Course Code: LAW121

Course Title: law of Taxation

Module 3: INCOME TAX AUTHORITIES 1. Their Appointment – Jurisdiction – Powers and
Functions 2. Provisions Relating to Collection and Recovery of Tax 3. Refund of Tax, Appeal,
Revision Provisions and Offences and Penalties
INCOME TAX AUTHORITIES
Entry 82 of the Union List of Schedule VII of the Indian Constitution grants the Central
Government of India the authority to impose taxes on all types of income other than agricultural
income.
The major source of government revenue is the Income Tax Department. Income tax is the
primary source of funding for the government’s operations and to provide services to the public.
Income tax authorities are required to prevent assessment of assesses, tax evasion, etc. In order
to implement the Income Tax Act effectively and manage the Income Tax Department, the
Government of India has established several authorities.
Classes of Income Tax Authorities
Section 116 of the Income Tax Act provides the following classes of income tax authorities:
1. The Central Board of Direct Taxes
2. Directors General of Income Tax or Chief Commissioners of Income Tax
3. Directors of Income Tax or Commissioners of Income Tax or Commissioners of Income
Tax (Appeals)
4. Additional Directors of Income Tax or Additional Commissioners of Income Tax or
Additional Commissioners of Income Tax (Appeals)
5. Joint Directors of Income Tax or Joint Commissioners of Income Tax
6. Deputy Directors of Income Tax or Deputy Commissioners of Income Tax or Deputy
Commissioners of Income Tax (Appeals)
7. Assistant Directors of Income Tax or Assistant Commissioners of Income Tax
8. Income Tax Officers
9. Tax Recovery Officers
10. Inspectors of Income Tax
Who Appoints Income Tax Authorities?
According to section 117 of the Income Tax Act, the central government has the power to
appoint such persons as it deems fit to income tax authorities. The central government has the
power to choose officials up to and above the rank of Assistant Commissioner of the Income
Tax.
The central government, can further, authorise the appointment of income tax officials below
the rank of a Deputy Commissioner or Assistant Commissioner by the Board, a Director-
General, a Chief Commissioner, a commissioner, or a Director. However, the appointment by
such authorities is made according to the rules and regulations of the central government
regulating the conditions of service of persons in public services and posts.
Jurisdiction Of Income Tax Authorities
120. (1) Income-tax authorities shall exercise all or any of the powers and perform all or any
of the functions conferred on, or, as the case may be, assigned to such authorities by or under
this Act in accordance with such directions as the Board may issue for the exercise of the
powers and performance of the functions by all or any of those authorities.
Explanation. —For the removal of doubts, it is hereby declared that any income-tax authority,
being an authority higher in rank, may, if so directed by the Board, exercise the powers and
perform the functions of the income-tax authority lower in rank and any such direction issued
by the Board shall be deemed to be a direction issued under sub-section (1).
(2) The directions of the Board under sub-section (1) may authorise any other income-tax
authority to issue orders in writing for the exercise of the powers and performance of the
functions by all or any of the other income-tax authorities who are subordinate to it. (3) In
issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other
income-tax authority authorised by it may have regard to any one or more of the following
criteria, namely: —
(a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d)
cases or classes of cases.
(4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by general
or special order, and subject to such conditions, restrictions or limitations as may be specified
therein, —
(a) authorise any Director General or Director to perform such functions of any other income-
tax authority as may be assigned to him by the Board;
(b) empower the Director General or Chief Commissioner or Commissioner to issue orders in
writing that the powers and functions conferred on, or as the case may be, assigned to, the
Assessing Officer by or under this Act in respect of any specified area or persons or classes of
persons or incomes or classes of income or cases or classes of cases, shall be exercised or
performed by an Additional Commissioner or an Additional Director or a Joint Commissioner
or a Joint Director, and, where any order is made under this clause, references in any other
provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed
to be references to such Additional Commissioner or Additional Director or Joint
Commissioner or Joint Director by whom the powers and functions are to be exercised or
performed under such order, and any provision of this Act requiring approval or sanction of the
Joint Commissioner shall not apply.
(5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered
necessary or appropriate for the proper management of the work, require two or more Assessing
Officers (whether or not of the same class) to exercise and perform, concurrently, the powers
and functions in respect of any area or persons or classes of persons or incomes or classes of
income or cases or classes of cases; and, where such powers and functions are exercised and
performed concurrently by the Assessing Officers of different classes, any authority lower in
rank amongst them shall exercise the powers and perform the functions as any higher authority
amongst them may direct, and, further, references in any other provision of this Act or in any
rule made thereunder to the Assessing Officer shall be deemed to be references to such higher
authority and any provision of this Act requiring approval or sanction of any such authority
shall not apply.
(6) Notwithstanding anything contained in any direction or order issued under this section, or
in section 124, the Board may, by notification in the Official Gazette, direct that for the purpose
of furnishing of the return of income or the doing of any other act or thing under this Act or
any rule made thereunder by any person or class of persons, the income-tax authority exercising
and performing the powers and functions in relation to the said person or class of persons shall
be such authority as may be specified in the notification.
Central Board of Direct Taxes
The Central Board of Direct Taxes (CBDT) is a statutory body constituted under the Central
Board of Revenue Act of 1963. It functions under the jurisdiction of the Ministry of Finance,
Government of India. The Board initially handled both direct and indirect taxes. However,
when the administration of taxes became too burdensome for one to handle, the Board was
divided into two: the Central Board of Direct Taxes and the Central Board of Excise and
Customs.
It has the power to control and supervise all the officers of the income tax department. Along
with this, the Central Board of Direct Taxes has the power to make such rules as are necessary
for the administration and implementation of the provisions of the Income Tax Act. The rules
made by the Board are controlled and approved by the central government.
Composition of Central Board of Direct Taxes
The Central Board of Direct Taxes comprises a chairman and six other members. The chairman
is the head of the Board. The other six members must be ex officio special secretary to the
government of India.
The six members of the Central Board of Direct Taxes deal with:
1. Income Tax & Revenue
2. Administration
3. Legislation
4. Audit and Judicial
5. Investigation
6. TPS & System
Powers of the Central Board of Direct Taxes
The Central Board of Direct Taxes has been empowered with the following powers by the
Income Tax Act of 1961:
