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    Act RulesIncome Tax
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    Act RulesIncome Tax
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    Limitation period for tax notices extended in specified cases; possession or information triggers a longer issuance window.
    Section 282 prescribes time limits for notices relating to escaped income: a general four year bar (four years and three months for initiation notices), with an extension up to six years (six years and three months for initiation notices) where the Assessing Officer either has in his possession books of account or other documents/evidence showing substantial escaped income, or where information with the Assessing Officer indicates substantial escaped income; additionally, no notice may be issued within one year from the end of any tax year.
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    Pre-notice hearing requirement: AO must serve show-cause and disclose information before issuing an escape-assessment notice.
    An Assessing Officer with information suggesting escaped income must serve a show-cause notice disclosing the information and allow the assessee to reply; after considering the reply and material on record the AO must obtain the prior approval of the specified authority before issuing a clause 280 notice. The pre-notice procedure is inapplicable where information arises from the scheme under section 260, Approving Panel directions under section 274(6), or findings in orders by an authority, Tribunal or court.
    Act RulesIncome Tax
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    Reassessment powers: AO may assess escaped income and recompute allowances, even when certain procedural steps were not complied with.
    Clause 279 permits the Assessing Officer, in a permissive exercise of discretion, to assess or reassess income escaping assessment and to recompute losses, depreciation and other allowances for the relevant tax year; this authority is framed subject to the procedural framework of sections 280-286. Subsection (2) allows the AO during those proceedings to assess other issues that come to notice subsequently and, in earlier draft text, expressly permits action irrespective of certain procedural non compliance, although the enacted wording narrows that explicit non compliance exception.
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    Hierarchical approval for anti-avoidance: internal review can produce binding, non-appealable determinations affecting assessments and applicable tax years.
    Clause 274 permits an Assessing Officer to refer suspected impermissible avoidance arrangements to the Principal Commissioner/Commissioner, who must issue a reasons-based notice and afford a hearing; if not satisfied, the officer refers the matter to an Approving Panel. The Panel may order inquiries, call for records, specify tax years of applicability and issue binding, non-appealable directions; time limits and specified exclusions apply, and the Board will constitute and support Panels and may make rules for their functioning.
    Act RulesIncome Tax
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    Best-judgment assessment: AO may determine income where required returns or responses to notices are not furnished.
    Section 271 empowers the Assessing Officer to make a best-judgment assessment where required returns are not furnished or where the assessee fails to comply with notices under sections 268 or 270(8); the AO must consider all relevant materials gathered and, as a general rule, provide an opportunity of being heard before determining income or loss, with a limited exception relieving the AO from issuing a separate show-cause notice if a earlier section 268(1) notice has been issued.
    Act RulesIncome Tax
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    Summary processing of returns permits correction of arithmetical errors and apparent incorrect claims with adjustment of tax or refund.
    Clause 270 authorises summary processing of returns to correct arithmetical errors and certain incorrect claims apparent from any information in the return, compute tax/interest/fee and adjust payments to determine payable or refundable amounts, subject to prior intimation to the assessee and an opportunity to respond; strict post year end timelines and special sequencing protect exempt and non profit entities, and the Act adds an express ground permitting prescribed cross year consistency checks.
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    Tax on updated return requires pre-filing payment of tax, interest and additional levy, increasing compliance obligations.
    Clause 267 requires that where an updated return under section 263(6) results in tax payable the assessee must, before furnishing the updated return, pay the tax, interest, any fee for delay/default and an additional income-tax computed on the aggregate of tax and interest; proof of payment must accompany the updated return. Specified credits, prior payments and interest already paid are to be set off in computing the net liability.
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    Self-assessment requirement: pre-payment of tax, interest and fee before filing specified income-tax returns, with proof attached.
    The clause requires payment of tax, interest and fee before filing specified income-tax returns where tax remains payable after deducting advance tax, source deductions, specified foreign tax reliefs and tax credits; returns must be accompanied by proof of payment, interest under the Act is computed on declared tax reduced by those credits, and a defined "assessed tax" serves as the base for interest on advance tax shortfall.
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    Mandatory filing duties and updated return limits reshape corrective filing eligibility and compliance obligations.
    Section 263 imposes mandatory filing duties for enumerated classes, prescribes due dates by category, empowers the Board to prescribe forms and particulars, and allows the Central Government to exempt classes. It distinguishes late returns, revised returns (both within nine months or before assessment completion), and an updated return remedy within a multi year window that is barred where updated filings would claim losses, reduce tax, produce refunds, duplicate updates, or where assessments, possession of information, international or internal information exchange, prosecutions, searches, surveys, requisitions or specified notices have intervened. Assessing Officers may treat unrectified defective returns as invalid after a short cure period.
    Act RulesIncome Tax
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    Digital evidence parity: seized electronic backups treated as books of account, extending tax search powers into virtual spaces.
    Clause 261 defines terms governing Chapter XIV search, seizure and requisition powers, treating material seized to include books of account, documents, digital data storage devices, computer systems and specialised programme backups and directing that such material be construed as books of account. It broadly defines computer system and virtual digital space to include cloud and remote servers, social media, online financial platforms and application platforms. The clause identifies the classes of approving, authorised and competent officers and ties the operative date for search or requisition to the last panchnama entry or the actual receipt of books, documents, computer systems or assets.
    Act RulesIncome Tax
