the authority is to detect tax- evasion and
supervise subordinate officers. Under the different
provisions of the Act, the Joint Commissioner enjoys the power to
accord approval to adopt
fair market value as full
consideration, instruct income tax officers, and exercise powers of
income tax officers, the power to call information, to inspect
registers of companies, to make
any enquiry among other powers.

Income-Tax Officers

While Income-Tax officers of Class I services are

appointed by the Central
Government, Income-tax Officers of Class II services are appointed by the
Commissioner
of
Income-Tax. Powers, functions and duties of Income-Tax officers are provided in many
sections, some of which are Power of search and seizure,
Power of assessment, Power to call
for information, Power of
Survey etc.
Inspectors of Income-Tax

They are appointed by the Commissioner of Income-Tax. Inspectors of

Income-Tax
have to perform such functions as are assigned to them by the
Commissioner or any other
authority under which they are appointed to work.
THE SCOPE OF EXERCISE OF THE POWERS GIVEN TO
THE INCOME-TAX
AUTHORITIES

The Income Tax Act, 1961 specifies the scope of the

powers handed to the income-tax
authorities. Given below are some of the important powers of the Income Tax Authorities and
their scope as given in the Sections provided under the Income Tax Act, 1961:

Power to Transfer Cases [Section 127|

CBDT can transfer the case fron Assessing Officer to another A.0. subordinate to him
after giving a reasonable opportunity of being heard to the concerned assessee.
However, no
opportunity of being heard shall be required if the case is to be transferred from one A.0. to

Download
another A.0. within the same city, town or locality. Disputes regarding
jurisdiction shall be
resolved by the concerned CCIT or CIT on mutual
understanding. However, for any
disagreement, the matter shall be referred to CBDT and CBDT shall resolve the dispute by
way of issuing a notification in the Official Gazette of India.

Opportunity of Being Reheard |Section 129]

Whenever, an Income Tax Authority ceases to exercise jurisdiction over a particular case
and is being succeeded by another Income Tax Authority, then the successor Income Tax
Authority shall continue the pending proceeding from the same stage at which it was left over
by the predecessor Income Tax Authority. There shall be no requirement on the part of the
successor Income Tax Authority to reissue any notice already issued by his
predecessor. However, if the concerned assessee demands that before the successor Income
Tax Authority continues the proceeding, he shall be given an opportunity of being reheard to
explain his case to the successor Income Tax Authority, then in such case, an opportunity of
being reheard has to be given to the assessee. However, such an opportunity of being reheard
is required to be given only if the concerned assessee demands for it and not otherwise.
The time of A.0. lost in giving such opportunity of being reheard to the assessee, shall be
excluded while calculating time limit to complete the assessment.

Discovery, Production of Evidence etc. [Section 131|

The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner.

Commissioner (Appeals), the Chief Commissioner and the Dispute Resolution Panel referred
to in section 144C have the powers vested in a Civil Court under the Code of Civil Procedure.
1908 while dealing with the folilowing matters:

(i) discovery and inspection;

(iü) enforcing the attendance of any person, including any officer of a banking
company and examining him on oath;
(iii) compelling the production of books of account and documents; and
(iv) issuing commissions

This Section gives certain powers of a court of law to the income tax authorities. Though
these authorities do not strictly act as courts of law, if is clear from this Section that they act

Download
in a quasi-judicial capacity and ought to conform to the element rules of judicial procedure."
The ITO cannot call for documents under this Section with first applying his mind to the
question whether they are relevant for the purpose of the proceeding,

Any proceeding under this Act is deemed to be a judicial proceeding for the purposes of
Section 196 of the Indian Penal Code and also within the meaning of Sections 193 and 228 of
that code. The ITO also is a 'tribunal' within the meaning of Section 135(2) of the Code of
Civil Procedure and, therefore, a perSon is exempt from arrest under civil process while he is
on his way to appear before an ITO in compliance with a notice issued by him under sec.
143(2) of the Act,2?

Search and Seizure [Section 132|

Today it is not hidden from income tax authorities that people evade tax and keep
unaccounted assets. When the prosecution fails to prevent tax evasion, the department has to
take actions like search and seizure. Under this section, wide powers of search and seizure
are conferred on the income-tax authorities. The provisions of the Criminal Procedure Code
relating to searches and seizure would, as far as possible, apply to the searches and seizures
under this Act. Contravention of the orders issued under this section would be punishable
with imprisonment and fine under section 275A.