1. Power to appoint income tax authorities: Section 117 of the Income Tax Act gives the
Board the power to appoint income tax authority below the rank of Deputy Commissioner or
Assistant Commissioner if authorised by the central government.
2. Power to control and supervise: Section 118 of the Income Tax Act empowers the Board
to control all the Income Tax Authorities subject to an overall framework of the Central
Government.
3. Power to issue instructions and circulars: Section 119 of the Income Tax Act empowers
the Board to issue instructions and circulars to its subordinate officials for the proper
administration and implementation of the Income Tax Act. The Board has the power to give
the following instructions:
1. Relaxation of certain provisions [sec 119(2)(a) of the Income Tax Act]
2. Extension of time limit [sec 119(2)(b) of the Income Tax Act]
3. Relaxation for claiming deduction [sec 119(2)(c) of the Income Tax Act]
4. Power to decide the powers and functions: Section 120 empowers the Board to decide on
and issue the powers and functions of the other income tax authorities.
5. Power to issue general or special orders: The Board can issue general or special orders to
relax the provisions of sections 115P, 115S, 139, 143, 144, 147, 148, 154, 155, 234A, 234B,
271 and 273 in order to properly and effectively manage the work of assessment and collection
of revenue.
6. Power to transfer cases: Section 127 of the Income Tax Act empowers the transfer of a case
from one Assessing Officer to another Assessing Officer subordinate to him after giving the
concerned assessee a reasonable opportunity to be heard.
Income Tax Settlement Commission
The Income Tax Settlement Commission is a quasi-judicial body that was constituted in
accordance with section 245B of the Income Tax Act.
According to section 245B(1) of the Income Tax Act, the income tax settlement commission is
set up for the settlement of cases related to income tax. It is constituted under the supervision
of the Central Government.
Composition of Income Tax Settlement Commission
The Settlement Commission consists of a Chairman, Vice-Chairman and other members. The
number of Vice-Chairmen and other members is decided by the central government. The
commission comprises individuals with integrity and who have special knowledge of and
experience with issues involving direct taxes and business accounts.
Powers
The powers of the Income Tax Settlement Commission are:
1. The Income Tax Settlement Commission has been vested with powers similar to that of
the Income Tax Authority in all the proceedings pending before it.
2. The Income Tax Settlement Commission has the power to grant immunity
from penalty and prosecution to the person who has made the application.
3. Section 245E of the Income Tax Act empowers the Settlement Commission to reopen
any completed proceeding which is connected to the case in the proceeding.
Powers of Other Income Tax Authorities
The income tax authorities have the following powers to prevent tax evasion or to implement
the provisions of the Income Tax Act, 1961:
1. Discovery, Production of Evidence, etc. (Section 131): Section 131 of the Income Tax Act
provides the income tax authorities with the same power as vested in the Civil Court under the
Civil Procedure Code.
2. Search and Seizure (Section 132): Section 132 of the Income Tax Act grants the income
tax authorities wide powers of search and seizure.
3. Power to Requisition Books of Account, etc. (Section 132A): The income tax authorities
can direct any officer or authority to deliver books of account, other documents or assets to the
requisitioning officer in the following cases:
1. If a summon or notice has been issued to any person to produce, or cause to be
produced, any books of account or other documents, but he has either omitted or failed
to do so.
2. If any books of account or other documents will be useful for any proceeding under the
income tax act
3. If any assets represent wholly or partly the income or property and such income or
property has not been or would not have been disclosed by the person from whose
possession or control such assets have been taken into custody by any officer or
authority.
4. Power to call for information (Sections 133): The Deputy Commissioner (Appeals),
Commissioner (Appeals) or Deputy Commissioner have the power to call for the following
information from the concerned person:
1. Direct any firm to provide a return of the addresses and names of partners of the firm
and their shares.
2. Direct any Hindu Undivided Family to provide a return of the addresses and names of
family members and the manager.
3. Direct any person who is a trustee, guardian or agent to provide a return of the names
of persons for or of whom he is an agent, trustee or guardian and their addresses.
4. Direct any assessee to provide a statement of the names and addresses of all the persons
to whom he has paid rent, interest, commission, royalty, etc., in any previous year.
5. Power of Survey (Section 133A): Section 133A of the Income Tax Act grants the power of
survey to the income tax authority. The income tax authority has the power to enter any location
within the limits of the area that has been allocated to him, any location that is occupied by a
person under whom he exercises jurisdiction and any location that he is authorised to enter.
6. Power to Collect Certain Information (Section 133B): According to section 133B of the
Income Tax Act, the income tax authority can enter any location within the limits of the area
that has been allocated to him or any location that is occupied by a person under whom he
exercises jurisdiction for collection of information which may be useful to them for any
purpose.
7. Power to Inspect Registers of Companies (Section 134): According to section 134 of the
Income Tax Act, the income tax authority has the power to inspect and take copies of any
register of the members, debenture holders or mortgagees of any company, if necessary.
Functions of Income Tax Authorities
Section of the Income Tax Act, 1961 provides for the administrative and judicial authorities for
administration of this Act. The new features of authorities have been properly depicted below.
These authorities have been grouped into two main wings:
(i) Administrative [ Income Tax Authorities] the Central Board of Direct Taxes constituted
Central Boards of Revenue Act, 1963 Directors-General of Income-tax or Chief
Commissioners of Income-tax, Directors of Income-tax or Commissioners of Income-tax or
Commissioners of Income-tax
(ii) Assessing Officer "Assessing Officer" means the Assistant Commissioner or Deputy
Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested
with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or
sub-section (2) of section 120 or any other provision of this Act, and the Joint Commissioner
or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise
or perform all or any of the powers and functions conferred on, or assigned to, an Assessing
Officer under this Act.
Functions of Income Tax Authorities
Income tax authorities play a crucial role in administering and enforcing the income tax laws
of a country. They are responsible for ensuring compliance with tax regulations, collecting
taxes, and resolving tax-related disputes. The functions of income tax authorities can be
categorized into several key areas:
1. Registration and Assessment:
Registration: Income tax authorities are responsible for registering individuals and entities
liable to pay income tax. They maintain a database of taxpayers and issue unique identification
numbers. - Assessment: They assess the taxable income of individuals and entities based on the
information provided in tax returns. This involves verifying income, deductions, exemptions,
and any other relevant financial details.
2. Collection of Taxes:
 Collection Process: Income tax authorities are responsible for collecting taxes from taxpayers.
