- Introduction
The term ‘survey’ is not defined
under relevant provisions dealing with the survey actions, nor it is
defined anywhere else in the Income-tax Act. The best possible meaning
of the term, can be derived by analyzing and understanding the powers
of an ‘Income tax Authority’ that are permitted to be exercised during
the course of survey action and the limitations of such powers. Comparing
and contrasting a survey action with a search action also helps in understanding
the concept of survey. The dictionary meaning of the term ‘survey’ is
‘comprehensive inspection’ of a place, which when applied in the context
of a survey under the Income-tax Act, means an inspection of the place
of business and also of the valuables, books, documents and of the persons
found at such place. At times survey is better understood by finding
out what cannot be done during the course of survey by the authorities.
The scope of this article is restricted to the provisions of ss. 133A(2)
to (4) and (6). The other provisions are dealt with in details in different
articles of this Income Tax Review.
- Powers of survey
Section 133A(3) of the Act empowers an
Income tax Authority (hereafter ‘authority’) to specifically do the
following :–
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To enter any place of business
or profession or enter any other place where books of account,
documents, cash, stock or valuable article, etc. relating to business
or profession are kept.
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To inspect the books of account
and other documents, make extracts or copies and place marks of
identification on them.
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To impound such books of account
and documents.
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To retain the custody of such
books of account and documents.
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To check and verify cash, stock
and valuables and making an inventory thereof.
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To record statement of any person
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To exercise the powers u/s.
131(1) for enforcing compliance.
These powers are analyzed in detail
hereafter.
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To enter any place of business
or profession
An entry by an ‘authority’ marks the beginning of the survey.
Only such person who is duly authorized, under the section, can
enter a place of business for survey. An Income tax Authority
is defined under Explanation (a) of the section. Person holding
a rank below that of a Joint Director or Joint Commissioner is
required to obtain an approval of the Joint Director or the Joint
Commissioner before proceeding with the action. This power of
entry can be exercised in respect of the place of business or
profession by such persons who enjoy the jurisdiction over such
place or the person occupying such place. Power is also vested
to visit places other than the place of business in certain circumstances.
An ‘authority’ can enter the place of business only during the
hours at which such place is open for the conduct of business
of profession and in respect of other permitted places the entry
is possible only after sunrise and before sunset. A detailed discussion
about these aspects relating to the places to be surveyed and
the time thereof is available in a separate article of this Income-tax
Review. Similarly, a separate article is devoted to the persons
authorized to enter and conduct survey.
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To inspect the books of
account and other documents, make extracts or copies and place
marks of identification on them
At the time of the introduction of S. 133A, in 1964, the
power of survey was mainly restricted to inspection of books of
account and documents and taking extracts there from. Subsequently,
the scope of the section was expanded in 1975, for vesting the
authorities with additional powers. A person attending to the
business is required to afford an ‘authority’ with the necessary
facility to inspect the books of account and other documents required
by such authority. This power is restricted to inspection of such
books and documents, which are available at the place of survey.
The authority is also empowered to place marks of identification
on the books of account or documents inspected by him. He is also
authorized to take extracts of such books and documents and make
copies thereof. It will be possible for him to take photostat
or electronic copies of the books or documents. It is in the interest
of the businessman to authenticate such copies and extracts and
wherever possible and to keep a copy thereof.
This power of inspection, etc.
is also vested in the Inspector of Income tax besides the other
specified persons. An Inspector, being an Income tax Authority,
enjoys restricted powers of survey in as much as he can inspect
the books of account and documents and place marks of identification
on them and take copies or extracts of the same. Unlike other
‘authorities’, he is not empowered to check and verify assets,
take inventory thereof or impound the books of account and documents.
He is also not authorized to record the statement during the course
of survey. Venkateshwara Tourist vs. ADIT, 233 ITR 736 (Kar)
and ITO vs. Jewelers Emporium, 48 ITD 164 (Ind.).
