Presumptions in Tax Offence Prosecutions : Clause 489 of the Income Tax Bill, 2025 Vs. Section 278D of the Income-tax Act, 1961

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....ences, as they shift the evidentiary burden in certain circumstances, thereby facilitating enforcement and deterrence against tax evasion. The legislative context of both provisions is rooted in the need to empower tax authorities with effective tools to combat the concealment of income, assets, and fraudulent documentation, while balancing the rights of individuals against arbitrary or excessive State power. The Income Tax Bill, 2025, aims to modernize and consolidate the existing framework of direct tax law in India, replacing the Income-tax Act, 1961, which has governed tax administration for over six decades. Clause 489, as part of the proposed new legislation, represents an evolution of Section 278D, reflecting changing economic reali....

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....ns of ownership, particularly where assets or documents are found in the possession of individuals who deny knowledge or responsibility. Clause 489 extends this rationale into the new legislative framework, updating the scope and language to reflect contemporary realities, including the advent of virtual digital assets. Detailed Analysis of Clause 489 of the Income Tax Bill, 2025 (1) Presumption in the Course of Search under section 247 Clause 489(1) provides that where, during the course of a search u/s 247, any money, bullion, jewellery, virtual digital asset, or other valuable article or thing (collectively referred to as "assets"), or any books of account or other documents, are found in the possession or control of any person,....

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....e presumption to situations where assets or documents are taken into custody by an officer or authority u/s 248(1)(a), (b), or (c), and are delivered to the requisitioning officer u/s 248(2). If such assets or documents are tendered in evidence by the prosecution, the presumption u/s 247(7) applies. * Requisition Process: This provision is analogous to the requisition mechanism in Section 132A of the 1961 Act, where tax authorities can requisition assets or documents seized by other authorities (e.g., police, customs). * Chain of Custody: The provision ensures that the presumption is not lost merely because the assets/documents changed hands between authorities before being produced in evidence. (3) "So Far as May Be" - ....

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.... Section 278. - Clause 489: Applies to the person from whom assets are seized and persons referred to in Section 484 (the corresponding provision in the new Bill). * Reference to Underlying Presumption Provision: - Section 278D: Applies "so far as may be" the provisions of Section 132(4A). - Clause 489: Applies "so far as may be" the provisions of Section 247(7). In both cases, the underlying provision sets out the nature of the presumption regarding ownership, correctness of books of account, and authenticity of signatures. * Legislative Language: The language of both provisions is substantially similar, with updates to reflect changes in asset classes and cross-references to new section numbers. Substantive and Policy Diffe....

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....5 Bill, replacing Section 132A. Persons Covered Person in possession and person referred to in Section 278 Person in possession and person referred to in Section 484 Section 484 likely updates or expands the category of related persons; the scope may be broader or more specific. Presumption Provision Applied Section 132(4A) Section 247(7) Section 247(7) is the updated presumption provision, likely mirroring Section 132(4A) but potentially with modifications. Substantive Continuity and Evolution While the core structure and rationale remain unchanged, Clause 489 modernizes the provision by: * Explicitly including virtual digital assets, thereby addressing a major gap in the 1961 Act, where cryptocurrencies and simila....

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....ting the evidentiary burden in the context of searches and seizures is retained, ensuring continuity in judicial approach and prosecutorial practice. (3) Increased Compliance Burden * The expansion in scope necessitates greater diligence on the part of taxpayers, especially those dealing in digital assets, to maintain proper records and explanations. (4) Judicial Oversight and Safeguards * The rebuttable nature of the presumption, coupled with the "so far as may be" qualifier, ensures that courts retain the discretion to prevent misuse and to uphold the rights of the accused. Conclusion Clause 489 of the Income Tax Bill, 2025, represents both continuity and progress in the legal framework governing tax offences in India. B....