TaxTMI 
TaxTMI 
Inspection Powers of Tax Authorities over Company Registers : Clause 255 of Income Tax Bill, 2025 and Section 134 of Income-tax Act, 1961
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned to facilitate effective tax administration, prevent evasion, and ensure compliance by enabling authorities to verify ownership, financial interests, and transactions by inspecting registers of members, debenture holders, or mortgagees of companies. This commentary undertakes a comprehensive analysis of Clause 255 of the Income Tax Bill, 2025, in juxtaposition with the existing Section 134 of the Income-tax Act, 1961. It examines the legislative intent, operational mechanics, and practical implications of these provisions, while highlighting their evolution and the broader policy context. The analysis further explores the scope, authority, and procedural aspects, as well as potential ambiguities and areas for reform. Objective and Purp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eals), Joint Commissioner, Joint Commissioner (Appeals), Commissioner (Appeals), and any subordinate officer authorized in writing by these authorities. Clause 255 of the 2025 Bill similarly empowers the Assessing Officer, assessment unit, verification unit, Joint Commissioner, Joint Commissioner (Appeals), Commissioner (Appeals), or any subordinate person so authorized. A notable development in Clause 255 is the explicit reference to "assessment unit" and "verification unit," reflecting the move towards a more structured, technology-driven, and faceless assessment regime. This aligns with recent reforms in the Indian tax administration, emphasizing centralized processing and minimizing direct interface between taxpayers and officers. 2. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ization is a safeguard against arbitrary or unauthorized access. 4. Evolution and Amendments Section 134 has undergone several amendments to reflect changes in the organizational structure of the income-tax department and to keep pace with evolving administrative needs. The inclusion of new authorities (e.g., Deputy Commissioner (Appeals), Joint Commissioner (Appeals)) and the substitution of designations have ensured that the power to inspect is not rendered obsolete by bureaucratic restructuring. Clause 255 of the Income Tax Bill, 2025, builds on this by introducing "assessment unit" and "verification unit," terms that have gained prominence with the advent of faceless assessment and verification schemes. This signals an intent to mode....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tered office and allow inspection by specified persons. The power under the income-tax law is supplementary, enabling tax authorities to access these records for tax administration purposes, even if the Companies Act otherwise limits access. However, the exercise of such power must not contravene the procedural requirements or confidentiality obligations under the Companies Act, unless specifically overridden by the income-tax law. Practical Implications 1. For Companies Companies are required to maintain accurate and up-to-date registers of members, debenture holders, and mortgagees. The power of inspection by tax authorities underscores the importance of compliance with the Companies Act and the need for robust record-keeping. Non-com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ure holders beyond those under the Companies Act. 4. Procedural and Compliance Considerations The requirement for written authorization ensures that only duly empowered persons may conduct inspections, reducing the risk of misuse. Companies should verify the identity and authority of the officer seeking inspection and maintain records of all such interactions. With the increasing digitization of corporate records, companies may need to provide electronic access or copies, raising considerations of cybersecurity and data protection. Comparative Analysis: Clause 255 (2025 Bill) vs. Section 134 (1961 Act) Aspect Section 134 of the Income-tax Act, 1961 Clause 255 of the Income Tax Bill, 2025 Analysis Empowered Authorities Assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... faceless assessment initiatives. The principal change in Clause 255 is the adaptation to the new administrative structure, ensuring that the powers are exercisable by units operating under faceless and centralized schemes. The substance of the power-scope, process, and authorization-remains largely unchanged, reflecting the enduring need for such investigative tools. Comparative Perspective: Other Jurisdictions Many common law jurisdictions empower tax authorities to inspect company registers, though the manner and extent of such powers may vary. For example: * United Kingdom: HM Revenue & Customs (HMRC) has statutory powers to obtain information and inspect documents relevant to tax matters, including company registers, under the Fin....