TaxTMI 
TaxTMI 
Powers to Call for Information under the Income Tax Law : Clause 252 of the Income Tax Bill, 2025 Vs. Section 133 of the Income-tax Act, 1961
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....e between the investigatory needs of the tax administration and the rights of taxpayers and third parties. This commentary provides a detailed analysis of Clause 252, explores its objectives and practical implications, and undertakes a comparative examination with Section 133, highlighting similarities, differences, and the evolution of statutory powers in this domain. Objective and Purpose The primary objective of Clause 252 is to confer broad and flexible powers upon specified income tax authorities to require information from a wide range of persons and entities. The legislative intent is to facilitate the collection of information necessary for the proper conduct of enquiries or proceedings under the Income Tax Act, including assessment, reassessment, and investigation into possible tax evasion or avoidance. Historically, the power to call for information has been a cornerstone of tax administration, enabling authorities to trace the flow of funds, verify the accuracy of returns, and uncover concealed income. The policy considerations underlying these powers include: * Ensuring effective tax compliance and enforcement. * Deterring tax evasion and avoidance by enhancing tr....
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....rangements for tax avoidance. * Assessees Regarding Specified Payments (Clause 252(1)(e)): Assessees may be required to furnish statements of names and addresses of persons to whom they have paid, in any tax year, rent, interest, commission, royalty, brokerage, or any annuity (other than those taxable under "Salaries") exceeding Rs. 10,000 or such higher amount as prescribed, with particulars of all such payments. Interpretation: This enables authorities to cross-check the claims of recipients and ensure proper reporting of income. The threshold of Rs. 10,000 (or higher if prescribed) reflects an intent to focus on significant transactions. * Dealers, Brokers, Agents, and Stock/Commodity Exchanges (Clause 252(1)(f)): Such persons may be required to provide statements of names and addresses of all persons to whom or on whose behalf payments have been made or received in connection with the transfer of assets, along with particulars of all such payments and receipts. Interpretation: This provision is vital for tracing transactions in financial markets and preventing the use of exchanges for unreported or illicit transfers. Sub-section (2): Extension of Power to Other Aut....
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....of persons, including taxpayers, financial institutions, intermediaries, and fiduciaries. The key implications are: * Requirement to maintain detailed records and be prepared to furnish information at short notice. * Potential exposure to scrutiny not only for one's own affairs but also for transactions involving others (e.g., payments to third parties, fiduciary relationships). * Increased compliance costs, especially for small businesses and intermediaries. * Obligation to ensure accuracy and completeness of information provided, as furnishing false or incomplete information may attract penalties or prosecution. For Tax Authorities For tax authorities, Clause 252 is a powerful investigatory tool that: * Enables effective detection of unreported or concealed income. * Facilitates cross-verification of information from multiple sources. * Supports international cooperation in tax matters, including exchange of information. * Requires careful exercise of discretion and adherence to procedural safeguards to prevent abuse of power and protect the rights of persons from whom information is sought. Procedural and Compliance Aspects * Authorities must specify the....
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....anges Clause (5): Names/addresses of persons to whom/for whom payments made/received in connection with transfer of assets, with particulars. Clause (1)(f): Same. No substantive change; language modernized. Authority to Exercise Power AO, DC(A), JC, JC(A), C(A); also, higher authorities (Principal DG, DG, Principal CC, CC, Principal D, D, Principal C, C, Joint D, Deputy D, Assistant D). AO, JC, JC(A), C(A); also, competent authority or Assistant Director (for 1(a)). List of authorities slightly restructured; "competent authority" and "Assistant Director" added for certain powers. Approval Requirement (No Proceedings Pending) Below Principal D or D or Principal C or C (other than Joint D, Deputy D, Assistant D) must obtain prior approval in cases where no proceedings are pending. Similar; below Principal D or D or Principal C or C (other than Joint D or Assistant D) must obtain prior approval. Deputy Director is omitted in Clause 252, possibly reflecting administrative restructuring. International Agreements Income-tax authority notified u/s 131(2) can exercise these powers for agreements u/s 90/90A, even if no proceedings pending. Income-tax authority no....