Power to call for information.

252(1)

The Assessing Officer, the Joint Commissioner or the Joint Commissioner (Appeals) or the Commissioner (Appeals) may, for the purposes of this Act, require any—

• (a) person, including a banking company or any officer thereof, to furnish, within such time, requisite information or to furnish statements of account and affairs verified in such manner specified by such authority, giving such information in relation to such matters as, in the opinion of such authority, will be useful for, or relevant to, any enquiry or proceedings under this Act;
• (b) firm to furnish him with a return of the names and addresses of the partners of the firm and their respective shares;
• (c) Hindu undivided family to furnish him with a return of the names and addresses of the manager and the members of the family;
• (d) person whom he has reason to believe to be a trustee, guardian or agent, to furnish him with a return of the names of the persons for or of whom he is trustee, guardian or agent, and of their addresses;
• (e) assessee to furnish a statement of the names and addresses of all persons to whom he has paid in any tax year, rent, interest, commission, royalty or brokerage, or any annuity, not being any annuity taxable under the head “Salaries” amounting to more than ten thousand rupees, or such higher amount as prescribed, together with particulars of all such payments made;
• (f) dealer, broker or agent or any person concerned in the management of a stock or commodity exchange to furnish a statement of the names and addresses of all persons to whom he or the exchange has paid any sum in connection with the transfer, whether by way of sale, exchange or otherwise, of assets, or on whose behalf or from whom he or the exchange has received any such sum, together with particulars of all such payments and receipts.

252(2)

The powers conferred under sub-section (1)(a) may also be exercised by the competent authority or the Assistant Director.

252(3)

The powers under sub-section (1)––

• (a) shall not be exercised by any income-tax authority below the rank of Principal Director or Director or Principal Commissioner or Commissioner, other than the Joint Director or Assistant Director, without the prior approval of the Principal Director or Director or, as the case may be, the Principal Commissioner or Commissioner, in a case where no proceeding is pending.
• (b) may be exercised by an income-tax authority notified under section 246(2)(a), for the purposes of an agreement referred to in section 159, even if no proceedings are pending before it or any other income-tax authority.

Explanation

Section Summary:

Section 252 of the Income Tax Act grants specific tax authorities the power to call for information from individuals, businesses, and other entities to assist in tax-related inquiries or proceedings. This section ensures that tax authorities can gather necessary details to verify compliance, investigate potential tax evasion, or resolve disputes. It applies to a wide range of entities, including individuals, firms, Hindu undivided families (HUFs), trustees, dealers, brokers, and others.

Key Changes:

1. Expanded Authority: The section now explicitly allows the Joint Commissioner, Joint Commissioner (Appeals), and Commissioner (Appeals) to request information, in addition to the Assessing Officer.
2. Inclusion of Additional Entities: The section now includes banking companies, stock or commodity exchanges, and their officers, broadening the scope of entities from which information can be sought.
3. Higher Threshold for Reporting: The threshold for reporting payments like rent, interest, commission, etc., has been increased to over ₹10,000 or a higher prescribed amount, reducing the compliance burden for smaller transactions.
4. Approval Requirements: Sub-section (3) introduces stricter approval requirements for lower-ranking tax authorities to exercise these powers, ensuring oversight and preventing misuse.

Practical Implications:

• For Taxpayers: Individuals and businesses may be required to provide detailed information, such as financial statements, partner/shareholder details, or transaction records, upon request. This increases compliance obligations but also ensures transparency.
• For Banking and Financial Institutions: Banks and financial entities may need to furnish account details or transaction records, which could involve additional administrative work.
• For Firms and HUFs: Firms must provide details of partners and their shares, while HUFs must furnish information about the manager and family members.
• For Brokers and Dealers: Brokers, agents, and commodity exchange managers must disclose payments and receipts related to asset transfers, ensuring greater scrutiny of high-value transactions.

Critical Concepts:

• Assessing Officer: The tax official responsible for assessing and verifying tax returns.
• Joint Commissioner/Commissioner (Appeals): Higher-ranking tax authorities with the power to request information and handle appeals.
• Competent Authority/Assistant Director: Additional officials authorized to exercise these powers under sub-section (2).
• Prior Approval Requirement: Lower-ranking authorities (below Principal Director/Director or Principal Commissioner/Commissioner) must obtain approval before requesting information in cases where no proceedings are pending.

Compliance Steps:

1. Maintain Accurate Records: Ensure all financial records, partner/shareholder details, and transaction data are up-to-date and readily available.
2. Respond Promptly: If requested, provide the required information within the specified timeframe.
3. Verify Information: Ensure that the information provided is accurate and verified as per the authority’s requirements.
4. Monitor Thresholds: For payments like rent, interest, or commission, track amounts exceeding ₹10,000 (or the prescribed limit) and maintain detailed records.

Examples:

• Scenario 1: A firm receives a notice from the Assessing Officer requesting details of its partners and their share percentages. The firm must provide this information within the stipulated time.
• Scenario 2: A bank is asked to furnish account statements of an individual under investigation for tax evasion. The bank must comply with the request, ensuring the information is verified and accurate.
• Scenario 3: A stockbroker is required to disclose all payments made to clients for asset transfers exceeding ₹10,000. The broker must prepare a detailed statement of these transactions and submit it to the tax authority.

This section strengthens the tax authorities’ ability to gather information, ensuring better enforcement of tax laws while imposing additional compliance responsibilities on taxpayers and entities.