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To impound such books of
account and documents
The major distinction, between a search & seizure action
u/s. 132 and a survey action u/s. 133A, has been partially removed
by the Financial Act, 2002 with effect from 1-6-2002. Till that
date, it was not possible, for an authority, to impound the books
of account during the course of survey. The courts consistently
had thwarted the attempts by the Income tax Department to do so.
Gheru Lal Bal Chand vs. ITO, 137 ITR 190 (P&H), Maruti Mills
(P) Ltd. vs.UOI 250 ITR 348 (Raj), CIT vs. Mool Chand Salecha
256 ITR 730 (Raj). In fact the Calcutta High Court in the case
of Dr. Vijay Pahwa vs. DCIT, 250 ITR 354 (Cal), passed serious
strictures against the Income tax authorities for impounding the
books of account during the course of survey action and ordered
them to pay a fine for such violation.
This established position in
law has been sought to be changed by the Finance Act, 2002. With
effect from 1-6-2002, an authority is now empowered to impound
and retain in his custody the books of account or other documents
inspected by him after recording his reasons for impounding .
Though impounding is now possible, it appears that it will be
possible only after application of mind to the situation on hand
and will be found to be justified only where the assessee has
been seen to have resisted the powers to make extracts and take
copies. The requirement of recording the reasons presupposes an
application of mind and existence of valid reasons, enough for
impounding.
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Retention of books of account
and documents
An authority is empowered to retain in his custody the books
of account or documents impounded for such period as he thinks
fit, provided the period of retention does not exceed 10 days,
excluding the holidays, without obtaining the approval of the
Chief Commissioner or Director General. It appears that such retention
can be extended beyond 10 days with the approval of the Chief
Commissioner or Director General. No time limit in such cases
for returning the books of account has been provided for. In the
circumstances, it will be essential for the authorities extending
the time of retention to specifically provide for the time of
returning the same. This power of retention u/s. 133A is independent
of the power u/s. 131(3). Needless to say that the assessee should
be authorized to take extracts and make copies of the impounded
books of account and documents.
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Verification of cash, stock,
valuables and making an inventory thereof
A person attending to the business is required to offer the
‘authorities’ with the necessary facility to check or verify cash,
stock and other valuable articles or things. Simultaneously the
‘authority’ is empowered to make an inventory of such assets.
Checking and verification is restricted to the assets found at
the place of business. As noted earlier, an inspector or any other
person not being an ‘authority’ is not authorized to check, verify
and inventorize such assets. ITO vs. Jewellers Emporium 48
ITD 164 (Ind.). The ‘authorities’ are required to furnish
the copy of the inventory of the assets verified by them. It is
usual for the ‘authorities’ to seek assistance of the assessee
and determine the value of the stock found at the time of survey,
only. This exercise, in my opinion, is unnecessary at the relevant
time and is perhaps beyond the powers of survey. The objective
of the survey is to inventorise the stock or valuables and not
to indulge into valuation of such assets and make instantaneous
assessment of the income of the assessee.
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To record the statement
of any person
A person attending to the business is required to furnish
such information, on any matter, which may be useful for or relevant
to any proceeding under the Act. This information is to be furnished
on being required to do so by the ‘authorities’. Failure to do
so might result in invocation of powers u/s. 131(1) by the ‘authorities’.
The ‘authorities’ are empowered to record the statement of any
person, who is found to be useful or relevant for any proceedings
under the Act. The scope here is not restricted to the recording
of statement of the persons surveyed. It is possible for an ‘authority’
to record statement of any person as long as such recording is
considered to be useful and relevant for any proceeding under
the Act, provided it is in relation to the person being surveyed.
The scope of this power, though appears to be very wide, should
be restricted to the books of account and other assets found during
the course of survey and should concern the pending matters or
findings of survey. An assessee or a person giving such statement
has a right to obtain a copy of such statement.
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To exercise the powers u/s.
