VIP Road Chartered Accountants Association

Introduction
The term ‘survey’ has not been defined in the Income-tax Act, 1961 (the Act). As per the Oxford Dictionary ‘survey’ means ‘to take a general view of; examine the general condition of’. Section 133A of the Act, empowers the Income-tax Authorities to exercise the power of survey. Section 133A falls in Part C of Chapter XIII of the Act, which provides for the powers of the Income-tax Authorities. Such powers include power regarding discovery and production of evidence (s. 131), power to search (s. 132), power to requisition books of account etc. (s. 132A), power to call for information (s. 133), power of survey (s. 133A), p

ower to collect certain information (s. 133B) and power to inspect register of Companies (s. 134). These powers are conferred on the Income-tax Authorities so as to perform their duties properly and effectively, for achieving the object of the Act, i.e. to assess and collect ‘income tax’ in accordance with law. The powers are to be exercised only by those authorities who have been conferred with such powers and within the limitations prescribed in the provisions. If the power exercised is without authority in law, it would be held illegal and invalid. If the power exercised is within the scope of the provisions then the citizen/assessee can have no grievance. The Authorities are expected to exercise the powers in a reasonable and fair manner. There should be circumstances warranting exercise of such powers. In Mool Chand Salecha vs. I.T.O. 58 ITD 482 (Jp) Jaipur Bench of the Tribunal held as under:

"Both the powers, namely, those under sections 131(1) and 133A would be required to be taken up only when there are compelling circumstances or when the matter is such where some special investigation is required or where the assessee is not coming forward. As an illustration, the tax authority may compel the production of books of account under section 131(1) and may also carry out a survey under section 133A to physically verify the stocks or the cash balance. But the important thing is that there should be reasons to assume the powers under both the provisions."

The authorities are expected to exercise the power bonafide and without any bias. If the action of an authority is with mala fide intention or with bias, court may hold such an action to be illegal and invalid. Recently, in Union of India vs. Vipin Kumar Jain 260 ITR 1 (S.C.), the Supreme Court held as under:

"The question of bias will have to be decided on the facts of each case. If the assessee is able to establish that the Assessing Officer was in fact biased in the sense that he was involved or interested in his personal capacity in the outcome of the assessment or the procedure for assessment, no doubt, it would be a good ground for setting aside the assessment order."

In this article we consider three aspects of the power of survey, viz., (i) Authorities concerned, (ii) Place of Survey and (iii) Timings of Survey.

Authorities concerned
The power of survey has been given to the Income-tax Authorities, who have either territorial jurisdiction over the area or special jurisdiction over the person. An Income-tax Authority having jurisdiction over an area assigned to him or in respect of any place occupied by any person in respect of whom he exercises jurisdiction, may authorize any other Income-tax Authority, to exercise the power of survey.

Explanation (a) to section 133A defines "Income-tax Authority" to mean:

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.

Accordingly, these are the Authorities concerned for exercising the power of survey u/s 133A. Other Authorities cannot exercise the power under this section. Further, the powers of the Inspector of Income-tax are restricted to the following matters:

Entry into business or professional premises and to inspect books of account or other documents available at such place [S. 133A(1)(i)].
Placing marks of identification on the books of account or other documents inspected by him and make or cause to be made extracts or copies therefrom
[S. 133A(3)(i)].
Calling for statements of expenditure in respect of function, ceremony or event, after the function, ceremony or event
[S. 133(5)].

The section further provides that the following authorities cannot exercise the powers under the section without obtaining the approval of the Joint Director or the Joint Commissioner, as the case may be:

Assistant Director of Income-tax.
Deputy Director of Income-tax.
Assessing Officer.
Tax Recovery Officer.
Inspector of Income-tax.

Place of survey
Under section 133A of the Act, an Income-tax Authority can survey the place at which the business or profession of a person is carried on, whether such place is principle place of such business or profession or not, i.e. it may be a the branch office or godown, etc. Therefore, generally there cannot be survey at the residential place. However, if business is carried on at the residence, then survey action could be taken at the portion of the residence where the business is carried on.

