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    Digital Annual Information Transformation in Tax Administration : Clause 510 of the Income Tax Bill,...
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    Annual Information Statement: statutory digital disclosure enabling taxpayers to verify and reconcile reported financial data.
    The provision requires upload of an Annual Information Statement into the assessee's registered electronic filing account by the prescribed income tax authority or an authorised person, in the prescribed form, manner and time, containing such information as is in the possession of the authority; specifics of content, format and timelines are left to subordinate rules, and the clause confines AIS data to information already held by the authority.
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    Crypto-asset reporting obligations require prescribed entities to file periodic transaction statements and correct inaccuracies promptly.
    Clause 509 creates a statutory obligation for prescribed reporting entities to furnish periodic statements on crypto-asset transactions to the income-tax authority in a prescribed form and manner; it provides time-bound notice-and-cure procedures for defective or non-filed statements, mandates prompt self-correction of inaccuracies, and empowers rule-making for registration, record-keeping and due diligence including KYC.
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    Obligation to furnish financial transaction statements expands reporting duties and mandates due diligence, thresholds, and correction procedures.
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    Reporting obligations for media producers require disclosure of substantial payments to enhance transparency and tax oversight.
    Clause 507 requires persons producing cinematograph films or engaging in specified entertainment activities during any part of a tax year to furnish prescribed statements to income-tax authorities identifying payments made or due to each engaged person that exceed the aggregate reporting threshold; it defines inclusive categories of specified activities, delegates timing, form and manner to subordinate rules (including electronic filing and standardized formats), and emphasizes reporting both actual payments and accrued liabilities to enhance transparency and tax oversight.
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    Disclosure obligations for indirect transfers require Indian concerns to furnish prescribed information to tax authorities.
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    Service of notice for discontinued businesses allows authorities to serve former members or principal officers to proceed with assessment.
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    Service of notice after partition preserves tax proceedings by enabling notice on designated former managers or adult members.
    Clause 503 secures continuation of tax proceedings after a HUF's total partition or a firm's dissolution by allowing service of notices for pre disruption income on the last manager of the HUF (or, if deceased, all adults who were members immediately before partition) and on any adult partner or member of a dissolved firm or association; a formal finding of partition or dissolution by the Assessing Officer triggers application and minors are excluded from service.
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    Authentication of notices: statutory deeming of validity where designated authority details appear, enabling electronic and paper issuance.
    Clause 502 requires notices and documents to be signed and issued in paper form or communicated electronically as per prescribed procedures, deems documents authenticated where the name and office of a designated income-tax authority are printed, stamped or written thereon, and defines designated authorities as those authorized by the Board to issue such authenticated documents, thereby centralizing authorization while delegating procedural detail to subordinate rules.
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    Service of notices: modernised electronic and prescribed modes expand tax communication obligations and board rule making.
    Clause 501 prescribes authorised modes for serving statutory tax communications-post or Board approved courier, CPC methods for summons, electronic records under the IT Act, and other prescribed means-while empowering the CBDT to designate addresses (including electronic mail addresses) for service and to prescribe additional modes. It supplies a comprehensive, technology neutral definition of electronic mail covering messages and attachments, thereby modernising and clarifying the law of service and reducing ambiguities present in the earlier statutory cross references.
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    Provisional attachment powers protect revenue by allowing property restraint pending tax proceedings, subject to guarantees and time limits.
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    Voidable asset transfers: transfers during tax proceedings can be voided against tax claims, with exceptions for bona fide transferees.
    Clause 499 renders charges or transfers of assets void against tax claims when effected during proceedings or after completion but before service of recovery notice, covering transfers by sale, mortgage, gift, exchange or any other mode and an expansive list of assets including virtual digital assets. Exceptions protect transfers made for adequate consideration without notice and those with prior permission of the Assessing Officer, while stock in trade is excluded; the clause updates procedural references and preserves core safeguards from the predecessor provision.
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    Application of new criminal procedure code aligns tax prosecutions under updated procedures, altering prosecutor status and qualification requirements.
