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Report No. 12

103. Commissioners.-

As second appeals would lie (if our proposal is accepted) to the High Court and as the smaller assessees may not be able to afford the expense involved in such an appeal, we would recommend the free use by Commissioners of Income-tax of their judicial powers to give relief to the smaller assessees. In the case of smaller assessees the Commissioner should treat an application in revision as an appeal. Administrative instructions to this effect may be given by the Central Board of Revenue.

104. Other changes.-

The other important change which has been made in this Chapter is the provision1 for appeals against all orders of the Income-tax Officers which are prejudicial to the assessee, e.g., an order under section 35, the levy of interest under section 18A (6), an order refusing to correct a recovery certificate, an order refusing to treat the assessee as not in default and other similar orders.

1. See clause 254, sub-clauses (d)(j)(k) and (l), App I.

105. Chapter XXII: Penalties imposable by Income-tax authorities.-

The provisions of the existing Act relating to penalties have been grouped together in this Chapter. No change has been made in the substance of these provisions.

106. Chapter XXIII: Offences and prosecutions.-

The provisions of the existing Act relating to offences and prosecutions have been grouped together in this Chapter. No change of substance has been made.

107. Chapter XXIV: Special provision relating to certain Provident Funds.-

The provisions of Chapter IXA, Recognised provident funds, have been incorporated in this Chapter, with suitable modifications explained in the notes to the relevant clauses.

108. Chapter XXV: Special provisions relating to certain Superannuation Funds.-

Provisions relating to approved superannuation funds, contained in Chapter IX B, have been reproduced in this chapter with suitable modifications explained in the notes to the relevant clauses.

109. Chapter XXVI: Miscellaneous.-

All the other provisions of the Act which are not covered by the earlier Chapters have been grouped together in this Chapter.

The important changes made in this Chapter are as under:-

(1) Authorised representatives.-

We consider that there is no justification for permitting a person who is not a lawyer or a chartered accountant to appear in the income-tax proceedings. The Income-tax Officer exercises powers which are often far more responsible than the powers similarly exercised by a civil court or a criminal court. When persons other than lawyers are not allowed to appear before the civil court and the criminal court, there is no reason why persons who are not entitled to appear before such courts should be permitted to appear in an income-tax proceeding. An exception should however be made in favour of chartered accountants, as they assist companies in the maintenance of accounts. Moreover, they have certain obligations under the Companies Act in relation to the preparation of the accounts of companies. We have therefore provided that appearance in income-tax proceedings be confined to lawyers and chartered accountants.

In order to protect the interests of those persons (who are, under the provisions of the present Act entitled to appear in the income-tax proceedings, we have provided for the continuance of their right to appear in the income-tax proceedings. We have, however, provided that they should be registered as Income-tax Practitioners. We are also the opinion that there should be a disciplinary body to control such Income-tax practitioners. We have therefore made suitable changes in the provisions of sections 59 and 61.1

1. See clause 324, App I. and clause 329, ibid.

(2) Service of notices.- We have provided for the mode of service of notice under the Act in the assessment of dissolved firms, dissolved associations and disrupted H.U.Fs. also.

(3) Rules.-We have added a provision authorising the Central Board of Revenue to make rules relating to the issue of tax verification certificates. Such certificates have been found useful in practice and it is desirable to place them on a statutory footing. We have, also added a provision for making rules relating to the constitution of an authority to take disciplinary action against Income-tax practitioners (other than lawyers and Chartered Accountants).

110. Schedules.-

The Schedules which we propose to annex to the Act are as under:-

First Schedule -relates to insurance business.'

Second Schedule.-Brings together in one place the provisions pertaining to the procedure to be adopted by the Collector for the recovery of tax on a certificate issued to him.

Third Schedule.-Deals with the procedure to be adopted by the Income-tax Officer who is empowered by the Commissioner to recover tax by distraint and sale of movable property.

111. Scheme of notes on clauses.-

In the preparation of notes on clauses we have departed from the method adopted by us in our previous reports. In the previous reports we have followed the order of the sections in the Act under revision and wherever new provisions were suggested, they were dealt with in appropriate places. This method could not be followed in revising this Act (Income-tax Act) as we have reshuffled all the sections and sub-sections of the Act. Hence the order of the clauses in the proposed draft has been followed in preparing the Notes on clauses.

112. Increase in number of sections.-

A word may be said about the increased number of the sections in the draft.1 The U.K. Act of 1952 contains 532 sections and 25 Schedules. The existing Income-tax Act has 67 sections and one Schedule. One section (Section 10) of the existing Act however, covers 14 printed pages in the Income-tax Manual, and some of the sections in the Act, though bearing one number have the letters A to V added e.g., sections 58A and 58B.

The 67 sections of the Act cover 186 printed pages in the Income-tax Manual. The actual number of sections in the existing Act is not 67, but about 120. The number of sections in the draft is thus only two and a half times the number in the existing Act. The increase in the number of sections is due to the fact that the existing sections have been split into a number of sections. It is hoped that the total coverage of the draft in printed pages will not show any appreciable increase.

1. The draft proposed by us contain 220 clauses and Three Schedules.

113. Scheme of Appendices.-

Appendix I contains our proposals in the form of draft clauses.

Appendix II contains comparative tables showing the existing provision and the corresponding provision in the draft in Appendix I.

Notes on clauses have been appended at the end. These explain, with reference to each clause in Appendix I, changes made by us in the form or substance of the existing provision.

114. Lists appended to the report.-

For convenience of reference, we have given at the end of this part of the report two lists, the first containing a summary of changes of importance proposed by us which have been embodied in the draft in Appendix I, and the second containing a list of recommendations made by us which have not been embodied in the draft in Appendix I.

Income-Tax Act, 1922 Back

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