Clause 258 Disclosure of information relating to assessees.
Income Tax Bill, 2025
Introduction
The confidentiality of taxpayer information is a cornerstone of modern tax administration, balancing the needs of effective governance, tax enforcement, and individual privacy. Clause 258 of the Income Tax Bill, 2025, and its predecessor, Section 138 of the Income Tax Act, 1961, both regulate the disclosure of information relating to assessees by income-tax authorities. These provisions are critical in delineating the boundaries for sharing sensitive taxpayer data with other authorities, individuals, and the public, while safeguarding the interests of justice, national security, and public policy.
This commentary provides an in-depth analysis of Clause 258, its objectives, structure, and implications, followed by a detailed comparative analysis with Section 138 of the 1961 Act. The analysis highlights the evolution of the legislative approach, the practicalities for stakeholders, and areas where the new provision alters, clarifies, or reinforces the existing legal regime.
Objective and Purpose
The primary objective of both Clause 258 and Section 138 is to regulate the circumstances under which information obtained by income-tax authorities in the course of their official functions may be disclosed. The provisions are designed to:
- Facilitate inter-agency cooperation for effective enforcement of tax and other laws.
- Protect the privacy and confidentiality of taxpayers' information.
- Enable selective disclosure in the public interest, subject to safeguards.
- Empower the Central Government to restrict disclosure in sensitive cases or classes of assessees.
These objectives reflect the dual imperatives of transparency and confidentiality, recognizing that while information sharing is essential for law enforcement and regulatory functions, it must not come at the cost of unwarranted invasions of privacy or misuse of sensitive data.
Clause 258 is structured into three sub-clauses, each addressing a distinct aspect of information disclosure.
Sub-Clause (1): Disclosure to Other Authorities
Key Elements:
- Empowering Authority: The Board (CBDT) or another specified income-tax authority is vested with the power to disclose information.
- Eligible Recipients: The recipients include:
- Authorities involved in the imposition of tax, duty, cess, or foreign exchange regulation.
- Other authorities or bodies as may be specified by the Central Government, if deemed necessary in the public interest.
- Scope of Information: Any information obtained by income-tax authorities during their official functions.
- Purpose Limitation: Disclosure is limited to enabling the recipient to perform their lawful functions.
- Central Government Oversight: The Central Government's opinion and notification are prerequisites for disclosure to authorities under other laws, ensuring an additional layer of scrutiny.
Interpretation and Issues:
- The clause preserves the principle of necessity and proportionality-information can only be shared if it is necessary for the recipient authority to perform its functions.
- The "public interest" qualifier acts as a safeguard, preventing arbitrary or excessive disclosures.
- The clause continues the tradition of inter-agency cooperation, vital for tackling tax evasion, money laundering, and other economic offenses.
- Potential ambiguities may arise regarding the determination of "public interest" and the scope of information considered "necessary."
Sub-Clause (2): Disclosure to Private Persons on Application
Key Elements:
- Applicant: Any person may apply for information relating to an assessee.
- Decision-Maker: Senior income-tax officials (Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner).
- Criteria: Disclosure is permitted if:
- The application is in the prescribed form.
- The authority is satisfied that disclosure is in the public interest.
- Finality and Non-Justiciability: The authority's decision is final and cannot be challenged in court.
Interpretation and Issues:
- This sub-clause provides a mechanism for third parties (such as creditors, litigants, or other interested persons) to seek tax information, subject to stringent public interest safeguards.
- The non-justiciability of the authority's decision is a significant feature, insulating the process from judicial review and ensuring administrative finality.
- Potential concerns may arise regarding transparency and the scope of "public interest." The lack of judicial review could be contentious if the decision is arbitrary or capricious.
Sub-Clause (3): Central Government Power to Restrict Disclosure
Key Elements:
- Overriding Effect: This provision overrides sub-clauses (1) and (2) and any other law.
- Central Government Power: The Central Government may, by notification, impose restrictions on the furnishing or production of information or documents by public servants.
