TaxTMI 
TaxTMI 
Preventing Tax Avoidance by Asset Transfer : Clause 319 of the Income Tax Bill, 2025 Vs. Section 175 of the Income-tax Act, 1961
X X X X Extracts X X X X
X X X X Extracts X X X X
.... provisions are designed to empower tax authorities to take preemptive action where there is an apprehension of tax evasion through asset alienation. The comparison between Clause 319 and Section 175 is significant, as it highlights the legislative evolution in the approach to anti-avoidance, the procedural safeguards, and the scope of the powers conferred on the tax authorities. The significance of these provisions lies in their preventive nature. While the general scheme of income tax law is to assess income for a previous year in the following assessment year, these provisions create exceptions to this rule, allowing for immediate assessment in cases where there is a risk that the taxpayer may render themselves judgment-proof by transfe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urrent tax year that any person is likely to charge, sell, transfer, dispose of or otherwise part with any of his assets with a view to avoiding payment of any liability under the provisions of this Act, the total income of such person for the period beginning from the first day of that current tax year up to the date when the Assessing Officer commences proceedings under this section shall be chargeable to tax in current tax year. (2) For the purpose of sub-section (1), the provisions of section 317(2) to (6) shall, so far as may be, apply to any proceedings in the case of any such person as they apply in the case of persons leaving India. 3.2 Notwithstanding Clause Clause 319 begins with a non-obstante clause ("Irrespective of anything....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of Section 317(2) to (6) Sub-section (2) of Clause 319 incorporates, by reference, the procedural machinery of section 317(2) to (6), which pertains to the assessment of persons leaving India. These typically include provisions for: * Notice of assessment * Time limits for filing returns * Best judgment assessment in case of non-compliance * Provisions for recovery and collection of tax This ensures that the procedural safeguards and powers available in cases of imminent departure from India are also available in cases of asset alienation with a view to tax avoidance. 3.6 Ambiguities and Issues in Interpretation Several interpretational challenges may arise: * Subjectivity of AO's Opinion: The AO is required to form an ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction certificates to mitigate risk. 4.3 Administrative and Procedural Considerations The provision empowers the AO to act swiftly, but also places a premium on procedural fairness. The application of section 317(2) to (6) is intended to provide a measure of due process, but the effectiveness of these safeguards depends on their actual implementation. The provision also places a burden on the tax administration to ensure that the power is not misused or invoked in a mechanical manner. 4.4 Compliance and Enforcement Taxpayers may be required to file returns and pay tax on income for a truncated period, disrupting normal accounting cycles. The provision also facilitates the immediate recovery of tax, reducing the risk of revenue loss due ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d of the previous year (i.e., the period not yet assessed) to the date of proceedings. Clause 319, by contrast, assesses income from the first day of the current tax year, which may indicate a shift towards real-time or current-year assessment, aligning with international trends in tax administration. * Procedural Reference: Section 175 applies the procedures from Section 174, which deals with persons leaving India. Clause 319 updates this cross-reference to Section 317, which presumably serves the same function in the 2025 Bill. * Terminological Modernization: The 2025 Bill replaces "assessment year" and "previous year" with "tax year," suggesting a move towards a simpler and more intuitive system. 5.4 Unique Features and Potential Co....