Section 120 of Income Tax Act: Powers and Jurisdiction of Income Tax Authorities

Taxation in India functions through a structured hierarchy of officers and authorities. For this system to work effectively, there must be clarity on who exercises what power & in which jurisdiction. That’s exactly what Section 120 of the Income Tax Act, 1961 provides.

This section lays down the jurisdiction, powers, and duties of income-tax authorities, ensuring that every officer functions within a clear framework. It empowers tax authorities to act on behalf of the government, rectify mistakes, and enforce compliance in a fair and organized manner.

Understanding Section 120 is crucial for both taxpayers and professionals, as it determines how cases are allocated & which authority has the right to conduct assessments, appeals, or other proceedings.

Income-Tax Authorities Shall Exercise All or Any of the Powers

The core of Section 120 is the principle that “income-tax authorities shall exercise all or any of the powers conferred on them.”

This means:

• An Income Tax Officer (ITO) or Assessing Officer (AO) can exercise powers delegated to them under law.
• Higher authorities such as Commissioners, Principal Commissioners, or the CBDT (Central Board of Direct Taxes) can also reassign powers when necessary."
• In some cases, officers can exercise additional powers to handle special situations like search, survey, or reassessment.

This ensures that taxation is not limited by rigid structures & that authorities can adapt to circumstances for effective administration.

Jurisdiction and Delegation of Powers

Section 120 also deals with jurisdiction, i.e., which authority handles which cases. Jurisdiction may be defined based on:

• Territorial areas (e.g., state or city-wise)
• Classes of taxpayers (individuals, companies, trusts, etc.)
• Types of income (salary, business, international transactions)
• Functions assigned (assessment, appeals, penalty, investigation)

Through notifications and orders, the CBDT delegates powers so that there is no overlap or confusion. This ensures that cases are handled by the right officer & that taxpayers know where to approach for queries or disputes.

Also Read: Long-Term Capital Gains Tax Explained

Income Tax Authorities Shall Exercise All or Any of the Powers Conferred on Them

One important phrase under this section is that “income tax authorities shall exercise all or any of the powers conferred on them.”

This reinforces two principles:

1. Delegated Authority – Tax officers only exercise powers that have been formally given to them.
2. Limited Scope – An officer cannot go beyond what the Act allows. For example, an ITO cannot issue orders that only a Commissioner is empowered to pass.

This balance protects taxpayers from misuse of power and ensures accountability within the tax department.

Empowers Income Tax Authorities to Correct Any Mistake or Error

Another important element is that Section 120, along with related provisions, empowers the income tax authorities to correct any mistake or error in proceedings.

For example:

• If an officer issues a notice with a clerical mistake, it can be corrected without invalidating the entire process."
• If jurisdiction is wrongly assigned, higher authorities can transfer cases to the correct officer.
• If taxpayers file objections about jurisdiction, they are heard & resolved within this framework.

This reduces unnecessary litigation & ensures that small errors do not derail the process of tax administration.

Section 120 and CBDT Notifications

The Central Board of Direct Taxes (CBDT) plays a key role in implementing Section 120. Through official notifications, CBDT:

• Assigns jurisdiction to various officers.
• Transfers cases from one authority to another.
• Defines special roles for handling large taxpayers, non-residents, or international tax disputes.

For example, large multinational companies may be assessed under a centralized circle rather than local officers, ensuring better handling of complex cases.

Importance of Section 120 for Taxpayers

For taxpayers, Section 120 is important because it:

1. Defines which officer has jurisdiction over their case.
2. Provides clarity on where to file returns or appeal orders.
3. Ensures protection from unauthorized actions by officers.
4. Offers a structured chain of accountability within the tax department."

By knowing their jurisdiction, taxpayers can also challenge notices or orders if they are issued by an authority that does not have legal power over their case.

Also Read: Interest Penalty for Late Filing of ITR

Practical Examples

Let’s consider a few simple examples:

• A salaried individual in Delhi should normally fall under the jurisdiction of the local Income Tax Officer in Delhi. Section 120 ensures that an officer in another city cannot randomly issue notices.
• A multinational company with operations in multiple states may be assigned to a specialized jurisdiction dealing with corporate cases.
• If an Assessing Officer mistakenly issues an order without authority, the case can be reallocated to the right jurisdiction without invalidating the process.

These examples show how Section 120 maintains efficiency & fairness.

Challenges in Implementation

Despite its clarity, some challenges remain:

• Taxpayers may sometimes get notices from the wrong jurisdiction, leading to confusion.
• Frequent reallocation of cases under CBDT notifications can disrupt ongoing assessments.
• Errors in digital allocation of cases under faceless assessment schemes sometimes raise questions of jurisdiction.

However, the ability of authorities to correct mistakes or errors under Section 120 reduces the impact of such challenges.

Conclusion

Section 120 of the Income Tax Act provides the backbone for India’s tax administration system. By ensuring that income-tax authorities shall exercise all or any of the powers conferred on them, it creates a structured yet flexible system of jurisdiction. It also empowers income tax authorities to correct any mistake or error, preventing small issues from creating big disputes.

For taxpayers, it means clarity on jurisdiction, protection from overreach, and a fair chain of accountability. For the government, it ensures efficiency &  transparency in tax collection.

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