INCOME TAX

AUTHORITIES
PRINCIPLES OF TAXATION
 INTRODUCTION
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.
 VARIOUS TAX AUTHORITIES UNDER
THE INCOME TAX ACT
 The Central Board of Direct Taxes constituted under the Central Boards of Revenue Act,
1963 (54 of 1963),’Directors-General of Income-tax or Chief Commissioners of Income-
tax,
 Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax
(Appeals),
 Additional Directors of Income-tax or Additional Commissioners of Income-tax or
Additional Commissioners of Income-tax (Appeals),
 Joint Directors of Income-tax or Joint Commissioners of Income-tax.
 Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy
 Commissioners of Income-tax (Appeals),
 Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,
 Income-tax Officers,
 Tax Recovery Officers,
 Inspectors of Income-tax.
 Assessing Officer [ Sec. 2(7A)]
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

Importance of Assessing Officer

In the organizational setup of the income tax department Assessing Officer plays a very vital
role. He is the primary authority who initiates he proceedings and is directly connected with the
public. Form the time of filing of return till the assessment is completed he plays a pivotal role .
He can start proceedings for non filing of return, imposition of penalties etc. Orders passed by
him can be challenged only on approval. The department can revise his orders only if it is
proved that there are prejudicial to the revenue and that too only by the Commissioner of
Income Tax.
 THE CENTRAL BOARD OF DIRECT
TAXES
The Central Board of Direct Taxes is a statutory body constituted under the Central Board of
Revenue Act, 1963. It consists of a number of members appointed by the Central Government
for the performance of such duties, as may be entrusted to the Board from time to time. It is
functioning under the jurisdiction of the Ministry of Finance.
The Common functions of this Board are the following:
 The Board can relax any requirement contained in Sections 14 to 59 and 80A to 80U where
the assessee has failed to comply with any requirement. However, such default in the
requirement was due to circumstances beyond their control or if the assessee has complied
with such a requirement before the completion of assessment in relation to the previous
year in which such deduction is claimed. Every such order is to be laid before each House
of Parliament.
 The Board, to avoid genuine hardship in any case or classes of cases, may by general or
specific order authorise any income tax authority, to admit an application or claim for any
exemption, deduction, refund or any other relief under the Act after the expiry of the
period specified under the Act and deal with the same on merits in accordance with law.
However, such order cannot be issued to a Commissioner (Appeals).
 POWERS OF OTHER INCOME TAX
AUTHORITIES
1. Director General/ Director
The Director General/ Director, appointed by the Central Government, are required to perform such functions as maybe assigned by
the Central Government, are required to perform such functions as may be assigned by the Central Board of Direct Taxes. This
position enjoys the following powers under different provisions of the Act:

a. To give instructions to the Income-Tax officers

b. To enquire or investigate into concealment
c. To search and seizure
d. To requisite books of account
e. To survey
f. To make any enquiry

2. Commissioners of Income Tax:

Commissioners are appointed by the Central Government. Generally, they are appointed to head income-tax administration of a
specified area. As the head of administration, a Commissioner of income-tax enjoys certain administrative as well as judicial powers.
A commissioner may exercise powers of an assessing officer. It has the power to transfer any case from one or more assessing officers
to any other assessing officer. 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.
3. 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.

4. 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, exercise powers of income tax officers, the power to
call information, to inspect registers of companies, to make any enquiry among other powers.
5. Income-Tax Officers:
While Income-Tax officers of Class I services are appointed by the Central Government,
Income-tax Officers of Class II services are appointed by the Commissioner of Income-
Tax. Powers, functions and duties of Income-Tax officers are provided in many sections,
some of which are Power of search and seizure, Power of assessment, Power to call for
information, Power of Survey etc.

6. Inspectors of Income-Tax:
They are appointed by the Commissioner of Income-Tax. Inspectors of Income-Tax
have to perform such functions as are assigned to them by the Commissioner or any
other authority under whom they are appointed to work.
 THE SCOPE OF EXERCISE OF THE
POWERS GIVEN TO THE INCOME-
TAX AUTHORITIES
The Income Tax Act, 1961 specifies the scope of the powers handed to the income-tax authorities. Given
below are some of the important powers of the Income Tax Authorities and their scope as given in the
Sections provided under the Income Tax Act, 1961:

• Power to Transfer Cases [Section 127]:

CBDT can transfer the case from Assessing Officer to another A.O. subordinate to him after giving a reasonable opportunity of being
heard to the concerned assessee. However, no opportunity of being heard shall be required if the case is to be transferred from one
A.O. to another A.O. within the same city, town or locality. Disputes regarding jurisdiction shall be resolved by the concerned CCIT
or CIT on mutual understanding. However, for any disagreement, the matter shall be referred to CBDT and CBDT shall resolve the
dispute by way of issuing a notification in the Official Gazette of India.

