CENTRAL UNIVERSITY OF

SOUTH BIHAR

SCHOOL OF LAW AND GOVERNANCE

TOPIC :- Income Tax Authorities : Power and Function

SUBMITTED BY :- SUBMITTED TO :-
YASHASVI RANJAN Mani Pratap Sir

CUSB2013125139 ASSISTANT PROFFESOR

SEMESTER 7th Dept. - School of Law and Governance

SECTION 'A'

BA.LLB 2020-25
 ACKNOLWLEDMENT

I the student of the Central University of South Bihar, Dept. of Law, LL.B(H)
5th semester, do hereby acknowledge our gratefulness towards all the persons
associated in the completion of this project.

First of all, we would like to pay our thanks to our respected teacher Assistant
Professor Mr. Manipratap sir who has chosen me for this topic and also
provided us help with knowledge, inspiration and information. It would not be
possible for us to complete the same without her sincere and affectionate help.
Secondly, we again would like to thank our Srivastava Sir (dean of the dept.)
who has provided us appropriate environment with library facility to gather
the informtation which needed for the project.

Lastly, I pay our thanks to our parents, friends who contributed to some
extent to complete the same.
 Income Tax Authorities : Power and
Function
Search and Seizure

Introduction
Income Tax Authorities typically refer to government agencies or departments responsible for
the administration and enforcement of income tax laws. These authorities are in charge of
collecting assessing, and ensuring compliance with income tax regulations. They may also
handly issues such as tax evasion, auditing and providing guidance to taxpayers regarding their
tax obligations. Income Tax Department also referred to as IT Department, is a government
agency in charge of monitoring the income tax collection by the government of India. It function
under the Department of Revenue of the Ministry of Finance. In this reading further we are
going to discuss about Income Tax Authorities, various Income Tax Authorities, Power and
Function of Income Tax Authorities, Search and Seizure with few case laws.

Income Tax Authorities

Income Tax Authorities under section 116 means a Commissioner, a Joint Commissioner, a
Director , a Joint Director, and Assistant Director or a Deputy Director or an Assessing Officer,
or a Tax Recovery Officer, various authorities have been arranged by the Central Government
for the administration of the Income Tax Act. These authorities have to perform all the function
and can use those powers which have been delegated to these authorities by the Central Board of
Direct Taxes (CBDT).

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),
( 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) 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-tax1

Various forms of Authorities

Income Tax Act, 1961 provides for the administrative and judicial authorities for administration
of this act. This 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 dsignation 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.

Income Tax Officer and powers and functions

The officer has the power to call for information from any person either with regard to his own
matters or in case of a third person, with whom the person has any dealings, which are covered
under various sections of the Income Tax Act2.
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:
 discovery and inspection
 to enforce any person for attendance and examining him on oath
 issuing commission
 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 to take actions like search and seizure.

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 3. Requisition of books of accounts, 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 under secttion 132(1) and the book of accounts or other documents or the
assets hae 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, etc to require the authority to provide sue books of ccount, 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 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.

5. Collection of Innformation : 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.

Central Board of Direct Taxes (CBDT)

CBDT - Powers and functions

The Central Board of Direct Taxes is a statutory body constituted under the Central Board of
Revenue Act, 19633. 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

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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.

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 scope of Exercise of 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.

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 275A4.

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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 percent 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.

Jurisdiction of Income Tax Authorities :

Income Tax authorities are required to exercise their powers and perform their functions in
accordance with directions given by the Board. Tax authority higher in rank, if directed by
Board, shall exercise the powers and perform tie functions of the Income- Tax authority lower in
rank. The directions of CBDT include direction to authorize any Income Tax authority to issue
instructions to their subordinates. In issuing instruction or orders, the Board or the Income-Tax
authority may adopt any one or more of the following criteria -

(a) Territorial area

(b) Person or classes of persons
(c) Incomes or classes of incomes
(d) Cases or classes of cases
The Board can also authorize Director General or Chief Commissioner or Commissioner to issue
orders in writing to the effect that the functions conferred or assigned to the Assessing Officer in
respect of the above four criteria shall be exercised or performed by Joint Commissioner or Joint
Director.

Also, the Assessing Officer has been vested with jurisdiction over any area or limits of such area
-
 . If a person carries on business or profession only in that area. In respect of that person;
or
 If a person carries on business or profession in more than one place, then the principal
place of business or profession situated in that area; or
 In respect of any other person residing within that area.

Any dispute relating to jurisdiction to assess any person by an Assessing Officer shall be
determined by Director General /Chief Commissioner/Commissioner of Income Tax If the
dispute is relating to areas within the jurisdiction of different Director General /Chief
Commissioner/ Commissioner, then such issue is to be solved mutually among themselves. If the
above authorities are not in agreement among themselves such matter has to be decided by the
Board or Director General/ Chief Commissioner/ Commissioner authorized by the Board.

Conclusion
In recent times the catena of judicial pronouncements and statue provisions are creating quite a
stir. However, there is still a need to further define and redefine and implement the extent to
which Income Tax authorities are required to exercise their powers and perform their functions
so as to prevent harassment of assesses, tax-evasion, unnecessary discrimination in collection of
tax and to help assesses effectively manage taxes.