CHAPTER Four

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Administrative Authorities under

the Income-tax Act, 1961
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Chapter Four
Administrative Authorities under
the Income-tax Act, 1961

4.1 Introduction

The present Chapter discusses the administrative

authorities, their jurisdictions, functions and powers

under the Income-tax Act, 1961 (hereinafter ‘the

Act’).

4.2 Income-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 authori­

ties; 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 Secs. 131 to 136 are concerned

with the powers ofthe income tax authorities; while

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Part-D containing Secs. 137 (omitted) and 138 pertain to the disclosure of

information respecting assessees.

4.3 Appointment and Control of Income-tax Authorities

Sections 116 to 119 contained in Part-A of Chapter-XHI of the Income-tax Act,
1961,read:
Part-A: Appointment and Control
116. 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 ofIncome Tax or Chief Commissioners ofIncome Tax,
(c) Directors ofIncome Tax or Commissioners ofIncome Tax or Commissioners of
Income Tax (Appeals),
(cc) Additional Directors ofIncome Tax or Additional Commissioners ofIncome Tax
or Additional Commissioners ofIncome Tax (Appeals),
(cc-a)Joint Directors ofIncome Tax or Joint Commissioners ofIncome Tax,
(d) Deputy Directors of Income Tax or Deputy Commissioners of Income Tax or
Deputy Commissioners ofIncome Tax (appeals),
(e) Assistant Directors ofIncome Tax or Assistant Commissioners ofIncome Tax,
(f) Income Tax Officers,
(g) Tax Recovery Officers,
(h) Inspectors ofIncome Tax.
117. Appointment of Income Tax authorities. - (1) The Central Government may
appoint such persons as it thinksfir to be Income Tax authorities.
(2) Without prejudice to the provisions of sub-Section (1), and subject to the rules
i

and orders ofthe Central Government regulating the conditions ofservice ofpersons
in public services ami 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
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conditions ofservice ofpersons in public services andposts, an Income Tax authority

authorized in this behalfby the Board may appoint such executive or ministerial staff
as may be necessary to assist it in the execution of its functions.
118. Control ofIncome tax authorities. - The Board may, by notification in the Official
Gazette, direct that any Income Tax authority or authorities specified in the notification
shall be subordinate to such other Income Tax authority or authorities as may be
specified in such notification.
119. Instructions to subordinate authorities. -(1) The Board may, from time to time,
issue such orders, instructions and directions to other Income Tax authorities as it
may deem fit for the proper administration of this Act, and such authorities and all
other persons employed in the execution of this Act shall observe and follow such
orders, instructions and directions ofthe Board:
Provided that no such orders, instructions or directions shall be issue -
(a) so as to require any Income Tax authority to make a particular assessment or to
dispose ofa particular case in a particular manner; or
(b) so astir interfere with the discretion ofthe Commissioner (Appeals) in the exercise
ofthis appellate functions.
(2) Without prejudice to the generality of the foregoing power, -
(a) the Board may, ifit considers it necessary or expedient so to do, for the purpose
ofproper and efficient management ofthe work of assessment and collection of.
revenue, issue, from time to time (whether by way of relaxation of any of the
provisions ofSections. 139,143, 144,147, 148, 154,155 (sub-Section (1-A) of
<

Section 201, Sections 210, 211, 234-A, 234-B, 234-C, 271 and273 or otherwise,
general or special orders in respect of any class of incomes or class of cases,
settingforth directions or instructions (not being prejudicial to assessees) as to
the guidelines, principles or procedures to be followed by other Income Tax
authorities in the work relating to assessment or collection of revenue or the
initiation ofproceedingsfor the imposition ofpenalties and any such order may,
ifthe Board is ofopinion that it is necessary in the public interest so to do, be
published and circulated in the prescribed mannerfor general information;
(b) the Board may, if it considers it desirable or expedient so to do for avoiding
genuine hardship in ary case or class of cases, by general or special order,
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authorize any Income Tax authority, not being a Commissioner (Appeals) to

admit an application or claimfor any exemption, deduction, refund or any other
reliefunder this Act after the expiry ofthe period specified by or under this Act
for making such application or claim and deal with the same on merits in
accordance with law;
(c) the Board may, if it considers it desirable or expedient so to do for avoiding
genuine hardship in any case or class of cases, by general or special orderfor
reasons to be specified therein, relax any requirement contained in any of the
provisions ofChapter IVor Chapter VI-A, where the assessee hasfailed to comply
with any requirement specified in such provision for claiming deduction
thereunder, subject to the following conditions, namely:-
(i) the default in complying with such requirement was due to circumstances
beyond the control of the assessee; and
(ii) the assessee has complied with such requirement before the completion of
assessment in relation to the previous year in which such deduction is
claimed:
Provided that the Central Government shall cause every order issued under
this clause to be laid before each House ofParliament.

Sections 116 to 119 deal with the income-tax authorities, both quasi-judicial

and executive. (Note: Section 252 deals with the Appellate Tribunal which is not

an income tax authority). Thus, there are seven income tax authorities, namely,

(1) Central Board of Direct Taxeds,

(2) Directors of Inspection,

(3) Commissioners and Additional Commissioners,

(4) Appellate Assistant Commissioners,

(5) Inspecting Assistant Commissioners,

(6) Income-tax Officers, and

(7) Income-tax Inspectors.

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These authorities are defined in clauses (3), (12), (16), (21), (27) and (28)

of Section 2. ‘Director of Inspection’ includes Additional, Deputy or Assistant

Director of Inspetion. ‘Commissioner’ includes an Additional Commissioner.

4.4 Powers and Functions of the Central

Board of Direct Taxes (Sec. 119)
The Central Board of Direct Taxes (CBDT), the highest executive authority under

the Income-tax Act, 1961, was constituted under the Central Boards ofRevenue

Act, 1963. It works under the Ministry of Finance. The CBDT’s powers of

administration, supervision and control extend over the whole ofthe Income Tax

Department : it has power to make rules and to issue orders, instructions and

directions to all officers and persons employed in the execution of the provisions

of the Act.

Specifically, the Act has assigned main powers and functions to the Board

in interpreting the following Sections:

2(17) : ‘Company’

2(18) : ‘Company in which the public are substantially interested’

ll(l)(c) : Income derived from property held under trust,

35(3) : Entitlement of a company for deduction for expenditure on

scientific research,

35D(3) : Deduction allowable towards amortization of certain preliminary

expenses by an Indian company or a person (other than a company),

36(l)(iv) : Deductions of contributions paid to the recognized provident fond

or superannuation fund for the employees,

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44AA Maintenance ofaccounts by certain persons carrying on profession

or business,

80RRA Deduction in respect of remuneration received for services rendered

outside India,

80U Deduction in the case of permanent physical disability,

118 Control of income tax authorities,

119 Instructions to subordinate authorities,

120 Jurisdiction of income tax authorities,

124(2) Jurisdiction of assessing officers,

127 Power to transfer cases,

132(1) Search and seizure,

138 Disclosure of information respecting assessees,

139A(4) Allotment of permanent account numbers,

197(2A) Grant of certificates regarding deduction of income tax at lower

rates or no deduction of income tax,

200 Duties of persons deducting tax,

228A Recovery oftax in pursuance of agreements with foreign countries,

246 Appealable orders,

273A(2) Power to reduce or waive penalty, etc., in certain cases.

279 Prosecution at the instance of the Chief Commissioner or the

Commissioner,

288 Appearance of an assessee through an authorized representative,

293B Condonment of delays in obtaining Government’s or Board’s

approval, and Sec.295 : Power to make rules.

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The CBDT also enjoys various powers under the Second Schedule

(Procedure for Recovery of Tax) and to recognize provident funds and to approve

superannuation funds and gratuity funds under the Fourth Schedule.

Further illustrated description of the powers and functions of the CBDT is

being offered below.

(1) Instructions to subordinate authorities:

From time to time, the Board may issue such orders, instructions and

directions to other income tax authorities as it may deem fit for the proper

administration of the Act. Such authorities and all other persons employed in the

execution of the Act) shall observe and follow such orders, instructions and
i
directions of the Board.
i

In the following two instances, however, the Board cannot issue orders,

instructions or directions to the subordinate authorities:

l t >

1. The Board cannot issue an instruction, direction or order so as to require

any income-tax authority to make a particular assessment or to dispose of

! ''

a particular case in particular manner; ,

i
i
2. Moreover, the Board cannot issue any direction, order or instruction so as
|
to interference with the discretion of the Deputy Commissioner (Appeals)

or the Commissioner (Appeals) inj the exercisb ofihis appellate functions.

■ i

It is a well settled law, as laid down by the Supreme Court,*1 that under

Sec.119, a circular issued by the Board would be binding on all persons and

officers employed in the execution of the Act.

1. Navnit Lai CJaveri v. K.K.Sen, AAC(1965), 56 1TR 198)

I
I
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(3) Not binding on the Court:

What is binding on administrative authorities is not necessarily binding on

the Courts. In the case of Delhi Flour Mils Go.Limited2, the Delhi High Court

observed that the decisions of the Board are not binding upon Courts; they are

meant only for the guidance of the departmental authorities and if these

departmental decisions are not in accordance with the provisions of the statute,

they have to be disregarded. To the similar effect is the decision of the Calcutta

High Court3, wherein it was held that, ordinarily, a circular containing instructions

which are inconsistent with the provisions of the statute is of no effect.