They establish procedures for tax payment and provide various channels for taxpayers to fulfill
their tax obligations. - Tax Deduction at Source (TDS): They ensure that taxes are deducted at
the source by employers, financial institutions, and other entities as per the applicable rates.
This helps in the timely collection of taxes.
3. Tax Refunds and Appeals:
Refunds: Income tax authorities process and issue tax refunds to eligible taxpayers who have
paid excess tax or have claimed a refund due to certain provisions. - Appeals: They handle
appeals and grievances filed by taxpayers who are dissatisfied with the assessment or any other
tax-related decision. The authorities provide a platform for resolving disputes through appeals
and ensure fair treatment of taxpayers.
4. Tax Compliance and Enforcement:
Tax Compliance: Income tax authorities monitor and enforce tax compliance by conducting
audits, investigations, and inspections. They verify tax returns, conduct inquiries, and take
necessary actions to ensure accurate reporting and payment of taxes. - Penalties and
Prosecution: In cases of non-compliance or tax evasion, the authorities have the power to
impose penalties, initiate legal proceedings, and prosecute offenders. This helps deter tax
evasion and maintain the integrity of the tax system.
5. Tax Policy and Administration:
Policy Development: Income tax authorities contribute to the development of tax policies and
regulations. They provide insights and recommendations to policymakers regarding changes
and improvements in the income tax system. - Tax Education and Awareness: The authorities
play a role in creating awareness among taxpayers about their rights, obligations, and benefits
related to income tax. They conduct workshops, seminars, and campaigns to educate taxpayers
and improve tax literacy.
Provisions Relating to Collection and Recovery of Tax
Collection and Recovery of Tax in India: Understanding the Mechanisms and Legal
Framework
The collection and recovery of taxes are fundamental processes that ensure the government has
the necessary funds to provide public services and infrastructure. In India, the collection and
recovery of tax are governed by the Income Tax Act, 1961, which outlines the procedures and
mechanisms for tax administration. Understanding these processes is crucial for both taxpayers
and tax authorities to maintain compliance and ensure the smooth functioning of the tax system.
Legal Framework for Tax Collection and Recovery
Overview of the Income Tax Act, 1961
The Income Tax Act, 1961 is the primary legislation governing income tax in India. It
establishes the framework for tax assessment, collection, and recovery. Key sections relevant
to tax collection and recovery include:
 ▪ Section 220: This section outlines the procedures for the collection of tax dues,
including the issuance of demand notices and the circumstances under which a taxpayer
is deemed to be in default.
▪ Section 221: This section provides for penalties for failure to pay tax as per the demand
notice.
▪ Section 222: This section allows tax authorities to take action for recovery of tax dues.
▪ Sections 226 to 232: These sections provide mechanisms for the collection of tax due
from the assessee, including the authority to attach property and recover dues from third
parties.
Role of the Central Board of Direct Taxes (CBDT)
The Central Board of Direct Taxes (CBDT) is the apex body responsible for the administration
of direct taxes in India. It formulates policies, oversees tax collection, and ensures compliance
with tax laws. The CBDT plays a significant role in tax recovery by issuing guidelines and
instructions to tax authorities. It also conducts research and analysis to improve tax
administration and enhance taxpayer services.
Tax Collection Mechanisms
1. Direct Tax Collection
Direct taxes are levied directly on individuals and corporations. The primary types of direct
taxes include income tax, corporate tax, and capital gains tax. The collection of direct taxes
involves several mechanisms:
Tax Deducted at Source (TDS)
TDS is a method of collecting income tax at the source of income. It requires the payer to
deduct tax before making payments to the payee. For example, employers deduct TDS from
employees' salaries and deposit it with the government.
▪ TDS Rates: Different rates apply depending on the nature of the payment. For instance,
TDS on salaries is based on the applicable income tax slab, while TDS on interest
payments may be at a flat rate.
▪ TDS Compliance: Payers must obtain the Permanent Account Number (PAN) of the
payee to deduct TDS at the correct rate. Failure to do so results in a higher deduction
rate.
▪ TDS Returns: After deducting TDS, the payer must file TDS returns, detailing the
amount deducted and deposited. This is typically done quarterly.
Tax Collected at Source (TCS)
TCS is applicable to specific transactions, such as the sale of goods and services. Sellers are
required to collect tax from buyers at the time of sale and deposit it with the government.
• TCS Rates: TCS rates vary based on the nature of the goods or services sold. For
example, TCS on the sale of alcohol is set at 1%, while TCS on the sale of scrap is set
at 1% as well.
 • TCS Compliance: Sellers must obtain the PAN of the buyer to collect TCS at the correct
rate. If the PAN is not provided, the TCS rate is increased.
2. Indirect Tax Collection
Indirect taxes are levied on goods and services. The Goods and Services Tax (GST) is the
primary indirect tax in India. The collection of GST involves:
Input Tax Credit (ITC)
Businesses can claim credit for the tax paid on inputs used in the production of goods and
services. This reduces the overall tax liability and encourages compliance.
• Claiming ITC: To claim ITC, businesses must ensure that the supplier has paid the GST
and that the purchase is used for business purposes. Proper documentation is crucial for
claiming ITC.
• Reversal of ITC: If the goods are returned or if the supplier fails to pay the GST, the
ITC claimed must be reversed.
GST Returns
Businesses are required to file GST returns periodically, detailing their sales, purchases, and
tax collected. This ensures transparency and accountability in tax collection.
▪ Types of GST Returns: There are different types of GST returns, including GSTR-
1 (sales), GSTR-2 (purchases), and GSTR-3B (summary return). Timely filing of
these returns is crucial for maintaining compliance.
▪ Late Fees: Failure to file GST returns on time can result in late fees and penalties,
which can significantly increase the overall tax liability.
Recovery of Tax Dues
1. Assessment and Demand Notices
The recovery of tax dues begins with the assessment process. Tax authorities assess the income
of taxpayers and issue demand notices for any outstanding tax liabilities.
Types of Demand Notices
• Notice under Section 156: This notice is issued when there is a demand for tax payment.
It specifies the amount due and the due date for payment.
• Notice under Section 220: This notice informs the taxpayer about the due date for
payment and the consequences of non-payment. It also indicates that the taxpayer may
be deemed in default if the payment is not made.
Importance of Timely Response: It is crucial for taxpayers to respond promptly to demand
notices to avoid penalties and legal action. Ignoring these notices can lead to severe
consequences, including recovery proceedings.
2. Modes of Recovery
Tax authorities have several modes of recovery available to them, including:
Tax Recovery Officers (TROs)
TROs are responsible for the collection of tax dues. They can initiate recovery proceedings
against defaulters.
• Role of TROs: TROs have the authority to issue recovery certificates, attach properties,
and take legal action to recover dues. They play a critical role in enforcing tax
