Stox N Tax

Powers of an Income Tax Officer

Introduction

Income Tax Officers (ITOs) are vested with extensive powers under the Income-tax Act, 1961 to ensure effective administration, assessment, and recovery of taxes. These powers encompass search and seizure, requisition, arrest, prosecution, attachment, and filing of suits, among others. This article presents a comprehensive discussion on the scope and limitations of these powers as laid down by statutory provisions, CBDT instructions, and judicial precedents.

1. Power to Assess and Reassess Income [Sections 143, 147-151]

  • Section 143(1)/(2)/(3): Enables scrutiny of returns, issue of notices, and detailed assessment.
  • Section 147: Facilitates reassessment if income has escaped assessment.
  • Section 148: Notice for income escaping assessment.
  • Section 151: Sanction for issue of reassessment notice by higher authorities.

Judicial Note: In GKN Driveshafts (India) Ltd. v. ITO [(2003) 259 ITR 19 (SC)], procedural compliance under reassessment was elaborated.

2. Power of Survey [Section 133A]

  • Conducted to verify books of account, cash, stock, or documents.
  • Power includes impounding of books and recording of statements.
  • Cannot remove books from premises without approval.
  • Applicable to business or professional premises.

CBDT Instruction: Guidelines issued to ensure surveys are not misused and are conducted with proper authorisation.

3. Power of Search and Seizure [Sections 132 & 132A]

  • Section 132: Authorises search and seizure if there is a belief of undisclosed income/assets.
  • Section 132A: Requisition of assets seized by other authorities.
  • Powers include:
    • Entering premises and breaking locks.
    • Seizure of books, cash, jewellery, etc.
    • Recording statements under oath.

Recent Update: Thresholds introduced for approval by Principal DGIT/CCIT to curb indiscriminate searches.

Safeguards: Supreme Court in Pooran Mal v. Director of Inspection (1974) 93 ITR 505 (SC) upheld constitutionality but emphasized judicial review of satisfaction.

4. Power to Attach Property [Section 281B]

  • Provisional attachment of property to protect interests of revenue during pendency of proceedings.
  • Valid for up to 6 months (extendable).
  • Requires prior approval from the Principal Commissioner.

Objective: Prevent alienation of assets by the assessee.

5. Power to Summon and Call for Information [Sections 131 & 133]

  • Section 131: Equivalent to civil court powers to enforce attendance, compel evidence, discovery.
  • Section 133: Power to call for information from banks, companies, etc.

Case Law: In ITO v. Seth Brothers (1969) 74 ITR 836 (SC), it was ruled that power under Section 131 is judicial in nature and must be exercised with responsibility.

6. Power to Arrest [Section 132(1)(iib)] (Limited and Rarely Used)

  • Arrest power under IT Act is not explicitly mentioned.
  • However, under Black Money (Undisclosed Foreign Income and Assets) Act, 2015, prosecution and imprisonment up to 10 years permitted.
  • Arrests are generally conducted under PMLA, IPC, or in criminal prosecutions initiated for willful default.

7. Power to Prosecute [Chapter XXII – Sections 275A to 280D]

  • Various sections provide for prosecution:
    • 276C: Wilful attempt to evade tax.
    • 276CC: Failure to file return.
    • 277: False statement.
  • Cognizable offences in serious cases (Section 279A).

Prosecution Sanction: Mandatory prior sanction under Section 279(1).

Recent Trend: CBDT has instructed to focus prosecution on cases with willful default or high tax impact.

8. Power to File Suits and Recovery Proceedings [Section 222, Rule 16 of Second Schedule]

  • Recovery through Tax Recovery Officer (TRO).
  • Modes of recovery:
    • Attachment and sale of movable/immovable property.
    • Arrest and detention of defaulter (Rule 73 of Second Schedule).
    • Garnishee proceedings (Section 226(3)).

Case Reference: Keshav Mills Co. Ltd. v. CIT (1965) 56 ITR 365 (SC) – Revenue powers of recovery are judicially sanctioned.

9. Power under Benami Transactions (Prohibition) Act, 1988

  • ITOs are designated as ‘Initiating Officer’ under the Benami Law.
  • Powers to attach benami property under Section 24 after approval from Approving Authority.

10. Power under Faceless Regime

  • Powers exercised digitally under the faceless assessment/reassessment/review schemes.
  • Statutory Basis: Section 144B of the Act.
  • Limited human interface, but still entails all powers exercised through centralized teams.

11. Limitations and Checks on Powers

  • Natural justice principles must be upheld (audi alteram partem).
  • Writ jurisdiction under Article 226 of the Constitution can be invoked.
  • CBDT Circulars prescribe standard operating procedures.
  • ITAT and High Court are appellate remedies against arbitrary action.

Conclusion

The Income Tax Officer is equipped with wide-ranging powers to ensure proper tax administration. However, these powers are not unfettered and are subject to procedural safeguards, judicial oversight, and administrative accountability. As a Chartered Accountant, understanding these powers in detail is crucial to protect taxpayer rights while ensuring compliance.

Note: This article covers legal position as of FY 2024-25. Taxpayers and professionals are advised to refer to current CBDT circulars and statutory amendments for updated applicability.

Disclaimer: The information provided herein is for educational and informational purposes only and should not be construed as legal advice.

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