Sections 293C and 294 of Income Tax Act 1961: Withdrawal of Approval and Pending Tax Charge
Section 293C of the Income Tax Act, 1961 empowers the Central Government, the Central Board of Direct Taxes or an income-tax authority that has statutory power to grant an approval to withdraw that approval even where the particular approval provision does not expressly provide a withdrawal power. Section 294 ensures continuity of the Act where, on 1 April of an assessment year, a Central Act charging income-tax for that year has not yet been enacted.
Section 293C - Power to withdraw approval
Meaning: Section 293C is an enabling provision. If the Central Government, the Board or an income-tax authority has been given power under any provision of the Income Tax Act to grant approval to an assessee, the same authority may withdraw that approval even if the provision conferring the approval power does not separately state that the approval may be withdrawn.
Conditions and safeguards under Section 293C
The competent authority may withdraw the approval at any time, but the statutory proviso requires procedural safeguards. Before withdrawal, the assessee concerned must be given a reasonable opportunity to show cause against the proposed withdrawal. The authority must also record the reasons for withdrawing the approval.
Who can exercise the power?
The power belongs to the Central Government, the Board or the income-tax authority, as the case may be, where that authority has been conferred power under the Income Tax Act to grant the relevant approval. Section 293C therefore supplements the underlying approval provision by supplying a withdrawal power even where an express withdrawal clause is absent.
Reasonable opportunity of showing cause
The proviso makes an opportunity to show cause part of the statutory process. The assessee must have a reasonable opportunity to respond to the proposed withdrawal before the approval is withdrawn. Recording reasons is also expressly required by the section.
Section 294 - Act to have effect pending legislative provision for charge of tax
Meaning: Section 294 provides a continuity mechanism for an assessment year where the annual legislative provision charging income-tax has not yet been made by a Central Act by 1 April.
If, on 1 April in an assessment year, a Central Act has not yet made provision for charging income-tax for that assessment year, the Income Tax Act nevertheless continues to have effect until the charging provision is made.
During that interim period, the applicable provision is treated as the provision in force in the preceding assessment year or the provision proposed in the Bill then before Parliament, whichever is more favourable to the assessee.
Purpose of Section 294
The section prevents a legislative timing gap at the start of an assessment year from interrupting the operation of the income-tax law. At the same time, its express statutory test protects the assessee by applying the more favourable of the preceding year's provision and the provision proposed in the Bill then before Parliament until the Central Act makes the charging provision.
Difference between Sections 293C and 294
Section 293C deals with withdrawal of an approval granted under a provision of the Income Tax Act and prescribes procedural safeguards for the assessee. Section 294 deals with continuity of the Income Tax Act pending annual legislative provision for charging income-tax. They are separate miscellaneous provisions serving different statutory purposes.
Related provisions
Section 293C should be read with the particular provision under which the relevant approval was originally granted. Section 294 operates in the context of the annual legislative provision for the charge of income-tax. For the authoritative text of the Income Tax Act, 1961 and the law applicable to a specific assessment year, the relevant Finance legislation should also be checked.
Official legal references
The official Income Tax Department resources linked alongside this article provide the statutory provisions and tax-law materials. India Code may also be consulted for Central legislation.