Income Tax Act, 1961 Authorities and Tribunal are Court

[DEV KUMAR KOTHARI]

There are some confusions or lack of clarity  in minds of many about tax authorities role and authority as court, while acting under the provisions of Income-tax Act, 1961  in the course of enquiry and / or investigations and whether provisions of the Indian Evidence Act, apply or not. If apply, then to what extent.

For example in a recent judgment honorable Calcutta High Court  in  PRINCIPAL COMMISSIONER OF INCOME TAX FIVE, KOLKATA VERSUS SWATI BAJAJ - 2022 (6) TMI 670 - CALCUTTA HIGH COURT
 noted with approval the following (in paragraph 9 of reported judgment

“ The CIT(A) referred to a decision of the Bombay Bench of the ITAT in the case of M/s. Mont Blane Properties and Industries Pvt. Ltd., ITA No. 614/Bom/87 A.Y. 1983-84 wherein the Tribunal held that the word “evidence” as used under Section 143(3) covered circumstantial evidence also and cannot be confined to direct evidence and in tax jurisprudence the word “evidence” had much wider connotations.

Further, the use of the word “material” in Section 143(3) showed that the Assessing Officer not being a Court could rely upon material which might not strictly be evidence admissible under the Indian Evidence Act, for the purpose of making an order of assessment.... “

Unquote:

Therefore, In this writ-up, and other write-ups written and to be written author makes an attempt to understand these aspects. Learned readers are requested to provide their feedback based on knowledge and experience.

Before looking at provisions of the Income-tax Act, 1961, let us have some a look on provisions of the Indian Evidence Act. From preamble and some important definitions  it is found that authorities are  considered Court.  As the matter relating to ‘evidence’ is under study, let us see provisions relating to evidences regarding court.

THE INDIAN EVIDENCE ACT, 1872 ACT NO. 1 OF 18721 [15th March, 1872.]

Preamble.-WHEREAS it is expedient to consolidate, define and amend the law of Evidence; It is hereby enacted as follows: - PART I RELEVANCY OF FACTS CHAPTER I.––PRELIMINARY

1. Short title. ––This Act may be called the Indian Evidence Act, 1872.

 Extent.––It extends to the whole of India  and applies to all judicial proceedings in or before any Court, including Courts-martial, other than Courts-martial convened under the Army the Naval Discipline Act the Indian Navy (Discipline) Act, 1934 (34 of 1934),] 7 [or the Air Force Act (7 Geo. 5, c. 51)] but not to affidavits  presented to any Court or officer, nor to proceedings before an arbitrator;

3. Interpretation-clause.––

In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context: –– “Court”.––

“Court” includes all Judges and Magistrates  , and all persons, except arbitrators, legally authorised to take evidence

Observations of author: Tax authorities are legally authorized to take evidence. Therefore, when acting about collection and examination of evidences, they  are Court, furthermore because they are performing judicial proceedings. Therefore, the Evidence Act is applicable to them.

In view of above provisions of Evidence Act itself  it can be said that tax authorities having authority to take evidence in course of their role in performing judicial proceedings are having power as a civil court. Therefore, even if there is no specific provision in any enactment governing any subject matter, if authority acting thereunder and performing judicial functions are Court.

From the Income-tax Act, 1961

Provisions of Income-tax Act, 1961 specifically provides about tax  officers, authorities, and Tribunal to have powers of Court. Although provision provide for limited scope ( for the purpsoes of Income-tax Act, 1961)  about such authorization, however, these limited powers  are sufficient for the purposes of the income-tax Act. In these provisions, some provisions of Civil Procedure Code (CPC)  and Criminal Procedure Code (Cr.PC)  and Indian Penal Code have also been referred.

  Some of provisions are as follows with highlights added by author to analyze and highlight relevant core words and phrases  relating to ‘court’ : 

Section 131

Power regarding discovery, production of evidence, etc.

131.   (1) The Assessing Officer, Deputy Commissioner (Appeals) Joint Commissioner, Commissioner (Appeals) Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or  Commissioner and the Dispute Resolution Panel referred to in clause (a) of sub-section (15) of section 144C  shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely :-

(a) discovery and inspection;

(b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath;

(c) compelling the production of books of account and other documents; and

(d) issuing commissions.

Xxxx

Section 136 provides for judicial proceedings:

Proceedings before income-tax authorities to be judicial proceedings.

136. Any proceeding under this Act before an income-tax authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code (45 of 1860) ¹[and every income-tax authority shall be deemed to be a Civil Court for the purposes of section 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974)].

Relating to  (a) authority for advance ruling AAR and

                    (b) the Board for Advance Rulings w.e.f. 01.04.2021

Powers of the Authority.

245U. (1) The Authority shall, for the purpose of exercising its powers, have all the powers of a civil court under the Code of Civil Procedure, 1908 (5 of 1908) as are referred to in section 131 of this Act.

(2) The Authority shall be deemed to be a civil court for the purposes of section 195, but not for the purposes of Chapter XXVI, of the Code of Criminal Procedure, 1973 (2 of 1974) and every proceeding before the Authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code (45 of 1860).

¹[(3) On and from such date as the Central Government may, by notification in the Official Gazette, appoint, the powers of the Authority under this section shall be exercised by the Board for Advance Rulings and the provisions of this section shall mutatis mutandis apply to the Board for Advance Rulings as they apply to the Authority.]

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NOTES:-

1. Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-04-2021

255. Procedure of Appellate Tribunal 1

(6) The Appellate Tribunal shall, for the purpose of discharging its functions, have all the powers which are vested in the income- tax authorities referred to in section 131, and any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code (45 of 1860 ), and the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1898 (5 of 1898 ). 5

Observations of author:

In view of above illustrative provisions, it is clear beyond any doubt that tax officer are or deemed a court while acting and performing judicial proceedings and particularly while examining witnesses and evidences.

In the Income –tax Act, there is no exclusion of provisions of the  Indian Evidence Act . The Indian Evidence Act is general law. It extends to the whole of India  and applies to all judicial proceedings in or before any Court, and all persons, except arbitrators, legally authorized to take evidence.