Entry 82 of the Union List of Schedule VII of the Indian Constitution grants the Central Government of India the authority to impose taxes on all types of income other than agricultural income.
The major source of government revenue is the Income Tax Department. Income tax is the primary source of funding for the government’s operations and to provide services to the public.
Income tax authorities are required to prevent assessment of assesses, tax evasion, etc. In order to implement the Income Tax Act effectively and manage the Income Tax Department, the Government of India has established several authorities.
In this article, you will read about the role, powers and functions of some income tax authorities.
Classes of Income Tax Authorities
Section 116 of the Income Tax Act provides the following classes of income tax authorities:
- The Central Board of Direct Taxes
- Directors General of Income Tax or Chief Commissioners of Income Tax
- 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
- Deputy Directors of Income Tax or Deputy Commissioners of Income Tax or Deputy Commissioners of Income Tax (Appeals)
- Assistant Directors of Income Tax or Assistant Commissioners of Income Tax
- Income Tax Officers
- Tax Recovery Officers
- Inspectors of Income Tax
Who Appoints Income Tax Authorities?
According to section 117 of the Income Tax Act, the central government has the power to appoint such persons as it deems fit to income tax authorities. The central government has the power to choose officials up to and above the rank of Assistant Commissioner of the Income Tax.
The central government, can further, authorise the appointment of income tax officials below the rank of a Deputy Commissioner or Assistant Commissioner by the Board, a Director-General, a Chief Commissioner, a Commissioner, or a Director. However, the appointment by such authorities is made according to the rules and regulations of the central government regulating the conditions of service of persons in public services and posts.
Central Board of Direct Taxes
The Central Board of Direct Taxes (CBDT) is a statutory body constituted under the Central Board of Revenue Act of 1963. It functions under the jurisdiction of the Ministry of Finance, Government of India. The Board initially handled both direct and indirect taxes. However, when the administration of taxes became too burdensome for one to handle, the Board was divided into two: the Central Board of Direct Taxes and the Central Board of Excise and Customs.
It has the power to control and supervise all the officers of the income tax department. Along with this, the Central Board of Direct Taxes has the power to make such rules as are necessary for the administration and implementation of the provisions of the Income Tax Act. The rules made by the Board are controlled and approved by the central government.
Composition of Central Board of Direct Taxes
The Central Board of Direct Taxes comprises a chairman and six other members. The chairman is the head of the Board. The other six members must be ex officio special secretary to the government of India.
The six members of the Central Board of Direct Taxes deal with:
- Income Tax & Revenue
- Administration
- Legislation
- Audit and Judicial
- Investigation
- TPS & System
Powers of the Central Board of Direct Taxes
The Central Board of Direct Taxes has been empowered with the following powers by the Income Tax Act of 1961:
1. Power to appoint income tax authorities: Section 117 of the Income Tax Act gives the Board the power to appoint income tax authority below the rank of Deputy Commissioner or Assistant Commissioner if authorised by the central government.
2. Power to control and supervise: Section 118 of the Income Tax Act empowers the Board to control all the Income Tax Authorities subject to an overall framework of the Central Government.
3. Power to issue instructions and circulars: Section 119 of the Income Tax Act empowers the Board to issue instructions and circulars to its subordinate officials for the proper administration and implementation of the Income Tax Act. The Board has the power to give the following instructions:
- Relaxation of certain provisions [sec 119(2)(a) of the Income Tax Act]
- Extension of time limit [sec 119(2)(b) of the Income Tax Act]
- Relaxation for claiming deduction [sec 119(2)(c) of the Income Tax Act]
4. Power to decide the powers and functions: Section 120 empowers the Board to decide on and issue the powers and functions of the other income tax authorities.
5. Power to issue general or special orders: The Board can issue general or special orders to relax the provisions of sections 115P, 115S, 139, 143, 144, 147, 148, 154, 155, 234A, 234B, 271 and 273 in order to properly and effectively manage the work of assessment and collection of revenue.
6. Power to transfer cases: Section 127 of the Income Tax Act empowers the transfer of a case from one Assessing Officer to another Assessing Officer subordinate to him after giving the concerned assessee a reasonable opportunity to be heard.
Income Tax Settlement Commission
The Income Tax Settlement Commission is a quasi-judicial body that was constituted in accordance with section 245B of the Income Tax Act.
According to section 245B(1) of the Income Tax Act, the income tax settlement commission is set up for the settlement of cases related to income tax. It is constituted under the supervision of the Central Government.
Composition of Income Tax Settlement Commission
The Settlement Commission consists of a Chairman, Vice-Chairman and other members. The number of Vice-Chairmen and other members is decided by the central government. The commission comprises individuals with integrity and who have special knowledge of and experience with issues involving direct taxes and business accounts.
Powers
The powers of the Income Tax Settlement Commission are:
- The Income Tax Settlement Commission has been vested with powers similar to that of the Income Tax Authority in all the proceedings pending before it.
- The Income Tax Settlement Commission has the power to grant immunity from penalty and prosecution to the person who has made the application.
- Section 245E of the Income Tax Act empowers the Settlement Commission to reopen any completed proceeding which is connected to the case in the proceeding.
Powers of Other Income Tax Authorities
The income tax authorities have the following powers to prevent tax evasion or to implement the provisions of the Income Tax Act, 1961:
1. Discovery, Production of Evidence, etc. (Section 131): Section 131 of the Income Tax Act provides the income tax authorities with the same power as vested in the Civil Court under the Civil Procedure Code.
2. Search and Seizure (Section 132): Section 132 of the Income Tax Act grants the income tax authorities wide powers of search and seizure.
3. Power to Requisition Books of Account, etc. (Section 132A): The income tax authorities can direct any officer or authority to deliver books of account, other documents or assets to the requisitioning officer in the following cases:
- If a summon or notice has been issued to any person to produce, or cause to be produced, any books of account or other documents, but he has either omitted or failed to do so.
- If any books of account or other documents will be useful for any proceeding under the income tax act
- If any assets represent wholly or partly the income or property and such income or property has not been or would not have been disclosed by the person from whose possession or control such assets have been taken into custody by any officer or authority.
4. Power to call for information (Sections 133): The Deputy Commissioner (Appeals), Commissioner (Appeals) or Deputy Commissioner have the power to call for the following information from the concerned person:
- Direct any firm to provide a return of the addresses and names of partners of the firm and their shares.
- Direct any Hindu Undivided Family to provide a return of the addresses and names of family members and the manager.
- Direct any person who is a trustee, guardian or agent to provide a return of the names of persons for or of whom he is an agent, trustee or guardian and their addresses.
- Direct any assessee to provide a statement of the names and addresses of all the persons to whom he has paid rent, interest, commission, royalty, etc., in any previous year.
5. Power of Survey (Section 133A): Section 133A of the Income Tax Act grants the power of survey to the income tax authority. The income tax authority has the power to enter any location within the limits of the area that has been allocated to him, any location that is occupied by a person under whom he exercises jurisdiction and any location that he is authorised to enter.
6. Power to Collect Certain Information (Section 133B): According to section 133B of the Income Tax Act, the income tax authority can enter any location within the limits of the area that has been allocated to him or any location that is occupied by a person under whom he exercises jurisdiction for collection of information which may be useful to them for any purpose.
7. Power to Inspect Registers of Companies (Section 134): According to section 134 of the Income Tax Act, the income tax authority has the power to inspect and take copies of any register of the members, debenture holders or mortgagees of any company, if necessary.
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