compliance.
• Recovery Certificates: Once a demand notice is issued and not complied with, the
TRO can issue a recovery certificate to initiate the recovery process.
Garnishee Proceedings
This involves recovering tax dues from third parties who owe money to the taxpayer. For
example, if a taxpayer has a bank account, the tax authorities can issue a garnishee order to the
bank to recover the owed tax amount.
• Process: The tax authorities serve a notice to the third party, instructing them to
withhold the payment due to the taxpayer and remit it to the government. This
process is often used to recover dues without direct confrontation with the
taxpayer.
Attachment of Property
In cases of significant tax arrears, tax authorities can attach the taxpayer's property, including
bank accounts, assets, and properties, to recover the dues.
• Procedure: The tax authorities issue a notice of attachment, and the taxpayer is
informed of the action taken. The attached property can be sold to recover the tax dues.
This method is typically used as a last resort when other recovery methods have failed.
3. Legal Proceedings for Recovery
Tax authorities can initiate legal proceedings to recover tax dues. The Income Tax Appellate
Tribunal (ITAT) plays a crucial role in resolving disputes related to tax recovery.
Filing Appeals Against Tax Demands
Taxpayers have the right to appeal against tax demands issued by the tax authorities. The
appeal process involves filing a petition with the ITAT, which reviews the case and makes a
determination.
• Steps to File an Appeal: Taxpayers must submit Form 35 along with the necessary
documentation and fees. The ITAT will schedule a hearing to review the appeal.
• Time Limit for Filing Appeals: Taxpayers must file their appeals within 60 days from
the date of receipt of the demand notice.
Consequences of Non-Compliance
Failure to comply with recovery orders can lead to severe consequences, including penalties,
interest on unpaid taxes, and legal action by tax authorities.
 • Penalties: The Income Tax Act provides for various penalties for non-compliance,
including fines and interest on outstanding amounts.
• Legal Action: Persistent non-compliance may result in the attachment of assets and
properties, and tax authorities may initiate criminal proceedings in cases of wilful
default.
Challenges in Tax Collection and Recovery
Despite the established mechanisms for tax collection and recovery, tax authorities face several
challenges:
• Taxpayer Compliance: Ensuring compliance among taxpayers can be difficult due to
a lack of awareness or understanding of tax obligations. Many taxpayers are unaware
of the consequences of non-compliance, leading to unintentional defaults.
• Economic Factors: Economic downturns can impact taxpayers' ability to pay their
dues, leading to increased tax arrears. Businesses may struggle to meet their tax
obligations during challenging economic conditions.
• Administrative Inefficiencies: Bureaucratic hurdles and inefficiencies within tax
administration can hinder effective tax collection and recovery efforts. Delays in
processing and communication can exacerbate compliance issues.
• Complexity of Tax Laws: The complexity of tax laws can lead to confusion among
taxpayers, resulting in unintentional non-compliance. Many taxpayers find it
challenging to navigate the intricacies of tax regulations.
• Fraud and Evasion: Tax evasion and fraudulent practices pose significant challenges
to tax authorities. Identifying and prosecuting tax evaders requires substantial resources
and expertise.
Best Practices for Effective Tax Collection and Recovery
To improve tax collection and recovery, several best practices can be implemented:
• Taxpayer Education and Awareness: Educating taxpayers about their obligations and
the importance of timely tax payments can enhance compliance. This can be achieved
through workshops, seminars, and informational campaigns.
• Streamlining Recovery Processes: Improving efficiency in tax recovery processes,
such as automating certain procedures and utilizing data analytics, can lead to better
outcomes. This includes using technology to track defaulters and streamline
communication.
• Dispute Resolution Mechanisms: Establishing effective dispute resolution
mechanisms can help resolve tax disputes amicably and reduce the burden on tax
authorities. This may involve mediation, arbitration, or other alternative dispute
resolution methods.
• Collaboration with Financial Institutions: Collaborating with banks and financial
institutions can enhance the recovery process. For instance, banks can assist in
identifying accounts with tax dues and facilitate garnishee proceedings.
 • Regular Audits and Assessments: Conducting regular audits and assessments can help
identify potential tax evasion and ensure compliance. This proactive approach can
prevent significant tax arrears from accumulating.
Income Tax Refund:
An income tax refund happens when there is a mismatch between tax paid and your actual tax
liability. You may realise that you have a tax refund at the time of filing your Income Tax
Return (ITR). After you have filed your ITR and the income tax officer assessing the return
finds it to be in the order he/she may approve your income tax refund.
This is usually seen as a bonus income, as TDS rates are far lower than the income tax slab
rates.
What is Income Tax Refund?
An income tax refund is a state of reimbursement to a taxpayer when he pays a higher tax in
the given financial year (FY) than your final assessed liability. Income tax refunds are possible
when you have been paying the compulsory advance tax or have TDS deductions on your
income.
At the time of filing an income tax return (or ITR), you can estimate the possible tax refund.
The excess tax you have paid will be returned to you as a refund under Section 237 of the
Income Tax Act, 1961. The income tax department will sanction the tax refund only after
thorough verification of the income tax return filed.
The additional tax paid does not attract any interest. Thus, you can avoid paying excess tax and
rather invest the money. You should estimate your possible tax liability for the year in advance
and adjust your advance tax payments accordingly.
Eligibility Criteria for Income Tax Refund
You become eligible for the income tax refund if you meet any of the following criteria:
a) Your total advance tax payments are more than 100% of your actual tax
liabilities for the financial year
b) Your TDS payments in the financial year exceed your final tax liability after
regular assessment
c) If you have made last moment tax-saving investments
d) You have paid tax on your income in a foreign country that has double taxation
avoidance agreement (DTAA) with India
e) You have paid excess tax under regular assessment due to an error in assessment
How to Claim Income Tax Refund?
The simplest way to claim your income tax refund is by filing a correct income tax return before
the due date. While filing your return you can check the total advance tax payments under Form
26AS.
After you have filed your income tax return the assessment officer must be satisfied with the
income tax calculation of the form. If your balance of advance tax payment under Form
26AS is more than your tax liability under the filed ITR, the officer may approve your tax
refund.
Otherwise, you can also file Form 30 to request a review of your income tax payments against
your liability. You can receive your income tax refunds faster if you provide your bank account
details for direct transfer.
You can check the income tax refund status on your e-filing dashboard after filing and verifying
the ITR.
Due Date to Claim Income Tax Refund
You can claim an income tax refund within 12 months after the end of the relevant assessment
year. However, the following conditions will also apply to the tax refund claims:
