Rule 261 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 261 of the Income-tax Rules, 2026 requires an inquiry before an authorised income-tax practitioner can be disqualified; rule 262 requires definite charges in writing with the supporting allegations; rules 263 to 268 supply the Inquiry Officer, cross-examination and the reasoned order.
Rule 261 — the gateway
Rule 261 is a single sentence and it is the whole protection: an order disqualifying an authorised income-tax practitioner from representing an assessee under section 515(5)(b) shall be passed only after an inquiry, held as far as may be, in accordance with rules 262 to 267. The 1962 parallel is rule 59.
Two things follow. Disqualification is not an administrative act — it requires a completed inquiry under a prescribed procedure. And the words "as far as may be" allow reasonable adaptation of that procedure without permitting it to be dispensed with.
Rule 262 — the charge-sheet
Sub-rule (1): where the prescribed authority, on the basis of information in its possession, is of the opinion that prima facie a practitioner is guilty of misconduct in connection with any income-tax proceedings, it shall:
- frame definite charges against him; and
- communicate them in writing, together with a statement of the allegations in support of the charges.
Sub-rule (2): the practitioner shall be required to submit, within such time as the prescribed authority specifies, a written statement of his defence, and also to state whether he desires to be heard in person. The 1962 parallel is rule 60.
Rule 262(1) requires both. The charges state what the practitioner is said to have done wrong; the statement of allegations sets out the factual case supporting them. A communication that recites a general accusation of misconduct without particulars leaves the practitioner unable to admit or deny charge by charge — which matters directly, because rule 264(1) confines the inquiry to such of the charges as are not admitted. Ask for the particulars at the outset; the structure of the whole inquiry depends on them.
Note also who acts. It is the prescribed authority as defined in rule 250(c) — the officer having jurisdiction over the case in the proceedings in which the misconduct is alleged, not the officer who happens to hold the practitioner's register.
The Inquiry Officer under the rule 261 scheme
| Rule | Provision |
|---|---|
| 263 | The prescribed authority shall, unless it proposes to conduct the inquiry itself, appoint an Inquiry Officer not below the rank of Assistant Commissioner of Income-tax, and shall inform the practitioner of the appointment |
| 266 | Where the prescribed authority conducts the inquiry itself, the procedure in rules 264 and 265 applies to it to the extent possible |
| 267 | Where it becomes necessary to change the Inquiry Officer, another may be appointed at the same minimum rank, and the proceedings continue from the point where they were left by his predecessor |
Rule 267 is worth noting for what it does not require. A change of Inquiry Officer does not restart the inquiry and does not entitle the practitioner to have evidence reheard — the successor picks up where the predecessor stopped.
Rule 264 — the inquiry itself
This is where the practitioner's rights sit:
| Sub-rule | Provision |
|---|---|
| (1) | On receipt of the written statement of defence — or if none is received in time — the Inquiry Officer shall inquire into such of the charges as are not admitted |
| (2) | He shall consider such documentary evidence and take such oral evidence as may be relevant or material in regard to the charges |
| (3) | The practitioner is entitled to cross-examine witnesses examined in support of the charges and to give evidence in person |
| (4) | If the Inquiry Officer declines to examine any witness on the ground that his evidence is not relevant or material, he shall record his reasons in writing |
| (5) | At the conclusion he shall prepare a report recording his findings on each of the charges together with the reasons |
Sub-rule (1) of rule 264 provides for the case where no written statement is received within the time specified: the inquiry proceeds anyway. What is lost is the chance to admit charges selectively and confine the inquiry to the rest, and the chance to state that a personal hearing is desired under rule 262(2). The rights in sub-rules (3) and (4) — cross-examination, evidence in person, reasons for refusing a witness — survive, but a practitioner who does not answer the charge-sheet enters the inquiry with every charge live.
Rule 265 — the order
Sub-rule (1): the prescribed authority shall consider the Inquiry Officer's report and record its findings on each charge — and, where it does not agree with the Inquiry Officer, record the reasons for its disagreement.
