Power to collect certain information.

254(1)

Irrespective of anything contained in any other provision of this Act, an income-tax authority may, for the purposes of collecting any information which may be useful for, or relevant to, the purposes of this Act, enter––

• (a) any building or place within the limits of the area assigned to such authority; or
• (b) any building or place occupied by any person in respect of whom such authority exercises jurisdiction, at which a business or profession is carried on, regardless of the fact that such place be the principal place or not of such business or profession and require any proprietor or employee or any other person, who may at that time and place, be attending in any manner to, or helping in, or carrying on of such business or profession, to furnish such information as prescribed.

254(2)

The income-tax authority may enter any place of business or profession referred to in sub-section (1) only during the hours at which such place is open for the conduct of business or profession.

254(3)

The income-tax authority acting under this section shall, on no account, remove or cause to be removed from the building or place wherein it has entered, any books of account or other documents or any cash or stock or other valuable article or thing.

254(4)

In this section, “income-tax authority” means––

• (a) a Joint Commissioner, or a Joint Director or an Assistant Director or an Assessing Officer; and
• (b) an Inspector of Income-tax, authorised by the Assessing Officer to exercise the powers conferred under this section in relation to the area in respect of which the Assessing Officer exercises jurisdiction or part thereof.

Explanation

Section Summary:

Section 254 of the new income tax law grants income-tax authorities the power to collect information relevant to the purposes of the Income Tax Act. This includes entering any building or place where a business or profession is carried out, regardless of whether it is the principal place of business, and requiring individuals present to provide necessary information. The section also sets limitations on the timing of such visits and prohibits the removal of books, documents, cash, stock, or other valuables from the premises.

Key Changes:

1. Expanded Access: Unlike previous provisions, this section explicitly allows income-tax authorities to enter any place of business or profession, even if it is not the principal place of business.
2. Timing Restrictions: Authorities can only enter during business hours, ensuring minimal disruption to normal operations.
3. Prohibition on Removal: Authorities are explicitly barred from removing any books, documents, cash, stock, or valuables from the premises, which was not always clearly stated in earlier laws.

Practical Implications:

• For Businesses: Businesses must be prepared to provide information to income-tax authorities during business hours. This could include financial records, transaction details, or other relevant documents.
• For Taxpayers: Individuals involved in a business or profession may be required to furnish information on the spot, even if they are not the primary owner or operator.
• For Authorities: This section enhances the ability of tax authorities to gather information efficiently, but they must adhere to the restrictions on timing and the prohibition on removing items.

Critical Concepts:

• Income-Tax Authority: Defined as a Joint Commissioner, Joint Director, Assistant Director, Assessing Officer, or an Inspector of Income-tax authorized by the Assessing Officer.
• Jurisdiction: The authority’s power is limited to the area assigned to them or the area where they exercise jurisdiction.
• Information Collection: The focus is on collecting information useful for tax purposes, which could include verifying income, expenses, or compliance with tax laws.

Compliance Steps:

1. Maintain Records: Ensure all financial records and documents are readily accessible during business hours.
2. Employee Awareness: Inform employees about the possibility of tax authorities visiting and the need to cooperate by providing requested information.
3. Document Requests: Keep a record of any information or documents provided to tax authorities during such visits.

Examples:

• Scenario 1: A tax authority visits a small retail shop during business hours to verify sales records. The shop owner must provide the requested sales data but is assured that no physical items will be removed from the premises.
• Scenario 2: An income-tax inspector visits a branch office of a large corporation to collect information on certain transactions. The branch manager provides the necessary documents, and the inspector leaves without taking any physical records or valuables.

This section aims to balance the need for effective tax enforcement with the rights of businesses and individuals, ensuring that information collection is conducted fairly and without undue disruption.