a) You can claim a tax refund on the income tax paid within six successive
assessment years. CBDT will not accept tax refund claims older than this period.
b) CBDT does not pay any interest on the tax refunds
c) The officers may accept delayed tax refund claims if it requires verification
d) The total claim amount for one assessment year should not be more than Rs 50
lakh
Income Tax Refund in Special Cases
In case a person is unable to claim an income tax refund due to insolvency, death, liquidation,
incapacity, or any other cause, their legal representative, guardian, receiver, or trustee can file
for an income tax refund on their behalf, under Section 238 of the Income Tax Act, 1961.
Interest Earned on Income Tax Refund
The Income Tax Department mandatorily pays an interest if the refund amount is equal to or
above 10% of the total tax paid under Section 244A of the Income Tax Act. Accordingly, simple
interest of 0.5% per month is levied on the amount of tax refund and paid to you.
Appeals and Revisions in Income Tax
When it comes to income tax, taxpayers often find themselves at odds with the decisions made
by assessing officers. To ensure fairness and justice, the Income Tax Act, 1961 provides
avenues for redressal through appeals and revisions. These mechanisms enable taxpayers to
challenge and seek rectification of assessment orders that they deem erroneous or prejudicial.
Introduction to Appeals and Revisions in Income Tax
The provisions for appeals and revisions are designed to offer taxpayers a structured path to
contest and rectify decisions that affect their financial liabilities. Appeals allow taxpayers to
seek a higher authority’s review of an assessment order, whereas revisions enable certain
authorities to correct errors or address issues in the orders passed by lower authorities.
Appeal in Income Tax
An appeal process begins with an assessment order passed by the Assessing Officer (AO) under
various sections such as Section 143(3), 144, 153A and 147(1). When an assessee is dissatisfied
with such an order, the first level of appeal is to the Commissioner (Appeals) under Section
264A within 30 days of the order’s issuance.
The specific time limit for filing an appeal under Section 249(2) is within 30 days from the
date of service of the assessment order. However, if the Commissioner is satisfied that there
was sufficient and reasonable cause for the delay, the appeal may be admitted even after the
expiry of the given time limit.
The appeal process has been streamlined to be conducted electronically using Form 35. The
second level of appeal is to the Income Tax Appellate Tribunal (ITAT), which must be filed
under Section 253 within 60 days of the order passed in the first appeal. This level of appeal is
open to both the assessee and the AO, unlike the first appeal, which is available only to the
assessee.
The ITAT is the highest fact-finding authority. An appeal to the High Court is permissible under
Section 260A only when a substantial question of law is involved. With the leave of the High
Court, the assessee can approach the Supreme Court under Section 261. Additionally, an
assessee can file a Special Leave Petition under Article 136 of the Constitution.
Burden of Proof
The burden of proof typically lies on the assessee to demonstrate that their income is exempt
from taxation. However, this is not always the case, as illustrated by different court rulings.
In Ena Chaudhuri v. CIT, the court held that the appellant failed to produce evidence to
support the claim that her income was exempt from tax and thus the burden of proving such
exemption rested on her.
Conversely, in L.M.L. Fibres Ltd. v. Dy. Commissioner of Income Tax, the court ruled that
the mere fact of making payments to creditors without deducting tax at source could not be
inferred as an intention to evade tax. The court emphasised that the burden of proving the
assessee’s motive was on the revenue, which it failed to do. Therefore, the question of who
carries the burden of proof can vary based on the circumstances of each case of taxation law.
Revision Under Section 263 of the Income Tax Act
The Commissioner of Income Tax (CIT) may call for and examine the records of any
proceeding under the Income Tax Act if he is of the opinion that the order passed is erroneous
and prejudicial to the interest of the revenue. In such cases, the CIT has the power to hear both
sides, modify or enhance the assessment or cancel the assessment and order a fresh one.
This revisionary power ensures that any detrimental errors in the assessment process are
corrected to protect the revenue’s interest. If the assessee is aggrieved by the order under
Section 263, they can appeal to the Income Tax Appellate Tribunal (ITAT) under Section 253.
Revision Under Section 264 of the Income Tax Act
Under Section 264, the CIT has the authority to call for any records and make inquiries as
deemed fit, provided the action is not prejudicial to the assessee. This can be done either suo
moto or on an application by the assessee. Unlike Section 263, there is no provision for a higher
appeal against an order under Section 264 within the Income Tax Act. The only recourse for
the assessee in this scenario is to file a writ petition under Article 226 of the Constitution in the
High Court.
Section 264 empowers the CIT with a wide range of revisionary authority to revise assessment
orders, acting as a quasi-judicial function. The CIT must exercise this power judiciously,
without being influenced by irrelevant issues or directives from other authorities, including
circulars. The CIT can grant relief to the assessee or choose not to interfere but cannot enhance
the assessment. This authority allows the CIT to consider new arguments or deductions not
previously raised before the Assessing Officer.
The scope of Section 264 was highlighted in the case of Rashtriya Vikas Ltd. vs.
Commissioner of Income-Tax, where the Revisional Court’s verdict was quashed for not
considering the merits of the assessee’s claim. The matter was returned for reconsideration,
emphasising the necessity of evaluating the merits in revision petitions.
Orders violating natural justice principles can also be remedied under Section 264. The
provision stipulates that modifications can only be made within one year of the original order’s
date. If an assessee applies under Section 264, the application must be made within one year
from the date of communication of the order or the date when the assessee becomes aware of
it, whichever is earlier.
The proviso to Section 264(3) allows the CIT to admit an application for revision if the assessee
is prevented by ‘sufficient cause’ from making the application within the specified period.
‘Sufficient cause’ should be interpreted liberally to advance substantial justice, as affirmed in
the case of Dwarka Nath v. ITO, where it was held that the CIT must grant an oral hearing
before deciding on a revision application.
In exercising the authority under Section 264, the CIT must act impartially, consider the
arguments objectively and adhere to the principles of natural justice. For instance, in Harish
Wadhwa v. ITO, the Karnataka High Court held that an order passed without application of
mind and consideration of the case facts deserved to be set aside, directing the Tribunal to redo
the exercise after giving the assessee an opportunity to present their arguments.
The CIT’s decision should be free from external influences, including undisclosed matters or
directives from other authorities, to ensure a fair and just resolution.
Difference Between Appeals and Revisions in Income Tax
Appeals and revisions in income tax serve distinct purposes and follow different procedures.
While both mechanisms allow taxpayers to challenge assessment orders, they have unique
characteristics and applications. Here’s a comparative overview of appeals and revisions:

