Direct Tax Law - I Notes: Income Tax Authorities

Unit – 4: Income Tax Authorities, their Powers and Functions
Income Tax Authorities
Section  of the Income Tax Act, 1961 provides for the administrative and judicial authorities for administration of this Act. The Direct Tax Laws Act, 1987 has brought far-reaching changes in the organizational structure. The implementation of the Act lies in the hands of these authorities. The change in designation of certain authorities and creation of certain new posts in the structure are the main features of amendments made by The Direct Tax Laws Act, 1987. The new features of authorities has been properly depicted in a chart on the facing page. These authorities have been grouped into two main wings :
(i)  Administrative [ Income Tax Authorities ][ Sec. 116 ]
(a)       the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963),
(b)      Directors-General of Income-tax or Chief Commissioners of Income-tax,
(c)       Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax (Appeals),
(d)      Additional Directors of Income-tax or Additional Commissioners of Income-tax or Additional Commissioners of Income-tax (Appeals),
(e)      Joint Directors of Income-tax or Joint Commissioners of Income-tax.
(f)        Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy Commissioners of Income-tax (Appeals),
(g)       Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,
(h)      Income-tax Officers,
(i)         Tax Recovery Officers,
(j)        Inspectors of Income-tax.
(ii) Assessing Officer [ Sec. 2(7A)]
"Assessing Officer" means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;
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 assessement 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.
Appointment of Income-Tax Authorities [ Sec. 117 ]
(1) Power of Central Government : The Central Government may appoint such persons as it thinks fit to be income-tax authorities. It kept with itself the powers to appoint authorities upto and above rank of an Assistant Commissioner of Income-Tax [ Sec. 117 (1) ]
(2)  Power of the Board and Other Higher Authorities :  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 authorize the Board, or a Director-General, a Chief Commissioner or a Director or a Commissioner to appoint income-tax authorities below the rank of an Assistant Commissioner or Deputy Commissioner.  [ Sec. 117 (2) ]
(3) Power to appoint Executive and Ministerial Staff :  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 authorized 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.
Central Board of Direct Taxes and their powers
The Central Board of Direct Taxes (CBDT) is the highest executive authority. It is sub­ject to the overall control of the Central Government. It is authorized to discharge all those functions prescribed in the Act and those which are entrusted to it by the Central Government. The Central Board of Direct Taxes consists of a Chairman and following six Members: -
1.       Chairman
2.       Member (Income-tax)
3.       Member (Legislation & Computerisation)
4.       Member (Personnel & Vigilance)
5.       Member (Investigation)
6.       Member (Revenue)
7.       Member (Audit & Judicial)
Powers of the Board :
(a)    It declares any association etc. as company u/s 2(17)(iv).
(b)   Conditions for Leave Travel Concession are prescribed by the Board u/s 10(5).
(c)    House rent “allowance limit is prescribed for exemption u/s (13A).
(d)   Various rules arid limits u/ss 11 and 12A regarding charitable institutions and their registration are prescribed by the Board.
(e)   Rates of depreciation are determined by the Board u/s 32.
(f)     Prescribed authorities are named by the Board u/s 35CCA and 35CCB.
(g)    The Board prescribed cases where payment exceeding Rs. 10,000 could be made in cash u/s 40A(3).
(h)   The Board notifies professions and persons who have to maintain books of ac­counts etc. u/s 44AA.
(i)      The conditions governing the reference to the Valuation Officer are prescribed by the Board.
(j)     To specify permanent disability or mental-retardation for deduction u/s 80DD.
(k)    The Board assigns proper jurisdiction on income-tax authorities,
(l)      In case of clash of jurisdiction between various authorities, it solves the issue u/s 124(2).
(m) It authorizes particular income-tax authorities to conduct a search etc. u/s 132(1).
Powers of other Income Tax Authorities
1) Power relating to Discovery, Production of evidence, etc: The Assessing Officer, The Joint Commissioner, the Chief Commissioner or the Commissioner has the powers as are provided in a court under the code of Civil Procedure, 1908, when trying to suit for the following matters:
(a) discovery and inspection;
(b) to enforce any person for attendance, and examining him on oath
(c) issuing commissions; and
(d) compelling the production of books of account and other document.
