Section 246 Power regarding discovery, production of evidence, etc.

Income-tax Act, 2025

At a Glance

These documents present two versions of Clause/Section 246 concerning powers of income-tax authorities to obtain discovery, compel attendance, and produce evidence. Document 1 is titled "Section 246 of Income-tax Act, 2025" (Act version); Document 2 is the "Clause 246 of Income Tax Bill, 2025 - Old Version" (Bill version). The provisions affect taxpayers, income-tax authorities and intermediary institutions (e.g., banks). The text supplied does not state an effective date.

Background & Scope

Statutory hook: Clause/Section 246 is situated within the Income-tax Act/Bill, 2025 and expressly cross-references the Code of Civil Procedure, 1908, and sections 159 and 247 of the same enactment. The provision purports to vest specified income-tax authorities with "the same powers as are vested in a court under the Code of Civil Procedure, 1908, when trying a suit" in respect of discovery, attendance, production of books and issuing commissions. The text supplies no definitions beyond the list of authorities and the listed powers.

Statutory Provision Mode

Text & Scope

• The core scope in both documents is to confer court-like powers on a range of income-tax authorities. Paragraph (1) lists the authorities (Assessing Officer, Joint Commissioner, Joint Commissioner (Appeals), Commissioner (Appeals), Commissioner or Principal Commissioner, Chief Commissioner or Principal Chief Commissioner, and the Dispute Resolution Panel referred to in section 275(17)(a)) and identifies four categories of court powers: (a) discovery and inspection; (b) enforcing attendance of any person (including any officer of a banking company) and examining him on oath; (c) compelling production of books of account and other documents; and (d) issuing commissions.
• Sub-section (2) extends the exercise of the powers in (1) to particular authorities even where no proceedings are pending against the person(s) concerned. The enumerated authorities differ slightly in drafting between versions but include: (a) any income-tax authority (not below Assistant Commissioner) notified by the Board for inquiries in respect of an agreement u/s 159; (b) officers at DGGI/Directorate levels (Principal Director General/Director General/Principal Director/Director/Joint Director/Assistant Director) for inquiries/investigations relating to concealment of income; and (c) the authorised officer u/s 247(1) in connection with actions u/s 247.
• Sub-section (3) deals with impounding books of account and other documents produced in proceedings; sub-section (4) requires the Assessing Officer or Assistant Director to record reasons for impounding and prescribes an initial retention period of up to fifteen days exclusive of holidays, with further retention only with prior sanction of an approving authority.

Interpretation

The text indicates legislative intent to endow income-tax authorities with quasi-judicial fact-finding and evidence-gathering powers mirroring those of a civil court. The specification that these powers apply "for the purposes of this Act" suggests their use is limited to tax-related inquiries, but procedural limitations and safeguards (beyond impounding recording/period) are not set out in the text. The explicit cross-reference to the Code of Civil Procedure, 1908, imports established court mechanisms for discovery, inspection, summons and commissions as interpretive aids.

Exceptions/Provisos

There are limited carve-outs in the text itself. Sub-section (2) contemplates exercise of powers even when no proceedings are pending but only by specifically listed authorities. Sub-section (3) is subject to rules made in the behalf. Sub-section (4) limits retention to fifteen days (exclusive of holidays) unless extended with prior sanction. Other exceptions, privileges (e.g., legal professional privilege), or constitutional constraints are Not stated in the document.

Illustrations

• Example 1: An Assessing Officer issues a notice under the provision to compel a bank officer to attend and produce account records for inspection in connection with an assessment proceeding. This use is consistent with sub-section (1)(b) and (c). (The text supplies no factual example; this is an illustration consistent with the text.)
• Example 2: A Principal Director suspects concealment of income by a class of taxpayers and, even though no specific proceedings are pending, invokes sub-section (2)(b) to compel production of documents and impound them subject to the impound/retention rules in sub-sections (3)-(4).

Interplay

The provision expressly imports the Code of Civil Procedure, 1908, for procedural mechanisms, and cross-references sections 159 and 247 of the same Act/Bill (for agreements and authorised officers respectively). The text states sub-section (3) is "subject to the rules made in this behalf," indicating reliance on subordinate legislation for procedural detail. Specific interactions with other statutes (e.g., Banking Regulation Act, Evidence Act, privilege doctrines) are Not stated in the document.

