568441375-Unit-2-Income-Tax-Authorities-Powers-and-Functions.pdf

income tax notes

1. Income Tax Authorities Powers
and Functions
In India, the Central Government has been empowered by Entry 82 of the
Union List of Schedule VII 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
Judicial pronouncements by Supreme Court and High Courts.

2. Income Tax Authorities - [Section 133A]:
"Income-tax authority" means a Commissioner, a Joint Commissioner, a Director, a
Joint Director, an Assistant Director or a Deputy Director or an Assessing Officer,
or a Tax Recovery Officer, and for the purposes of clause (i) of subsection (1),
clause (i) of sub-section (3) and sub-section (5), includes an Inspector of Income-
tax.
Various Authorities:
Income Tax Act, 1961 provides for the administrative and judicial authorities for
administration of this Act. The Direct Tax Laws Act, 1987 has brought far-reaching
changes in the organizational structure. The implementation of the Act lies in the
hands of these authorities. The change in designation of certain authorities and
creation of certain new posts in the structure are the main features of amendments
made by The Direct Tax Laws Act, 1987.

3. The authorities have been grouped into two main wings:
(i) Administrative [ Income Tax Authorities ][ Sec. 116 ]
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),
(cc) Additional Directors of Income tax or Additional Commissioners of Income
tax or Additional Commissioners of Income tax (Appeals),
(cca) 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.

4. (ii) Assessing Officer [ Sec. 2(7A)]
"Assessing Officer" means the Assistant Commissioner or Deputy Commissioner or Assistant
Director or Deputy Director or the Income-tax Officer who is vested with the relevant
jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of
section 120 or any other provision of this Act, and the Joint Commissioner or Joint Director who
is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of
the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;
Importance of Assessing Officer:
In the organizational setup of the income tax department Assessing Officer plays a very vital
role. He is the primary authority who initiates the proceedings and is directly connected with the
public. From the time of filing of return, till the assessment is completed, he plays a vital role.
He can start proceedings for non filing of return, imposition of penalties etc. Orders passed by
him can be challenged only on approval. The department can revise his orders only if it is
proved that there are prejudicial to the revenue and that too only by the Commissioner of
Income Tax.

5. Appointment of Income-Tax Authorities [ Sec. 117 ]
Power of Central Government: The Central Government may appoint such persons as it
thinks fit to be income tax authorities. It kept with itself the powers to appoint authorities
up to and above rank of an Assistant Commissioner of Income Tax [ Sec. 117 (1) ]
Power of the Board and Other Higher Authorities: Subject to the rules and orders of
the Central Government regulating the conditions of service of persons in public services
and posts, the Central Government may authorize the Board, or a Director-General, a
Chief Commissioner or a Director or a Commissioner to appoint income-tax authorities
below the rank of an Assistant Commissioner or Deputy Commissioner. [ Sec. 117 (2) ]
Power to appoint Executive and Ministerial Staff: Subject to the rules and orders of the
Central Government regulating the conditions of service of persons in public services and
posts, an income tax authority authorized in this behalf by the Board may appoint such
executive or ministerial staff as may be necessary to assist it in the execution of its
function.

6. The Central Board of Direct Taxes (CBDT) and its Powers:
The Central Board of Direct Taxes is a statutory body (body set up by the parliament)
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, it 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.

7. Powers of the Board:
The Board has been empowered under Section 119 to issue instructions and
circulars to its subordinates 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-
Require any income tax authority to make the assessment of a particular case
in a particular manner, or
Interfere with the discretion of the Commissioner (Appeals) in the exercise
of his appellate functions.

8. 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 income 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, are required to perform such functions as may be assigned by the Central
Board 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

9. 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 assessing officer.
Can grant approval for an order issued by the assessing officer. Prior approval is required for
reopening of an assessment. 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.
d)Power to set off refunds against tax remaining payable.
e)Power to dispose of appeals.
f)Power to impose penalty.

10. 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 instruct income tax officers, 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 whom they are appointed to work.

11. 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 from Assessing
Officer (A.O) to another A.O. 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.O. to another A.O. within the same city,
town or locality.
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.

12. 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 following matters: (i) discovery and inspection; (ii) 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.
Search and Seizure [Section 132]: Today it is not hidden from income tax authorities
that people evade tax and keep unaccounted assets. 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.

13. Power to call for information [Sections 133]:
The Commissioner, the Assessing Officer or the Joint Commissioner may for the
purpose of this Act:
(a) Can call any firm to provide him with a return of the addresses and names of
partners of the firm and their 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 is 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.

14. Power of Survey [Section 133A]: The term 'survey' is not defined by the Income Tax
Act. According to the meaning of dictionary 'survey' means inspection of something.
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 assessment;
(c) To verify that the assessee who claims not to 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.
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 such authority, or
any place or building occupied by any person in respect of whom he exercises
jurisdiction.

15. 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). All the 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.