(3) Benevolent circulars:

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 assessee4 (and such other atleast ten decisions

of Bombay, Punjab & Haryana, Kerala, Calcutta, Andhra Pradesh and Madhya

Pradesh High Courts). Further, benevolent circulars have to be applied in a

sympathetic as well as in a broad and liberal manner.5

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 ofthe same being inconsistent with the statutory

provision. The ratio of the judgment of the Court further precluded the right of

the Department to file an appeal against die correctness of the binding nature of

the circulars. Therefore, it is clear that so far as the department is concerned,

2. Delhi Flour Mills Co.Ltd. v. CIT ((1974) 95 ITR 151,
3. CIT vs. Swedish East Asia Co.Ltd. (1981) 127 ITR 148,
4. Laxmichand Hiijibhai v. CIT (1981) 128 ITR 747 (Guj.)
5. CIT v. K.T.M.S.Mohamed (1981) 128 ITR 580 (Mad.).
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whatever action it has to take, the same will have to be consistent with the circular

which is in force at the relevant point of time.6

(4) Circulars me not law :

Another important point worth remembering was made Allahabad High

Court7, wherein it was held that the circulars issued by the Board are not law and

the Tribunal is not bound to take judicial notice of than. It is interesting to note

that when a circular gives administrative relief strictly beyond the terms of the

relevant provision of the statute, the contention ofthe department that the circular

has no legal effect cannot be accepted.

(5) Contrary opinions ofHigh Courts:

In the case of T.P.Kapadia v. CIT, it was held that the Tribunal was not

right in following the decision of a different High Court in a situation where a

specific Board circular on the point in dispute existed containing a contrary view,

as the High Court decisions are binding only in the State concerned. In another

decision8, the Court extended benefit of a circular to an assessee even though

there is a decision of the High Court of the same State to the contrary rendered

without noticing the circular.

(6) Earlier orders:

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

passed, the later issued circular can have no application to the earlier passed

order, unless there is something in the circular itself, making it operative even

retrospectively.9 Where, however, the Supreme Court or the High Court have
6. Paper Products Ltd. v. CCE (2001) 115 Taxman 147 (SC).
7. Bela Singh Daulat Singh v. CIT (1966) 62ITR 250 (All.).
8. Pankaj Oil Mills v. CIT (1978) 115 ITR 824 (Guj.).
9. Rajarajeshwari Weaving Mills v. ITO (1978) 113 ITR 405 (Ker.) and
Rajnikant Narmadashankar v. C.L.Munshi (1982) 134 ITR 310 (Bom.).
 109

declared the law on the question arising for consideration, it will not be open to

a Court to direct that a circular should be given effect to and not the view expressed

in a decision in the Supreme Court or the High Court.10

Where a circular was issued and came into force after the completion ofthe

original assessment, such circular cannot be invoked even in reassessment

proceedings for the same year started after the date ofthe circular.*11 Reassessment

proceeding cannot be initiated on the basis of post-assessment circular.12

(6) Withdrawn circulars:

Sometimes a circular is withdrawn or the Section concerned is amended.

The legal position in dither of these eventualities has also been spelt out in some

of the cases. In Tata Iron and Steel Co.Ltd. v. N. C. Upadhyaya, 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.13 In CIT v. India Sea

Foods, it was held that though the Board has the power to withdraw or recall its

circulars, the assessee’s right to have the assessment effected or carried in

accordance with the said circular cannot be prejudicially affected.14

(7) Circulars beneficial to the assessee : The circular of the Board has the

force of law. It can even supplant the law where it is beneficial to the assessee

and has mitigated or relaxed the rigour ofthe law. A circular of the Board can be
i

enforced by the courts.15

10. Hindustan Aeronautics Ltd. v. CIT (2000), 110 Taxman 311/243ITR 808 (SC).
11. Peria Karamalai Tea &Produce Co.Ltd. v. CIT (1980) 124 ITR 899 (Ker.).
12. Rajeshwari Birla v. WTO (1979) ITR 629 (Cal.).
13. Tata Iron & Steel Co.Ltd. vs. Upadhyaya 96 ITR 1, 15-7.
14. CIT v. India Sea Foods (1991) 192 ITR 515 (SC).
15. Ibid.
 no
(8) Binding on officers ofIncome-tax Department:

The Board circular is binding on the subordinate officers of the Income-tax

Department. However, such a circular, if opposed to the provisions of the Act, is

not enforceable against an unwilling assesses, who is entitled to ignore the circular

if its terms are beyond the scope of the provisions of the Act.15

(9) Orders issued by way of relaxation of certain provisions

under Section II9(2)(a) in certain cases.

Without prejudice to the general provisions of Sec. 119(l)as above, the Board

may from time to time issue certain orders, instructions or directions to subordinate

authorities under Sec.ll9(2)(a) if the following conditions are satisfied:

a. Such orders, instructions or directions may be issued by the Board if it

considers it necessary or expedient so to do, for the purpose of proper and

efficient management of the work of assessment and collection of revenue,

b. Such orders, etc., may be issued whether by way of relaxation of any of the

provisions of Secs. 139,143,144,147,154,155,201(1A), 210,211,234A,

234B, 234C, 271 and 273 or otherwise,

c. Such orders, etc., may be issued by general or special orders in respect of

any class of incomes or class of cases,

d. Such orders, etc., cannot be prejudicial to the assessee,

e. Such orders, etc., are the guidelines, principles or procedures to be followed

by other income tax authorities in the work relating to assessment or

collection of revenue or the initiation of proceedings for the imposition of

penalties,

15. Sort. K.Bhoomiamma v. CIT (1991) 98 CTR (Kar.) 184 (SC).

f. If the Board is of opinion that it is necessary in the public interest so to do,

such orders may be published and circulated in the prescribed manner for

general information.

(10) Orders giving extension of time limit (Sec. I19(2)(b)) :

The Board (if it considers it desirable to expedient so to do for avoiding

J

genuine hardship in any case or class of cases) may by general or special order,

authorize 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 (for making such application or claim) and

deal with the same on merits in accordance with law. However, such order cannot

be issued to a Deputy Commissioner (Appeals) or Commissioner (Appeals).

(11) Orders giving relaxation for claiming deduction (Sec. U9(2)(c)) :

The Board by general or special order (if it considers it desirable or expedient

so to do) for avoiding genuine hardship in any case or class of cases (for reasons

to be specified therein) relax any requirement contained in Sees. 14 to 59 and

80A to 80U where the assessee has failed to comply with any requirement specified

in such provision for claiming deduction thereunder. Such order shall be issued

subject to the following conditions:

a. The default in complying with such requirement was due to circumstances

beyond the control of the assessee,

b. The assessee has complied with such requirement before the completion of

assessment in relation to previous year in which such deduction is claimed,

c. The Central Government shall cause every order issued under Sec. 119(2)(c)

to be laid before each House of Parliament.

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4.5 Jurisdictions of Income-tax Authorities

Sections 120,124,127 and 129 contained in Part-B of Chapter-XlII ofthe Income-

tax Act, 1961, read as:

Part-B: Jurisdiction

120. Jurisdiction ofIncome Tax Authorities. -

(1) Income Tax authorities shall exercise all or any ofthe powers andperform all or
any of the Junctions conferred on, or, as the case may be, assigned to such
authorities by or under this Act in accordance with such directions as the Board
may issue for the exercise ofthe powers andperformance ofthe Junctions by all
or any of those authorities.
(2) The directions ofthe Board under sub-section (1) may authorize any other income
tax authority to issue orders in writing for the exercise of the powers and
performance of the Junctions by all or any of the other income tax authorities
who are subordinate to it.
(3) In issuing the directions or orders referred to in sub-sections (1) and (2), the
Board or other income tea authority authorized by it may have regard to any one
or mote ofthe following criteria, namely:-
(a) territorial area;
(b) persons or classes ofpersons;
(c) incomes or classes of income; and
(d)
'' cases or classes ofcases.
(4) Without prejudice to the provisions ofsub-sections (1) and (2), the Board may,
by general or special order, and subject to such conditions, restrictions or
limitations as may be specified therein, -
(a) authorize any Director-General or Director to perform such Junctions of
any other income tax authority as may be assigned to him by the Board;
(b) empower the Director-General or ChiefCommissioner or Commissioner
' to issue orders in writing that the powers andJunctions conferred on, or
as the case may be, assigned to, the Assessing Officer by or wider this Act
in respect ofany specified area orpersons or classes ofpersons or incomes
or classes of income or cases or classes of cases, shall be exercised or
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performed by a Joint Commissioner or a Joint Director, and, where any

order is made under this clause, references in any other provision of this
Act, or in any rule made thereunder to the Assessing Officer shall be deemed
to be references to such Joint Commissioner or Joint Director by whom
the powers and junctions are to be exercised or performed under such
order, and anyprovision of this Act requiring approval or sanction ofthe
Joint Commissioner shall not apply.
(5) The directions and orders referred to in sub-sections (1) ami (2) may, wherever
considered necessary or appropriate for the proper management of the work,
require two or more Assessing Officers (whether or not of the same class) to
exercise and perform, concurrently, the powers andjunctions in respect ofany
area or persons or classes ofpersons or incomes or classes of income or cases
or classes of cases; and, where such powers and junctions are exercised and
performed concurrently by the Assessing Officers of different classes, any
authority lower in rank amongst them shall exercise die powers andperform the
functions as any higher authority amongst them may direbt, and, further,
references in any other provision of this Act or in any rule made thereunder to
the Assessing Officer shall be deemed to be reference to such higher authority
and anyprovision ofthis Act requiring approval or sanction ofany such authority
shall not apply.
(6) Notwithstanding anything contained in any direction or order issued under this
section, or in Section 124, the Board may, by notification in the Official Gazette,
direct thatfor the purpose offurnishing of the return of income or the doing of
any other act or thing under this Act or any rule made thereunder by any person
or class ofpersons, the income tax authority exercising andperforming the powers
and junctions in relation to the said person or class ofpersons shall be such
authority as may be specified in the notification.
124. Jurisdiction ofAssessing Officers. -
(1) Where by virtue ofany direction or order issued under sub-section (1) or sub­
section (2) ofSection 120, the Assessing Officer has been vested withjurisdiction
over any area, within the limits ofsuch area, he shall have jurisdiction
(a) in respect ofanyperson carrying on business orprofession, ifthe place at
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which he carries on his business or profession is situate within the area,

or where his business or profession is carried on in more place than one,
if the principal place of his business or profession is situate within the
area, and
(b) in respect ofany other person residing within the area.
(2) Where a question arises under this section as to whether an Assessing Officer
has jurisdiction to assess any person, the question shall be determined by the
Director-General or the Chief Commissioner or the Commissioner; or where
the question is one relating to areas within the jurisdiction ofdifferent Director-
Generals or ChiefCommissioners or Commissioners, by the Director-Generals
or Chief Commissioners or (Commissioners concerned or, if they are not in
agreement, by the Board or by such Director-General or ChiefCommissioner or
Commissioner as the Board may, by notification in the Official Gazette specify.
(3) No person shall be entitled to call in question the jurisdiction of an Assessing
Officer-
i