Sub-rule (2): where satisfied on those findings that the practitioner is guilty of misconduct in connection with any income-tax proceedings, it shall pass an order directing that he be:
- disqualified to represent an assessee under section 515(1) for such period as it may determine; and
- that his name be removed from the register for that period.
Sub-rule (3): while communicating that order, the authority shall furnish the practitioner with a copy of the Inquiry Officer's report and a statement of its findings, together with the reasons for disagreement, if any.
The decision-maker under rule 265 is not the person who heard the evidence. That gap is bridged by two requirements: the authority must record findings on each charge, and where it departs from the Inquiry Officer it must record its reasons for doing so — and then give the practitioner both the report and those reasons. So a practitioner who was exonerated by the Inquiry Officer but disqualified by the authority is entitled to see exactly why. An order that disagrees with the report without reasons, or that withholds the report, is defective on the face of rule 261's scheme.
Note that the disqualification is period-based, and removal from the register is for that period — which dovetails with rule 260(b), under which the name is re-entered once the period is complete.
Rule 268 — the powers behind a rule 261 inquiry
For any proceedings under rules 261 to 267, the prescribed authority and the Inquiry Officer have the same powers as are vested in a Court under the Code of Civil Procedure, 1908 when trying a suit, in respect of:
- discovery and inspection;
- enforcing the attendance of any person, including any officer of a banking company, and examining him on oath;
- compelling the production of books of account and other documents; and
- issuing commissions.
These are the same four powers rule 249(4) confers for a registered valuer inquiry — though that rule, as printed, attributes them to the Bharatiya Nyaya Sanhita, 2023 rather than to the Code of Civil Procedure. Rule 268's citation is the correct one.
Worked example
| Facts | Position under rules 261 to 268 |
|---|---|
| Commissioner disqualifies a practitioner on a departmental note, without inquiry | Contrary to rule 261 |
| Charge-sheet alleges "professional misconduct" with no particulars | Rule 262(1) requires definite charges and a statement of allegations |
| Practitioner admits two of five charges | The inquiry proceeds on the three not admitted |
| Practitioner files no defence | Inquiry proceeds with all charges live |
| Inquiry Officer at Income-tax Officer rank | Below the floor — rule 263 requires Assistant Commissioner or above |
| Inquiry Officer refuses a defence witness without reasons | Contrary to rule 264(4) |
| Inquiry Officer replaced midway; practitioner asks for a rehearing | Rule 267 continues the proceedings from that point |
| Report exonerates; authority disqualifies without reasons | Contrary to rule 265(1) and (3) |
| Order communicated without the Inquiry Officer's report | Rule 265(3) requires a copy of the report |
| Disqualification for two years | Name removed for that period and re-entered after it under rule 260(b) |
| Inquiry Officer summons a bank officer | Within the powers in rule 268 |
Compliance checklist
- Check the charge-sheet carries definite charges and a statement of allegations; ask for particulars if not.
- Confirm the officer framing charges is the prescribed authority with jurisdiction over that case.
- File the written statement within the time specified, and admit only what is actually admitted.
- State expressly that a personal hearing is desired.
- Check the Inquiry Officer's rank is not below Assistant Commissioner.
- Exercise the right to cross-examine and to give evidence in person.
- Where a witness is refused, ask for the reasons in writing.
- On the order, insist on the report, the findings on each charge and the reasons for any disagreement.
Common mistakes
- Treating disqualification as an administrative step that rule 261 permits without inquiry.
- Ignoring a charge-sheet and losing the chance to narrow the inquiry.
- Failing to ask for a personal hearing under rule 262(2).
- Accepting a refusal of witnesses without recorded reasons.
- Accepting an order that departs from the report without reasons for the disagreement.
- Expecting an inquiry to restart when the Inquiry Officer changes.
Which year this governs
The Income-tax Rules, 2026 are made under the Income-tax Act, 2025. The 1962 parallels are rule 59 for rule 261, rule 60 for rule 262, rule 61 for rule 263, rule 62 for rule 264, rule 63 for rule 265, rule 64 for rule 266, rule 65 for rule 267 and rule 66 for rule 268, given for tracing only. Verify the current text before responding to a charge-sheet.