131(1) for enforcing compliance
Section 133A (6) empowers an ‘authority’ to exercise powers
u/s. 131(1) in cases where the person attending to the business
refuses or evades, during the course of survey, to afford facility
to him for inspecting books of account, etc or to verify cash,
stock, etc. or to furnish any information and evades the recording
of the statement. By exercise of power u/s. 131(1), the ‘authority’
is empowered to enforce the compliance with the requirements of
s.133A. Under the said section, an authority shall enjoy the same
powers as are vested in a court under the Code of Civil Procedure,
1908 for discovery and inspection, enforcing the attendance and
examination on oath, comparing the production of books of account
and other documents and issuing commissions.
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Limitations of powers –
Things which should not be done
A discussion on powers of survey would be incomplete without
the discussion about the limitation of the powers of the Income tax
Authorities. It is usual to come across cases where the ‘authorities’
conducting survey are found to have exceeded their powers. Some cases
of excessive indulgence by the ‘authorities’ are discussed hereafter.
- Section 133A(4) prohibits the removal of
any cash, stock or valuables from the place of survey. Till 31-5-2002,
this restriction extended to the books of account and other documents,
as well. The ‘authorities’ conducting survey are not empowered
to remove any assets even where it is on account of transportation
of such assets from one place of business to another place of
business. Many a times, it is seen that the books of account and
other documents are transported from one place to another during
the course of survey without recording the facts about such transportation.
- Similarly, no documents or loose papers should
be brought to the place of survey from outside without recording
the facts of such receipt.
- The Income tax Authorities on their arrival
of the place of business usually ask the businessman to suspend
the activities and temporarily stop the regular work. They also
deny the access to telephone and insist on the personal presence
of the assessee. The actions of the ‘authorities’ are beyond their
powers and the scope of section 133A. There is nothing in the
section permitting the ‘authorities’ to insist on suspension of
the day-to-day work and the business activities. Even section
132, dealing with search and seizure action, does not empower
the authorities to demand the suspension of business. An attempt
was made by the Finance Bill, 1992 to provide for such powers
but the said attempt was aborted in time. Any order resulting
in suspension of business might amount to violation of the right
of a citizen to conduct business. Shyam Jewellers, 196 ITR
243 (All). Further any attempt to restrict the movement of
an assessee may also amount to confinement. It is therefore submitted
that the power u/s. 131A should be exercised with discretion by
the ‘authorities’.
- During the course of search u/s. 132, an
authority conducting the search is specifically empowered to break
open lock of any door, locker, safe, almirah, etc. No such power
is vested in an ‘authority’ conducting the survey. A care therefore
should be taken to ensure that no attempt is made to break open
the lock of a room or a cupboard.
- It is possible to take a personal search
only when the person taking such search is specifically empowered
to do so. Such a power is provided for u/s. 132 for being exercised
in limited circumstances. In the absence of any such power u/s.
133A, an ‘authority’ should refrain from taking a personal search
during the course of survey.
- The Delhi High Court in the case, L. R.
Gupta vs. UOI, 194 ITR 32 (Del), held that the authorities
acting u/s. 132 had no power to confine a person to a certain
place or room. Similarly the Allahabad High Court in Shyam
Jewelers vs. Chief Commissioner (Adm), 196 ITR 243 (All.),
held that it was not possible for an authority acting u/s. 132
to seal the premises. Accordingly, it will not be possible for
an authority u/s. 133A to lock or seal the premises while conducting
survey. An authority should also refrain from sealing the computers
or any other receptacle or device.
- The most serious cases of excessive use of
powers are the cases where the ‘authorities’ insist on declaration
of additional income during the course of survey. This happens
quite often, even in cases where nothing worthwhile is found and
no undisclosed asset or income is detected. Needless to say that
neither the ‘authorities’ are vested with any power to demand
such declaration nor it is desirable on their part to insist on
such declaration. In fact, as a custodian of law, they should
set an example by guiding the assessees by explaining to them
the correct provisions of law. The law and the law enforcers will
be respected only when the rights of the defenceless citizens
are protected by those enforcing the law.
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