TaxTMI 
TaxTMI 
Safeguards and Procedures in Income Tax Prosecution : Clause 491 of the Income Tax Bill, 2025 Vs. Section 279 of the Income Tax Act, 1961
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....ure that prosecution for tax offences is not undertaken arbitrarily and that there are adequate checks and balances before criminal proceedings are initiated against taxpayers. They also address the compounding of offences, evidentiary rules in prosecution, and the powers of higher tax authorities to issue directions or instructions regarding prosecution and compounding. The significance of these provisions lies in their role as gatekeepers to criminal prosecution within the income tax framework. By requiring prior sanction from designated senior officers and providing mechanisms for compounding, these sections balance the interests of tax enforcement with the need to prevent undue harassment of taxpayers. The 2025 Bill, through Clause 491....
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....sioner (Appeals). This is a critical safeguard ensuring that lower-level officers cannot unilaterally commence criminal proceedings, which could have severe consequences for taxpayers. The inclusion of appellate authorities (Joint Commissioner (Appeals) and Commissioner (Appeals)) is noteworthy, as it expands the pool of officers empowered to grant sanction, potentially leading to greater oversight and a more nuanced consideration of cases where prosecution is contemplated. 2. Directions and Instructions by Senior Authorities (Sub-section 2) Clause 491(2) authorizes the Principal Chief Commissioner, Chief Commissioner, Principal Director General, or Director General to issue instructions to the authorities empowered to sanction prosecuti....
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....use it was given in the belief that penalties would be reduced or that the offence would be compounded. This prevents accused persons from retracting or disowning incriminating statements on technical grounds, thereby strengthening prosecutorial efficacy. 6. Board's Power to Issue Directions (Sub-section 6) Clause 491(6) explicitly affirms the power of the Board (CBDT) to issue instructions or directions, including requiring prior Board approval, to ensure proper composition of offences. This centralizes policy control and fosters consistency across the tax administration. It also potentially allows the Board to set thresholds, procedures, or conditions for compounding, thus standardizing practice nationwide. Comparative Analysis wit....
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....l may issue instructions to the sanctioning authorities. The CBDT's power to issue directions for compounding is also affirmed. * Clause 491: Similar powers are provided, but with clearer articulation of the Board's authority to require its prior approval for compounding decisions, enhancing centralized oversight. 4. Bar on Prosecution Where Penalty is Waived * Section 279(1A): Bars prosecution u/ss 276C or 277 where penalty u/s 270A or section 271(1)(iii) has been reduced or waived u/s 273A. * Clause 491(3): Bars prosecution u/ss 478 or 482 where penalty u/s 439 has been reduced or waived u/s 469. The structure and rationale are aligned, but the specific section numbers differ due to legislative reorganization. 5. Compound....
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.... and functional specialization to modernize tax enforcement. Clause 491 does not contain an analogous provision, possibly indicating that such schemes may be dealt with elsewhere in the new Bill, or that the drafters intend to centralize such powers within the Board rather than the Government. 9. Terminological and Structural Updates The 2025 Bill updates terminology and section references to align with its new structure. For example, "assessment year" becomes "tax year," and section numbers referenced for offences, penalties, and authorities are revised. These changes are primarily technical but are important for legal clarity and administrative coherence. Ambiguities and Issues in Interpretation While the overall structure and intent....