(a) where he has made a return under sub-section (1) ofSection 139, after the
expiry of one month from the date on which he was served with a notice
under sub-section (1) ofSection 142 or sub-section (2) ofSection 143 or
after the completion of the assessment, whichever is earlier;
(b) where he has made no such return, after the expiry of the time allowed by
the notice under sub-section (1) ofSection 142 or under Section 14$ for
the making ofthe return or by the notice under thefirst proviso to Section
144 to shim cause why the assessment should not be completed to die best
of the judgment ofthe Assessing Officer, whichever is earlier.
(4) Subject to the provisions ofsub-section (3), where an assessee calls in question
the jurisdiction ofan Assessing Officer, then the Assessing Officer shall, if not
satisfied with the correctness of the claim, refer the matter for determination
under subsection (2) before the assessment is made.
(5) Notwithstanding anything contained in this section or in any direction or order
issued under Section 120, every Assessing Officer shall have all the powers
conferred by or under this Act on an Assessing Officer in respect of the income
accruing or arising or received within the area, if any, over which he has been
 115

vested with jurisdiction by virtue of the directions or orders issued under sub1
section (1) or sub-section (2) ofSection 120.
127. Power to transfer cases.-
(1) The Director-General or ChiefCommissioner or Commissioner may, after giving
the assessee a reasonable opportunity of being heard in the matter, wherever it
is possible to do so, and after recording his reasons for doing so, transfer any
case from one or more Assessing Officers subordinate to him (whether with or
without concurrent jurisdiction) to any other Assessing Officer or Assessing
Officers (whether with or without concurrent jurisdiction) also subordinate to
him.
(2) Where the Assessing Officer or Assessing Officers from whom the case is to be
transferred and the Assessing Officer or Assessing Officers to whom the case is
to be transferred are not subordinate to the same Director-General or Chief
Commissioner or Commissioner, -
(a) where the Director-Generals or ChiefCommissioners or Commi-ssioneres
to whom such Assessing Officers are subordinate are in agreement, then
the Director-General or ChiefCommissioner or Commissionerfrom whose
jurisdiction the case is to be transferred may, after giving the assessee a
reasonable opportunity ofbeing heard in the matter, wherever it is possible
to do so, and after recording his reasons for doing so, pass the order;
(b) where the Director Generals or Chief Commissioner or Commissioners
aforesaid are not in agreement, the order transferring the case may,
similarly, be passed by the Board or any such Director-General or Chief
Commissioner or Commissioner as the Board may, by notification in the
Official Gazette, authorize in this behalf.
(3) Nothing in subsection (1) or subsection (2) shall be deemed to require any
such opportunity to be given where the transfer is from any Assessing Officer or
Assessing Officers (whether with or without concurrentjurisdiction) to any other
Assessing Officer or Assessing Officers (whether with or without concurrent
jurisdiction) and the offices of all such officers are situated in the same city,
locality or place.
(4) The transfer ofa case under sub-section (1) or sub-section (2) may be made at
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any stage ofthe proceedings, and shall not render necessary the re-issue ofany
notice already issued by the Assessing Officer or Assessing Officers from whom
the case is transferred.
Explanation. - In Section 120 and this section, the word ‘case ’, in relation to any person
whose name is specified in any order or direction issued thereunder, means all
proceedings under this Act in respect ofany year which may be pending on the date of
such order or direction or which may have been completed on or before such date, and
includes also allproceedings under this Act which may be commenced after the ilate of
such order or direction in respect ofany year.
130. Change of incumbent of an office. -
Whenever in respect ofany proceeding under this Act, an income tax authority
ceases to exercise jurisdiction and is succeeded by another who has and exercises
jurisdiction, the income tax authority os succeeding may continue the proceedingfrom
the state at which the proceeding was left by his predecessor;
Provided that the assessee concerned may demand that before the proceeding is
so continued, the previous proceeding or any part thereofbe reopened or that before
i ll ,
* ,1

any order ofassessment is passed against hi, he be heard.

These four sections may be summarized as under:

Section 120 pertains to the jurisdiction of the income tax authorities from

the Director-General downwards till the Income-tax Inspectors, as may be assigned

to them respectively by the CBDT, as regards (a) territorial area, (b) persons or
I , , 1

classes of persons, (c) incomes or classes of income, and (d) cases or classes of

cases. The ultimate detennining authority in all these behalf, of course, rests with

the CBDT.

Section 124 relates to the territorial area-wise and administrative powers-

wise jurisdiction of the Assessing Officers. It is also laid down that in certain

specific instances, no person shall be entitled to question the jurisdiction of the

Assessing Officer.
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Section 127 describes the power of the Director-General, Chief

Commissioner and the Commissioner of Income tax to transfer the cases from

the jurisdiction of one assessing officer to another’s. The concerned assessee, in

certain instances, would be given an opportunity of hearing before the transfer of

case or cases takes places; but at other instances, the discretion of the Director-

General, Chief Commissioner or the Commissioner shall be absolute.

Section 129 concerns the change of incumbent of an office before whom

cases are lying for consideration. Normally, the successor shall continue the

proceeding from the state at which it was left by his predecessor. It is also provided

that the assessee concerned may demand that before the proceeding is so

continued, the previous proceeding or any part thereofbe reopened or that before

any order of assessment is passed against him, he be reheard.

4.6 Powers of Income-tax Authorities

Sections 131, 132, 132A, 132B, 133, 133A, 133B, 134, 135 and 136 contained

in Part-C of Chapter-XIII of the Income-tax Act, 1961, read:

Part-C: Powers
131. Power regarding discovery, production of evidence, etc.-
(1) The Assessing Officer, Deputy Commissioner )Appeals), Joint Commissioner,
Commissioner (Appeals) and Chief Commissioner or Commissioner shall, for
the purposes of this Act, have the same powers as are vested under the Code of
Civil Procedure, 1908 (5 of1908), when trying a suit in respect ofthefollowing
matters, namely,-
(a) discovery and inspection;
(b) enforcing the attendance ofanyperson, including any officer ofa hanking
company and examining him on oath;
(c) compelling the production ofbooks ofaccount and other documents; and
(d) issuing commissions.
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(l-A) If the Director-General or Director or Joint Director ofAssistant Director or

Deputy Director, or the authorized officer referred to in sub-section (1) ofSection
132 before he takes action under clauses (i) to (v) ofthat subsection, has reason
to suspect that any income has been concealed, or is likely to be concealed by
any person or class ofpersons, within his jurisdiction, then, for the purposes of
making any enquiry or investigation relating thereto, it shall be competent for
him to exercise the powers conferred under sub-section (1) on the income-tax
authorities referred to in that subsection, notwithstanding that no proceedings
with respect to such person or class ofpersons are pending before him or any
other income tax authority.
(2) (Omitted).
(3) Subject to any rules made in this behalf, any authority referred to in subsection
(1) or subsection (l-A) may impound and retain in its custody for such period
as it thinks jit any books of account or other documents produced before it in
any proceeding under this Act.
Provided that an Assessing Officer or an Assistant Director or Deputy
Director shall not-
(a) impound any books of account or other documents without recording his
reasons for doing so, or
(b) retain in his custody any such books or documents for a period exceeding
fifteen days (exclusive ofholidays) without obtaining the approval of the
Chief Commissioner or Director-General or Commissioner or Director
therefor, as the case may be.
132. Search and seizure. -
(1) Where the Director-General or Director of the Chief Commissioner or
Commissioner or any such Joint Director or Joint Commissioner as may be
empowered in this behalf by the Board, in consequence of information in his
possession, has reason to believe that -
(a) any person to whom a summons under sub-section (1) ofSection 37 ofthe
Indian Income Tax Act, 1922 (11 of1922), or under sub-section (1) of
Section 131 ofthis Act, or a notice under sub-section (4) ofSection 22rof
the Indian Income Tax Act, 1922 (11 of1922), or under sub-section (1) of
 119

