Overview of Income Tax Authorities in India
The Income Tax Act in India empowers the Central Government to levy taxes on all income except agricultural income. The Income Tax Department, governed by the Central Board of Direct Taxes, plays a crucial role in revenue mobilization. Understanding the functioning, powers, and limitations of tax authorities is essential for effective financial management. Chapter XIII of the Income Tax Act details the appointment, control, jurisdiction, and powers of income tax authorities in India.
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Introduction about this Act- 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 Tax (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. The 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, Government 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 mobilizer 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 effect 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.
Chapter XIII of the Income-tax Act, 1961, is devoted to the income-tax authorities and contains a total of 30 Sections. Part-A of the Chapter, containing Sections 116 to 119, relates to the appointment and control of the income tax authorities; Part-B containing Sections 120 to 130-A (out of which only the Sections 120, 124, 127 and 129 are in force, the rest having been omitted) pertain to the jurisdiction of the income-tax authorities; Part-C containing Sec. 131 to 136 are concerned with the powers of the income tax authorities; while Part-D containing Sec. 137 (omitted) and 138 pertain to the disclosure of information respecting assessees.
Sec. 11 6- Income Tax authorities.- There shall be the following classes of income tax authorities for the purposes of this Act, namely:- (a) The Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of1963), (b) Directors-General of Income Tax or Chief Commissioners of Income Tax, (c) 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), (cc-a)Joint Directors of Income Tax or Joint Commissioners of Income Tax, (d) Deputy Directors of Income Tax or Deputy Commissioners of Income Tax or Deputy Commissioners of Income Tax (appeals), (e) Assistant Directors of Income Tax or Assistant Commissioners of Income Tax, (f) Income Tax Officers, (g) Tax Recovery Officers, (h) Inspectors of Income Tax
Assessing officer- 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.
117. Appointment of Income Tax authorities. (1) The Central Government may appoint such persons as it thinks fit to be Income Tax authorities. (2) Without prejudice to the provisions of sub-Section (1), and subject to the rules i 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. (3) 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 functions.
Power to commissioner 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. 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. 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 the powers of income tax officers, the power to call information, to inspect registers of companies, to make any enquiry among other powers.
Resolve of dispute-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. 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
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.
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;
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.