Aspect Appeals Revisions

To seek redressal against an To correct errors or address issues in an

Purpose
assessment order assessment order

Commissioner of Income Tax (CIT) or

Initiated by Assessee (primarily)
assessee

Relevant Sections 246A, 253, 260A and

Sections 263 and 264
Sections 261

30 days (to Commissioner 1 year from the date of the order or its
Time Limit
(Appeals)), 60 days (to ITAT) communication

Electronic filing via Form 35,

CIT examines records, may call for
Process hearings before appellate
additional inquiries
authorities

Correction of errors prejudicial to

Review of factual and legal
Scope revenue (Section 263) or providing relief
issues
to assessee (Section 264)
 Aspect Appeals Revisions

Decision Commissioner (Appeals), ITAT,

Commissioner of Income Tax
Authority High Court, Supreme Court

Available, can escalate to higher

Higher Limited, only writ petition under Article
authorities (ITAT, High Court,
Appeal 226 for Section 264
Supreme Court)

On revenue for proving errors under

Burden of
Typically, on the assessee Section 263; assessee for relief under
Proof
Section 264

Nature of Quasi-judicial (administrative discretion

Judicial (structured hearings)
Proceedings with legal guidelines)

Examples Ena Chaudhuri v. CIT, L.M.L. Rashtriya Vikas Ltd. vs CIT, Dwarka
of Cases Fibres Ltd. v. Dy. CIT Nath v. ITO

Appeals focus on providing a structured judicial review of assessment orders, allowing both
factual and legal challenges. They involve a tiered process, starting from the Commissioner
(Appeals) and potentially escalating to the Supreme Court. On the other hand, revisions
primarily aim to rectify errors or provide relief under the CIT’s administrative discretion, with
limited options for further appeal.
Conclusion
Both appeal and revision serve as important mechanisms for assessees to challenge and rectify
assessment orders that they find prejudicial. While the appeal process involves a formal review
by the Commissioner (Appeals) and is a right vested solely in the assessee, the revision process
allows for both assessees and the Commissioner of Income Tax to address erroneous orders.
Understanding these options and their respective processes is essential for assessees seeking to
protect their interests and ensure fair tax administration.
Offences and Penalties
Penalties and Prosecutions Under Income Tax Act, 1961
Under the Income Tax Act, 1961, penalties and prosecutions are imposed for various defaults
and non-compliance issues. Key penalties include fines for failure to pay self-assessment tax
(Section 140A), undisclosed income (Section 158BFA), and late filing of returns (Section
234F). Specific penalties apply to defaults like failure to maintain books of account (Section
271A) and inaccuracies in international transactions (Section 271AA). Penalties also cover
failures in tax deductions (Section 271C), loan and deposit regulations (Sections 271D, 271E),
and inaccuracies in financial reports (Section 271J). For severe cases, such as non-compliance
during searches or obstructing tax recovery, prosecutions can lead to rigorous imprisonment
and unlimited fines (Sections 275A, 276). Additionally, provisions for immunity from penalties
exist if reasonable cause is proven or an application for settlement under Section 245C is made.
The document provides a comprehensive overview of the penalties and legal repercussions
under the Act, including detailed sections on each default and corresponding penalties.
PENALTIES & PROSECUTION
Section Nature of default Penalty leviable

140A (3) Failure to pay wholly or partly— Such amount Such amount as
as Assessing Officer may impose but not Assessing Officer may
exceeding tax in arrears impose but not
(a) self-assessment tax, or exceeding tax in arrears
(b) interest and fee, or
(c)both under section 140A (1)

158BFA (2) Determination of undisclosed income of block Minimum: 100 per cent
period of tax leviable in respect
of undisclosed income

Maximum: 300 per cent

of tax leviable in respect
of undisclosed income.