    Clause 498 applies the Bharatiya Nagarik Suraksha Sanhita, 2023 to Special Court proceedings under the Income Tax Bill, deeming the person conducting the prosecution to be a Public Prosecutor and enabling the Central Government to appoint Special Public Prosecutors. Appointments require an experienced advocate with "special knowledge of law", and appointees are treated as Public Prosecutors within the BNSS definition, thereby importing BNSS powers, duties and procedural rules to tax prosecutions.
    Act RulesBills
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    Summons case classification: minor tax offences must be tried by Special Courts under the new criminal procedure framework.
    Clause 497 requires that offences under the Income Tax Bill punishable with imprisonment not exceeding two years, or with fine, or with both, be tried as summons cases by a Special Court, overriding contrary BNSS provisions and applying the BNSS summons-case procedure accordingly.
    Act RulesBills
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    Exclusive jurisdiction of Special Courts centralises tax prosecutions, with cognizance only on authorised complaints.
    Clause 496 mandates exclusive trial of income tax offences by designated Special Courts, subject to actual designation for relevant areas or classes of cases, and contains a non obstante provision giving it overriding effect over the general criminal procedure code. Cognizance by a Special Court is restricted to complaints filed by authorities authorised under the Act. Transitional rules preserve continuity by allowing designated courts to continue existing and future trials and permitting non designated courts to finish pending matters; the clause cross references the Bill's procedural provision to align competence within the reorganised statute.
    Act RulesBills
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    Special Courts designation enables focused, consolidated trials for tax offences and aligns procedure with the new criminal code.
    Clause 495 empowers the Central Government, after consultation with the Chief Justice of the High Court, to notify one or more courts of Judicial Magistrate of the first class as Special Courts for specified areas, cases or classes of cases to try offences under the Income Tax Bill, 2025; it permits these Special Courts to try related offences joined at the same trial under the applicable criminal procedure and updates procedural references to the Bharatiya Nagarik Suraksha Sanhita, 2023, while preserving the core scheme of Section 280A.
    Act RulesBills
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    Unauthorized disclosure by public servants criminalised; prosecution requires Central Government sanction and carries imprisonment and fine.
    Clause 494 criminalises unauthorized furnishing of taxpayer information or production of documents by a public servant in contravention of the Bill's secrecy provision, prescribes imprisonment and fine, and requires prior sanction of the Central Government before prosecution.
    Act RulesBills
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    Admissibility of official tax records: certified copies allowed as evidence, easing prosecution while preserving challenge rights.
    Clause 493 mandates that entries in records or documents in the custody of an income-tax authority "shall be admitted in evidence" in prosecution proceedings under the chapter and permits proof either by production of the original records or by production of a certified copy signed by the custodian stating it is a true copy and that the originals are in its custody. The clause covers varied formats of records, limits application to criminal proceedings under the chapter, and preserves courts' power to test genuineness and require originals where fairness demands.
    Act RulesBills
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    Non-cognizable classification of specified tax offences requires magistrate sanction before arrest or investigation, limiting summary enforcement.
    Clause 492 of the Income Tax Bill, 2025 designates specified income tax offences as non-cognizable for purposes of the Bharatiya Nagarik Suraksha Sanhita, 2023 by means of a non-obstante provision. As a result, arrest cannot be effected without a magistrate-issued warrant and investigations into those offences require prior magistrate authorization, imposing judicial gatekeeping at the threshold of criminal proceedings and constraining unilateral police action in tax enforcement.
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    Prior sanction for tax prosecution centralises oversight, enables compounding, and restricts arbitrary criminal initiation against taxpayers.
    Clause 491 makes prior sanction by designated senior officers a precondition to prosecution for specified tax offences, authorises senior regional heads and the Board to issue directions, permits compounding of offences at any stage by senior officials, bars prosecution where specified penalties have been reduced or waived, and affirms that statements or documents given to tax authorities remain admissible notwithstanding an expectation of penalty reduction or compounding.

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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