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The IT Department is also responsible for enforcing the Double Taxation Avoidance Agreements and deals with various aspects of international taxation such as Transfer Pricing. Finance Bill 2012 seeks to grant Income Tax Department powers to combat aggressive Tax avoidance by enforcing General Anti Avoidance Rules.[3]

The Income Tax Department was created in 1922, with the passing of the Income-tax Act, 1922. The Act gave, for the first time, a specific nomenclature to various income tax authorities. In 1924, Central Board of Revenue Act constituted the Board as a statutory body with functional responsibilities for the administration of the Act. Commissioners of income tax were appointed separately for each province and Assistant Commissioners and income tax Officers were provided under their control. Two vital structural changes were made to the Act, through amendments in 1939. The changes, separated appellate functions from administrative functions; a class of officers, known as Appellate Assistant Commissioners, thus came into existence; and also created a central charge in Bombay (now Mumbai). The first attached office of the Board, called Directorate of Inspection (Income Tax), was created in 1940, with the intention of exercising effective control over the progress and inspection of the work of Income Tax Department throughout India. The Appellate Tribunal was created in 1941, as a result of the separation of executive and judicial functions. A central charge was created in Calcutta (now Kolkata) the same year.[4]

The Income-tax Act, 1961 is the charging Statute of Income Tax in India. It provides for levy, administration, collection and recovery of Income Tax. Recently the Government of India has brought out a draft statute called the "Direct Taxes Code" intended to replace the Income Tax Act,1961 and the Wealth Tax Act, 1956. Public Commentary has been called for the Draft Bill.[1] The redrafted bill is supposed to be made public soon.