- Customary and Other Relevant Factors: The Government may consider practices, usages, or other relevant factors in making such a determination.
- Class of Assessees and Authorities: The restriction can be tailored to specific classes of assessees and/or specified authorities.
Interpretation and Issues:
- This sub-clause provides a robust mechanism for the Central Government to protect sensitive information, especially in cases involving national security, high-profile assessees, or other exceptional circumstances.
- The overriding effect ensures that these restrictions take precedence over other statutory or regulatory disclosure obligations.
- The provision is broad and discretionary, potentially leading to concerns about transparency and accountability.
Practical Implications
For Taxpayers
The provisions are designed to assure taxpayers that their information will not be disclosed indiscriminately, thereby fostering trust in the tax administration system. However, the broad powers of authorities and the Central Government mean that, in exceptional circumstances, taxpayer information may still be shared or withheld without recourse to judicial review.
For Government Agencies
Clause 258 facilitates seamless information flow between tax authorities and other government agencies, strengthening the fight against tax evasion, money laundering, and economic offences. The provision aligns with global trends towards inter-agency and cross-border information sharing, as seen in the context of the OECD's Common Reporting Standard (CRS) and the Financial Action Task Force (FATF) recommendations.
For Third Parties and Public
The ability to apply for information, subject to public interest and the authority's satisfaction, provides a limited right of access. However, the high threshold for disclosure and the finality of the authority's decision mean that most requests are likely to be refused unless a compelling public interest is demonstrated.
For Tax Administration
The new provision clarifies and consolidates the powers of income-tax authorities regarding disclosure, providing a clear legal framework and reducing the risk of unauthorized or unlawful disclosure. The provision also enables the government to respond swiftly to emerging threats by restricting disclosure in sensitive cases.
Comparative Analysis: Clause 258 (2025) vs. Section 138 (1961)
Structural Similarities
A close reading reveals that Clause 258 of the 2025 Bill is substantially modeled on Section 138 of the 1961 Act. Both provisions:
- Authorize the Board and specified authorities to share information with other agencies and authorities.
- Permit disclosure to individuals upon application and satisfaction of public interest.
- Empower the Central Government to restrict disclosure in certain cases by notification.
- Use similar language regarding the necessity and public interest as justification for disclosure.
Notable Differences and Evolution
- Wording and Structure:
- Clause 258 omits certain phrases found in Section 138 (e.g., "by a general or special order in this behalf" in reference to the Board's power), possibly streamlining the process but also centralizing discretion.
- The reference to "Official Gazette" in Section 138 for notifications is replaced with "notification" in Clause 258, but this likely reflects a modernization of legislative drafting rather than a substantive change.
- Scope of Application:
- Both provisions cover information received or obtained "in the performance of his functions under this Act," ensuring that only official information is subject to disclosure.
- The 2025 Bill's language is more concise but does not appear to materially alter the classes of information or authorities covered.
- Finality and Judicial Review:
- Both provisions make the authority's decision on disclosure final and non-justiciable, underscoring legislative intent to minimize litigation over disclosure decisions.
- Government Power to Restrict Disclosure:
- Section 138(2) and Clause 258(3) are nearly identical, granting the Central Government broad discretion to restrict disclosure by notification, with reference to practices, usages, and other relevant factors.
- The 2025 Bill refers to "notification" rather than "order notified in the Official Gazette," a minor drafting update.
- References and Cross-References:
- Both provisions reference the Foreign Exchange Management Act, 1999, and the definition of "dealings in foreign exchange."
- The 2025 Bill updates and streamlines cross-references, reflecting legislative modernization.
- Procedural Aspects:
- Both provisions require applications for disclosure to be made in the prescribed form and vest satisfaction of public interest in the specified authority.
- Neither provision provides for an appeal or review mechanism, emphasizing administrative finality.
