GAAR Procedural Safeguards: What Changes Under Clause 183?
Focus Keyphrase: Procedural safeguards in GAAR
The concept of procedural safeguards in GAAR (General Anti-Avoidance Rules) has taken a sharp turn under Clause 183 of the Income Tax Bill, 2025, compared to the older Section 100 of the Income-tax Act, 1961. This shift reflects the government’s intent to bring clarity, transparency, and structured checks to how GAAR is invoked.
Let’s break down the changes in simple terms for you.
What Was Section 100 of the Income-tax Act, 1961?
Under Section 100:
- The Assessing Officer (AO) could initiate GAAR proceedings if he believed a transaction was an “impermissible avoidance arrangement.”
- Approval from the Principal Commissioner or Commissioner was required before proceeding.
- Taxpayers had limited opportunity to respond before GAAR was applied.
Problem:
Too much discretion at lower levels, not enough procedural clarity.
What Clause 183 of the Income Tax Bill, 2025 Introduces
Clause 183 restructures the process to safeguard taxpayers better:
| Feature | Section 100 (1961 Act) | Clause 183 (2025 Bill) |
|---|---|---|
| Initiation | Assessing Officer on belief | Specified Authority involvement mandatory |
| Approval Level | Principal Commissioner or Commissioner | Three-member Approving Panel (minimum) |
| Taxpayer Hearing | Limited opportunity | Mandatory right to be heard |
| Time-bound Process | No strict timelines | Specific deadlines at each stage |
| Transparency | Moderate | Enhanced procedural transparency |
Why These Changes Matter to You
- Less Arbitrary GAAR Invocations: No sudden surprises by AOs.
- Guaranteed Hearing: You must get a chance to explain before GAAR is applied.
- Higher Burden of Proof: Authorities must record detailed reasons before invoking GAAR.
Legal Basis and Government References
- Draft Income Tax Bill, 2025 – Clause 183 Text
- Taxation Laws (Second Amendment) Act, 2013 – Original GAAR provisions
- CBDT FAQs on GAAR, 2017 – Clarifications still valid where consistent