2) Power of Search and Seizure: 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 the to take actions like search and seizure. 
3) Requisition of Books of account, etc: 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.
4) Power to Call for Information: 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;
5) Power of Survey: 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:
 To discover new assessees;
 To collect useful information for the purpose of assessment;
 To verify that the assessee who claims not to maintain any books of accounts is in-fact maintaining the books;
 To check whether the books are maintained, reflect the correct state of affairs.
6) Collection of Information: 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.
Procedure for Filling an appeal
In general parlance, ‘appeal’ means ‘making a request’ and in legal parlance, it means ‘apply to a higher court for a reversal of the decision of a lower court’. In this article I have covered the levels of appeal under Income Tax Act. Hope this helps. In India, the taxpayer computes the tax payable on his total income and pays to the government. If the Income Tax department (the government) disagrees with the tax computed by the taxpayer, they can levy an additional tax. Under Income Tax Act, the liability is determined at the level of Assessing Officer (it can be Income Tax Officer (ITO) or Assistant/Deputy Commissioner of Income Tax)
A tax payer aggrieved by various actions of Assessing Officer (say higher tax demand) can appeal before Commissioner of Income Tax (Appeals). Further appeal can be preferred before the Income Tax Appellate Tribunal. On substantial question of law, further appeal can be filed before the High Court and even to the Supreme Court.
1. Appeal before Commissioner (Appeals): Aggrieved tax payer can file appeal before the Commissioner (Appeals) having, jurisdiction over the tax payer. Appeal can be filed when a taxpayer is adversely affected by the Orders passed by Tax authorities. Every appeal to the Commissioner (Appeals) is to be filed in Form No. 35, signed by the taxpayer/director or his authorized representative. Appeal Fees to be paid depending upon total income determined by the Assessing Officer, subject to a maximum of Rs.1000.
Appeal is to be filed within 30 days of the date of service of notice of demand relating to assessment or penalty order or the date of service of order sought to be appealed against, as the case may be. The commissioner may admit an appeal after the expiry of 30 days, if he is satisfied that there was sufficient cause of not presenting the appeal within the period of 30 days.
On receipt of Form no. 35, Commissioner of Income-tax (Appeals) fixes date and place for hearing the appeal by issuing notice to the tax payer and the Assessing Officer, against whose order appeal is preferred. After the hearing is concluded, Commissioner (Appeals) passes order in writing, disposing of the appeal and stating the decision on each ground of appeal with reasons.
2. Appeal before Income Tax Appellate Tribunal (ITAT): Appeal against an order of Commissioner (Appeals) lies with the Income Tax Appellate Tribunal (ITAT). Both tax payer and the Assessing Officer can file appeal before ITAT. Appeal is to be filed (in Form 36) before the Appellate Tribunal within 60 days of the date on which order appealed against is communicated to the taxpayer or the Commissioner, as the case may be. Appeal fee to be paid based on the taxable income subject to a maximum of Rs.10000. The Appellate Tribunal may admit an appeal after the period of 60 days if it is satisfied that there was sufficient cause for not presenting it within the prescribed time. Normally appeals are heard by a Bench comprising of one judicial member and one accountant member.
3. Appeal before High Court: Appeal against Appellate Tribunal’s order lies with the High Court, where the High Court is satisfied that the case involves a substantial question of law. Appeal to the High Court against Appellate Tribunal’s order can be filed by the tax payer or the Chief Commissioner/Commissioner within 120 days of receipt of the order and in the form of memorandum of appeal, precisely stating the substantial question of law involved. Appeal filed before High Court is heard by bench of not less than two Judges and decision is by majority
4. Appeal before Supreme Court: Appeal against High Court’s order in respect of Appellate Tribunal’s order lies with the Supreme Court in those cases, which are certified to be fit for appeal to the Supreme Court. Special leave can also be granted by the Supreme Court under Art. 136 of the constitution of India against the order of the High Court.

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