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TMI BlogThe Taxation Laws (Amendment) Act, 1975 - Explanatory notes on the provisions coming into force with effect from October 1, 1975.X X X X Extracts X X X X X X X X Extracts X X X X ..... mulate; rationalising the exemptions and deductions available under the aforesaid Acts; and streamlining the administrative set up with a view to making it functionally more efficient. 3. Commencement - In terms of Notification No.SO475(E), dated 15-9-1975, issued by the Central Government under section 1(2) of the Amending Act, the various provisions of that Act will come into force with the effect from the dates mentioned hereunder: Date of commencement Provisions of the Amending Act 1-10-1975 Clause (i) of section 3, sections 29 to 37 (both inclusive), 50, 52 to 56 (both inclusive) and 59, clause (iv) of section 61, sections 64, 68, 70 to 74 (both inclusive), 77, 78, 81 and 84 to 87 (both inclusive), section 92, in so far as it relates to the insertion of new section 18B in the Wealth-tax Act, 1957 and sections 94, 97, 100 to 104 (both inclusive), 107 to 110 (both inclusive), 112, 118, 120 to 122 (both inclusive) and 124. 1-1-1976 Sections 45, 47, 57, 66 and 90, clause (v) of section 91 and section 93. 1-4-1976 Section 2, clause (ii) of section 3, sections 4 and 6 to 13 (both inclusive) section 14, in so far as it re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges made in this behalf is explained in paragraphs 7 to 9 below. Concurrent jurisdiction of Income-tax Officers - Section 124(2) 7. At present, the Commissioner can direct that two or more Income-tax Officers will exercise concurrent jurisdiction in respect of the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases but under such direction, the same function, in respect of the same case cannot be performed by more than one Income-tax Officer. The Amending Act has modified the provisions in section 124 in order to enable the same function in relation to the same case being performed by more than one Income-tax Officer according to such written orders of the Commissioner or the Inspecting Assistant Commissioner as may be made by him for the purposes of facilitating the performance of such functions by the Income-tax Officers concerned. The underlying object is to provide greater flexibility in the distribution of work among the Income-tax Officers. [Section 29 of the Amending Act] Concurrent jurisdiction of Inspecting Assistant Commissioner and Income-tax Officers. New section 125A 8. The Ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , production of evidence, etc. Section 131 11. At present, Income-tax Officers, Appellate Assistant Commissioners, Inspecting Assistant Commissioners, and Commissioners exercise powers of discovery and inspection, enforcing attendance of persons, compelling production of books of account, etc., and issuing commissions. These powers are, however, not available to Assistant Directors of Inspection. With a view to enabling Assistant Directors of Inspection to make proper investigation in the cases entrusted to them, the Amending Act has modified the provisions of section 131 to confer on the Assistant Director of Inspection all such powers as the Income-tax Officer exercise under that section. Assistant Directors of Inspection will be able to exercise these powers in cases where there is reason to suspect that any income has been concealed or is likely to be concealed by any person or class of persons within his jurisdiction, even though no proceedings with respect of such persons or classes of persons may be pending before him or any other income-tax authority. [Section 34 of the Amending Act] Powers of search and seizure - Section 132 12. The Amending Act has made several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er documents, money, bullion, jewellery or other valuable article for which the search is being made. 5. The Commissioner has been empowered to authorise a search of any building, place, vessel, vehicle or aircraft within his territorial jurisdiction even in cases where he has no jurisdiction over the person concerned, if he has reason to believe that any delay in obtaining authorisation from the Commissioner having jurisdiction over the person would be prejudicial to the interests of the revenue. 6. The commissioner's power to authorise a search has been enlarged in another direction as well. Where a search for any books of account or other documents or assets has been authorised by any authority competent to do so and any Commissioner has reason to suspect that such books of account, other documents or assets are kept in any building, place, vessel, vehicle or aircraft not mentioned in the search warrant, he may authorise the authorised officer to search such other building, place, vessel, vehicle or aircraft. Thus, if a search warrant is issued by the Commissioner of Income-tax, Bombay, authorising the search of a premises in Madras and the authorised officer finds that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin a period of 15 days of the seizure and thereafter the powers and functions of the authorised officer under sub-sections (8) and (9) of section 132 will be exercised by the assessing officer. [section 35 of the Amending Act] Powers to requisition books of account, etc. - New Section 132A 13. The Amending Act has substituted the existing section 132A by a new section and has renumbered the existing Section 132A as section 132B. The new section 132A provides that where any books of account, other documents or assets have been taken into custody by any officer or authority under any other law (e.g., by the Collector of Customs, Sales Tax Commissioner, etc.), the Director of Inspection or the Commissioner of Income-tax may, in the circumstances covered by section 132, authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer to require such officer or authority to deliver to him such books of account, other documents or assets. Where such a requisition is made, the officer or authority concerned will be required to deliver the books of account, other documents and assets to the requisitioning offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to any proceeding under the Income-tax Act. 5. The income-tax authorities will also have the power to collect information and record statements of persons concerned at any time after any function, ceremony or event even before the stage of assessment proceedings for the following year for which the information may be relevant, if they are of the opinion, that having regard to the nature, scale or extent of the expenditure incurred, it is necessary to do so. The object of this provision is to help collecting evidence about ostentatious expenditure immediately after the event to be used at the time of assessment. 