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    Power to call for information: tax authority may require relevant records for verification, subject to defined scope of proceeding.
    A prescribed income tax authority may issue notices requiring persons to furnish information for verification of information in the authority's possession that is useful for, or relevant to, any inquiry or proceeding under the Act; the authority may specify form, manner and time for compliance and may process and utilise such information under a scheme notified under section 260. The enacted Section 259 adds subsection (3) linking the term "proceeding" to the meaning in section 253, clarifying the definitional scope of notices.
    Act RulesIncome Tax
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    Judicial character of tax proceedings clarified; civil court deeming limited and excludes a specified statutory chapter.
    Section 257 deems proceedings before income-tax authorities to be judicial proceedings for specified provisions of the Bharatiya Nyaya Sanhita, 2023, and deems income-tax authorities to be Civil Courts for the purposes of section 215 of the Bharatiya Nagarik Suraksha Sanhita, 2023, but expressly excludes application of that deeming for the purposes of Chapter XXVIII of the Bharatiya Nagarik Suraksha Sanhita, 2023.
    Act RulesIncome Tax
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    Enquiry powers: specified senior income-tax officers authorised to exercise Assessing Officer powers for statutory enquiries.
    Section 256 vests enquiry authority in specifically listed senior officers - Principal Director General/Director General, Principal Director/Director, Principal Chief Commissioner/Chief Commissioner, Principal Commissioner/Commissioner and Joint Commissioner - and grants them Assessing Officer-like powers to make enquiries under the Act, including summons and document requisition, while the clause contains no procedural provisos or territorial limits and therefore relies on other statutory or subordinate provisions for operational safeguards and delegation mechanics.
    Act RulesIncome Tax
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    Survey powers over electronic records and premises enable inspection, technical access and limited impoundment for tax compliance verification.
    Survey powers authorise entry into premises where business, profession or charitable activities are carried on to inspect books, documents, electronic media and computer systems and to require necessary technical and other assistance including access codes; officers may verify assets and stock, make extracts or copies, record statements on oath, prepare inventories and impound or retain records or computer systems after recording reasons, with retention beyond the initial statutory period requiring prior approval and temporal limits on entry applicable to business and other premises.
    Act RulesIncome Tax
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    Retention limits for seized material clarified, with supervised copying rights and an administrative remedy to challenge extensions.
    Clause 251 requires transfer of seized assets and material to the territorial Assessing Officer where the seizing authorised officer lacks jurisdiction, mandates supervised opportunity for the person to make copies or extracts, prescribes statutory retention limits tied to assessment or recomputation events with written reasons and approving authority approval for extensions, and preserves a right to apply to the Board against approvals for extended retention.
    Act RulesIncome Tax
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    Application of seized assets: assets may be applied to recover tax liabilities, subject to explanation-based release and distraint.
    The provision authorises recovery from assets seized or requisitioned under search or requisition to satisfy tax liabilities, including penalty and interest (excluding advance tax), aggregating liabilities arising before, during assessments consequent to the search, and those connected to settlement proceedings; the enacted text expressly includes block-period assessments under Part B of Chapter XVI. Release within the statutory period requires the Assessing Officer to be satisfied on the basis of the explanation furnished about nature and source, recovery of existing liabilities, and prior commissioner-level approval, while non-monetary assets are deemed under distraint and may be realised as prescribed.
    Act RulesIncome Tax
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    Power to requisition: tax officers may compel delivery of materials and electronic evidence held by other authorities.
    Clause 248 empowers an approving authority to authorise specified tax officers to require delivery of assets, books, documents, electronic information or computer systems held by officers or authorities under other laws where persons served with summonses or notices fail to produce material, where material will be useful to tax proceedings and would not be returned, or where custody assets represent undisclosed income; post-delivery, designated procedural seizure, custody and preservation provisions apply with the requisitioning officer substituted for the authorised officer.
    Act RulesIncome Tax
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    Search and seizure powers expanded to include virtual digital spaces, compelled access and evidentiary presumptions for tax investigations.
    Clause 247 authorises income tax officers to enter and search physical premises and virtual digital spaces when records or assets relevant to tax proceedings or undisclosed income are believed to be present, including compelled technical assistance, overriding access codes, copying electronic data, inventory and seizure (excluding stock in trade), and deemed seizure where removal is impracticable; it cross references IT law, applies evidentiary presumptions to found material, and provides limited procedural timelines and approvals while leaving detailed safeguards and rules to be prescribed.
    Act RulesIncome Tax
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    Discovery and production powers: tax authorities may compel evidence and attendance, subject to limited retention safeguards.
    The provision confers court-like powers on enumerated income-tax authorities to compel discovery, attendance, examination on oath, production of books and issuance of commissions for tax purposes; it allows certain authorities to exercise these powers even absent pending proceedings, ties investigative authority for senior officers to a jurisdictional nexus and suspicion of concealment, and authorises impoundment and, in the Act, explicit custody and retention of documents subject to a fifteen-day initial limit, recorded reasons and prior sanction for extensions.
    Act RulesIncome Tax
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    Case transfer power: authorities may transfer tax cases with recorded reasons and limited hearing requirements, preserving continuity of proceedings.
    A specified income-tax authority may transfer any case between Assessing Officers under its control or, where authorities differ, by agreement or by an order of the Board (or an authority the Board specifies by notification). The authority must record reasons and, "wherever it is possible to do so," afford the assessee a reasonable opportunity to be heard, except for transfers between officers in the same city/locality/place; transfers may occur at any stage and notices already issued need not be re issued. The enacted text consolidates the temporal definition of "case" and makes minor drafting refinements.

