PRINCIPLES OF TAXATION LAW

Income Tax Authorities: Their Powers,

Function, Appointment & Jurisdiction

SUBMITTED TO: Prof. Nitesh Nanavati

(Assistant professor)

SUBMITTED BY: Preet Patel

Sem: 8 (A)

Roll no: 20180401062

 DECLARATION

I the undersigned solemnly declare that the project named “Income Tax Authorities: Their
Powers, Functions & Appointment” is based on my own work carried out during the course
of my study. The text reported in the project is the outcome of my own efforts and no part of
this project assignment is copied in any unauthorized manner and no part of it has been
incorporated without due acknowledgement.

Name: Preet Patel

 Table of Contents
DECLARATION.......................................................................................................................2

STATUTES REFERRED..........................................................................................................4

RESEARCH METHODOLOGY...............................................................................................5

INTRODUCTION......................................................................................................................6

INCOME TAX AUTHORITIES...........................................................................................7

HEIRARCHY OF INCOME TAX AUTHORITIES.........................................................7

CENTRAL BOARD OF DIRECT TAXES (CBDT).........................................................8

FUNCTIONS OF INCOME TAX AUTHORITIES..............................................................8

APPOINTMENT OF INCOME TAX AUTHORITIES:.......................................................9

POWERS OF INCOME TAX AUTHORITIES:...................................................................9

JURISDICTION OF INCOME TAX AUTHORITIES.......................................................10

CONCLUSION........................................................................................................................13

BIBLIOGRAPHY....................................................................................................................14

WEBSITES REFERRED.....................................................................................................14
 STATUTES REFERRED
1) The Income Tax Act, 1961.
 RESEARCH METHODOLOGY
1) Objective: The aim is to study the functioning of income tax authorities.
2) Hypothesis: There is a need to know the role and functions of income tax authorities
and basic introduction to income tax.
3) Question: What is income tax? Income Tax Authorities: Their Powers, Functions,
Jurisdiction, Hierarchy & Appointment.
4) Coverage & Scope: This research contains the introduction to income tax and income
tax authorities as per the legislations and their powers, appointment, functions,
hierarchy and jurisdiction in detail and with accordance to the legislation.
 INTRODUCTION
Income Tax is a kind of tax that the central government charges on the income procured
during a financial year by the individuals and businesses. Taxes are sources of income for the
government. Government uses this income for developing infrastructure, giving healthcare,
education, subsidy to the farmer/agriculture sector and in other government welfare schemes.
Taxes are mostly of two types, direct taxes and indirect type of taxes. Tax demanded directly
on the income procured is called as direct tax, for model Income tax is a direct tax. The tax
computation depends on the income slab rates appropriate during that financial year.1

Direct tax is the tax which is charged directly such as income tax, wealth tax, gift tax, capital
gain tax, etc and Indirect tax is the tax which is not charged directly such as value added tax,
octroi tax, service tax, custom duty, etc.

The Income tax Act has classified the types of taxpayers in categories so as to apply different
tax rates for different types of taxpayers. Those categories are as below:

a) Individuals, Hindu Undivided Family (HUF), Association of Persons (AOP) and

Body of Individuals (BOI).
b) Firms.
c) Companies

Types of Income:

a) Income earned from other sources: Income from interest earned from savings bank
account or fixed deposits, winning from lotteries, etc are taxable here.
b) Income from House Property: Income earned from any property owned by any
individual are taxable here.
c) Income from Capital Gains: Income earned from sale of mutual funds, shares,
property, etc are taxable here.
d) Income from Business & Profession: Income earned from business owned or by
providing any professional service such as doctors, lawyers, tuition teacher, etc are
taxable here.
e) Income from Salary: Income earned from salary under employment and pension is
taxable here.

1
Income tax in India: Basic, slabs and e-filing process in 2021, available on https://cleartax.in/s/income-tax,
Last accessed on 1st May, 2021.
INCOME TAX AUTHORITIES:

Section 1162 of the Income Tax Act, 1961 provides that, 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 of 1963) & Principal Directors General of Income-tax or Principal
Chief Commissioners of Income-tax,
b) Directors-General of Income-tax or Chief Commissioners of Income-tax & Principal
Directors of Income-tax or Principal Commissioners of Income-tax,
c) 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.
d) Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy
Commissioners of Income-tax (Appeals),
e) Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,
f) Income-tax Officers,
g) Tax Recovery Officers,
h) Inspectors of Income-tax.

