Clause 248 Powers to requisition.

Income Tax Bill, 2025

1. Introduction

Clause 248 of the Income Tax Bill, 2025, and u/s 132A of the Income-tax Act, 1961, both deal with the powers of income-tax authorities to requisition books of account, documents, electronic records, or assets that have been taken into custody by other authorities under any other law. These provisions are pivotal in the context of tax enforcement, particularly in cases involving undisclosed income or assets and non-compliance with summons or notices. They empower tax authorities to access material evidence or assets that may otherwise be inaccessible due to their custody with other agencies. Understanding and evaluating Clause 248 in light of its predecessor, Section 132A, is essential to appreciate legislative continuity, reforms, and the evolving policy objectives of the Indian taxation regime. This commentary seeks to provide an in-depth analysis of Clause 248, examine its objectives, dissect its operative mechanisms, and compare its provisions with the existing Section 132A of the Income-tax Act, 1961, highlighting similarities, differences, and practical implications.

2. Objective and Purpose

Legislative Intent and Policy Considerations: The core objective behind both Clause 248 and Section 132A is to ensure that tax authorities are not thwarted in their investigations or assessments due to the unavailability of evidence or assets, merely because such material is in the custody of another authority under a different law. The provisions are designed to facilitate the smooth flow of information and material evidence between various enforcement agencies, thereby strengthening the ability of the tax department to detect and bring to tax concealed income or assets. The policy rationale is rooted in preventing tax evasion and promoting inter-agency cooperation. When a person fails to comply with a summons or notice, or when assets representing undisclosed income are seized by another agency (such as police, customs, or anti-corruption authorities), the tax department should not be left powerless. These provisions bridge the operational gap and enable the tax department to requisition such material for their proceedings.

Historical Background: Section 132A was introduced by the Taxation Laws (Amendment) Act, 1975, as a complement to the search and seizure powers u/s 132. Over the years, it has undergone amendments to expand the scope of officers empowered, clarify procedures, and address judicial interpretations. Clause 248 in the Income Tax Bill, 2025, appears to be a modernized version, reflecting changes in technology (explicit inclusion of electronic media and computer systems), and possibly streamlining administrative processes.

3. Detailed Analysis of Clause 248 of the Income Tax Bill, 2025

Clause 248 can be broken into three main sub-sections, each addressing a specific aspect of the requisitioning process:

3.1 Sub-section (1): Conditions for Requisition

Sub-clause (1) sets out the conditions under which the approving authority (notably, a senior officer designated under the Act) may authorise a requisition. The key elements are:

• Information and Reason to Believe: The approving authority must possess information that gives rise to a "reason to believe" that one of three situations exists. The "reason to believe" standard, a well-established threshold in tax law, ensures that the power is not exercised arbitrarily but is based on objective material.
• Triggering Situations:
  • (a) A person who was issued a summons or notice to produce documents has failed to do so, and those documents are now in the custody of another authority.
  • (b) Documents or electronic media will be useful or relevant for tax proceedings, and the person to whom a summons or notice has been or might be issued will not produce them when returned by the other authority.
  • (c) Assets in custody of another authority represent income or property not disclosed for tax purposes.
• Scope of Material: Notably, Clause 248 explicitly includes "information stored in an electronic media or a computer system," reflecting the increasing significance of digital evidence.
• Authorisation: Upon satisfaction of the above, the approving authority may authorise specified officers (Joint Director, Joint Commissioner, Assistant Director, Assistant Commissioner, or Income-tax Officer) to requisition the material from the other authority.

Key Features and Interpretative Points:

• The provision is triggered not merely by possession of information, but by the formation of "reason to believe"
• a standard that has been subject to judicial scrutiny, requiring the authority to act on credible information and not mere suspicion.
• The explicit inclusion of "information stored in an electronic media or a computer system" reflects adaptation to modern business practices and digitalization.
• The clause covers both non-compliance (failure to produce) and proactive anticipation of non-production upon return of material.
• The scope extends to "assets" representing undisclosed income, not just documents or books.

3.2 Sub-section (2): Delivery of Material

Upon requisition, the officer or authority in possession of the material is mandated to deliver it to the requisitioning officer, either immediately or when it is no longer necessary to retain it.

Interpretative Notes:

- The provision balances the interests of the requisitioning income-tax authority and the authority currently holding the material, allowing the latter to retain it if necessary for their own proceedings.

- The use of "forthwith or when...no longer necessary" prevents undue delay while respecting the procedural needs of the original authority.

3.3 Sub-section (3): Application of Other Provisions

Once delivered, the material is treated as if it had been seized u/s 247 by the requisitioning officer, and all relevant provisions (Sections 247(7)-(11), 250, and 251) apply, with appropriate substitution of terms.

Legal and Practical Significance:

- This deeming fiction ensures that the rights and obligations, procedural safeguards, and timelines applicable to material seized during a search are equally applicable to requisitioned material.

- It provides clarity on the legal regime governing the custody, retention, and eventual release or utilization of the requisitioned material.

4. Practical Implications

Clause 248 has significant implications for various stakeholders:

4.1 For the Income Tax Department

• Enhanced Investigative Reach: The department can access crucial evidence even if it is not in the direct possession of the assessee or taxpayer but with another law enforcement or regulatory authority.
• Efficiency and Avoidance of Redundancy: There is no need for duplicate searches or seizures, reducing administrative burden and potential harassment to individuals.
• Digital Evidence: The explicit inclusion of electronic records broadens the scope and modernizes tax enforcement in line with contemporary business practices.

