Rule 129 — Notice and Forms for reference under section 274. Made under s.274 of the Income-tax Act, 2025.
Rule 129 gives effect to Section 274 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) requires the Assessing Officer, before making a reference to the Commissioner under section 274(1), to issue a notice to the assessee seeking objections, if any, as to the applicability of the provisions of Chapter XI in his case.
Sub-rule (2) fixes the contents of that notice. It must set out details of the arrangement to which Chapter XI is proposed to be applied; the tax benefit arising under the arrangement; the basis and reason for considering that the main purpose of the identified arrangement is to obtain a tax benefit; the basis and the reasons why the arrangement satisfies the conditions in section 179(1)(a) to (d); and the list of documents and evidence relied upon in respect of the last two of those.
Sub-rule (3) prescribes Form No. 62 for the Assessing Officer's reference to the Commissioner under section 274(1).
Sub-rule (4) deals with the Commissioner deciding not to proceed. Where he is satisfied that Chapter XI need not be invoked with reference to an arrangement, he records his satisfaction regarding the applicability of Chapter XI in Form No. 63 and issues directions to the Assessing Officer in Form No. 63, after considering the reference received under section 274(1) or the assessee's reply to the notice issued under section 274(2).
Sub-rule (5) deals with the Commissioner deciding to proceed. Before making a reference to the Approving Panel under section 274(4) he must record his satisfaction regarding the applicability of Chapter XI in Form No. 64, and must seek a specific factual report in writing from the International Financial Service Centre Authority where the assessee is an entity located in an International Financial Service Centre.
Sub-rule (6) provides that the reference to the Approving Panel under section 274(4) is made by the Commissioner or Principal Commissioner in Form No. 64, with such other documents as deemed fit, all submitted in four sets, either in Hindi or English.
Chapter XI is invoked against an arrangement, and the Act builds a chain of Assessing Officer, Commissioner and Approving Panel so that no single officer can characterise a transaction as impermissible on his own. The rule supplies the paper that makes that chain reviewable: a notice that must disclose the case before the assessee has to answer it, and a fixed form at each hand-off so a later reader can see what was recorded and when.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Number of sets in which the reference to the Approving Panel must be submitted | Four sets | Form No. 64 with such other documents as deemed fit, either in Hindi or English | Sub-rule (6) |
The notice under sub-rule (1) is not a bare intimation. Sub-rule (2) makes the Assessing Officer disclose the arrangement, the tax benefit, his reasoning on main purpose, his reasoning on each of the conditions in section 179(1)(a) to (d), and the documents he relies on — so an assessee who receives a notice that omits any of these has a defect to point to before the reference is even made. Form No. 63 carries two things at once: the record of satisfaction and the directions to the Assessing Officer, which is why a decision not to invoke Chapter XI still produces a written instrument. In an International Financial Service Centre case the Commissioner cannot refer to the Approving Panel on his own material alone — sub-rule (5)(b) requires him to seek a specific factual report in writing from the ifsc Authority first. The rule prescribes only the notice, the forms and the manner of reference; the powers themselves and the consequences of invoking Chapter XI come from section 274 and Chapter XI.
An Assessing Officer proposes to apply Chapter XI to a restructuring. He issues a notice under sub-rule (1) which sets out the arrangement, quantifies the tax benefit as Rs 4 crore, gives his reasons for treating the main purpose as obtaining that benefit, gives his reasons on each of section 179(1)(a) to (d), and lists the documents relied on. The assessee objects; the Assessing Officer nonetheless refers the matter in Form No. 62. The Commissioner, having considered both the reference and the reply, is satisfied that Chapter XI need not be invoked, and records that satisfaction and issues his directions to the Assessing Officer in Form No. 63. Had he decided the other way, he would have recorded satisfaction in Form No. 64 and referred the matter to the Approving Panel in four sets.
An assessee meets it as the notice seeking objections that arrives before any Chapter XI reference is made, and afterwards through the outcome — either directions in Form No. 63 closing the matter, or a reference in Form No. 64 to the Approving Panel.
before making a reference to the Commissioner, the Assessing Officer shall issue a notice to the assessee seeking objections, if any, as to the applicability of provisions of Chapter XI in his case
the basis and the reasons why the arrangement satisfies the conditions in section 179(1)(a) to (d)