New section 133C of the Income-tax Act, 1961 – an analysis

[CA DEV KUMAR KOTHARI]

Section 133C was  Inserted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of October, 2014. It reads as follows (Highlights added)

Power to call for information by prescribed income-tax authority.

     ‘133C. The prescribed income-tax authority, may for the purposes of verification of information in its possession relating to any person, issue a notice to such person requiring him, on or before a date to be specified therein, to furnish information or documents verified in the manner specified therein, which may be useful for, or relevant to, any inquiry or proceeding under this Act.

     Explanation.-In this section, the term “proceeding” shall have the meaning assigned to it in clause (b) of the Explanation to section 133A]

Rule 12D was Inserted vide NOTIFICATION NO. 48/2014,  Dated: September 30, 2014 in relation to S. 133C.

Rule 12D  reads as follows (high lights added)

12D. The prescribed authority under section 133C shall be the Principal Director General or Director General or Principal Director or Director as the case may be.        

Explanation.- For the purposes of this rule “Principal Director General or Director General or Principal Director or Director” means the Principal Director General of Income-tax or the Director General of Income-tax or the Principal Director of Income tax or the Director of Income-tax to whom the Central Board of Direct Taxes may authorise to act as prescribed authority for the purposes of section 133C.]

Observations on section and rule are  as follows:

On reading of S. 133C and Rule 12D, as reproduced above, meaning og ‘prescribed authority’ is sure , certain and exhaustive .As per this meaning the following authorities can be authorised by the CBDT:

the Principal Director General of Income-tax ,

 the Director General of Income-tax or

 the Principal Director of Income tax

 the Director of Income-tax

 to whom the Central Board of Direct Taxes may authorise to act as prescribed authority for the purposes of section 133C.

Therefore any such authority must be specifically authorised by CBDT to act as prescribed authority for the purposes of S. 133C. Without such specific  authorisation an officer though holding office of prescribed rank will not be prescribed authority/

An Assessing Officer  (AO) whether be an DCIT, Addl. DCIT  or  An  Income-tax Officer (ITO) cannot act as prescribed authority for the purposes of S. 133C  does not appear to be prescribed authority for the purpose of S. 133C .

In practice we find that some  AO  have issued notices u/s 133C, to assessee for verification of information in his possession. Author feel that that is not within scope of the AO. 

Effective date:

Section 133C was inserted w.e.f. 01.10.2014, so it is applicable to  any previous  year which commenced  after 01.10.14 that is previous year commencing on 01.04.2015 that is PY 2015-16 relevant to AY 16-17 will be first year to which this section can be applied. However, in practice we find that notices have been issued u/s 133C for verification of information relating to earlier years. This seems not proper.

The information based on which enquiry can be made must be|:

1. which come into possession of prescribed authority on or after 01.010.2014,
2. It must be relevant information for any assessment year 2016-17 and subsequent years and not for earlier years.

Explanatory notes:

Relevant note says“ This amendment will take effect from 1st October, 2014””.

This is silent about previous year or assessment year, therefore, general rule that a provision which exist on the 1^st day of previous year will be applicable to assessee and authorities.This is because the public must also know beforehand, as to what is law, what arerights, and obligation in relation to income, tax and related enquiry in relation to any previous yearbefore the previous year begun.

The provision is substantive:

It can be said that the provision is substantive and not merely procedural. On one hand it empowers certain authorities to make enquiry and consequently it imposes obligation on concerned parties to provide information. Furthermore, in spite of many other powers already provided in the Act, a new category of authority has been prescribed and vested with power to make enquiry, in addition to lot of scope of enquiry and investigation, already found in the Act. Furthermore, if the provision be considered as procedural and retrospective, then it can create discrimination and  inequalities   because the provision is not mandatory but discretionary and it will depend on prescribed authority to make or not to make enquiry based on information ins his possession.

If the provision be considered as retrospective, then it is likely to disturb settled matters and provide scope for roving enquiries leading to multiple proceedings and harassment of public. This is not as per the policy of government.