Substantive Impact and Policy Continuity
The comparative analysis suggests that Clause 258 is intended to continue the policy approach of Section 138, with only minor updates to language and structure. There is no evidence of a significant shift in the balance between transparency and confidentiality, nor in the classes of authorities or information covered. The central principles-controlled disclosure, public interest safeguards, and government power to restrict-remain unchanged.
The modernization of language and streamlining of structure may enhance administrative efficiency and clarity, but the substantive rights, duties, and powers are largely preserved. This continuity provides legal certainty and predictability for taxpayers and authorities alike.
Ambiguities and Potential Issues
- Subjectivity of "Public Interest":
- Both provisions vest significant discretion in tax authorities to determine what constitutes public interest, without providing detailed criteria. This could lead to inconsistent application or allegations of arbitrariness.
- Finality and Lack of Judicial Review:
- The bar on challenging disclosure decisions in court may raise concerns about due process, especially if information is denied or disclosed in controversial circumstances.
- Breadth of Government Power:
- The Central Government's power to restrict disclosure is broadly framed, with few explicit checks or balances. While necessary for national security or sensitive cases, the lack of transparency in decision-making could be problematic.
- Absence of Appeal Mechanism:
- The absence of a statutory appeal or review process may limit recourse for aggrieved parties.
Key Differences and Evolving Features
| Aspect |
Section 138 of the Income Tax Act, 1961 |
Clause 258 of the Income Tax Bill, 2025 |
Analysis |
| Empowering Authority |
Board or other income-tax authority specified by general or special order |
Board or other income-tax authority specified by order |
Minor linguistic update; both allow the Board to delegate disclosure powers. |
| Eligible Recipients |
Officers under tax, duty, cess, or foreign exchange laws; other officers as notified in public interest |
Same |
No substantive change; scope remains broad. |
| Scope of Information |
Information received or obtained by any income-tax authority in performance of functions |
Same |
No change in the scope of information that can be disclosed. |
| Disclosure to Private Persons |
On application, if satisfied it is in public interest; decision final and non-justiciable |
Same |
Substantive content is maintained; process and safeguards are similar. |
| Central Government Power to Restrict Disclosure |
By order notified in the Official Gazette, restricts disclosure by public servants for certain classes of assessees or authorities |
By notification, restricts disclosure by public servants for certain matters/classes of assessees/authorities |
Terminology updated; intent and effect remain the same. |
| Overriding Effect |
"Notwithstanding anything contained in sub-section (1) or any other law..." |
"Irrespective of anything contained in sub-section (1) or (2) or any other law..." |
Clause 258 explicitly refers to both sub-sections (1) and (2), clarifying the overriding nature. |
| Form of Orders/Notifications |
General or special order; notification in Official Gazette |
Order; notification |
Clause 258 omits explicit reference to "Official Gazette" in some places, potentially allowing more flexible notification mechanisms. |
| Language and Structure |
More segmented, longer sentences, with historical amendments and footnotes |
Streamlined, modern drafting style |
Clause 258 reflects contemporary legislative drafting practices, making the provision more accessible. |
Conclusion
Clause 258 of the Income Tax Bill, 2025, represents a continuation and modernization of the policy and legal framework established by Section 138 of the Income Tax Act, 1961. Both provisions seek to balance the competing imperatives of transparency, effective law enforcement, and taxpayer confidentiality. The new provision updates the language and structure but does not fundamentally alter the substantive rights, powers, or obligations of stakeholders.
Key takeaways include the continued emphasis on controlled disclosure, the centrality of public interest as a guiding principle, and the broad powers of the Central Government to restrict disclosure in sensitive cases. While the provisions provide clarity and administrative efficiency, potential issues remain regarding the subjectivity of public interest, the breadth of government discretion, and the absence of a statutory appeals mechanism.
Future reforms may consider introducing clearer criteria for public interest determinations, enhanced transparency in government notifications, and stronger data protection safeguards. As tax administration becomes increasingly data-driven and interconnected, the importance of robust, fair, and transparent disclosure regimes will only grow.
Full Text:
Clause 258 Disclosure of information relating to assessees.
Dated: 5-6-2025
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