221(1) Default in making payment of tax Such amount as

Assessing Officer may
impose but not
exceeding amount of tax
in arrears

234E Failure to file statement within time prescribed Rs. 200 for every day
in section 200(3) or in proviso to section 206C during which failure
(3) continues but not
exceeding tax
deductible/collectible

234F Default in furnishing return of income within Rs. 5,000 if return is

time prescribed in section 139(1) furnished after due date
specified under section
139(1). However, if the
total income of the
person does not exceed
Rs. 5 lakhs then Rs.
1,000 shall be the late
filing fees.
234G Fee for default in submission of Rs. 200 per day
statement/certificate prescribed under section
35/ Section 80G
234H Fee for default in intimating the Aadhaar a) Rs. 500, if such
Number intimation is made
between 01-04-2022 and
30-06-2022; and
b) Rs. 1,000, in all other
cases.

270A (1) Under-reporting and misreporting of income A sum equal to 50% of

the amount of tax
payable on under-
reported income.
However, if under-
reported income is in
consequence of any
misreporting thereof by
any person, the penalty
shall be equal to 200% of
the amount of tax
payable on under-
reported income.

271A Failure to keep, maintain, or retain books of Rs. 25,000

account, documents, etc., as required under
section 44AA.
271AA (1) 1) Failure to keep and maintain information and 2% of value of each
documents required by section 92D international
(1) or 92D(2). transaction/or specified
(2) Failure to report such transaction domestic transaction
(3) Maintaining or furnishing incorrect entered into
information or document

271AA (2) Failure to furnish information and document as Rs. 5,00,000/-

required under Section 92D (4)

271AAA Where search has been initiated before 1-7-2012 10% of undisclosed
and undisclosed income found. income.

271AAB (1) Where search has been initiated on or after 1-7- (a) 10% of undisclosed
2012 but before 15-12-2016 and undisclosed income of the specified
income found previous year if assessee
admits the undisclosed
income; substantiates the
manner in which it was
derived; and on or before
the specified date pays
the tax, together with
interest thereon and
 furnishes the return of
income for the specified
previous year declaring
such undisclosed income
(b) 20% of undisclosed
income of the specified
previous year if assessee
does not admit the
undisclosed income, and
on or before the specified
date declare such income
in the return of income
furnished for the
specified previous year
and pays the tax, together
with interest thereon;
(c) 60% of undisclosed
income of the specified
previous year if it is not
covered by (a) or (b)
above

271AAB(1A) Where search has been initiated on or after 15- (a) 30% of undisclosed
12-2016 and undisclosed income found income of the specified
previous year if assessee
admits the undisclosed
income; substantiates the
manner in which it was
derived; and on or before
the specified date pays
the tax, together with
interest thereon and
furnishes the return of
income for the specified
previous year declaring
such undisclosed income
(b) 60% of undisclosed
income of the specified
previous year in any
other case.

271AAC Income determined by Assessing Officer or the 10% of tax payable under
Commissioner (Appeals) includes any income section 115BBE.
referred to in section 68, section 69, section
69A, section 69B, section 69C or section
69D for any previous year. [if such income is not
included by assessee in his return or tax in
accordance with section 115BBE has not been
paid]
271AAD Penalty, if during any proceedings under the Act, 100% of such false
it is found that in the books of accounts entries or omitted entry.
maintained by assessee, there is:
a) A false entry; or
b) Any entry relevant for computation of total
income of such person has been omitted to evade
tax liability.
271AAE Penalty for violation of the provisions of 21st a) For the first violation:
proviso to section 10(23C) or section to the extent of income
13(1)(c) pertaining to passing of unreasonable applied by the institution
benefits to trustees or specified person. for the benefit of any
interested party referred
to in section 13(3);
(b) For any violation in
subsequent years: twice
the amount of such
income so applied
(“double penalty”).

271B Failure to get accounts audited or furnish a report One-half per cent of total
of audit as required under section 44AB. sales, turnover or gross
receipts, etc., or Rs.
1,50,000, which-ever is
less.
271BA Failure to furnish a report from an accountant as Rs 1,00,000
required by section 92E.

271BB Failure to subscribe any amount to units issued 20 per cent of such
under scheme referred to in section 88A (1) amount

271C Failure to deduct tax at source, wholly or partly, Amount equal to tax not
under sections 192 to 196D (Chapter XVII-B) deducted or paid
or failure to pay wholly or partly tax u/s 115-O
(2) or proviso to section 194B, or failure to pay
or ensure payment of tax as required by 115-O
(2), first proviso to section 194R(1), proviso
to section 194S(1) or section 194BA(2).

271CA Failure to collect tax at source as required under Amount equal to tax not
Chapter XVII-BB. collected.

271D Taking or accepting any loan or deposit or Amount equal to loan or

specified sum in contravention of the provisions deposit or specified sum
of Section 269SS. “Specified sum” means any so taken or accepted
sum of money receivable, whether as advance or
 otherwise, in relation to transfer of an
immovable property, whether or not the transfer
takes place.

271FA Failure to furnish an annual information return Rs. 500 per day of
as required under section 285BA(1)2 default

Failure to furnish annual information return Rs. 1,000 per day of

within the period specified in notice u/s default
285BA(5)

271FAA Furnishing of inaccurate information in Rs. 50,000

statement of financial transaction or reportable
account

Furnishing of inaccurate information by Rs, 5,000 for every

reporting financial institution and such inaccurate reportable
inaccuracy is due to false or inaccurate account.
information submitted by the holder of
reportable accounts.

