SURVEY

U/S 133 A OF THE INCOME TAX ACT, 1961 ASHWANI KUMAR F.C.A.

MEANING

TO COLLECT INFORMATION AND DATA FOR THE PURPOSE OF THE ACT PLACE ON THE OF SPOT, AT BUSINESS THE OR PROFESSION OF THE ASSESSEE .

PURPOSE & OBJECT OF SURVEY

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Make a surprise business/profession visit to the place of Personally Inspect books of account and/or other documents Verify stocks, cash and other valuable articles Impound documents.

relevant books of accounts and/or Collect information about evasion of Taxes.

Bring new assessees on record.

Verify whether books of accounts maintained contemporaneously.

are being

TYPES OF SURVEY

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Internal Survey

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Survey in connection with functions, ceremonies, events etc.

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External General Survey (Door to Door Survey) of business premises

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External (Specific) Survey of business premises

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Survey to check compliance with TDS provisions.

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Recovery Survey

AUTHORITIES COMPETENT TO CONDUCT SURVEY

 Commissioner of Income Tax  Joint Commissioner of Income Tax  Director of Income Tax  Joint Director of Income Tax  Assistant Director of Income Tax  Deputy Director of Income Tax  Assessing Officer  Tax Recovery Officer  Inspector of Income Tax (subject to proper authority but only with limited powers )

POWERS OF THE AUTHORITIES DURING SURVEY

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Enter place of business during business but only after sunrise and before sunset Enter place other than business premises if assessee states that cash, stock, etc., are lying there Place marks of identification on books of account Take extracts from books of accounts and documents Impound books of accounts after recording reasons Make an inventory of cash, stocks and other valuables Record statement of any person Collect information regarding nature and quantum of expenditure on personal functions and events Discovery and production of evidence etc. when there is non-cooperation on the part of the Assessee

TDS SURVEY

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Authority having jurisdiction as to the Tax deduction at source matters, has the power to conduct survey

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Cash, bank accounts,stocks and other valuables cannot during TDS survey be verified/seized

SURVEY IN CONNECTION WITH FUNCTIONS U/S 133A(5)

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To collect information about the nature and scale of expenditure ceremony or other events incurred in any

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Information can be collected from various sources including third parties and external agencies.

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Action can be taken only after the function is over and not during the function

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Video recording permissible of the function is not

SPECIFIC SURVEY ON BUSINESS PREMISES

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Can be carried out at any place where business or profession is carried on i.e., Head Office, Branches, Godowns etc.

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Authorized Officer can enter only if premises are open and only during business hours

IMPLICATIONS OF FINDINGS OF SURVEY

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Stock found

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Excess

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Short

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Cash found

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Excess

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Short

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Discovery of Undisclosed Turnover 90 ITR 271 (SC) Commissioner of Sales Tax Vs. Esufali

POWER TO IMPOUND BOOKS OF ACCOUNTS

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I.T. authorities empowered to impound and retain books of accounts/other documents inspected during survey

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Power to be exercised reasons for doing so after recording

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Approval of the Chief Commissioner of Income Tax/ Director General of Income Tax required for retaining books/documents for more than ten working days

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Assessee can ask for copies of impounded records at the time of survey or even subsequently

CAN A COMPUTER BE IMPOUNDED ?

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Computer outside definition of Books or Books of Accounts u/s 2(12A)

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Surveying authority can only insist for copy data on Computer disc, floppy or print out.

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Provisions of Information Technology Act, 2000

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Section 43 provides for penalty for accessing, tampering etc, of a computer without proper authority

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Section 81 provides that the said Act has overriding effect over all other Acts

SEIZURE

Sub section (4) of section 133A does not empower the authority to seize any article and/or asset found during survey

RECORDING OF STATEMENTS

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Statement of the person surveyed should be recorded under oath and in a language which the person understands

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Instructions of CBDT confessions to be followed for extracting

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Confession as to the Undisclosed Income should be voluntary and based on reliable evidence

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Assistance of Tax Consultants during the survey

STATEMENT ELICITED DURING SURVEY OPERATION HAS NO EVIDENTIARY VALUE....

CIT vs. S. KHADER KHAN SON 352 ITR 480 (SC) PAUL MATHEWS & SONS vs. CIT 263 ITR 101 (KER) ASHOK MANILAL THAKKAR Vs. ACIT 279 ITR (AT) 143 (AHD)

RETRACTION OF THE STATEMENT

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Retraction is permissible subject to certain conditions and should be made as early as possible without delay Sec. 94 of the Evidence Act provides that a presumption can be rebutted by proving that admission or confession was caused by inducement, threat or promise.

Burden to prove that the admission made is untrue lies on the party who made the admission

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Pullangode Rubber Produce Co. Ltd. vs. State of Kerala 91ITR 18 (SC)

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Sarwan Singh Rattan Singh vs. State of Punjab AIR 1957 SC 637

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Krishan Lal Shiv Chand Rai vs. CIT 88 ITR 293 (Pb. & Har)

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Karam Chand vs. ACIT 73 ITD 434 (Chandigarh)

PENALTIES & PROSECUTION

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Penalty leviable u/s 272A for failure to answer questions, sign statements and furnish information, returns or statements

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Excess Stock found in survey could not lead to presumption u/s 276C calling for prosecution 203 ITR 866 (Pb. & Har.) ITO vs. Mohinder Pal

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Penalty leviable u/s 272AA for failure to Comply with S. 133B

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Penalty for Concealment of Income leviable in Assessment Proceedings for existing Assessees

ALLIED REVENUE LAWS

There are internal administrative instructions that the income tax authorities should inform the other enforcement agencies whenever evidence of law breaking is discovered during the course of a survey

DO’S FOR THE TAX AUTHORITIES

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To disclose the purpose and to commence survey of the business premises, without disturbing the ongoing business and without dislocating the normal business

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To provide copy of inventories of cash, stock and other valuable articles or things, books of account and documents found in the course of the survey

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To keep, maintain and preserve all the inventories copies of the documents and books of account

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To prepare a report containing details of survey and findings on the material found in the course of the survey

DON’TS FOR TAX AUTHORITIES

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To remove, take in possession or seize cash, stock in trade and other valuable articles found in the course of the survey

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To pressurize the tax payer surrender any specific amount to

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To issue any summon u/s 131(3) of the Act without recording reasons therefor

OBLIGATIONS OF AN ASSESSEE

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To assist in preparing inventory of various items

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To give completely, statements accurately,correctly unambiguously truthfully and and

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To sign the inventories and statements after carefully reading, vouching its correctness and obtaining its copies

AFTER SURVEY

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Remedies available to the assessee

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Assessment procedure

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Settlement Commission

GENERAL ISSUES

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Relevancy of material found in the course of the survey for making assessment Presumptions about tax returns filed after survey Effect of an illegal survey Assessments completed u/s earlier years can be re - opened 143(3) for No need for pendency of proceedings for conducting survey Survey can also be conducted on a person who is not an existing tax-payer

ISSUES FOR DISCUSSION

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Whether the authorities have powers to break any door, lock or window to gain entry

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Can the business premises be sealed during survey - Shyam Jewellers vs. CIT 196 ITR P. 243 (All)

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Can survey be converted into search ?

A Survey u/s 133A can be converted into a search u/s 132 if the conditions of that section are satisfied – Vinod Goel & Others vs. UOI and others 252 ITR 29 [P&H]

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Implications of Sec. 269SS, Sec. 40A(3)

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Implication of deductions under Chapter VI A

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