Section 142 ofthis Act was issued to produce, or cause to be produced any
books ofaccount or other documents has omitted to railed to produce, or
cause to be produced, such books of account, or other documents as
required by such summons or notice, or
(b) any person to whom a summons or notice as aforesaid has been or might
be issued will not, or would not, produce or cause to be produced, any
books ofaccount or other documents which will be usefulfor, or relevant
to any proceeding under the Indian Income Tax Act, 1922 (11 or 1922) or
under this Act, or
(c) any person is in possession of any money, bullion, jewellery or other
valuable article or thing and such money, bullion, jewellery or other
valuable article or thing represents either wholly or partly income or
property which has not been, or would not be, disclosedfor the purposes
of the Indian Income Tax Act, 1922 (11 of1922), or this Act (hereinafter
in this Section referred to as the undisclosed income or property), then, -
(A) the Director-General or Director or the Chief Commissioner or
Commissioner, Assistant Director or Deputy Director, Assistant
Commissioner or Deputy Commissioner or Income Tax Officer, or,
(B) such Joint Director or Joint Commissioner, as the case may be, may
authorize any Assistant Director or Deputy Director, Assistant
Commissioner or Deputy Commissioner or Income Tax Officer,
(the officer so authorized in all cases being hereinafter referred to as the
authorized officer) to -
(i) enter and search any building place, vessel, vehicle or aircraft where
he has reason to suspect that such books ofaccount, other documents,
money, bullion, jewellery or other valuable article or thing are kept;
(ii) break open the lock ofany door, box, locker, safe, almirah or other
receptacle for exercising the powers conferred by clause (i) where
the keys thereofare not available;
(ii-a) search any person who has got out of, or is about to get into, or is
in, the building, place, vessel, vehicle or aircraft, if the authorized
officer has reason to suspect that such person has secreted about
 120

his person any such books of account, other documents, money,

bullion, jewellery or other valuable article or thing;
(iii) size any such books of account, other documents, money, bullion,
jewellery or other valuable article or thingfound as a result ofsuch
search;
(iv) place marks of identification on any books of account or other
documents or make or cause to be made extracts or copies therefrom;
(v) make a note or an inventory of any such money, bullion, jewellery
or other valuable article or thing.
Provided that where any building, place, vessel, vehicle or aircraft referred
to in clause (i) is within the area ofjurisdiction ofany Chief Commissioner or
Commissioner, but such ChiefCommissioner or Commissioner has no jurisdiction
over the person referred to in clause (a) or clause (b) or clause (c), then,
notwithstanding anything contained in Section 120, it shall be competent for
him to exercise the powers under this sub-section in all cases where he has
reason to believe that any delay in getting the authorization^ from the Chief
Commissioner or Commissioner having jurisdiction over such person may be
prejudicial to the interests of the revenue;
Providedfurther that where it is not possible orpracticable to take physical
possession ofany valuable article or thing and remove it to a safe place due to
its volume, weight or other physical characteristics or due to its being of a
dangerous nature, the authorized officer may serve an order on the owner or the
l

person who is in immediate possession or control thereofthat he shall not remow,

part with or otherwise deal with it, except with the previous permission ofsuch
I

authorized officer and such action of the authorized officer shall be deemed to
be seizure ofsuch valuable article or thing under clause (iii).
(1 -A) Where any ChiefCommissioner or Commissioner, in consequence ofinformation
his possession, has mason to suspect that any books ofaccount, other documents,
money, bullion, jewellery or other valuable article or thing in respect ofwhich
an officer has been authorized by the Director-General or Director or any other
Chief Commissioner or Commissioner or any such Joint Director or Joint
Commissioner as may be empowered in this behalf by the Board to take action
 under clauses (i) to (v) ofsub-section (1) are or is kept in any building, place,
vessel, vehicle or aircraft not mentioned in the authorization order under sub­
section 91), such Chief Commissioner or Commissioner may, notwithstanding
anything contained in Section 120, authorize the said officer to take action under
any ofthe clauses aforesaid in respect ofsuch building, place, vessel, vehicle or
aircraft.
(2) The authorized officer may requisition the services of any police officer or of
any officer ofthe Central Government, or ofboth, to assist himfor all or any of
the purposes specified in sub-section (1) or sub-section (1-A) and it shall be the
duty ofevery such officer to comply with such requisition.
(3) The authorized officer may, where it is notpracticable to seize any such books of
account, other documents, money, bullion, jewellery or other valuable article or
thing, for reasons other than those mentioned in the second proviso to sub­
section 91) serve an order on the owner or the person who is in immediate
possession or control thereof that he shall not remove, part with or otherwise
deal with it except with the previous permission ofsuch officer and such officer
may take such steps as may be necessaryfor ensuring compliance with this sub­
section.
i

Explanation - For the removal ofdoubts, it hereby declared that serving ofan
order as aforesaid under this sub-section shall not be deemed to be seizure
ofsuch books ofaccount, other documents, money,1bullion, jewellery or
other valuable article or thing under clause (iiif ofsub-section (1).
(4) The authorized officer may, during the course ofthe search or seizure, examine
on oath any person who is found to be in possession or control ofany books of
account, documents, money, bullion, jewellery or other valuable article or thing
i

and any statement made by such person during such examination may thereafter
be used in evidence in any proceeding under the Indian Income Tax Act, 1922
(11 of1922), or under this Act.
Explanation - For the removal ofdoubts, it is hereby declared that the examination
ofany person under this sub-section may be not merely in respect ofany
books ofaccount, other documents or assetsfound as a result ofthe search,
but also in respect of all manners relevant for the purposes of any
 122

investigation connected with anyproceeding under the Indian Income Tax

Act, 1922 (11 of1922), or under this Act.
(4-A) Where any books ofaccount, other documents, money, bullion, jewellery or other
valuable article or thing are or is found in the possession or control of any
person in the course ofa search, it may be presumed -
(i) that such books ofaccount, other documents, money, bullion, jewellery or
other valuable article or thing belong or belongs to such person;
(ii) that the contents ofsuch books ofaccount and other documents are true;
and
(Hi) that the signature and every other part ofsuch books ofaccount and other
documents which purport to be in the handwriting ofanyparticularperson
or which may reasonably be assured to have been signed by, or to be in
the handwriting of, anyparticularperson, are in thatperson’s handwriting,
and in the case ofa document, stamped, executed or attested, that it was
duly stamped and executed or attested by the person by whom it purports
to have been so executed or attested.
(5) Where any money, bullion, jewellery or other valuable article or thing (hereinafter
in this section and in Sections 132-A and 132-B referred to as the assets) is
seized under subsection (1) or subsection (1-A), as a result ofa search initiated
or requisition made before the 1st day ofJuly, 1995, the Assessing Officer, after
affording a reasonable opportunity to the person concerned ofbeing heard and
making such enquiry as may be prescribed, shall, within one hundred and twenty
days of the seizure, make an order with die previous approval of the Joint
Commission,-
(i) estimating the undisclosed income (including the income from the
undisclosedproperty) in a summary manner to the best ofhisjudgment on
the basis ofsuch materials as are available with him;
(ii) calculating the amount of tax on the income so estimated in accordance
with the provisions of die Indian Income Tax Act, 1922 (11 of1922), or
this Act;
(ii-a) determining the amount of interest payable and the amount ofpenalty
imposable in accordance with the provisions of the Indian Income Tax
 123

Act, 1922 (11 of1922), or this Act, as if the order had been the order of
regular assessment;
(Hi) specifying the amount that will be required to satisfy any existing liability
under this Act and any one or more of the Acts specified in clause (a) of
sub-section (1) of Section 230-A, in respect of which such person is in
default or is deemed to be in default;
and retain in this custody such assets orpart thereofas are in his opinion sufficient
to satisfy the aggregate ofdie amounts referred to in clauses (ii), (ii-a) and (Hi)
andforthwith release the remaining porHon, ifany, of the assets to the person
from whose custody they were seized;
Provided that if, after taking into account the materials available with
him, the Assessing Officer is of the view that it is not possible to ascertain to
which particularprevious year or years such income or anypart thereofrelates,
he may calculate the tax on such income or part, as the case may be, as ifsuch
income or part were the total income chargeable to tax at the rates in force in
the financial year in which the assets were sized and may also determine the
interest or penalty, if any, payable or imposable accordingly;
Provided further that where a person has paid or made satisfactory
arrangements for payment of all the amounts referred to in clauses (ii), (ii-a)
and (Hi) or anypart thereof, the Assessing Officer may, with the previous approval
of the Chief Commissioner or Commissioner, release the assets or such part
thereofas he may deem fit in the circumstances of the case.
(6) The assets retained under sub-secHon (Sfmay be dealt with in accordance with
the provisions ofSecHon 132-B;
(7) If the Assessing Officer is saHsfied that the seized assets or any part thereof
were held by such person, or on behalfofany otherperson, the Assessing Officer
may proceed under sub-secHon (5) against such other person and all the
provisions ofthis Section shall apply accordingly;
(8) The books of account or other documents seized under sub-section (1) or sub­
section (1-A) shall not be retained by the authorized officerfor aperiod exceeding
one hundred and eighty days from the date of the seizure unless the reasons for
retaining the same are recorded by him in writing and the approval ofthe Chief
 124

