Power of competent authority.

256

The competent authority shall be competent to make any enquiry under this Act, and for this purpose, shall have all the powers that an Assessing Officer has under this Act in relation to the making of enquiries.

Explanation

Section Summary:

Section 256 of the Income Tax Act grants the Competent Authority the same powers as an Assessing Officer to conduct inquiries under the Act. This means the Competent Authority can investigate tax-related matters with the same authority and tools as an Assessing Officer.

Key Changes:

• No substantive change: This section is not new or amended in the recent law. It reaffirms the powers of the Competent Authority, which have historically been aligned with those of an Assessing Officer.
• Clarification of powers: It explicitly states that the Competent Authority can conduct inquiries and has the same powers as an Assessing Officer, ensuring consistency in enforcement.

Practical Implications:

• For taxpayers: The Competent Authority can now directly investigate tax matters, including audits, assessments, and other compliance checks, without needing to rely on the Assessing Officer. This could lead to more streamlined or direct inquiries.
• For businesses: Businesses may face inquiries from the Competent Authority, who can demand documents, conduct surveys, or issue notices, just like an Assessing Officer.
• For compliance processes: Taxpayers must be prepared to respond to inquiries from the Competent Authority, as they would with an Assessing Officer.

Critical Concepts:

• Competent Authority: A designated authority under the Income Tax Act, often involved in resolving disputes, such as those related to transfer pricing or international taxation.
• Assessing Officer: A tax officer responsible for assessing and verifying tax returns, conducting audits, and ensuring compliance.
• Powers under the Act: These include the authority to summon individuals, demand documents, conduct surveys, and issue notices.

Compliance Steps:

1. Maintain records: Ensure all financial and tax-related documents are accurate and readily available for potential inquiries.
2. Respond to notices: If the Competent Authority issues a notice, provide the required information or documents promptly.
3. Cooperate with inquiries: Be prepared for audits or surveys conducted by the Competent Authority, similar to those by an Assessing Officer.

Examples:

• Scenario 1: A multinational company is under investigation for transfer pricing discrepancies. The Competent Authority issues a notice demanding financial records and transaction details. The company must comply, just as it would with an Assessing Officer.
• Scenario 2: An individual taxpayer is selected for scrutiny regarding foreign income. The Competent Authority conducts an inquiry, requesting bank statements and proof of income. The taxpayer must provide the necessary documentation.

This section ensures that the Competent Authority can effectively enforce tax laws, maintaining consistency with the powers of an Assessing Officer.