271FAB Section 9A provides that fund management Rs. 5,00,000

activity carried out by an eligible offshore
investment fund through an eligible fund
manager acting on behalf of such fund shall not
constitute business connection in India (subject
to certain conditions). The provision requires
that eligible investment fund shall furnish within
90 days from the end of the financial year a
statement, in respect of its activities in a financial
year, in the prescribed form containing
information relating to fulfilment of specified
conditions and such other information or
documents as may be prescribed. Penalty to be
levied if investment fund failed to comply with
the requirement.

271G Failure to furnish any information or document 2% of the value of the

as required by section 92D (3). international
transaction/specified
domestic transaction for
each failure

271GA Section 285A provides for reporting by an Penalty shall be:

Indian concern if following two conditions are a) a sum equal to 2% of
satisfied: a) Shares or interest in a foreign value of transaction in
company or entity derive substantial value, respect of which such
 directly or indirectly, from assets located in failure has taken place, if
India; and b) Such foreign company or entity such transaction had
holds such assets in India through or in such effect of, directly or
Indian concern. In this case, the Indian entity indirectly, transferring
shall furnish the prescribed information for the right of management or
purpose of determination of any income control in relation to the
accruing or arising in India under Section Indian concern;
9(1)(i). In case of any failure, the Indian concern b) a sum of Rs. 5,00,00 in
shall be liable to pay penalty. any other case.

271GB (1) Failure to furnish report under section 286(2) Rs. 5,000 per day upto 30
days and Rs. 15,000 per
day beyond 30 days.

271GB(2) Failure to produce the information and Rs. 5,000 for every day
documents within the period allowed during which the failure
under section 271GB (6). continues.

271GB(3) Failure to furnish report or failure to produce Rs. 50,000 for every day
information/documents under section 286 even for which such failure
after serving order under section continues beginning
271GB(1) or 271GB(2) from the date of serving
such order.

271GB(4) Failure to inform about inaccuracy in report Rs. 5,00,000

furnish under section 286(2) Or furnishing of
inaccurate information or document in response
to notice issued under section 286(6).
271H Failure to deliver/cause to be delivered a W.e.f. 1-10-2014
statement within the time prescribed in section Assessing Officer may
200(3) or the proviso to section 206C(3), or direct payment of
furnishes incorrect information in the statement penalty. Penalty shall not
be less than Rs. 10,000
but may extend to Rs.
1,00,000
271K Penalty of default in submission of Rs. 10,000 to Rs. 1 lakh
statement/certificate prescribed under section
35/Section 80G
271-I As per section 195(6) of the Act, any person Rs. 1,00,000
responsible for paying to a non-resident or to a
foreign company, any sum (whether or not
chargeable to tax), shall furnish the information
relating to such payment in Form
15CA and 15CB. Penalty shall be levied in case
of any failure.
271J Furnished incorrect information in any report or Rs. 10,000 for each
certificate by an accountant or a merchant banker incorrect report or
or a registered valuer. certificate.
272A(1) Failure to: Rs. 500 for every day
(a) furnish requisite information in respect of during which the failure
securities as required under section 94(6) ; continues. (In respect of
(b) give notice of discontinuance of business or penalty for failure, in
profession as required under section 176(3) ; relation to a declaration
c) furnish in due time returns, statements or mentioned in section
certificates, deliver de-claration, allow 197A, a certificate as
inspection, etc., under sections 133, 134, required by section
139(4A), 139(4C), 192(2C),197A, 203, 206, 203 and returns
206C, 206C(1A) and 285B; u/ss 206 and 206C and
(d) deduct and pay tax under section 226(2) statements under Section
(e) file a copy of the prescribed statement within 200(2A) or section
the time specified in section 200(3) or the 200(3) or proviso
proviso to section 206C(3) (up to 1-7-2012) to section
(f) file the prescribed statement within the time 206C(3) or section
specified in section 206A(1) 206C(3A), penalty shall
(g) Failure to deliver or cause to be delivered a not exceed amount of tax
statement under Section 200(2A) or Section deductible or collectible)
206C(3A) within prescribed time. With effect
from June 1, 2015, it is mandatory for an office
of the Government, paying TDS or TCS, as the
case may be, without production of a challan, to
deliver a statement in the prescribed form and
manner to the prescribed authority.
272AA(1) Failure to comply with section 133B Not exceeding Rs. 1,000

272B Failure to comply with provisions relating to Rs. 10,000 for each
PAN or Aadhaar as referred to in section default.
139A/139A(5)(c)/(5A)/(5C).
272BB(1) Failure to comply with section 203A Rs. 10,000 for each
failure/default.
272BB(1A) Quoting false tax deduction account number /tax Rs. 10,000
collection account number/ tax deduction and
collection account number in
challans/certificates/ statements/documents
referred to in section 203A(2).

OFFENCES AND PROSECUTIONS

Section Nature of default Punishment (rigorous Fine
imprisonment)

275A Contravention of order Up to 2 years No limit

made under section
132(1) (Second Proviso)
 or 132(3) in case of search
and seizure.
275B Failure to afford necessary Up to 2 years No limit
facility to authorised
officer to inspect books of
account or other documents
as required under section
132(1)(iib)
276 Removal, concealment, Up to 2 years No limit
transfer or delivery of
property to thwart tax
recovery

276A Failure to comply with 6 months to 2 years

provisions of section
178(1) and (3) re: company
in liquidation

276B Failure to pay to credit of 3 months to 7 years No limit

Central Government (i) tax
deducted at source under
Chapter XVII-B (non-
cognizable offence
under section 279A), or
proviso to section 194B, or
failure to pay or ensure
payment of tax as required
by section 115O(2), first
proviso to section 194R(1),
proviso to section
194S(1) or section
194BA(2).