• Opportunity of Being Reheard [Section 129]:

Whenever, an Income Tax Authority ceases to exercise jurisdiction over a particular case and is being succeeded by another Income
Tax Authority, then the successor Income Tax Authority shall continue the pending proceeding from the same stage at which it was
left over by the predecessor Income Tax Authority. There shall be no requirement on the part of the successor Income Tax Authority
to reissue any notice already issued by his predecessor. However, if the concerned assessee demands that before the successor
Income Tax Authority continues the proceeding, he shall be given an opportunity of being reheard to explain his case to the successor
Income Tax Authority, then in such case, an opportunity of being reheard has to be given to the assessee. (However, such an
opportunity of being reheard is required to be given only if the concerned assessee demands for it and not otherwise).The time of
A.O. lost in giving such opportunity of being reheard to the assessee, shall be excluded while calculating time limit to complete the
assessment.
 Discovery, Production of Evidence etc. [Section 131]:
The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appeals), the Chief Commissioner
and the Dispute Resolution Panel referred to in section 144C have the powers vested in a Civil Court under the Code of Civil
Procedure, 1908 while dealing with the following matters:
(i) discovery and inspection;
(ii) enforcing the attendance of any person, including any officer of a banking company and examining him on oath;
(iii) compelling the production of books of account and documents; and
(iv) issuing commissions

 Search and Seizure [Section 132]:

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

 Power to Requisition Books of Account etc. [Section 132A]:

Where the Director or the Director-General or Commissioner or the Chief Commissioner in consequence of information in his
possession, has reason to believe that (a), (b), or (c) as mentioned under section 132(1) and the book of accounts or other documents
or the assets have been taken under custody by any authority or officer under any other law, then the Chief Commissioner or the
Director General or Director or Commissioner can authorize any Joint Director, Deputy Director, Joint Commissioner, Assistant
Commissioner, Assistant Director, or Income tax Officer to require the authority to provide sue books of account, assets or any
documents to the requisitioning officer, when such officer is of the opinion that it is no longer necessary to retain the same in his
custody.
➢ Application of Retained Assets [Section 132B]:
This section provides that the seized assets can be appropriated against all tax liabilities of the assessee. However, if the nature of
source of acquisition of seized assets is explained satisfactorily by the assessee, then, such assets are required to be released within a
period of 120 days from the date on which last of the authorisations for search under section 132 is executed after meeting any existing
liabilities. For this purpose, it has been provided that the assessee should make an application to the Assessing Officer within a period
of 30 days from the end of the month in which the asset was seized. The assessee shall be entitled to simple interest at ½% per month
or part of a month, if the amount of assets seized exceeds the liabilities eventually, for the period immediately following the expiry of
120 days from the date on which the last of the authorisations for search under section 132 or requisition under section 132A was
executed to the date of completion of the assessment under section 153A or under Chapter XIV-B.

➢ Power to call for information [Sections 133]:

The Commissioner The Assessing Officer or the Joint
Commissioner may for the purpose of this Act:
(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 of Survey [Section 133A]:
The term 'survey' is not defined by the Income Tax Act. According to the meaning of dictionary 'survey' means casting of
eyes or mind over something, inspection of something, etc. An Income Tax authority can have a survey for the purpose of
this Act. The objectives of conducting Income Tax surveys are:

(a)To discover new assessees;

(b)To collect useful information for the purpose of assessment;
(c)To verify that the assessee who claims not to maintain any books of accounts is in-fact maintaining the books; (d)To
check whether the books are maintained, reflect the correct state of affairs.

• Power to Collect Certain Information [Section 133B]:

For the purpose of collection of information which may be useful for any purpose, the Income tax authority can enter any
building or place within the limits of the area assigned to such authority, or any place or building occupied by any person
in respect of whom he exercises jurisdiction.

• 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.