Commissioner, Commissioner, Director-General or Director for such retention

is obtained;
Provided that the Chief Commissioner, Commissioner, Director-General
or Director shall not authorize the retention ofthe books ofaccount and other
documentsfor a period exceeding thirty days after all the proceedings under the
Indian Income Tax Act, 1922 (11 of1922), or this Act in respect ofthe yearsfor
which the books ofaccount or other documents are relevant are completed.
(8-A) An order under sub-section (3) shall not be in force for a period exceeding sixty
days from the date ofthe order, except where the authorized officer, for reasons
to be recorded by him in writing, extends the period of operation of the order
beyond sixty days, after obtaining the approval of the Director or, as the case
may be, Commissioner, for such extension;
Provided that the Director or, as the case may be, Commissioner shall not
approve the extension of the periodfor any period beyond the expiry of thirty
days after the completion ofall the proceedings under this Act, in respect ofthe
yearsfor which the books ofaccount, other documents, money, bullion, jewellery
or other valuable articles or things are relevant;
(9) The person from whose custody any books of account or other documents are
seized under sub-section (1) or sub-section (1-A) may make copies thereof, or
take extracts therefrom, in the presence of the authorized officer or any other
person empowered by him in this behalf, at such place and time as the authorized
officer may appoint in this behalf;
(9-A). Where the authorized officer has no jurisdiction over the person referred to in
clause (a) or clause (b) or clause (c) ofsub-section (1), the books ofaccount or
other documents or assets seized under that sub-section shall be handed over by
the authorized officer to the Assessing Officer having jurisdiction over such
person within a period offifteen days ofsuch seizure and thereupon the powers
exercisable by the authorized officer under sub-section (8) or sub-section (9)
shall be exercisable by such Assessing Officer.
(10) If a person legally entitled to the books of account or other documents seized
under subsection (1) or sub-section (1-A) objectsfor any reason to the approval
given by the Chief Commissioner, Commissioner, Director-General or Director
 125

under sub-section (8), he may make an application to the Board stating therein
the reasons for such objection and requesting for the return of the books of
account or other documents;
(11) Ifany person objects for any reason to an order made under sub-section (5), he
may, -within thirty days of the date of such order, make an application to the
Chief Commissioner or Commissioner stating therein the reasons for such
objection and requesting for appropriate relief in the matter;
(ll-A)Every application referred to in sub-section (11) which is pending immediately
before the 1st day ofOctober, 1984, before an authority notified under that sub­
section as it stood immediately before that day shall stand' transferred on that
day to the Chief Commissioner or Commissioner, and the Chief Commissioner
or Commissioner may proceed with such application from the stage at which it
was on that day;
Provided that the applicant may demand that before proceeding further
with the application, he be reheard.
(12) On receipt ofthe application under sub-section (10), the Board, or on receipt of
the application wider sub-section (11), the ChiefCommissioner or Commissioner
may, after giving the applicant an opportunity ofbeing heard, pass such orders
as it or be thinks jit;
(13) The provisions ofthe Code ofCriminal Procedure, 1973 (2 of1974), relating to
%

searches and seizure shall apply, so far as may be, to searches and seizures
shall apply, so far as may be, to searches and seizure under sub-section (1) or
sub-section (1-A);
(14) The Board may make rules in relation to any search or seizure under this section;
in particular, and without prejudice to the generality of the foregoing power,
such rules may providefor the procedure to be followed by,the authorized officer-
(i) for obtaining ingress into any building place, vessel, vehicle or aircraft
to be searched where free ingress thereto is not available;
(ii) for ensuring safe custody ofany books ofaccount or other documents or
assets seized;
Explanation-1. - In computing the period referred to in sub-section (5) for the
purposes of what sub-section, any period during which any proceeding under
 126

this section is stayed by an order or injunctions ofany court shall be excluded.

Explanation-2. - In this section, the word 'proceeding means any proceeding in
’

respect ofany year, whether under the Indian Income Tax Act, 1922 (11 of1922),
or tins Act, which may be pending on the date on which a search is authorized
under this section or which may have been completed on or before such date and
includes also all proceedings under this Act, which may be commenced after
such date in respect ofany year.
132-A. Powers to requisition books of account, etc, -
(1) Where the Director-General or Director or the Chief Commissioner or
Commissioner, in consequence of information in his possession has reason to
believe that:
(a) Any person to whom a summons under subsection (1) ofSection 37 ofthe
Indian Income Tax Act, 1922 (11 of 1922), or under sub-section (1) of
Section 131 of this Act, or a notice under sub-section (4) ofSection 22 of
the Indian Income Tax Act, 1922 (11 of1922), or under sub-section (1) of
Section 142 of this Act was issued to produce, or came to be produced,
any books ofaccount or other documents, has omitted orfailed to produce,
or cause to be produced; such books of account or other documents, as
required by such summons or notice and the said books of account or
other documents have been taken into custody by any officer or authority
under any other law for the time being in force, or
(b) any books ofaccount or other documents will be usefulfor, or relevant to,
any proceeding under the Indian Income Tax Act, 1922 (11 of1922), or
under this Act and ary person to whom a summons or notice as aforesaid
has been or might be issued will not, or would not, produce or came to be
produced, such books ofaccount or other documents on the return ofsuch
books ofaccount or other documents by any officer or authority by whom
or which such books ofaccount or other documents have been taken into
custody under ary other lawfor the time being in force, or
(c) any assets represent either wholly or partly income or property which has
not been or would not have been, disclosedfor the purposes ofthe Indian
Income Tax Act, 1922 (11 of1922), or this Act by any person from whose
 127

possession or control such assets have been taken into custody by any
officer or authority under any other law for the time being in force,
then, the Director-General or Director or the Chief Commissioner or
Commissioner may authorize any Joint Director, Joint Commissioner, Assistant
Director or Deputy Director, Assistant Commissioner or Deputy Commissioner
or Income Tax Officer (hereafter in this section and in sub-section (2) ofSection
278-D referred to as the requisitioning officer) to require the officer or authority
referred to in clause (a) or clause (b) or clause (c), as the case may be, to
deliver such books of account, other documents or assets to the requisitioning
officer.
(2) On a requisition being made under sub-section (1), the officer or authority
referred to in clause (a) or clause (b) or clause (c), as the case may be, of that
subsection shall deliver the books ofaccount, other documents or assets to the
requisitioning officer eitherforthwith or when such officer or authority is ofthe
opinion that it is no longer necessary to retain the same in his or its custody.
(3) Where arty books ofaccount, other documents or assets hive been delivered to
the requisitioning officer, the provisions of subsections (4-A) to (14) (both
inclusive) ofSection 132 and Section 132-B shall, so far as may be, apply as if
such books of account, other documents or assets had been seized under sub­
section (1) ofSection 132 by the requisitioning officer from the custody of the
' ' person referred to in clause (a) or clause (b) or clause (c), as the case may be,
ofsubsection (1) ofthis Section and as iffor the words "the authorized officer”
occurring in any of the aforesaid subsections' (4-A) to 914), the words "the
requisitioning officer” were substituted.
132-B. Application of retained assets,► -
(1) The assets retained under sub-section (5) ofSection 132 maybe dealt with in the
following manner, namely,-
(i) The amount of the existing liability referred to in clause (Hi) of the said
subsection and the amount of the liability determined on completion of
the regular assessment or reassessmentfor all the assessmentyears relevant
to the previous years to which the income referred to in clause (i) of that
subsection relates (including any penalty levied or interest payable in
 128

connection with such assessment or reassessment and in respect ofwhich

he is in default or is deemed to be in default may be recovered out ofsuch
assets;
(ii) Ifthe assets consist solely ofmoney, or partly ofmoney andpartly ofother
assets, the Assessing Officer may apply such money in the discharge of
the liabilities referred to in clause (i) and the assets shall, be discharged
ofsuch liability to the extent of the money so applied;
(iii) The assets other than money may also be appliedfor the discharge ofany
such liability referred to in clause (i) as remains undischarged and for
this purpose such assets shall be deemed to be under distraint as ifsuch
distraint was effected by the Assessing Officer, or, as the case may be, Tax
Recovery Officer under authorization from the Chief Commissioner or
Commissioner under sub-section (5) of Section 226 and the Assessing
Officer or, as the case may be, Tax Recovery Officer may recover the amount
ofsuch liabilities by the sale ofsuch assets and such sale shall be effected
in the manner laid down in the Third Schedule.
(2) Nothing contained in sub-section (1) shall preclude the recovery of the amount
of liabilities aforesaid by any other mode laid down in this Act;
(3) Any assets or proceeds thereof which remain after the liabilities referred to in
clause (i) of sub-section (1) are discharged shall, be forthwith made over or
paid to the persons from whose custody the assets were seized.
(4) ' (a) The Central Government shall pay simple interest at the rate offifteen per
cent per annum on the amount by which the aggregate ofmoney retained
under Section 132 and of the proceeds, if any, of the assets sold towards
' 'the discharge of the existing liability referred to in clause (iii) of sub­
section (5) of that section exceeds the aggregate of the amounts required
to meet the liabilities referred to in clause (i) of sub-section (1) of this
section.
(b) Such interest shall run from the date immediatelyfollowing the expiry of
the period ofsix months from the date of the order under sub-section (5)
ofSection 132 ofthe date ofthe regular assessment or reassessment referred
to in clause (i) ofsub-section (1) or, as the case may be, to the date oflast
 129

ofsuch assessments or reassessments.

