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CMA Intermediate · Direct and Indirect Taxation · PAN

An income-tax authority wants to compel Mr. Arun Mehta, who is domiciled in India, to obtain a no-liability certificate before leaving India. Which combination of conditions must be satisfied under the Income-tax Act, 2025?

An income-tax authority can require a domiciled person to obtain a no-liability certificate only if circumstances exist which in its opinion make it necessary, and only after recording reasons and obtaining prior approval of the Principal Chief Commissioner or Chief Commissioner.

  1. ACircumstances must exist in the authority's opinion making the certificate necessary; the authority must record reasons and obtain prior approval of the Principal Chief Commissioner or Chief CommissionerCorrect
  2. BThe authority need only inform Arun in writing; no approval is needed
  3. CArun must have no PAN allotted to him; the authority then issues the certificate automatically
  4. DThe owner of the aircraft must first certify Arun's liability to the Assessing Officer

Explanation

Under section 420(5), the certificate can be required of a domiciled person if circumstances exist which, in the authority's opinion, make it necessary. Section 420(6) adds that the authority must record reasons and obtain prior approval of the Principal Chief Commissioner or Chief Commissioner. Absence of a PAN only triggers a prescribed certificate under sub-section (4), not this requirement.

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