OVERVIEW
The Income Tax Act, 1961, provides the income tax authorities with extensive powers to carry out their duties. These powers include the power to conduct search and seizure operations, summon and examine individuals, assess income, levy penalties, and initiate prosecution proceedings. The Act also lays down various provisions that govern the administration of income tax, including provisions related to filing income tax returns, scrutinizing income tax returns, reopening assessments, and levying penalties for non-compliance with the tax laws. The effective administration of income tax is crucial for the financial health of the country and ensures that individuals and businesses pay their fair share of taxes.
The Income Tax Act, 1961, is a comprehensive legislation that governs the administration of income tax in India. The Act establishes various income tax authorities, including the Central Board of Direct Taxes, the Director-General of Income Tax (Investigation), the Principal Chief Commissioner of Income Tax, the Chief Commissioner of Income Tax, the Commissioner of Income Tax, and the Assessing Officer. These authorities are responsible for ensuring compliance with the tax laws, investigating cases of tax evasion, and determining the amount of tax payable by individuals and businesses.
POWERS OF INCOME TAX AUTHORITIES
The Income Tax Act, 1961, empowers the income tax authorities to perform various functions to ensure compliance with the tax laws. The following are the powers of the income tax authorities under the Act:
i. The Central Board of Direct Taxes (CBDT) is the apex body that governs the administration of direct taxes, including income tax. The CBDT is responsible for formulating policies, procedures, and guidelines for the Income Tax Department to ensure the proper collection and assessment of income tax. It also monitors the performance of income tax authorities and takes corrective action when necessary.
ii. The Director-General of Income Tax (Investigation) is responsible for conducting investigations into cases of tax evasion and other tax-related offences. The Director-General has extensive powers to conduct search and seizure operations, summon and examine individuals, and seize documents and assets related to tax evasion. The Director-General also coordinates with other law enforcement agencies to combat tax evasion and other economic crimes.
iii. The Principal Chief Commissioner of Income Tax is responsible for the administration of income tax in a particular region. The Principal Chief Commissioner supervises the Chief Commissioners and Commissioners of Income Tax in the region and ensures that income tax is assessed and collected efficiently and effectively. The Chief Commissioner of Income Tax is responsible for the administration of income tax in a particular area, while the Commissioner of Income Tax is responsible for the administration of income tax in a particular district or city.
iv. The Commissioner of Income Tax is responsible for the administration of income tax in a particular district or city. The Commissioner is responsible for assessing and collecting income tax in their jurisdiction and ensuring compliance with the Income Tax Act, 1961. The Commissioner has the power to issue notices, conduct inquiries, and initiate penalty proceedings for non-compliance with the tax laws. They also supervise the Assessing Officers in their jurisdiction, ensuring that assessments are carried out accurately and fairly. The Commissioner of Income Tax plays a critical role in ensuring that income tax is collected efficiently and effectively in their assigned area, and in contributing to the overall economic health of the country.
v. The Assessing Officer is responsible for assessing the income tax returns filed by individuals and businesses and determining the amount of tax payable. The Assessing Officer has the power to call for additional information or documents to support the income tax return and also has the authority to make adjustments to the income declared by an individual or business if it is found to be incorrect or understated.
PROVISIONS UNDER THE INCOME TAX ACT, 1961
The Income Tax Act, 1961, contains various provisions that regulate the administration of income tax in India. These provisions are designed to ensure compliance with the tax laws and to prevent tax evasion. Some of the key provisions of the Act are discussed below:
i. Section 139 of the Income Tax Act, 1961, requires individuals and businesses to file their income tax returns with the income tax authorities. The section mandates that every person who has a total income exceeding the prescribed limit must file an income tax return within the prescribed time frame. Failure to comply with this provision may result in penalties and other legal consequences. In the case of CIT v. Smt. M.K. Saroja O.S. No. 82715/2015 (CCH.NO.43 2019) , the Karnataka High Court held that the obligation to file an income tax return is mandatory, and non-compliance with this provision is a breach of the Income Tax Act, 1961.
ii. Section 143 of the Income Tax Act, 1961, empowers the Assessing Officer to scrutinize the income tax returns filed by individuals and businesses. The section allows the Assessing Officer to make necessary adjustments to the income declared by the taxpayer and to issue notices for further information or documents to support the income tax return. In the case of CIT v. Saurashtra Kutch Stock Exchange Ltd. Oct 27, 2000 in ITA No. 69/Rjt/2020, the Gujarat High Court held that the Assessing Officer has the power to scrutinize the income tax return and make necessary adjustments if it is found to be incorrect or understated.
iii. Section 147 of the Income Tax Act, 1961, empowers the income tax authorities to reopen the assessment of income tax returns in case of any undisclosed income. The section allows the Assessing Officer to reopen the assessment within four years from the end of the relevant assessment year if he has reason to believe that any income chargeable to tax has escaped assessment. In the case of ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. Civil Appeal No. 2830 OF 2007 (Arising out of S.L.P. (C) No.24482 of 2005), the Supreme Court held that the Assessing Officer has the power to reopen the assessment if there is tangible material to suggest that income has escaped assessment.
iv. Section 271 of the Income Tax Act, 1961, empowers the income tax authorities to levy penalties on individuals and businesses for non-compliance with the tax laws. The section provides for penalties for various offences, such as failure to file an income tax return, concealment of income, and understatement of income. In the case of CIT v. Zoom Communication Pvt. Ltd. ITA No.1189/Del/2008, the Delhi High Court held that the penalty provisions under Section 271 of the Income Tax Act, 1961, are mandatory and apply in cases of non-compliance with the tax laws.
CONCLUSION
Income tax is a tax levied by the government on the income earned by individuals and businesses. The Income Tax Act, 1961, is the governing statute that lays down the provisions for the administration of income tax in India. The Act empowers various income tax authorities such as CBDT, Commissioner of Income Tax, Assessing Officer, etc., to investigate and scrutinize the income tax returns filed by individuals and businesses to ensure compliance with the tax laws. Provisions such as Section 139, 143, 147, and 271 of the Act provide the legal framework for the administration of income tax in India.
It is important for individuals and businesses to comply with the tax laws and file their income tax returns on time to avoid penalties and other legal consequences. Non-compliance with the tax laws can result in penalties under Section 271 of the Act. Moreover, tax evasion and other tax-related offences are taken seriously by the income tax authorities, and they have the power to conduct investigations and reopen assessments under Section 147 of the Act.
Comments