133. Power to callfor information. -
The Assessing Officer, the Deputy Commissioner (Appeals), the Joint
Commissioner or the Commissioner (Appeals) may, for the purposes of this Act,
(1) require anyfirm to furnish him with a return ofthe names and addresses of the
partners ofthe firm and their respective shares;
(2) require any Hindu undividedfamily to furnish him with a return of the names
and addresses ofthe manager and the members ofthe family;
(3) require any person whom he has reason to believe to be a trustee, guardian or
agent, to furnish him with a return ofthe names ofthe persons for or ofwhom he
is trustee, guardian or agent, and of their addresses;
(4) require any assessee to furnish a statement of the names and addresses of all
persons to whom he has paid in any previous year rent, interest, commission,
royalty or brokerage, or any annuity, not being any annuity taxable under the
head “Salaries ” amount to more than one thousand rupees, or such higher amount
as may be prescribed, together with particulars ofall such payments made;
(5) require any dealer, broker or agent or any person concerned in the management
of a stock or commodity exchange to furnish a statement of the names and
addresses of all persons to whom he or the exchange has paid any sum in
connection with the transfer, whether by way ofsale, exchange or otherwise, of
assets, or on whose behalf or from whom he or the exchange has received any
such sum; together with particulars ofall such payments and receipts;
(6) require anyperson, including a banking company or any officer thereof, tofurnish
information in relation to such points or matters, or to furnish statements of
accouMs and affairs verified in the manner specified by the Assessing Officer,
the Deputy Commissioner (Appeals), the Joint Commissioner or the
Commissioner (Appeals), giving information in relation to such points or matters
as, in the opinion ofthe Assessing Officer, the Deputy Commissioner (Appeals),
the Joint Commissioner or the Commissioner (Appeals), will be useful for, or
relevant to, any inquiry or proceeding under this Act;
Provided that the powers referred to in clause (6), may also be exercised
by the Director-General, the ChiefCommissioner, the Director and the Commissioner;
 130

Provided further that the power in respect of an inquiry, in a case where no

proceeding is pending, shall not be exercised by any income tax authority below the
rank ofDirector or Commissioner without the prior approval ofthe Director or, as the
case may be, the Commissioner
J33-A. Power ofSurvey. -
(1) Notwithstanding anything contained in any otherprovisions oftins Act, cm income
tax authority may enter -
(a) any place within the limits of the area assigned to him, or
(b) any place occupied by any person in respect of whom he exercises
jurisdiction;
(c) any place in respect of which he is authorized for the purposes of this
section by such income tax authority, who is assigned the area within
which such place is situated or who exercises jurisdiction in respect of
any person occupying such place;
at which a business or profession is carried on, whether such place be the
i

principal place or not ofsuch business or profession, and require any proprietor,
i

employee or any other person who may at that time and place be attending in
any manner to, or helping in, the carrying on ofsuch business or profession -
(i) to afford him the necessary facility to inspect such books of account or
other documents as he may require and which may be available at such
place;
(ii) to afford Mm the necessary facility to check or very the cash, stock or
other valuable article or thing which may 'be found therein, and
(iii) tofurnish such information as he may require as to any matter which may
be useful for, or relevant to, any proceeding under this Act.
Explanation. - For the purposes ofthis sub-sectiqn, a place where a business of
profession is carried on shall also include any other place, whether any business
or profession is carried on therein or not, in which the person carrying on the
business or profession states that any ofhis books ofaccount or other documents
or any part ofhis cash or stock or other valuable article or thing relation to his
business or profession are or is kept.
 131

(2) An income tax authority may enter any place ofbusiness or profession referred
to in sub-section (1) only during the hours at which such place is open for the
conduct ofbusiness or profession and, in the case ofany other place, only after
sunrise and before sunset.
(3) An income tax authority acting under Ms section may, -
(i) if he so deems necessary, place marks of identification on the bools of
account or other documents inspected by him and make or cause to be
made extracts or copies therefrom;
(ii) make an inventory of any cash, stock or other valuable article or thing
checked or verified by him;
(Hi) record the statement ofany person which may be usefulfor, or relevant to,
any proceeding under this Act.
(4) An income tax authority acting under tins section shall, on no account, remove
or cause to be removedfrom the place where he has entered, any books ofaccount
or other documents or any cash, stock or other valuable article or thing.
(5) Where, having regard to the nature and scale of expenditure incurred by an
assessee, in connection with any function, ceremony or event, the income tax
authority is of the opinion that it is necessary or expedient so to do, he may, at
any time, after such Junction, ceremony or event, require the assessee by whom
such expenditure has been incurred or any person who, in the opinion of the
income tax authority, is likely to possess information as respects the expenditure
■.incurred, to furnish such information as he may require as to any matter which
may be useful for, or relevant to, any proceeding under this Act and may have
the statements of the assessee or any other person recorded and any statement
so recorded may thereafter be used in evidence in anyproceeding under this Act.
(6) If a person under this section is required to afford facility to the income tax
authority to inspect books of account or other documents or to check or verify
any cash, stock or other valuable article or thing or to furnish any information
or to have his statement recorded either refuses or evades to do so, the income
tax authority shall have all the powers under sub-section 91) ofSection 131 for
enforcing compliance with the requirement made.
 132

Explanation. - In this Section, -

(a) ‘income tax authority ’ means a Commissioner, a Joint Commissioner, a Director,
a Joint Director, an Assistant Director or Deputy Director or an Assessing Officer,
andfar the purposes ofclause (i) ofsub-section (1), clause (i) ofsub-section (3)
and sub-section (5), includes an Inspector ofIncome Tax, if so authorized by
any such authority.
(b) ‘proceeding ’ means any proceeding under this Act in respect ofany year which
may be pending on the date on which the powers under this section are exercised
or which may have been completed on or before such date and includes also all
proceeding sunder this Act which may be commenced after such date in respect
ofany year.
133-B. Power to collect certain information. -
(1) Notwithstanding anything contained in any other provision ofthis Act, an income
tax authority may, for the purpose of collecting any information which may be
usefulfor, or relevant to, the purposes ofthis Act, enter-
fa) any building or place within the limits of the area assigned to such
authority; or
0) my building or place occupied by any person in respect of whom he
exercises jurisdiction,
at which a business or profession is carried on, whether such place be the
principalplace or not ofsuch business orprofession, and require anyproprietor,
employee or any other person who may at that time and place be attending in
any manner to, or helping in, the carrying on ofsuch business or profession to
furnish such information as may be prescribed.
(2) An income tax authority may enter any place ofbusiness or profession referred
to in sub-section (1) only during the hours at which such place is open for the
conduct of business or profession.
(3) For the removal of doubts, it is hereby declared that an income tax authority
acting under this section shall, on no account, remove or cause to be removed
from the building or place wherein he has entered, any books of account or
other documents or any cash, stock or other valuable article or thing.
 133

Explanation. - In this section, ‘income tax authority means ajoint Commissioner,

’

an Assistant Director or Deputy Director or an Assessing Officer, and includes an

Inspector ofIncome Tax who has been authorized by the Assessing Officer to exercise
the powers conferred under this section in relation to the area in respect ofwhich the
Assessing Officer exercises jurisdiction or part thereof
134. Power to inspect registers of companies. - The Assessing Officer, the Deputy
Commissioner (Appeals), the Joint Commissioner or the Commissioner (Appeals),
or anyperson subordinate to him authorized in writing this behalfby the Assessing
Officer, the Deputy Commissioner (Appeals), the Joint Commissioner or the
Commissioner (Appeals), may inspect, and if necessary, take copies, or cause
copies to be taken, of any register of the members, debenture holders or
mortgagees ofany company or ofany entry in such register.
135. Power ofDirector-General or Director, ChiefCommissioner or Commissioner
and Joint Commissioner. - The Director General or Director, the Chief
Commissioner or Commissioner and the Joint Commissioner shall be competent
to make any enquiry under this Act, and for this purpose shall have all the
powers that an Assessing Officer has under this Act in relation to the making of
enquiries.
136. Proceedings before income tax authorities to be judicial proceedings.- Any
proceeding under this Act before an income tax authority shall be deemed to be
a judicial proceeding within the meaning of section 193 ami 228 and for the
purposes ofSection 196 ofthe Indian Penal Code, 1860 (45 of1860), and every
income tax authority shall be deemed to be a Civil Court for the purposes of
Section 195, but notfor the purposes of Chapter XXVI ofthe Code of Criminal
Procedure, 1973 (2 of1974).
137. (Omitted).
138. Disclosure ofinformation respecting assessees.-
(1) (a) The Board ofany other income tax authority specified by it by a general
or special order in this behalfmayfurnish or cause not be furnished to
(i) any officer, authority or body performing any junction under any
law relating to the imposition ofany tax, duty or cess, or to dealings
in foreign exchange as defined in Section 2(d) of the Foreign
 134

Exchange Regulation Act, 1947 (7 of1947), or

(ii) such officer, authority or bodyperformingfimctions under any other
law as the Central Government may, ifin its opinion, it is necessary
so to do in the public interest, specify by notification in the Official
Gazette in this behalf,
any such information received or obtained by any income tax authority in
the performance ofhis junctions under this Act, as may, in the opinion of
the Board of other income tax authority, be necessaryfor the purpose of
enabling the officer, authority or body to perform his or itsjunctions under
that taw.
(b) Where a person makes an application to the Chief Commissioner or
Commissioner in the prescribedform for any information relating to any
assessee received or obtained by any income tax authority in the
performance of his junctions under this Act, the Chief Commissioner or
Commissioner may, ifhe is satisfied that it is the public interest so to do,
furnish or cause to befurnished the information askedfor and his decision
in this behalf shall be final and shall not be called in question in ary
court oflaw.
(2) Notwithstanding anything contained in sub-section (1) or any other law for the
time being in force, the Central Government may, having regard to the practices
and usages customary or any other relevant factors, by order notified in the
Official Gazette, direct that no information or document shall be furnished or
produced by a public servant in respect ofsuch matters relating to such class of

assessees or except to such authorities as may be specified in the order.

A brief description of the powers of the various income tax authorities as

emerging from the above quoted Sections is given hereunder:

4.6.1 Powers and Functions of the Director General/Director

Director General/Director, appointed by the Central Government, are required

to perform such functions as may be assigned by the CBDT. A Director General/

 135

Director enjoys the following powers under different provisions of the Act:

> to give instructions to Income-tax Officers (Sec. 119(2));

> to enquire or investigate into concealment (Sec. 131 (1 A));

> to search and seizure (Sec. 132);

> to requisition books of accounts (Sec. 132A);

> to survey (Sec. 133A);

> to make any enquiry (Sec. 135).

4.6.2 Powers and Functions of the Commissioners of Income-tax

Commissioners of Income-tax are appointed by the Central Government.