Further, Explanation to section 133A(1) provides that a place where business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of cash or stock or any other valuable article or thing related to his business or profession are or is kept. For this purpose, the place may be the residential place of the person or any other person or the office of any other person, as for example the office of his Advocate, Chartered Accountant, etc.

Thus, if the books of account of an assessee are lying in the office of his Chartered Accountant and if the Income-tax Authority intends to survey in the case of that assessee, then the Income-tax Authority can enter the office of the Chartered Accountant of the assessee and inspect the books of account of that assessee. In such a case the purpose and the scope is limited. It is restricted to the inspection of books of account of that particular assessee and nothing more is permitted. For example, the books of account of the Chartered Accountant and/or of other clients of that Chartered Accountant cannot be inspected.

Timings of survey
It is expected that the survey action must be during the business hours. Sub-section (2) of section 133A provides the time for entering the place of business for conducting survey. It provides that the Income-tax Authority may enter the place of business or profession, for the purpose of survey only during the hours at which such place is open for the conduct of business or profession, i.e. during the business hours only. Therefore, survey action can commence only during the working hours of business or profession. If it happens to be a holiday or the weekly rest day or the place is closed for some other reason, then it cannot be forcibly opened for the purpose of survey.

The section further provides that in respect of places (covered by Explanation to section 133A(1)) other than the place of business or profession, the survey party can enter, i.e. the survey can be commenced, only during the day time, i.e. between sunrise and sunset.

Though the section provides the time for commencement of the survey, no time is provided for continuation or termination of the survey. Once the survey action is commenced by adhering to the time prescribed for entry, the operations can go on continuously even round the clock. There is no need to suspend the operation at the closing time followed by the businessmen or profession or at the sun set, as the case may be, and then to resume the operations next day. In this respect the following observations of the Madras High Court in N. K. Mohnot vs. Dy. CIT 215 ITR 275 (Mad) at 284 and 285 are relevant:

"Learned counsel for the petitioner submitted that the power to conduct a survey can be exercised only during business hours and the continuance of the survey after the business hours is wholly impermissible under section 133A and, therefore, illegal. Though the submission so made appears plausible, such an interpretation of the provision would defeat the object of the provision and has to be rejected. The object of conducting a survey is to secure information. The section does not require prior notice of the survey being given to the affected person, in order to prevent the possibility of relevant materials whether it be accounts, documents, negotiable instruments or cash or other valuables, being removed from the place at which the business or profession is carried on. The section, therefore, advisedly provides that the authority may "enter" only during business hours. After such entry, no further limitation is imposed by the section regarding the period for which he may remain in that premises. If the volume of materials to be scrutinized is such as to require the survey being continued even after the business hours, the continued presence of the authority in that premises and the continuance of the survey cannot be regarded as "illegal".

Sub-section (2) of section 133A is not intended to enable persons to defeat the very object of the survey by providing them time within which to secrete or conceal the documents and valuables and thereby avoid liability for taxes and penalties, to which they may become subject when such material is discovered by the Department. After the authority enters the place of business or profession, the authority is entitled to continue the survey having due regard to the circumstances and the need for continuing such survey uninterruptedly. The hours during which the place of business or profession is kept open are relevant only for determining the time at which the authority may enter such premises or place. After having entered and commenced the survey, the survey may wherever it is reasonably necessary to do so, continue till it is completed notwithstanding the fact that the survey would spill over beyond the business hours of the establishment."

Conclusion
The powers of survey are necessary for proper administration of tax laws and for collection of tax according to law. The powers are also useful for keeping a check on tax evasion. However, like any other powers, the powers of survey u/s 133A are also prone to misuse. Many a times it is complained that these powers of survey have been used as a source of corruption. This is not an answer for the need for the power. The solution lies in keeping check on the corrupt practices of such authorities and to bring them to book.