15. It may be noted that while the Inspecting Assistant Commissioner, the Assistant Director of Inspection and the Income-tax Officer will have all the powers under the new provision, the Inspector of Income-tax has not been vested with the new powers referred to in items (2) and (4) of the preceding paragraph. Further, the Inspector of Income-tax can exercise the powers of survey vested in him only if he is authorised by the Income-tax Officer to do so. [Section 37 of the Amending Act] MEASURES FOR REDUCING TAX ARREARS 16. The Amending Act has made several ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of tax, penalty or other sum payable by the firm. Under sub-section (4) of section 182, a registered firm may retain out of the share of each partner in the income of the firm a sum not exceeding 30 per cent thereof until such time as the tax which may be levied on the partner in respect of that share is paid by him. It further provides that where the tax so levied cannot be recovered from the partners, the firm shall be liable to pay the tax to the extent of the amount which had been retained or which could have been so retained. Under the Explanation inserted by the Amending Act in sub-section (3) of section 189, every person who was a partner of the firm at the time of discontinuance of its business or profession, or at the time of dissolution of the firm itself, will be jointly and severally liable for the amount of tax which could have been retained by the firm under sub-section (4) of section 182 before its discontinuance or dissolution but which was not so retained. [Section 52 of the Amending Act] Penalties for non-payment of tax - Section 221 19. Under section 221, the Income-tax Officer is empowered to levy a penalty in a case where the assessee is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) of section 223 by a new sub-section to provide that the Tax Recovery Officer to whom a certificate has been issued may forward the certificate or a certified copy thereof to another Tax Recovery Officer within whose jurisdiction the assessee resides or has property for realising the tax or part of the tax due, not only when he is himself not able to recovery the entire amount but also when he considers that doing so would expedite or secure the recovery of the dues. [Section 55 of the Amending Act] Interest on refund of disputed tax or penalty - Section 244 22. Sub-section (1) of section 244 provides that where a refund us due to the assessee as a result of any order passed in appeal or other proceeding under the Income-tax Act and the refund is not granted within a period of three months from the end of the month in which such order is passed, the assessee will be entitled to receive simple interest at 12 per cent per annum on the amount of the refund due from the date immediately following the expiry of the aforesaid period of three months to the date on which the refund is granted. The Amending Act has inserted a new sub-section (1A) in section 244 to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assistant Commissioner unless at the time of filing of the appeal, the assessee has paid the tax due on the income returned by him, and where the assessee has not furnished the return of income, he has paid an amount equal to the amount of advance tax which was payable by him. The Appellate Assistant Commissioner has, however, been empowered to waive this requirement in appropriate cases if he is satisfied that there are good and sufficient reasons for doing so. In such cases, he will have to record such reasons in writing. [Section 59(ii) of the Amending Act] Certain transfers to be void - Section 281 25.Under section 281, transfers effected by an assessee during the pendency of any proceeding under the Income-tax Act with the intention to defraud the revenue are regarded as void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of such proceeding. This provision is applicable in cases where the assessee creates a charge on any of his assets, or parts with the possession thereof by way of sale, mortgage, exchange or any other mode of transfer whatsoever. Bona fide purchasers for value without notice are, how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the period of six months but, in appropriate cases, the Commissioner may, for reasons to be recorded by him in writing, extend this period from time to time so, however, that the total period of extension shall in no case exceed two years. This provision has been made in order to protect the interests of the revenue in cases where the raising of demand is likely to take time because of investigations and there is apprehension that the assessee may thwart the ultimate collection of that demand. [Section 74 of the Amending Act] Amendments to the provisions of the Second Schedule 28. Some of the rules in the Second Schedule dealing with the procedure for recovery of tax have been amended for facilitating expeditious recovery. These amendments are as follows: 1. Rule 19A has been amended to enable a Gazetted Officer of the Central Government working as a Tax Recovery Officer to delegate any of his functions to any other officer lower than him in rank but not below the rank of an Inspector of Income-tax. Whether the Tax Recovery Officer is an Income-tax Officer, he will be able to delegate his functions to any other officer only after obtaining the approval of the Inspectin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or arrest and detention in a civil prison, where the family is a defaulter. [Section 81 of the Amending Act] AMENDMENT OF PROVISIONS RELATING TO APPEALS TO APPELLATE ASSISTANT COMMISSIONER Appeal against best judgment assessment under section 144 - Section 249 29. Where a best judgment assessment is made under section 144, the assessee is entitled to apply for cancellation of the assessment under section 146. Besides, he has a right to appeal to the Appellate Assistant Commissioner against the best judgment assessment. The appeal to the Appellate Assistant Commissioner, however, becomes infructuous if the Income-tax Officer reopens the assessment under section 146. Where the Income-tax Officer refuses to cancel the best judgment assessment, the assessee can file an appeal to the Appellate Assistant