Central Board of Direct Taxes (CBDT)

The Central Board of Direct Taxes (CBDT) is the apex policy-making body for the administration of direct taxes in India, functioning under the Department of Revenue, Ministry of Finance.

Key Functions of CBDT

• Formulation of policies concerning direct taxes like income tax, corporate tax, etc.
• Supervision and control of the functioning of the Income Tax Department.
• Implementation and enforcement of provisions under the Income Tax Act, 1961.
• Negotiation and administration of Double Taxation Avoidance Agreements (DTAAs).
• Issuance of circulars and notifications for uniform interpretation of tax laws.

The CBDT is headed by a Chairperson and comprises six members, each assigned specific functions such as investigation, legislation, revenue, TPS, etc.

Income Tax Department

Role of Assessing Officers, Commissioners, etc.

The Income Tax Department is responsible for the administration and enforcement of direct tax laws. It functions under the supervision of the CBDT.

Organisational Hierarchy

• Principal Chief Commissioner of Income Tax (PCCIT) – Highest level officer in a region or zone.
• Chief Commissioner of Income Tax (CCIT)
• Commissioner of Income Tax (CIT)
• Additional/Joint Commissioner of Income Tax
• Deputy/Assistant Commissioner of Income Tax
• Income Tax Officer (ITO)
• Tax Assistant and Inspector of Income Tax

Key Responsibilities of Officials

• Assessing Officers – Issue notices, conduct assessments, and determine tax liability.
• Commissioners – Handle appeals, revise orders, and guide subordinate officers.
• Investigation Wing – Conducts raids, surveys, and handles cases involving evasion or black money.

The Income Tax Department also uses advanced data analytics, AI, and electronic processing systems like e-filing portal, Faceless Assessment Scheme, and Form 26AS integration for transparency and efficiency.

Central Board of Indirect Taxes and Customs (CBIC)

The Central Board of Indirect Taxes and Customs (CBIC) is responsible for the administration of indirect taxes such as GST (Goods and Services Tax), Customs Duty, and Central Excise.

Functions of CBIC

• Formulation and implementation of policies concerning indirect taxation.
• Administration of Customs Act, 1962 and GST Acts.
• Collection of GST, customs duty, central excise, and service tax (for past matters).
• Control and facilitation of cross-border trade through customs regulations.
• Monitoring anti-smuggling and anti-evasion efforts.

Like the CBDT, CBIC also functions under the Ministry of Finance and is headed by a Chairperson along with several members handling areas such as GST policy, customs, legal, and investigation.

Coordination between CBDT and CBIC

Though CBDT and CBIC are distinct entities, they coordinate on data sharing, enforcement actions, and policy harmonization for improving overall tax compliance in the country.

Detection of Tax Evasion

The detection of tax evasion is a critical function of the Income Tax Department aimed at ensuring compliance and preventing revenue leakage.

Key Sources and Methods

• Data Analytics & AI: Using AI-driven tools to analyze large data sets, spot discrepancies, and track suspicious patterns.
• Annual Information Statement (AIS): Cross-verification of high-value transactions like property purchases, mutual fund investments, or luxury spending.
• Third-party Information: Banks, registrars, employers, and financial institutions are mandated to furnish details of certain transactions.
• Surveys, Raids, and Scrutiny: Department conducts surveys and scrutiny assessments based on specific intelligence or random risk profiling.

The goal is to promote voluntary compliance and discourage the concealment of income.

Investigation and Search Powers

The Income Tax Department is empowered with special powers to investigate cases of suspected tax evasion through search and seizure operations (commonly known as “IT Raids”).

Relevant Provisions

• Section 132 – Empowers authorities to enter and search premises, seize books of account, assets, jewelry, or cash suspected to be undisclosed.
• Section 133A – Grants power to conduct a survey of business premises to verify books of account and stock.

Conditions to Exercise Powers

The authorities must have a reason to believe that the person:

• Has not disclosed income fully or properly, or
• Is in possession of undisclosed assets.

During such searches, statements may also be recorded under oath, and electronic data can be seized.

Recovery of Tax

Attachment and sale of property

When a taxpayer defaults in paying tax dues, the Tax Recovery Officer (TRO) may initiate recovery proceedings under the provisions of the Second Schedule of the Income Tax Act.

This includes:

• Attachment of movable and immovable property
• Sale of property through auction to recover outstanding dues

The defaulter is served with a demand notice, and upon non-compliance, the attachment proceedings commence.

Arrest and detention

If the defaulter willfully neglects to pay taxes, and if it's proved that the default is with malafide intent, the TRO has the power to order:

• Arrest and detention of the assessee in civil prison

Such action is taken only after obtaining approval from higher authorities and providing the assessee an opportunity to be heard.

Penalties and Prosecution

Tax laws in India provide for both monetary penalties and criminal prosecution for willful non-compliance or evasion.

Monetary Penalties

• Underreporting or misreporting of income – Penalty under Section 270A ranging from 50% to 200% of the tax sought to be evaded.
• Failure to file return – Penalty under Section 271F (applicable in older cases).
• Late filing fees – Under Section 234F, ranging from ₹1,000 to ₹5,000.

Prosecution (Criminal Proceedings)

Prosecution is initiated in serious cases of willful default under Chapter XXII of the Income Tax Act.

• Failure to file return (Section 276CC) – Imprisonment up to 7 years and fine.
• Willful attempt to evade tax (Section 276C) – Rigorous imprisonment ranging from 6 months to 7 years.
• False statement in verification (Section 277) – Imprisonment and fine.

Cases are filed in designated Special Economic Offences Courts after approval from the Principal Commissioner of Income Tax.