TAX AUTHORITIES AND THEIR POWERS UNDER INCOME TAX ACT

INTRODUCTION:

In India, the Central Government has been empowered by Entry 82 of the Union List of Schedule VII of
the Constitution of India to levy tax on all income other than agricultural income. The Income Tax Law
comprises The Income Tax Act 1961, Income Tax Rules 1962, Notifications and Circulars issued
by Central Board of Direct Taxes (CBDT), Annual Finance Acts and Judicial pronouncements by
Supreme Court and High Courts. The Government of India imposes an income tax on taxable income of
all persons including individuals, Hindu Undivided Families (HUFs), companies, firms, association of
persons, body of individuals, local authority and any other artificial judicial person. Levy of tax is
separate on each of the persons. The levy is governed by the Indian Income Tax Act, 1961. The Indian
Income Tax Department is governed by CBDT and is part of the Department of Revenue under
the Ministry of Finance, Govt. of India. Income tax is a key source of funds that the government uses to
fund its activities and serve the public. The Income Tax Department is the biggest revenue mobilizer for
the Government.

VARIOUS TAX AUTHORITIES UNDER THE INCOME TAX:

The Government of India has constituted a number of authorities to execute the Income Tax Act and to
control the Income Tax Department efficiently. There shall be the following classes of income-tax
authorities for the purposes of the Act as given under Section 116, namely:
 The Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963
(54 of 1963),
 Directors-General of Income-tax or Chief Commissioners of Income-tax,
 Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax
(Appeals),
 Additional Directors of Income-tax or Additional Commissioners of Income-tax or Additional
Commissioners of Income-tax (Appeals),
 Joint Directors of Income-tax or Joint Commissioners of Income-tax.
 Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy
Commissioners of Income-tax (Appeals),
 Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,
 Income-tax Officers,
 Tax Recovery Officers,
 Inspectors of Income-tax.

APPOINTMENT OF INCOME TAX AUTHORITIES:

The Central Government can appoint those persons whom it thinks are fit to become Income Tax
Authorities. The Central Government can authorize the Board or a Director-General, a Chief
Commissioner or a Commissioner or a Director to appoint income tax authorities below the ranks of a
Deputy Commissioner or Assistant Commissioner, According to the rules and regulations of the Central
Government controlling the conditions of such posts.
 
THE CENTRAL BOARD OF DIRECT TAXES AND IT’S POWERS:
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 Central Board of Direct Taxes, besides being the highest executive
authority, exercises control and supervision over all officers of the Income-tax Department and is
authorised to exercise certain powers conferred upon it by the Income-tax Act, 1961. In particular, it has
the powers, subject to the control and approval of the Central Government to make any rules, from time
to time for the proper administration of the provisions of the Income-tax Act, 1961. All the rules under
the Act are framed by the Board under section 295 of the ITA, 1961 and placed before the Parliament. In
addition to the general power of making rules and of superintendence, the Board has been given specific
powers on several matters.
The important powers of the Board and the relevant sections granting them have been detailed below.
 
Powers of the Board:
The Board has been empowered under Section 119 to issue instructions and circulars to it’s subordinates
for the proper administration of the Act. Under Section 118, CBDT shall control all the Income Tax
Authorities subject to an overall framework of Central Government. It is, in addition, obligatory for the
various authorities and all other persons employed in the execution of the Act to observe and follow such
orders, instructions and directions of the Board. However, the Board is not empowered to issue orders,
instructions or directions in such a way as to –
1.     Require any income-tax authority to make the assessment of a particular case in a particular manner,
or
2.     Interfere with the discretion of the Commissioner (Appeals) in the exercise of his appellate
functions.
Further, the Board may, if it considers necessary or expedient to do so, for the purpose of proper and
effective management of the work of assessment and collection of revenue, issue general or special orders
from time to time in respect of any class of incomes or class of cases setting the Board may relax the
provisions of Section 115P, 115S, 139, 143, 144, 147, 148, 154, 155, 234A, 234B, 271 and 273. Such
order etc., may be issued by general or special orders in respect of any class of incomes or fringe benefit
or class of cases.

POWERS OF OTHER INCOME TAX AUTHORITIES:

Powers of the Income Tax Authorities vary with the nature of the position acquired. Given below are the
various tax authorities along with the powers they hold under that position.
 
Director General/ Director:
The Director General/ Director, appointed by the Central Government, are required to perform such
functions as maybe assigned by the Central Government, 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
 
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.
 
Commissioner (Appeals): 
Commissioners of Income-Tax (Appeals) are appointed by the Central Government. It is an appellate
authority vested with the following judicial powers:
a.     Power regarding discovery, production of evidence etc.
b.     Power to call information.
c.     Power to inspect registers of companies.
d.    Power to set off refunds against tax remaining payable.
e.     Power to dispose of appeals.
f.     Power to impose penalty.
 
Joint Commissioners:
Joint Commissioners are appointed by the Central Government. The main function of the authority is to
detect tax- evasion and supervise subordinate officers. Under the different provisions of the Act, the Joint
Commissioner enjoys the power to accord approval to adopt fair market value as full consideration,
instruct income tax officers, exercise powers of income tax officers, the power to call information, to
inspect registers of companies, to make any enquiry among other powers.
 
Income-Tax Officers:
While Income-Tax officers of Class I services are appointed by the Central Government, Income-tax
Officers of Class II services are appointed by the Commissioner of Income-Tax. Powers, functions and
duties of Income-Tax officers are provided in many sections, some of which are Power of search and
seizure, Power of assessment, Power to call for information, Power of Survey etc.
 
Inspectors of Income-Tax:
They are appointed by the Commissioner of Income-Tax. Inspectors of Income-Tax have to perform such
functions as are assigned to them by the Commissioner or any other authority under whom they are
appointed to work.

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.
 
Other Powers [Sections 135 and 136]:
The Director General or Director, the Chief Commissioner or Commissioner and the Joint Commissioner
are competent to make any enquiry under this act and for all purposes they shall have the powers vested
in an Assessing Officer in relation to the making of enquiries. If the Investigating officer is denied entry
into the premises, the Assessing Officer shall have all the powers vested in him under sections 131(1) and
(2). All the proceedings before Income tax authorities are judicial proceedings for purposes of section 196
of the Indian Penal Code, 1860, and fall within the meaning of sections 193 and 228 of the Code. An
income-tax authority shall be deemed to be a Civil Court for the purposes of section 195 of the Criminal
Procedure Code, 1973.