Commissioner against such refusal. The Appellate Assistant Commissioner can take up the appeal against the best judgment assessment only after the appeal against the Income-tax Officer's order under section 146 is disposed of. 30.With a view to obviating the necessity on the part of the assessee to file an unnecessary appeal against the best judgment assessment under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 139(8) or 215 or 217 will be available only in cases where the Commissioner is satisfied that, apart from making voluntarily and in good faith full and true disclosure of his income, the assessee has paid the tax on the basis of the income so disclosed before a notice under section 139(2) or section 148 is issued to him. Another prerequisite for the exercise of the power by the Commissioner will be that he should be satisfied that the assessee has co-operated in any enquiry relating to the assessment of his income for the relevant assessment year. 2. For the purposes of the new provision, disclosure will be treated as full and true if the additions made to the income returned are not of such a nature as to attract penalty for concealment of income under section 271(1)(c). 3. It has been clarified that the Commissioner will have the power to reduce or waive the penalty or interest even after such penalty or interest has been imposed or levied. Further, the Commissioner will be able to exercise the power under section 273A either on an application made by the assessee or on his own motion. 4. In line with the existing provision for obtaining approval of the Board for waiver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minimum. The substance of the main changes made in this behalf is explained in paragraphs 34 to 45. Punishment for failure to deduct and pay tax - Section 276B 34. Under section 276B, a person who, without reasonable cause or excuse, fails to deduct or after deducting fails to pay the tax as required of him under section 80E(9) or Chapter XVII-B is punishable with rigorous imprisonment for a term which may extend to six months and with fine which shall not be less than the sum calculated at the rate of 15 per cent per annum on the amount of such tax from the date on which the tax was deductible to the date on which the tax is actually paid. This section has now been amended to provide that where the amount of deduction involved exceed Rs.1 lakh, the person shall be punishable with rigorous imprisonment upto seven years and with fine. The rigorous imprisonment will not, however, be for a period of less than six months in any case. In cases, where the amount of deduction involved does not exceed Rs.1 lakh, the punishment will be rigorous imprisonment for a minimum term of three months and a maximum term of three years and fine. The new provisions will apply in relation to of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been evaded if the failure had not been discovered. Where the amount of such tax exceeds Rs.1 lakh, the punishment will be rigorous imprisonment for a minimum term of six months and a maximum term of seven years and fine, and in any other case, rigorous imprisonment for a minimum term of three years and fine. The provisions of the new section 276CC will not apply in respect of a default in furnishing a return of income under section 139(1) for any assessment year prior to the assessment year 1975-76, and where the return relates to the assessment year 1975-76 or any subsequent assessment year, if the return is furnished before the end of the relevant assessment year or if the tax payable on the total income determined on regular assessment, as reduced by advance tax paid and any tax deducted at source, does not exceed Rs.3,000. The provisions of the new section 276CC will apply in relation to defaults committed on or after 1-10-1975. Defaults committed prior to that date will continue to be governed by the existing section 276C. [Section 68(Part) of the Amending Act] Punishment for false statement and verification, etc. - New section 277 37. The Amending Act ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and every subsequent offence with rigorous imprisonment for a minimum term of six months and a maximum term of seven years and with fine. [Section 70(Part) of the Amending Act] Criminal liability in cases of offences by companies - New section 278B 40. New section 278B makes certain provisions with regard to offences committed by companies, firms, associations of persons and bodies of individuals, whether incorporated or not. Where an offence has been committed by a company, firm, association of persons or body of individuals, the person who was in charge of, and was responsible to, the company or, as the case may be, the firm, association or body for the conduct of its business at the time when the offence was committed will be deemed to be guilty of the offence, unless he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of the offence. Further, if in the case of a company, it is proved that the offence had been committed with the consent or connivance of or is attributable to any neglect on the part of, any director, manager, secretary, or other officer of the company, such director, manager, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Section 276C] (c) failure to furnish returns of income [Section 276C] (d) false statement in verification, etc. [Section 277] (e) abatement of false return, etc. [Section 278] [Section 72 of the Amending Act] Bar on provisions of section 360 of the Code of Criminal Procedure or Probation of Offenders Act to prosecutions under the Income-tax Act - New section 292A 45. The Amending Act has inserted a new section 292A with a view to barring the application of section 360 of the Code of Criminal Procedure, 1973 and the provisions of the Probation of Offenders Act, 1958 to a person convicted of an offence under the Income-tax Act unless the person is under 18 years of age. The object is to secure that adults convicted of tax offences are not let off with mere admonition or on probation of good conduct without undergoing punishment as provided in law. [Section 78(Part) of the Amending Act] MISCELLANEOUS PROVISIONS Publication of information regarding prosecution - Section 287 46. Section 287 has been amended to enable the Central Government to publish the particular relating to prosecutions under the Income-tax Act even before the matter is disposed of by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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