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      Corporate Laws

      Small Industries Development Bank of India versus M/s. Sibco Investment Pvt. Ltd- Legal Position of NBFC in a civil suit.

      2 June, 2022

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      2022 (1) TMI 170 - Supreme Court

      Legal Position of NBFC in a civil suit.

      Section 45 MB of the RBI Act 1934. - Power of bank to prohibit acceptance of deposit and alienation of assets, Section 45 MC - Power of Bank to file winding up petition.

      Section 35A of the Banking Regulation Act, 1949 vests power in the RBI to give directions to banks and can take action, "to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company"

      A conjoint reading of the statutory provisions, makes it abundantly clear that for ‘public interest’ the RBI is empowered to issue any directive to any banking institution, and to prohibit alienation of an NBFC’s property.

      The term ‘Public interest’ has no rigid definition. It has to be understood and interpreted in reference to the context in which it is used. The concept derives its meaning from the statute where it occurs, the transaction involved, the state of society and its needs.

      It is not necessary for RBI to mention a specific provision before issuing directions, for it to have statutory consequences. All that is required is the authority under the law, to issue such direction.

      Therefore the RBI under Section 45-MB of the RBI Act, 1934 and 35-A of the Banking Regulation Act, 1949 has the requisite authority to issue the communication dated 09th June, 1997. Now the omission by the RBI to mention any enabling provision, doesn’t change the nature and status of the direction.

      The statutory arrangement and interpretation persuades to hold that actions in furtherance of grounds of ‘public policy’ by the RBI was justified, for issuing the Notification dated 10.04.1997. The notification itself clearly mentioned that it is issued for the benefit of "depositors and creditors" of CRB Capital.

      The actual status of the RBI Notification would have a bearing on the claim against the defendant in the suit and subsequent proceeding/s. The plaintiff, as can be noted, always had the option of challenging its legality but they have never specifically challenged those in the Suit. In a way the plaintiff " waived its right" by not challenging the RBI notification then/at that past point of time in the suit proceedings.

      The principle of waiver/acquiescence is applicable here.

      When the legality of the RBI Notification is not under challenge, relief can’t be granted in the Suit without determining its "legality". This in our perception can by itself, put a quietus on the issue at hand - the plaintiff cannot be granted parity with its predecessor-in-interest, Shankar Lal Saraf, who was paid interest which accrued in July, 1997 despite the RBI directive of 09.06.1997.

      The defendant defended this fallacy/aberration by clarifying that the payment to Shankar Lal Saraf was made before the defendant was in receipt of the RBI directive.

      Hence, the plaintiff cannot claim any advantage for themselves or parity with its predecessor-in-interest, on this cause. It amounted to sub-silencio acceptance.

      Suit barred by constructive res judicata.

      The cause of action for the plaintiff accrued the first time, when the defendant allegedly failed to pay timely interest. Since such a claim was not raised in the writ court, the subsequent Suit of SIBCO is barred by the principle of Constructive Res Judicata.

      Section 441(2) of the Companies Act, 1956 reveals that winding-up proceedings other than voluntary winding-up, are said to have commenced from the date of presentation of petition - A conjoint reading of Section 531 and 441(2) of the Companies Act, 1956 prima facie reveals that any transfer of property by or against a company in involuntary winding up, the suspect spell for deemed fraudulent transaction is six months before presentation of the winding up petition.

      In the present case, the petition for winding-up was submitted by RBI on 22.05.1997 and admittedly, the transfer in Shankar Lal Saraf’s favour was executed in February, 1997. The defendant’s contention as to the transfer being in the suspect spell, may be deemed fraudulent, cannot be rejected. 

      A question arose whether the present suit is barred by Constructive res judicata- It being decided that the cause of action for the plaintiff accrued the first time, when the defendant allegedly failed to pay timely interest. Since such a claim was not raised in the writ court/court of first instance, the subsequent Suit of SIBCO is barred by the principle of Constructive Res Judicata.

      This narrative makes us understand that a NBFC governed by the Banking  Regulation Act, 1949 and the  Reserve Bank of India Act, 1934 along with Section 531 and 441(2) of the Companies Act, 1956 is too subject to the common law principles and the Code of Civil Procedure, 1908 when in a civil suit before a Court of law.

       


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      2022 (1) TMI 170 - Supreme Court

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      ActsIncome Tax