HEIRARCHY OF INCOME TAX AUTHORITIES:

Chief Commissioner or Director General of Income Tax

Commissioner or Director of Income Tax

Additional Commissioner or Additional Director of Income Tax

Joint Commissioner or Joint Director of Income Tax

Deputy Commissioner or Deputy Director of Income Tax

Assistant Commissioner or Assistant Director of Income Tax

Transfer Pricing Officer

Income Tax Officer or Tax Recovery Officer

CENTRAL BOARD OF DIRECT TAXES (CBDT)

2
The Income Tax Act, 1961.
The Central Board of Revenue as the apex body of the Department, accused of the
administration of taxes, appeared as a result of the Central Board of Revenue Act, 1924. At
first the Board was responsible for both direct and indirect taxes. In any case, when the
administration of taxes turned out to be excessively unwieldy for one Board to deal with, the
Board was split up into two, in particular the Central Board of Direct Taxes and Central
Board of Excise and Customs with impact from 1.1.1964. This bifurcation was brought about
by constitution of two Boards u/s 3 of the Central Board of Revenue Act, 1963.

The Central Board of Direct Taxes is a statutory authority functioning under the Central
Board of Revenue Act, 1963. The officials of the Board in their ex-officio limit also function
as a Division of the Ministry managing matters identifying with toll and assortment of direct
taxes.

The Central Board of Direct Taxes consists of a Chairman and following six Members:

1) Chairman
2) Member (Income Tax & Revenue)
3) Member (Legislation)
4) Member (Administration)
5) Member (Investigation)
6) Member (TPS & system)
7) Member (Audit & Judicial)

FUNCTIONS OF INCOME TAX AUTHORITIES:

1) Selection and audit of income tax cases.

2) Computation and assessment of income tax chargeable.
3) Impose penalty on defaulters.
4) Process complaints of existing tax payers.
5) Ensure compliance of filing of statutory returns.
6) Communicate assessment and penalty orders.
7) Launch prosecution & Defend appeals.
8) Broadening of tax base and booking of new taxpayers.
9) Receive returns and statements.
10) Sort and disseminate information and other documents.
11) Staff postings and career planning.
APPOINTMENT OF INCOME TAX AUTHORITIES:
Section 1173 provides the appointment of income tax authorities which states that:

1) The Central Government may appoint such persons as it thinks fit to be income-tax
authorities.
2) Without prejudice to the provisions of sub-section (1), and subject to the rules and
orders of the Central Government regulating the conditions of service of persons in
public services and posts, the Central Government may authorise the Board, or a
Principal Director General or Director-General, a Principal Chief Commissioner or
Chief Commissioner or a Principal Director or Director or a Principal Commissioner
or Commissioner to appoint income-tax authorities below the rank of an Assistant
Commissioner or Deputy Commissioner.
3) Subject to the rules and orders of the Central Government regulating the conditions of
service of persons in public services and posts, an income-tax authority authorised in
this behalf by the Board may appoint such executive or ministerial staff as may be
necessary to assist it in the execution of its functions.

POWERS OF INCOME TAX AUTHORITIES:

 Powers of Director General:
a) Power to Discover & Produce Evidence: According to the CPC, 1908, he can
authorise any assessing officer, chief commissioner, commissioner, or the joint
commissioner to suit the following, discovery, inspection, examination of
individual on oath, issue pf commissions and compelling the individual to produce
books of accounts and related documents.
b) Power to Search & Seizure: There is a right to the income tax authority to search
& seizure in the circumstances of tax evasion which empowers them to take
possession of books of accounts, to make an inquiry and to survey.
 Power to Income Tax Commissioners:
a) Head Income Tax Administration.
b) Power to Transfer any case: He has the power to transfer a case from one
assessing officer to another.

