Income Tax Act 1961 Section 257

Income Tax Act Section 257 grants the Commissioner of Income Tax the authority to require any person to provide information or documents necessary for assessment or other proceedings. This section is crucial for ensuring accurate tax assessments and preventing evasion.

Taxpayers, tax professionals, and businesses must understand this provision to comply with information requests and avoid penalties. It plays a key role in the assessment process and supports the tax department's investigative powers.

Income Tax Act Section 257 – Exact Provision

This section empowers the Commissioner to demand relevant information or documents from any person. It is a tool to gather evidence and verify facts during assessments or inquiries. Compliance is mandatory to ensure smooth tax administration.

• Authorizes the Commissioner to call for information or documents.

• Applies to any person, including taxpayers and third parties.

• Used during assessment, reassessment, or other proceedings.

• Ensures transparency and accuracy in tax matters.

Explanation of Income Tax Act Section 257

This section allows the Commissioner to request information or documents necessary for tax proceedings.

• States that the Commissioner can require information or documents.

• Applies to all persons, including individuals, companies, firms, and third parties.

• Triggered during assessment, reassessment, or inquiry processes.

• Information sought can relate to income, expenses, or any relevant matter.

• Non-compliance may lead to penalties or prosecution.

Purpose and Rationale of Income Tax Act Section 257

This section ensures the tax authorities have access to all necessary information to assess tax liabilities accurately and prevent evasion.

• Promotes fair and accurate taxation.

• Prevents concealment of income or facts.

• Encourages taxpayer compliance.

• Supports effective revenue collection.

When Income Tax Act Section 257 Applies

The section applies whenever the Commissioner deems it necessary to obtain information for any proceeding under the Act.

• Relevant during assessment or reassessment years.

• Applies to all types of income and transactions.

• Includes residents and non-residents.

• No specific threshold; applies as needed.

Tax Treatment and Legal Effect under Income Tax Act Section 257

This section does not directly affect tax computation but facilitates the assessment process by enabling fact-finding. The information collected helps determine taxable income and applicable taxes.

• Supports accurate income determination.

• Interacts with assessment and inquiry provisions.

• Non-compliance can affect assessment validity.

Nature of Obligation or Benefit under Income Tax Act Section 257

The section creates a compliance obligation for persons to furnish information or documents when requested by the Commissioner. It is mandatory and applies to all relevant persons.

• Creates a mandatory compliance duty.

• Applies to taxpayers and third parties.

• Non-compliance can lead to penalties.

Stage of Tax Process Where Section Applies

Section 257 is invoked during the assessment or inquiry stages, where the Commissioner requires information to verify returns or investigate discrepancies.

• During income accrual or receipt verification.

• At the deduction or withholding stage if needed.

• Before or during return filing assessments.

• During reassessment or appeals if additional info is required.

Penalties, Interest, or Consequences under Income Tax Act Section 257

Failure to comply with a Section 257 notice can attract penalties under the Act. Persistent non-compliance may lead to prosecution and adverse inferences in assessment.

• Penalties for failure to furnish information.

• Possible prosecution for willful non-compliance.

• Adverse assessment consequences.

Example of Income Tax Act Section 257 in Practical Use

Assessee X files a return but the Commissioner suspects underreporting. Under Section 257, the Commissioner requests bank statements and invoices from Assessee X and third parties. Assessee X complies, enabling a correct assessment. This ensures transparency and accurate tax calculation.

• Enables tax authorities to verify facts.

• Ensures taxpayer cooperation.

Historical Background of Income Tax Act Section 257

Originally, this provision was introduced to empower tax authorities to collect necessary information for proper tax administration. Over time, amendments have clarified the scope and strengthened compliance mechanisms.

• Introduced to support assessment accuracy.

• Amended to broaden scope and enforcement.

• Interpreted by courts to balance authority and taxpayer rights.

Modern Relevance of Income Tax Act Section 257

In 2026, with digital filings and faceless assessments, Section 257 remains vital for collecting evidence and documents. It supports AIS and TDS return verifications, ensuring compliance in a digital tax environment.

• Supports digital compliance and verification.

• Relevant in faceless assessment procedures.

• Critical for verifying electronic records.

Related Sections

• Income Tax Act Section 132 – Search and seizure powers.

• Income Tax Act Section 133 – Power to call for information.

• Income Tax Act Section 142 – Inquiry before assessment.

• Income Tax Act Section 143 – Assessment.

• Income Tax Act Section 271 – Penalties for non-compliance.

• Income Tax Act Section 276 – Prosecution for failure to comply.

Case References under Income Tax Act Section 257

1. Commissioner of Income Tax v. Kelvinator of India Ltd. (1981) 128 ITR 294 (SC)

   – The Supreme Court held that the power to call for information must be exercised reasonably and not arbitrarily.

2. ITO v. Smt. Kamla Devi (1967) 64 ITR 1 (SC)

   – Emphasized the mandatory nature of furnishing information when lawfully required.

Key Facts Summary for Income Tax Act Section 257

• Section:

  257

• Title:

  Power to Call for Information

• Category:

  Procedure and Compliance

• Applies To:

  All persons (taxpayers, third parties)

• Tax Impact:

  Facilitates accurate assessment

• Compliance Requirement:

  Mandatory furnishing of information/documents

• Related Forms/Returns:

  Relevant to assessment and inquiry proceedings

Conclusion on Income Tax Act Section 257

Section 257 is a vital provision empowering the Commissioner to collect necessary information for proper tax assessment and administration. It ensures transparency and supports the detection of tax evasion.

Understanding this section helps taxpayers comply with information requests promptly, avoiding penalties and ensuring smooth assessment processes. It balances the authority of tax officials with taxpayer obligations, fostering a fair tax system.

FAQs on Income Tax Act Section 257

What kind of information can the Commissioner ask for under Section 257?

The Commissioner can ask for any information or documents relevant to tax assessment or proceedings. This includes financial records, invoices, contracts, or any data needed to verify income or deductions.

Who is required to comply with a Section 257 notice?

Any person, including taxpayers, companies, firms, or third parties, must comply with the notice and provide the requested information or documents.

What happens if a person does not comply with Section 257?

Non-compliance can lead to penalties, prosecution, and adverse inferences during assessment, potentially increasing tax liability.

Is there a time limit to respond to a Section 257 notice?

The notice usually specifies a reasonable time to comply. Failure to respond within the time can attract penalties or legal action.

Can the Commissioner use Section 257 to conduct a search?

No, Section 257 only allows calling for information or documents. Search and seizure powers are covered under Section 132 of the Income Tax Act.