Generally, they are appointed to head income-tax administration of a specified

area. As head of administration, a Commissioner of Income-tax enjoys the

\
I
following administrative as well as judicial powers and functions unde: the different
i

provisions of the Act. !These powers pertain to

> registration of a charitable trust or institution (Secs. 12A(a));

> approval of an annuity contract (Sec. 80E);

> appointment of Income-tax officers (Class-II) and Inspectors of

Income-tax (Sec. 117(2);

j
> instructions to subordinate authorities (Sec. 119);

> assigning jurisdiction of Inspecting Assistant Commissioners and

Income-tax Officers (Secs. 123 and 124);

> shifting of jurisdiction (Sec. 125); transfer of cases (Sec. 127);

> assignment of functions to Inspectors of Income-tax (Sec. 128);

> discovery, production of evidence (Sec. 131);

> search and seizure (Sec. 132);

 136

> requisition books of account (Sec. 132A);

> any enquiry (Sec. 135);

> disclosure of information respecting assessees (Sec. 138);

> granting sanction for issue of notice to reopen assessment after

the expiry of 4 years (Sec. 151 (2);

> authorizing Income-tax Officers to recover any arrears of tax due from

an assessee by distraint and sale of Ms movable property (Sec.226(5);

> withholding of refund in certain cases (Sec.241);

> set off of refunds against tax remaining payable (Sec.245);

> directing an Income-tax Officer to prefer an appeal to Appellate Tribunal

against the order of the Deputy Commissioner (Appeals) or

Commissioner (Appeals) (Sec.253(2);

> reference to High Court (Sec.256);

> revision of orders passed by Income-tax Officer wMch are prejudicial

to the revenue (Sec.263);

> revision of orders passed by subordinate authorities on Ms own motion

or on the application of the assessee (Sec.264);

> reduction or waiver of penalty in certain cases (Sec.273A);

to award and withdraw recognition to provident funds (Schedule IV).

4.6.3 Powers and Functions of the Commissioners (Appeals)

Commissioners ofIncome-tax (Appeals) are appointed by the Central Government.

It is an appellate authority vested with the following judicial powers:

> Power regarding discovery, production of evidence, etc. (Sec. 131);

> Power to call for information (Sec. 133);

 137

> Power to inspect registers of companies (Sec. 134);

> Power to set off refunds against tax remaining payable (Sec.245);

> Power to dispose of appeals.

> Power to impose penalty (Secs.271 and 272A).

4.6.4 Powers and Functions of the Joint Commissioners

Joint Commissioners are appointed by the Central Government. The main function

ofthis authority is to detect tax evasion and supervise subordinate officers. Under

different provisions of the Act, the Joint Commissioners enjoy the following

powers:

> approval of orders of additional tax on undistributed profits (Sec. 107);

> instruction to the Income-tax Officers (Sec. 119(3);

> exercise of powers of the Income-tax Officers (Sec. 125A);

> powers regarding discovery, production of evidence (Sec. 131);

> search and seizure (Sec. 132);

> to call information (Sec. 133);

> to survey (Sec. 133A);

> to inspect registers of companies (Sec. 134);

>, to make any enquiry (Sec. 135);

> to grant approval to the concerned Income-tax Officer to impose penalty

for concealment of income in excess of Rs.25 (Sec.271(l)(iii); and

> imposing penalty for failure to answer questions, sign statements, etc.

(Sec.272A).

4.6.5 Powers and Functions of the Income-tax Officers

While Income-tax Officers of Class-I services are appointed by the Central

 138

Government Income-tax Officers of Class-II services are appointed by the

Commissioner ofIncome-tax. Powers, functions and duties ofIncome-tax Officers

are provided in many Sections, some of which are summarized below:

> to impose additional income-tax on the undistributed profits of a company

(Sec. 104);

> discovery and production of evidence (Sec. 131);

> power regarding search and seizure (Sec. 132);

> power to requisition books of account (Sec. 132A);

> application of retained assets (Sec. 132B);

> power to call for information (Sec. 133);

> power of survey (Sec. 133 A);

> power to inspect registers of companies (Sec. 134);

> allotment of permanent account numbers (Sec. 139A);

> to make assessment (Secs. 143 and 144);

> to impose penalties;

> to make provision assessment for refund (Sec. 141 A);

> . to issue direction for getting accounts audited (Sec. 142);

> to reassess escaped income (Sec. 147);

> rectification of mistakes (Sec. 154);

> to grant approval for deduction of tax at source at lower rates of tax

(Secs. 194, 195 and 197);

> to demand advance payment of tax (Sec.210);

> to grant refunds (Secs.237 and 240).

 139

4.6.7 Powers and Functions of the Income-tax Inspectors

Inspectors of Income-tax are appointed by the Commissioner of Income-tax.

Income-tax Inspectors have to perform such functions as are assigned to them by

the Commissioner or any other authority under whom they are appointed to work.

4.7 Section-wise Interpretation

4.7.1 Section 131 - Power reg. discovery, production of evidence, etc.

The provisions of sub-sections (1) and (3) of this section correspond to those of

sub-sections (1) and (3) of section 37 of the 1922 Act. Underr that Act, the

income-tax authority had no power to levy a fine as it has under sub-section (2)

of the present Act. Powers similar to those conferred upon the income tax

authorities under this section are also conferred upon the Appellate Tribunal

under sec.255(6).

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 in a quasi-judicial capacity and ought to

conform to the element rules of judicial procedure.16 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.17 Exercising the powers of a
'•**' V-
civil court, the ITO may, under Order XIII, Rule 10 ofthe Code of Civil Procedure,

send for books and documents seized by a Magistrate in other procedmgs.18 In

the circumstances of a case, the powers under this Section may be coupled with

16. Dinshaw Shroff v. CIT 11ITR 172, 177.

17. New Central Jute Mills Co.Ltd. v. Dwijendralal 90 ITR 467.
18. Union of India v. State 42 ITR 753; Jhabramull Agarwalla v. Kashiram Agarwalla
71 ITR 269; See also: Ganpatrai Rawatmull v. Collector, Land Customs,
42 ITR 107.
 140

a duty, for example, a duty to enforce the attenance of a witness whose evidence

is material19 or' to call for the assessee’s books of account which are in the

possession of a public authority.20 The income tax authorities and the Tribunal

can issue a commission for any purpose for which a civil court may issue a

commission; to examine any person, to make a local investigation and to examine

accounts.

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 ofthat 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.21

Sub-section (l)(b) - Examination on oath - This clauses empowers but does

not oblige the income tax authorities concerned to administer oath; therefore,

the statements of witnesses taken without administration of oath are an admissible

evidence.22 When the evidence of a witness is being taken in the course of

assessment proceedings, the witness has no right, but the assessee has, to be

represented by a lawyer, or other authorized representative 23

Sub-section (l)(c) - Production of accounts - This clause is constitutional.24

A
* 1 *V
Under it, theffiTQ may call for accounts of a period beyond three years preceding
19. MunnalaLMurlidhar v. CIT 79ITR 540; See also: Nathu Ram Premchand v.
CIT 49 ITR 561.
20. EMC (Works) Ltd. v. ITO 49 ITR 650.
21. Basheshar Nath v. Amolak Ram 1 ITR 9.
22. Chowkchand Balabux v. CIT 41 ITR465.
23. Saiju Prosad Sharma v. ITO 93 ITR 36.
24. Calcutta Chromotype Ltd. v. ITO 79 ITR 442.
. 25. Sankaralinga Nadar v. CIT 4ITC 226 (FB); Fatehchand Chhakodilal v. CIT 13
ITR 198.
 141

the relevant accounting year.25

Sub-section (3) Power to impound and retain books and documents - This

sub-section gives power to the income tax authorities to impound and retain in

their custody for such period as they think fit any books of account or other

documents produced before them in any proceeding. Thus, there is no limit to

the period for which the retentionmay continue. The powers are unresricted in

the case of all the authorities, except the ITO and the Assisatant Director of

Inspection whose powers are subject to two restrictions: (a) they must record

their reasons for impounding books of account or other documents;26 and (b) if

they desire to retain their custody any such books or documents for a period

exceeeding fiteen days (excluding holidays), they must obtain the approval of the

Commissioner for that purpose. Impounding of books by these two authorities

without recording reasons would be illegal, and subsequent retention of books

so illegally impounded would be equally illegal even if the Commissioner’s

approval is obtained.27

4.7.2 Section 132 - Search and Seizure

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

conferredjby.this Section is regulation by Income-tax Rules 112,112A, 112B and

112C.28
26. Reasons need only to be recorded and need not be communciated to the
assessee. Ramji Dass Om Prakash v. ITO 77 ITR 1010.
27. Kanodia Bros. v. Seth 39 ITR 228.
28. Director of Inspection v. Pooran Mall 96 ITR 390 (SC).
 142

The scope ofthis Section was examined in several cases.29 The provisions

of Sections 132 and the original Section 132A (now renumbered Section 132B),

as they stood prior to their amendment in 1975, and Rules 112,112A, 112B and

112C, were held to be constitutional and valid.30

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.31 If action

taken under this Section is mala fide or arbitrary, or does not comply with the

statutory requirements, it would be illegal and the court would interfere.32 The

Section does not permit a sweeping search of seizure of documents or things,

irrespective of their relevance to some proceedings under this Act.33

In ITO v. Seth Bros.,34 the Supreme Court had observed that, “Since by

the exercise ofthe power, a serious invasion is made upon the rights, privacy and

freedom of the taxpayer, the power must be exercised strictly in accxordance

with the law and only for the purposes for which the law authorizes it to be

exercised. If the action of the officer issuing the authorization or of the designated

