Class Notes on Taxation – Unit II
Income Tax Authorities
Appointment and Jurisdiction:
- Appointment: Income Tax Authorities are appointed by the Central Government of India. Their appointments are made based on recommendations from the Union Public Service Commission (UPSC) and other administrative procedures.
- Jurisdiction: Each authority has a defined jurisdiction, typically based on geographic regions or types of taxpayers. Jurisdiction determines which officers have authority over specific areas, taxpayers, or types of cases.
Powers and Functions:
- Assessing Officer (AO):
- Powers: To assess the income of taxpayers, determine tax liability, and enforce tax laws. Can conduct audits and investigations.
- Functions: Includes processing income tax returns, issuing notices, and making assessments based on submitted returns and other relevant information.
- Commissioner of Income Tax (CIT):
- Powers: Supervises the work of subordinate officers and has the authority to issue directions and guidelines.
- Functions: Includes managing tax administration, overseeing assessments, and handling appeals within the jurisdiction.
- Income Tax Appellate Tribunal (ITAT):
- Powers: Acts as an appellate authority to resolve disputes between taxpayers and the Income Tax Department.
- Functions: Includes hearing appeals against orders passed by lower tax authorities and providing verdicts on tax-related disputes.
- Central Board of Direct Taxes (CBDT):
- Powers: Formulates policies and procedures for the Income Tax Department. Oversees tax administration and implementation of tax laws.
- Functions: Includes issuing guidelines, preparing tax legislation, and handling major tax policy issues.
Provisions Relating to Collection and Recovery of Tax
Collection of Tax:
- Tax Deducted at Source (TDS): Tax collected at the source of income by the payer (e.g., employer, bank) and paid to the government on behalf of the taxpayer.
- Advance Tax: Tax paid in advance during the financial year based on estimated income, rather than in a lump sum at the end of the year.
Recovery of Tax:
- Demand Notices: Issued by the tax authorities when a taxpayer fails to pay the assessed tax. Notices specify the amount due and the deadline for payment.
- Attachment of Property: Authorities can attach property or bank accounts if taxes are not paid. This action ensures that the tax due is recovered from the taxpayer’s assets.
Examples:
- Income Tax Recovery: If a taxpayer fails to pay the tax due, the tax authorities can issue a recovery notice and may attach the taxpayer’s bank account or property to recover the amount.
Refund of Tax
- Eligibility for Refund: Taxpayers are eligible for a refund if they have paid more tax than what is due or if there is an excess payment after adjustments.
- Process: Refunds are processed by the tax authorities after verifying the tax return and ensuring that the amount claimed is correct.
- Time Frame: Refunds are generally processed within a stipulated period, but delays can occur depending on the complexity of the case.
Examples:
- Excess TDS: If TDS has been deducted more than the actual tax liability, the taxpayer can claim a refund by filing the income tax return.
Appeal and Revision Provisions
Appeal Provisions:
- First Appeal: Filed with the Commissioner of Income Tax (Appeals) against the assessment order passed by the Assessing Officer.
- Second Appeal: Filed with the Income Tax Appellate Tribunal (ITAT) if dissatisfied with the order of the Commissioner (Appeals).
Revision Provisions:
- Revisional Powers: The Commissioner of Income Tax has the power to revise orders that are deemed erroneous or prejudicial to the interests of the revenue.
- Scope: Revision can be initiated on the application of the taxpayer or suo moto (on the authority’s own motion).
Examples:
- Appeal Process: A taxpayer who disagrees with an assessment order can appeal to the CIT (Appeals) for a review of the decision.
Offences and Penalties
Offences:
- Tax Evasion: Engaging in activities to avoid paying taxes, such as underreporting income or falsifying documents.
- Failure to File Returns: Not submitting income tax returns within the prescribed time.
Penalties:
- Penalties for Non-Compliance: Includes fines for late filing of returns, failure to pay taxes, and inaccuracies in the tax return.
- Prosecution: Serious offences can lead to criminal prosecution and imprisonment.
Examples:
- Penalties: A penalty of ₹5,000 for late filing of income tax returns or a fine for incorrect disclosure of income.
Wealth Tax
Charge of Wealth Tax:
- Definition: Wealth tax was levied on the net wealth of individuals, Hindu Undivided Families (HUFs), and companies. (Note: Wealth Tax was abolished in India from April 1, 2016, and replaced with an increased tax on income.)
Assets:
- Taxable Assets: Includes urban land, buildings, jewellery, and other assets.
- Deemed Assets: Assets considered taxable even if not directly owned, such as those held by associates.
- Exempted Assets: Includes agricultural land, certain government bonds, and specific assets like residential property.
Wealth Tax Authorities:
- Appointment: Wealth Tax Authorities were appointed by the Central Government to assess and collect wealth tax.
- Powers: Included assessing wealth, issuing demand notices, and enforcing recovery.
Offences and Penalties:
- Offences: Non-filing of wealth tax returns, concealment of wealth, and providing false information.
- Penalties: Imposed for non-compliance, including fines and interest on delayed payment.
Examples:
- Wealth Tax Liability: An individual with a total net wealth exceeding the exemption limit was required to file wealth tax returns and pay the applicable tax.