3
The Income Tax Act, 1961.
 c) Power with Regards to Orders: He has the power to grant approval to an order
issued and can also revise/alter an order passed by an assessing officer.
d) Judicial & Administrative Powers.
 Power to Joint Commissioners: His duty is to detect tax invasion and supervise his
subordinate officers. They also have power to adopt fair market value as full
consideration and to inspect company’s registers.
 Power to Income Tax Officers: They have the power to search & seizure, power to
assess & call for information from any individual and power to survey.
 Power to Income Tax Inspectors:4
a) Section 131 gives power to discover & production of evidence by compelling any
individual to produce books of accounts, enforce any individual for attendance,
issuing commission and inspect & discover.
b) Section 132 gives power to search & seizure.
c) Section 132A gives power to take possession of books of accounts.
d) Section 133 gives power to call for information and can call any individual to
produce details about partners & firms, can call Hindu Undivided Families for
details and can ask any trustee, agent, etc to provide details of clientele.
e) Section 133A gives power to survey for discovery of new assesses, information
regarding purpose of assessment and verification of books of accounts.
f) Section 133B gives power to collect information, where they have right to enter
any place within designated territorial area of the officer for the purpose of
resolving tax evasions.
g) Section 134 gives power to inspect registers of any company.

JURISDICTION OF INCOME TAX AUTHORITIES:

Section 120 of the Income Tax Act, 1961 provides the jurisdiction of the Income Tax
Authorities which states that:

1) Income-tax authorities shall exercise all or any of the powers and perform all or any
of the functions 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 of the powers and performance of the functions by all or any of those
authorities.

4
The Income Tax Act, 1961.
2) The directions of the Board under sub-section (1) may authorise any other income-tax
authority to issue orders in writing for the exercise of the powers and performance of
the functions 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-tax authority authorised by it may have regard to any one or more of the
following criteria, namely:
a) Territorial area,
b) Persons or classes of persons,
c) Income or classes of income,
d) Cases or classes of cases.
4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by
general or special order, and subject to such conditions, restrictions or limitations.
5) The directions and orders referred to in sub-sections (1) and (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 and functions in respect of any area or persons or
classes of persons or incomes or classes of income or cases or classes of cases; and,
where such powers and functions are exercised and performed concurrently by the
Assessing Officers of different classes, any authority lower in rank amongst them
shall exercise the powers and perform the functions as any higher authority amongst
them may direct, 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 references to
such higher authority and any provision of this Act requiring approval or sanction of
any 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 that for the purpose of furnishing 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 of
persons, the income-tax authority exercising and performing the powers and functions
in relation to the said person or class of persons shall be such authority as may be
specified in the notification.
Section 124 of the Income Tax Act, 1961 provides the jurisdiction of an assessing officer
which states that:

1) Where by virtue of any direction or order issued under sub-section (1) or sub-section
(2) of section 120, the Assessing Officer has been vested with jurisdiction over any
area, within the limits of such area, he shall have jurisdiction:
a) in respect of any person carrying on a business or profession, if the place at which
he carries on his business or profession is situate within the area, or where his
business or profession is carried on in more places than one, if the principal place
of his business or profession is situate within the area, and
b)  in respect of any 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.
3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer.
4) Subject to the provisions of sub-section (3), where an assessee calls in question the
jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied
with the correctness of the claim, refer the matter for determination under sub-section
(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 vested with jurisdiction by
virtue of the directions or orders issued under sub-section (1) or sub-section (2) of
section 120.
 CONCLUSION
Income Tax is a kind of tax that the central government charges on the income procured
during a financial year by the individuals and businesses. Taxes are sources of income for the
government. Government uses this income for developing infrastructure, giving healthcare,
education, subsidy to the farmer/agriculture sector and in other government welfare schemes.
Direct tax is the tax which is charged directly such as income tax, wealth tax, gift tax, capital
gain tax, etc and Indirect tax is the tax which is not charged directly such as value added tax,
octroi tax, service tax, custom duty, etc.
 BIBLIOGRAPHY
WEBSITES REFERRED
1) www.cleartax.com