4.2 For Other Law Enforcement Agencies

• Inter-Agency Cooperation: There is a statutory mechanism for the transfer of custody of material, fostering cooperation among agencies.
• Retention Rights: Agencies can retain material until their purpose is served, after which they are obliged to hand over to the tax authorities.

4.3 For Taxpayers and Assessees

• Potential for Multiple Proceedings: Material seized by one agency can become the basis for tax proceedings, increasing exposure to parallel investigations.
• Procedural Safeguards: The requirement of "reason to believe" and authorisation by a senior officer offers some protection against arbitrary action.
• Digital Privacy Concerns: The inclusion of electronic records raises issues of data privacy and the scope of permissible requisition.

4.4 Compliance and Procedural Impacts

• Record-Keeping and Audit Trails: Both authorities and taxpayers must maintain robust records to demonstrate compliance and proper chain of custody.
• Timelines and Coordination: The provision requires careful coordination to avoid loss, duplication, or wrongful retention of material.

5. Comparative Analysis: Clause 248 of the Income Tax Bill, 2025, and u/s 132A of the Income-tax Act, 1961

A clause-by-clause comparison reveals both continuity and evolution:

5.1 Authorities Empowered

• Section 132A: Empowers high-ranking officials (Principal Director General/Director General/Principal Director/Director/Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner) to authorize requisition; actual requisition can be carried out by officers down to the level of Income-tax Officer.
• Clause 248: Refers to "approving authority" (presumably similarly ranked, though the Bill may define this term elsewhere) and authorizes Joint Director/Commissioner, Assistant Director/Commissioner, or Income-tax Officer as requisitioning officers.
• Observation: The structure is largely similar, but terminology is modernized and perhaps streamlined in Clause 248.

5.2 Material Subject to Requisition

• Section 132A: Covers "books of account, other documents or assets."
• Clause 248: Expands to include "information stored in electronic media or a computer system," reflecting technological advancements and the prevalence of digital records.
• Observation: Clause 248 is more explicit and contemporary in scope, ensuring digital evidence is not excluded.

5.3 Triggers for Requisition

• Section 132A: Triggered when a person fails to comply with summons/notice, or when it is believed that material will not be produced upon return, or when assets represent undisclosed income.
• Clause 248: Mirrors these triggers, with more detailed references to the nature of material (including electronic records) and the relevant sections for summons/notices (Section 246(1) and 268(1) in the new Bill, as opposed to Section 131 and 142 in the old Act).
• Observation: The triggers are functionally identical, but Clause 248 updates statutory cross-references to the new Bill.

5.4 Procedure for Delivery

• Section 132A(2): The authority in possession "shall deliver" the material forthwith or when it is no longer necessary to retain it.
• Clause 248(2): Uses almost identical language, ensuring the same operational balance.

5.5 Application of Other Provisions

• Section 132A(3): Applies the provisions of Section 132(4A)-(14) and Section 132B to requisitioned material, with the term "requisitioning officer" substituted for "authorised officer."
• Clause 248(3): Applies Sections 247(7)-(11), 250, and 251 of the new Bill, with similar substitution.
• Observation: This reflects the renumbering and possibly reorganization of the search and seizure provisions in the new Bill, but the intent and mechanism are preserved.

5.6 Explanation Regarding "Reason to Believe"

• Section 132A: Contains an Explanation (inserted in 2017) stating that the "reason to believe" recorded by the authority shall not be disclosed to any person, authority, or the Appellate Tribunal.
• Clause 248: The provided text does not explicitly contain this Explanation; it may be retained elsewhere in the Bill or omitted.
• Observation: The omission (if not addressed elsewhere) could have implications for transparency and judicial review, as the non-disclosure of "reason to believe" has been a contentious issue in litigation.

5.7 Terminological and Procedural Modernization

• Clause 248 adopts more current terminology (e.g., "electronic media or computer system").
• Statutory cross-references are updated to the new Bill's structure.

6. Ambiguities and Potential Issues

6.1 Subjectivity of "Reason to Believe"

The standard of "reason to believe" is inherently subjective, though it must be based on tangible material. Courts have held that this cannot be mere suspicion, but the threshold is lower than "proof." The absence of a requirement to disclose reasons (as in Section 132A's Explanation) can shield arbitrary action, making judicial oversight crucial.

6.2 Interface with Other Laws

While the provision mandates delivery of material, it allows the original authority to retain it if necessary. Potential conflicts may arise if both agencies assert priority, especially in high-stakes criminal or economic offenses.

6.3 Digital Evidence

The explicit inclusion of electronic records is welcome, but practical challenges abound in handling, copying, and transferring digital evidence while maintaining chain of custody and data integrity.

6.4 Procedural Safeguards

The application of seizure-related provisions ensures procedural safeguards (such as panchnama, inventory, time limits, representation), but the effective implementation depends on clarity in subordinate rules and administrative training.

7. Conclusion

Clause 248 of the Income Tax Bill, 2025, represents a substantive continuation and modernization of the powers conferred u/s 132A of the Income-tax Act, 1961. The essential structure, triggers, and procedural mechanisms are preserved, ensuring continuity in tax enforcement. The key advancements lie in the explicit inclusion of electronic and digital records, updated terminology, and possibly streamlined administrative processes. However, certain aspects, such as the non-disclosure of "reason to believe," require careful legislative attention to balance investigative efficacy with taxpayer rights. The provision is a critical tool in the fight against tax evasion, enabling the tax department to access crucial evidence or assets held by other authorities. Its effectiveness will depend on inter-agency cooperation, judicial oversight, and the capacity of tax officers to handle both physical and digital evidence in compliance with procedural safeguards.

Full Text:

Clause 248 Powers to requisition.