29. \JETO. v. Seth Bros. 74 FTR 836 (SC); Balwant Singh v. Shah 711TR 550;
Mamchand & Co. v. CIT 76ITR 217; Ramjibhai Kalidas v. Desai 80ITR 721
(overruled only on the point of Rule 112A in Director of Inspection v. Pooran
Mall 96 ITR 390 (SC».
30. Pooran Mai v. Director of Inspection 93 ITR 505 (SC); Bhupendra Thakkar v.
CIT102 ITR 531 (SC); N.K.Textile Mills v. CIT 62 ITR 58; Venkata Reddy v.
ITO 66 ITR 212; Hindustan Metal Works v. CIT 68 ITR 798; Balwant Singh v.
Shah 71 ITR 550; Venkateshwara Lodge v. CIT 71 ITR 629; Ramjibhai
Kalidas v. Desai 80 ITR 971 (overruled on another point in in Director of
Inspection v. Pooran Mall 96 ITR 390 (SC).
31. Sibalv.ClT 101 ITR 112.
32. Commr.of Commercial Taxes v. Ramkishan Jhaver 66 ITR 664 (SC).
33. Senairam Doongarmall Agency Ltd. v. Johnson 52 ITR 637 (FB); N.K.Textile
Mills v. CIT 62 ITR 58.
34. ITO v. Seth Bros. 74 ITR 836, 843-4.
 143

officer is challenged, the officer concerned must satisfy the court about the

regularity of his action. If the action is maliciously taken or power under the

Section is exercised for a collateral puipose, it is liable to be struck down by the

court. Ifthe conditions for exercise ofthe power are not satisfied, the proceeding

is liable to be quashed. But where powere is exercised bona fide, and in furtherance

of the statutory duties ofthe tax officers, any arror ofjudgment on the part ofthe

officers will not vitiate the exercise of the power”.

The issue of a search warrant under this Section is not judicial or quasi­

judicial act.33 It is not necessary that the warrant of authorization should specify

the particulars of the account books or documents,36 or that before effecting

search and seizure under this Section, the Department should give to the person

concerned a notice to produce the relevant books and documents.37

The power of seizure38 under sub-section (1) cannot be exercised in respect

of assess or documens which are in the custody of the court,39 or in the custody

of & department ofthe Government under legal authority, for example, the customs

or extise authorities40 or police;41 nor can a prohibitory order under sub-section

(3) be passed in such a case 42 This lacuna has now been filled by Section 132A

35., ITO v. Seth Bros. 74ITR 836, 845;

ITO v. Madan Mohan Damma Mai 70 ITR 293.
36. ITO v. Seth Bros. 74 ITR 836; ITO v. Madan Mohan Damma Mai 70 ITR 293;
Balwant Singh v Shah 74; Venkateswara Lodge v. CIT 71 ITR 629.
37. Jain v. Union of India 98 ITR 469; Pooran Mai v. Director of Inspection 93
ITR 505, 520-1 (SC).
38. Kanwal Shamsher Singh v. Union of India 95 ITR 80; Punamchand Shah v.
ITO 101 nR 373.
39. Choyi v. Syed Abdulla 91 ITR 144.
40. Motilal v. Preventive Intelligence Officer 80 ITR 418; Johnson v. Laxmipat
Choraria 93 ITR 489; Tarsem Kumar v. CIT 94 ITR 567; Bafiia Textiles v.
no 98 ITR 1.
41. CIT v. Ramesh Chander 93 ITR 450.
42. Choyi v. Syed Abdulla 91 nR 144; Union of India v. Hadibandhu Das 91 nR
156.
 144

which was inserted by the Taxation Laws (Amendment) Act, 1975, which

empowers the income tax authorities to requisition assets and documents which

are in the custody of any officer or authority under any other law.

Retention of the seized documents would be illegal after the expiry of 180

days if the reasons for retaining them thereafter are not recorded or the

Commissioner’s approval for such retention is not obtained43 or if such approval

is not communicated to the person concerned.44 The Commissioner need not

give the person an opportunity of being heard before granting the approval.45

Thematerials obtained during a search or seizure illegally or irregularly

conduted can nevertheless be utilized for the purpose ofan ordinary assessment.46

But a summary estimate under sub-section (5) is liable to be set aside if the

search and seizure under sub-section (1) are illegal47 or if the estimate is made

beyond the prescribed period of ninety days48 or if the right of inspecting the

seized documents or making copies thereof or taking extracts therefrom under

sub-section (9) is denied to the assessee49 or if the ITO, having collected material

under this Section on which he proposes to rely, does not give a reasonable

opportunity to the assessee to show cause why such material should not be used

43. CIT v. Jawahar Lai Rastogi 78ITR 486 (SC); Seth Bros v. CIT 80ITR 693;
Seth Bros, v CIT 90 ITR 191.
44. Mahabir Prasad Poddar v. CIT 77 ITR 343, affirmed in CIT v. Mahabir Prasad
Poddar 93 ITR 215; Wadha v. CIT 78 ITR 782.
45. CIT v. Mahabir Prasad Poddar 93 ITR 215; Hanuman Pershad v. Director of
Inspection, 93 ITR 419.
46. Pooran Mai v. Director of Inspection 93 ITR 505, 524-8 (SC); ITO v. Madan
Mohan Damma Mai 70 ITR 293; Balwant Singh v. Shah 71 ITR 550,591-3;
United Chemical Agency v. Singh 97, ITR 14.
47. Johnson v. Laxmipan Choraria 93 ITR 489; CIT v. Ramesh Chander 93 ITR
450; Bafha Textiles v. ITO 98 ITR 1; Sibal v. CIT 101 ITR 112.
48. Punamchand Shah v. ITO 101 ITR 373.
49. CIT v. Ramesh Cahnder 93 ITR 450,477-8.
 145

against him.50 The period of limitation for making an order under sub-section (5)

can be waived by the party concerned, and in any event, it will not apply to an

order passed pursuant to a direction of the court for a fresh diposal of the case.51

Generally, the person affected by the search warrant issued under this Section

is entitled to inspection and copies of the relevant departmental record.52

A fixed deposit receipt or a title deed of immovable property is not a

‘valuable article or thing’ within sub-section (5) but is a ‘document’ within sub­

section (8)53

4.7.3 Section 132A - Power to requisition books of account, etc.

This Section was inserted by the Taxation Laws (Amendment) Act, 1975, with

effect from 1st October, 1975.

4.74. Section 132-B - Application of retained assets.

The Section prescribes the procedure for applying the assets seized and retained

under Section 132. Rule 112C of the Income-tax Rules deals with the release of

the assets, remaining after the tax liabilities are discharged. Sub-sec. (4) provides

for the payment of interest on the excess amount retained by the Department

under Section 132; and Rule 119A prescribes the mode ofcalculating such interest.

4.7.5 Section 133 - Power to call for information

A bank is bound to furnish a return under this Section even as any other person. 54

Power to require a bank to furnish statements of accounts is now specifically

conferred on the ITO, the AAC and the LAC by clause (6). Failure on the part of
50. Maneklal Bhagwandas v. Sheth 94ITR 287.
51. Director of Inspection v. Pooran Mall 96 ITR 390 (SC); CIT v. Ramesh
Chander 93 ITR 450.
52. New Kashmir & Oriental Transport Co.Ltd., v. CIT 92 ITR 334.
53. Bhagwandas Narayandas v. CIT 98 ITR 194.
54. Attorney General v. National Provincial Bank Ltd., 14 TC 111.
 146

any person to fiimsih the return or information called for under this Section may

attract penalty under Sec.272A(2). The prescribed forms of return of income

require certain particulars to be furnished under this Section.

4.7.6 Section 133=A : Power of Survey

This Section was inserted by the Finance Act, 1964, with effect from 1st April,

1964, and was substituted by the Taxation Laws (Amendment) Act, 1975, with

eflFect from 1st October, 1975. While making a survey under this Section, the

ITO has no jurisdiction to seize or impound anybooks or documents. 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.55

4.7.7 Section 134 : Power to inspect registers of companies

This Section empowers certain income tax authorities to inspect and take copies

of any register of the members, debenture holders or mortagees of a company.

Failure to allow inspection or copies to be taken may attract penalty under Section

272A(2).

4.7:8 Section 135 : Power of Director of Inspection, etc.

The Section states that the Director of Inspection, the Commissioner and the

Inspecting Assistant Commissioner shall be competent to make any inquiry under

this Act and shall have all the powers that an income tax officer has under this

Act in relating to the making of the inquiries.

4.7.9 Section 136 : Proceedings before Income tax authorities to be judicial

Proceedings - A proceeding before an ITO, which is deemed to be a “judicial

55. United Chemical Agency v. Singh 97 ITR 14.

 147

proceeding” by this Section for certain purposes of the Indian Penal Code56 must

be treated as a “proceeding in any court” within Section 195(1 )(b) ofthe Code of

Criminal Procedure, 1973; and a criminal court can take cognizance of the offence

of making falst statements in a proceeding before the ITO only on a complaint in

writing by the ITO.57

4.7.10 Section 138 : Disclosure of information respecting assessees

Rule 113 of the Income-tax Rules prescribes forms relevant for the purposes of

this Section which permits disclosure of information relating to assessee and

assessments. The CBDT has notified certain authorities to whom disclosure under

this Section may be made. The prohibition of disclosure, which was contained in

Section 137 has been removed with the repeal of that Section in 1964. But if an

order of the Central Government under sub-section (2) of this Section prohibits

the furnishing of certain information or the production of certain documents, a

contravention of that order would be punishable under Section 280.

Thus concludes an evaluation of the statutory provisions in respect of the

income tax authorities under the Income-tax Act, 1961.

□ □□

56. Sannana Chetty v. ITO 76 ITR 177.

57. Lalji Haridas v. State of Maharashtra 52 ITR 423 (SC);
Balwant Singh v. Bharupal 70 ITR.