Differences between the Act Version (Document 1) and the Bill (Old) Version (Document 2) and Practical Impact

• Reference to Board notification language in sub-section (2)(a): Bill reads "notified by the Board, for the purposes of making any inquiry or investigation in relation to an agreement referred to in section 159;" Act reads "notified by the Board in this behalf, for the purposes of making any inquiry or investigation in respect of an agreement referred to in section 159;"
  • Practical impact: largely drafting nuance; the Act wording ("in this behalf" and "in respect of") is marginally more formal but produces no materially different operational effect from the Bill text as presented.
• Sub-section (2)(b) scope and specificity: Bill: powers for specified senior officers "for the purposes of making any inquiry or investigation, if he has the reason to suspect that any income has been concealed, or is likely to be concealed;" Act: similar officers "for the purposes of making any inquiry or investigation in relation to any concealment of income, if he has the reason to suspect that any income has been so concealed, or is likely to be so concealed by such person or class of persons within his jurisdiction;"
  • Practical impact: the Act adds explicit territorial/jurisdictional language ("by such person or class of persons within his jurisdiction") and links the inquiry specifically to "any concealment of income." This clarifies that suspicion must relate to concealment by persons within the officer's jurisdiction, potentially narrowing or clarifying the officer's reach compared with the Bill text which lacks the explicit jurisdictional phrase.
• Sub-section (2)(c) textual cross-reference: Bill refers to the authorised officer acting "before taking action u/s 247(1)(b)(i) to (viii), or during the course of such action." Act refers to action "u/s 247(1)(i) to (vii), or during the course of such action, if he has reason to suspect that any income has been concealed, or is likely to be concealed by such person or class of persons within his jurisdiction."
  • Practical impact: The Act changes the cross-reference to different subclauses of section 247(1) (from 247(1)(b)(i)-(viii) to 247(1)(i)-(vii)) and inserts the suspicion requirement and jurisdictional phrase. That indicates a substantive redrafting: the Act narrows or adjusts which specific enumerated actions u/s 247(1) trigger use of these powers, and ties exercise to reasonable suspicion about concealment within jurisdiction.
• Impounding and retention (sub-section (3)): Bill: "may, subject to the rules made in this behalf, impound any books of account or other documents produced before it in any proceeding under this Act." Act: grants power to "impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act."
  • Practical impact: The Act explicitly authorises retention "in its custody for such period as it thinks fit," signalling an affirmative retention power (subject to sub-section (4) and rules). The Bill limited itself to impounding; the Act clarifies custody and retention authority which can affect evidence preservation and access by taxpayers. However, sub-section (4) imposes a temporal limitation and sanction requirement for extensions.
• Retention safeguards (sub-section (4)): Both texts require recording reasons for impounding and set an initial retention limit of up to fifteen days (exclusive of holidays) with further retention only with prior sanction of the approving authority.
  • Practical impact: This limit is consistent across both versions; its presence mitigates the expanded retention language in the Act but the Act still permits custody and potentially longer retention subject to approval.

Practical Implications

• Compliance and risk areas: The provision empowers tax authorities to summon bank officers, compel production of records and inspect documents; taxpayers and third parties (banks, custodians of records) should expect broader documentary and testimonial obligations. The Act's added retention language increases risk of temporary loss of access to originals, though a 15-day ceiling (subject to sanctioned extension) applies.
• Record-keeping/evidence points: Given the impound/retention power and court-like discovery, maintaining organised originals and producing certified copies where appropriate becomes critical. The text does not specify procedures for copying, challenge mechanisms, or timelines for return - Not stated in the document.
• Jurisdictional clarity: The Act's insertion of jurisdictional language for higher-level investigative officers may constrain the extraterritorial exercise of these powers compared with the Bill wording, but the exact territorial ambit is Not stated in the document.
• Authority to act without pending proceedings: Both texts permit certain authorities to exercise powers even when no proceedings are pending, widening proactive investigative capacity; the Act however ties some such exercise to suspicion within jurisdiction.

Key Takeaways

• Clause/Section 246 imports court-like discovery, attendance and production powers into the tax machinery.
• The Act version clarifies and augments the power to not only impound but to retain documents in custody for such period as it thinks fit, subject to the retention limit and sanction mechanism.
• The Act adds jurisdictionally-specific language and a suspicion nexus for senior investigative officers, which may narrow or clarify their reach compared with the Bill text.
• Cross-references to specific subclauses of section 247(1) differ between versions, indicating a substantive drafting change as to when an authorised officer may exercise these powers.
• Procedural safeguards beyond recording reasons and an initial 15-day retention limit are Not stated in the document.
• The provision allows certain authorities to act even absent pending proceedings, enhancing investigative powers available to tax administration.
• Practical consequences for taxpayers and third parties include increased documentary production obligations and potential temporary deprivation of originals.

Full Text:

Section 246 Power regarding discovery, production of evidence, etc.