The Section confers very wide powers of search and seizure on the income tax authorities
(in fact,-without any external check or safeguard for the citizen). The provisions of the Code
of Criminal Procedure relating to searches and seizure apply, to searches and seizure under
this Section. The exercise of the powers conferred by this Section is regulation by Income-tax
Rules 112,112A, 112B and |12C.23

The Punjab and Haryana High Court analyzed this Section in the light of the case law,
held that power of search and seizure had been exercised for a collateral purpose and quashed
the proceedings under this Section. If action taken under this Section is mala fde or
arbitrary, or does not comply with the statutory requirements, it would be illegal and the court

20 Dinshaw Shroff v.CIT ||ITR 172, 177.

2 New Central Jute Mills Co.Ltd. v. Dwijendralal 90 ITR 467.
2Basheshar Nathv. Amolak Ram 1ITR9.
3 Dircctor of Inspection v. Pooran Mall 96 ITR 390 (SC).
24 Sibal v.CIT 10I ITR 112. Download
would interfere.The Section does not permit a sweeping search of seizure of documents or
things, irrespective of their relevance to some proceedings under this Act,20
Power to Requisition Books of Account etc. |Section 132A]

Where the Director or the Director-General or Commissioner or the Chief Commissioner

in consequence of information in his possession, has reason to believe that (a), (b), or (c) as
mentioned under section 132(1) and the book of accounts or other documents or the assets
have been taken under custody by any authority or officer under any other law, then the Chief
Commissioner or the Director General or Director or Commissioner can authorize any Joint
Director, Deputy Director, Joint Commissioner, Assistant Commissioner, Assistant Director,
or Income tax Officer to require the authority to provide sue books of account, assets or any
documents to the requisitioning officer, when such officer is of the opinion that it is no longer
necessary to retain the same in his custody.

Application of Retained Assets [Section 132B]

This section provides that the seized assets can be appropriated against all tax liabilities of
the assessee. However. the nature of source of acquisition of seized assets is explained

satisfactorily by the assessee, then, such assets are required to be released within a period of
120 days from the date on which last of the authorisations for search under section 132 is
executed after meeting any existing liabilities. For this purpose, it has been provided that
the assessee should make an application to the Assessing Officer within a period of 30 days
from the end of the month in which the asset was seized. The assessee shall be entitled to
simple interest at ½% per month or part of a month, if the amount of assets seized exceeds the
liabilities eventually, for the period immediately following the expiry of 120 days from the
date on which the last of the authorisations for search under section 132 or requisition under
section 132A was executed to the date of completion of the assessment under section 153A or
under Chapter XIV-B.

Power to call for information [Sections 133|

The Commissioner The Assessing Officer or the Joint Commissioner may for the
purpose of this Act:

25 Commr.of Commercial Taxes v. Ramkishan Jhaver 66 ITR 664 (SC).

26 Senairam Doongarmall Agency Ltd. v. Johnson 52 ITR 637 (FB): N.K.Textile
Mills v. CIT 62 ITR 58.

Download
 (a) Can call any firm to provide him with a return of the addresses and names of
of the firm and their
partners
shares;
(b) Can ask any Hindu Undivided Family to
provide him with return of the addresses and
names of members of the family and the
manager;
(c) Can ask any person who is a trustee,
guardian or an agent to deliver him with return of
the names of persons for or of whom he
an agent, trustee or guardian and their
addresses;
(d) Can ask any person, dealer, agent or broker
concerned in the management of stock or
any commodity exchange to provide a statement of the
addresses and names of all the
persons to whom the Exchange or he has paid any sum related with the
transfer of
assets or the exchange has received any such sum with the
particulars of all such
payments and receipts.
Power of Survey [Section 133A]

The term 'survey' is not defined by the Income Tax Act.

According to the meaning of
dictionary 'survey' means casting of eyes or mind over something, inspection of
something,
etc. An Income Tax authority can have a survey for the
purpose of this Act. The objectives of
conducting Income Tax surveys are:
(a) To discover new assessees;
(b) To collect useful information for the purpose of asses sment;
(c) To verify that the assessee who claims not maintain any books of accounts is in
fact maintaining the books;
(d) To check whether the books are maintained, reflect the
correct state of affairs.
The ITO may be compelled to return books and documents illegally seized under this
Section, but he cannot be prevented from taking any appropriate proceedings on the basis of
the information gathered from them.2

Power to Collect Certain Information |Section 133B]

For the purpose of collection of information which may be useful for any purpose, the
Income tax authority can enter any building or place within the limits of the area assigned to

27 United Chemical Agency v. Singh 97 ITR I4.

Download
such authority, or any place or building occupied by any person in respect of whom he
exercises jurisdiction.

