TaxTMI 
TaxTMI 
Continuity and Change in the Powers of Tax Authorities to Make Enquiries : Clause 256 of the Income Tax Bill, 2025 and Comparative Analysis with Section 135 of the Income-tax Act, 1961
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....des a clause-by-clause comparison with Section 135 of the Income-tax Act, 1961. The analysis also examines interpretative issues, stakeholder impacts, and potential areas for reform or judicial clarification. Objective and Purpose The primary objective of both Clause 256 and Section 135 is to empower senior tax authorities to conduct enquiries under the respective Acts with the same authority as an Assessing Officer. This power is essential for effective tax administration, supervision, and oversight, especially in complex or sensitive cases where the involvement of senior officers may be required to ensure fairness, thoroughness, or to address issues of systemic importance. Historically, the delegation and distribution of investigative powers among various tiers of the tax hierarchy have been central to the functioning of the Income Tax Department. Section 135 of the 1961 Act was crafted to provide a statutory basis for such powers, reflecting the need for checks and balances, and the ability for higher authorities to intervene or supplement the work of Assessing Officers. The Income Tax Bill, 2025, seeks to modernize and streamline the tax law, with Clause 256 representing a co....
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....nt authority can independently and effectively investigate matters within its jurisdiction, without being hamstrung by procedural lacunae. 3. Nature and Extent of Enquiry The phrase "any enquiry under this Act" is broad and encompasses all forms of investigation or information-gathering that may be necessary for the administration of the Act. This includes, but is not limited to, enquiries in the context of assessment, reassessment, search and seizure, survey, transfer pricing, international taxation, and anti-abuse measures. The breadth of this language is intentional, ensuring that the competent authority is not limited to specific types of proceedings or circumstances. This approach is consistent with the evolving complexity of modern tax administration, where issues often cut across multiple domains and require a holistic investigative approach. 4. Procedural Safeguards and Oversight While Clause 256 empowers the competent authority, it does not, in itself, prescribe any procedural safeguards or limitations. It is presumed that the exercise of these powers would be subject to the general procedural framework of the Act, including principles of natural justice, rights of th....
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....ose shall have all the powers that an Assessing Officer has under this Act in relation to the making of enquiries. This section explicitly lists the authorities empowered to make enquiries, reflecting the administrative hierarchy of the Income Tax Department. The provision has been amended over time to include new designations and to reflect changes in the department's structure. Key Points of Comparison Aspect Section 135 of the Income-tax Act, 1961 Clause 256 of the Income Tax Bill, 2025 Authorities Covered Explicitly lists Principal Director General, Director General, Principal Director, Director, Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, Commissioner, Joint Commissioner Generic reference to "competent authority" (definition to be found elsewhere in the Bill) Scope of Power Any enquiry under the Act; all powers of Assessing Officer for enquiries Any enquiry under the Act; all powers of Assessing Officer for enquiries Legislative Technique Enumerative and specific Generic and potentially flexible Amendment History Multiple amendments to update designations and hierarchy Potentially obviates need for frequent amen....
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....orities. However, this also increases the responsibility to ensure that such designations are transparent, consistent, and subject to appropriate checks and balances. For Legal Practitioners Legal practitioners will need to pay close attention to the definitions and interpretative materials accompanying the new Bill, to advise clients accurately on the powers and jurisdiction of various authorities. Any ambiguity in the definition or scope of "competent authority" may become a subject of litigation, particularly in cases involving jurisdictional challenges or allegations of excess of power. Comparative Perspective: Other Jurisdictions Many jurisdictions adopt similar provisions empowering higher tax authorities to make enquiries and conduct investigations. The drafting approaches vary: * Some statutes, like the UK's Income Tax Act, use generic terms and delegate the power to specify competent authorities by regulation. * Others, like the US Internal Revenue Code, enumerate specific officials but also provide for delegation by the Commissioner of Internal Revenue. The trend towards generic drafting is increasingly common, reflecting the need for administrative agility i....