INCOME TAX

Certificate for lower deduction or non-deduction of tax.

INSTRUCTION NO. 8/2006

 Dated: October 31, 2006

Subject: Certificate for Lower Deduction or Non-deduction of Tax at Source under Section 197 of Income Tax Act - Indiscriminate Issuance thereof - regarding.

I am directed to say that instances have been brought to the notice of the Board that assessing officers are issuing certificates for lower deduction or no-deduction of tax at source under section 197 (1) of the Income tax Act indiscriminately and in contravention of the methodology and procedure laid down in rules 28AA and 28AB of the Income Tax Rules. Such arbitrary issuance of certificates under section 197 (1) not only adversely affects the collection of tax at source but also seriously jeopardizes the chances of disclosure/detection at a later stage of such incomes on which no tax has been deducted or tax has been deducted at a very low rate.

2. Accordingly, all assessing officers are directed to ensure that all certificates under section 197 (1) are issued by them strictly as per the manner prescribed under rule 28AA or rule 28AB, as the case may be. No certificate under section 197(1) shall be issued under circumstances, which are not covered by rule 28AA or rule 28AB, howsoever genuine and compelling such circumstances may be. Moreover, the assessing officer shall obtain prior administrative approval of the Range JCIT/Addl. CIT before issuing a certificate under section 197(1). The JCIT/Addl. CIT shall satisfy himself of the fact that the certificate is being issued strictly in accordance with rule 28AA/28AB before according his approval for issuance of the certificate. A record of such certificate issued should be maintained in the office of the assessing officer.

These instructions of the Board may kindly be brought to the notice of all officers working in your charge for strict compliance.

F.No.275/37/2006-IT(B)

(Anand Jha)
Director (Budget)