TaxTMI 
TaxTMI 
Modernizing the Verification of Tax Returns in India : Clause 265 of the Income Tax Bill, 2025 Vs. Section 140 of the Income-tax Act, 1961
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....d update the provisions relating to the verification of returns, marking a pivotal reform in the procedural aspects of tax law. This commentary provides a comprehensive analysis of Clause 265, juxtaposing its provisions with Section 140 of the Income-tax Act, 1961, and Rule 12AA of the Income-tax Rules, 1962, to elucidate the continuities, departures, and practical implications for stakeholders. Objective and Purpose Clause 265 of the Income Tax Bill, 2025, aims to specify the persons competent to verify the returns of income required to be furnished u/s 263 of the proposed legislation. The legislative intent is to provide clarity, reduce ambiguities, and align the verification process with contemporary business and legal realities, inclu....
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....ct. However, the catch-all provision for inability to verify and use of power of attorney may subsume such cases. The requirement for a valid power of attorney is retained, ensuring that the delegation of authority is formal and documented. * Potential Ambiguity: The omission of "absence from India" as a specific ground may create interpretational issues for non-resident individuals. Judicial clarification or administrative guidance may be needed to ensure continuity of practice. 2. Hindu Undivided Family (HUF) * Clause 265: Verification by the Karta; if Karta is absent from India or mentally incapacitated, by any other adult member. * Section 140(b): Identical provision. * Analysis: The provision is materially unchanged, preservin....
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.... 1961 Act. * Analysis: The Bill aligns with the 1961 Act, updating the cross-reference to the new Bill's section. The principle that the liquidator, as the person in control of the company's assets, is responsible for tax compliance, is retained. 6. Companies under Government Management * Clause 265: Verification by the principal officer. * Section 140(c) (Proviso (b)): Same. * Analysis: No substantive change; the principal officer is the appropriate person in such scenarios. 7. Companies under Corporate Insolvency Resolution * Clause 265: Verification by the insolvency professional appointed by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 (IBC). * Section 140(c) (c): Same, with definitions....
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....ith insolvency law. 10. Local Authorities * Clause 265: Verification by the principal officer. * Section 140(d): Same. * Analysis: No change. The principal officer is the logical verifying authority. 11. Political Parties * Clause 265: Verification by the chief executive officer (CEO), regardless of designation. * Section 140(dd): Same, referencing the CEO (secretary or other designation). * Analysis: The Bill continues the practice of requiring the CEO to verify, reflecting the need for accountability at the highest level in political entities. 12. Other Associations * Clause 265: Verification by any member or the principal officer. * Section 140(e): Same. * Analysis: No substantive change. This catch-all provision ens....
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....itigation. Comparative Analysis with Section 140 and Rule 12AA Continuities * The core structure and philosophy of Section 140 are preserved in Clause 265, ensuring continuity and minimizing disruption. * The fallback mechanisms for incapacity or absence (e.g., Karta, managing partner, designated partner) are maintained. * Integration with the IBC and the role of insolvency professionals, as introduced via amendments to Section 140 and Rule 12AA, are retained and clarified. Departures and Innovations * The Bill omits explicit reference to absence from India for individuals, which may be an inadvertent narrowing or may reflect an intent to subsume such cases under the broader "other reasons" clause. * The tabular presentation an....
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.... to avoid misuse or uncertainty. * The treatment of trusts, societies, and other non-corporate entities under the catch-all "other association" may require further clarification, especially as new organizational forms emerge. Practical and Compliance Considerations * Taxpayers must ensure that the person verifying their return is duly authorized as per the applicable provision. Failure to do so may render the return defective or invalid. * Entities under insolvency or winding up must coordinate closely with insolvency professionals or liquidators to ensure timely and proper compliance. * The use of digital signatures and electronic verification methods is not addressed in Clause 265 but is likely to be governed by procedural rules.....