Power to Inspect Registers of Companies [Section 134]

The Assessing Officer, the Joint Commissioner or the Commissioner (Appeals), or any
person subordinate to him authorised in writing in this behalf by the Assessing Officer, the
Joint Commissioner or the Commissioner (Appeals), as the case may be, may inspect and if
necessary, take copies, or cause copies to be taken, of any register of the members, debenture
holders or mortgagees of any company or of any entry in such register.

Other Powers [Sections 135 and 136]

The Director General or Director, the Chief Commissioner or Commissioner and the Joint
Commissioner are competent to make any enquiry under this act and for all purposes they
shall have the powers vested in an Assessing Officer in relation to the making of enquiries. If
the Investigating officer is denied entry into the premises, the Assessing Officer shall have all
the powers vested in him under sections 131(1) and (2). Allthe proceedings before Income
tax authorities are judicial proceedings for purposes of section 196 of the Indian Penal Code,
1860, and fall within the meaning of sections 193 and 228 of the Code. An income-tax
authority shall be deemed to be a Civil Court for the purposes of section 195 of the Criminal
Procedure Code, 1973.

CONCLUSION

It is believed that tax-authorities are independent judicial officers who are required to
pass reasoned orders based on their own reasoning un-influenced by instructions or advice
from their superior officers. The Central Excise adjudication manual published in 1988 (that
was its last publication), in para 39 directed that Board Orders and reference numbers should
not be quoted in the Adjudication Orders. It was further advised that Law Ministry's opin ion
is confidential and should never be communicated in the same language to even sub-ordinate
officers. There are several Assistant Commissioners who boast "I am an adjudicating
authority and not bound by the Board orders".

This has resulted in a considerable degree of uncertainty in financial management

with respect to taxes. For example it is hard to determine for the assesses, the binding value
of circulars issued by CBDT under Section 119 of the Income Tax Act, 1961. Also, these

Download
circulars blatantly contradict statutory provisions that have been given binding effect,
displace the authoritative pronouncements of the Higher Judiciary and cause an erosion of the
constitutionally-mandated effect of Supreme Court declarations under Article 141.
In recent times the catena of judicial pronouncements and statue provisions are
creating quite a stir. However, there is still a need to further define and redefine and
implement the extent to which Income Tax authorities are required to exercise their powers
and perform their functions so as to prevent harassment of assesses, tax-evasion, unnecessary
discrimination in collection of tax and to help assesses effectively manage taxes.

Download
Access the ultimate library SHOULD
TALK
SOMEONE
SHADON

with Scribd.

INDEX
INTRODUCTION
VARIOUS TAX AUTHORITIES UNDER THE INCOME TAX ACT
APPOINTMENT OF INCOME TAX AUTHORITIES
THECENTRAL BOARD OF DIRECT TAXES AND IT'S POWERS
POWERS OF THE BOARD
o Rule- Making Powers Of The Board Under
Section 119 Of The Income Tax
Act
With Respect To Binding Value Of Circulars On The Revenue
With Respect To Binding Nature Of Circulars On Assesses
With Respect To Binding Effect Of On Courts And Tribunals
o With Respect To Benevolent Circulars
With Respect To Earlier Orders
o With Respect To Withdrawn Circulars
POWERS OF OTHER INCOME TAX AUTHORITIES
o Director General/ Director
o Commissioners Of Income Tax
o Commissioner (Appeals)
Joint Commissioners
o Inspectors Of Income-Tax
THE SCOPE OF EXERCISE OF THE POWERS GIVEN TO THE INCOME-TAX
AUTHORITIES
o Power To Transfer Cases [Section 127]
Opportunity Of Being Reheard [Section 129]
o Discovery, Production Of Evidence Etc. [Section 131]
o Search And Seizure [Section 132]
o Power To Requisition Books Of Account Etc. [Section 132A]
o Application Of Retained Assets (Section 132B]
o Power To Call For Information [Sections 133]
o Power Of Survey [Section 133A]
o Power To Collect Certain Information [Section 133B]
o Power To Inspect Registers Of Companies (Section 134]
o Other Powers [Sections 135 And 136]
CONCLUSION
REFERENCES

Download