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Survey- Under Income Tax Act
CA Anup Kumar Jain
According to Concise Oxford Dictionary, "survey" means general view, casting of eyes or mind
over some things, inspection or investigation of the condition, amount, etc. of something,
account given of result of this etc.
Survey has not been defined in the Income Tax Act 1961( In short “Act”). 'Survey' in context of
the Income Tax Act means collection of data or information for the purposes of detection of
undisclosed income under the Income tax Act 1961.
1. Objects of Survey under Income Tax Act 1961
Survey is an important weapon in the armory of the Income Tax Department to call for
information of various kinds as may be found necessary for making proper assessment of
income of any person, expenditure incurred or investments made. Survey is mainly conducted
with the object of broadening tax base by discovering new assessees
and /or to gather
information about possible tax evasions by assessees, spot checking of available cash, stock ,
valuable article or things and to verify in a surprise and systematic manner, whether or not
accounts are maintained properly and on day to day basis etc.
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2. Types of Survey
Survey may be of three types –
a) Specific Survey under section 133A(1) - This is the survey on the business premises of a
taxpayer.( Detail in subsequent paras)
b) Survey of Expenditure on Marriages, Parties etc. under section 133A(5) - In involves
collecting information regarding the nature and scale of expenditure incurred by a
person on functions, ceremonies and events such as Marriages, Birthday Parties etc.
This type of survey is usually conducted on very specific information in the case of big
guns or celebrities.
c) Door to Door Survey under section 133B - The object of survey is to locate new
assessees and thereby unearth black money. Persons who have been avoiding from
coming into the tax net are brought into the mainstream through a shop to shop or
house to house survey. For the last number of years Department has dispensed with this
type of survey as large scale corruption found was found by the officials while
discharging
3. Legal Provision Section 133A.
“(1) Notwithstanding anything contained in any other provision of this Act, an income-tax
authority may enter –
(a) any place within the limits of the area assigned to him, or
(b) Any place occupied by any person in respect of whom he exercises jurisdiction,
(c) Any place in respect of which he is authorised for the purposes of this section by such
income-tax authority, who is assigned the area within which such place is situated or who
exercises jurisdiction in respect of any person occupying such place at which a business or
profession is carried on, whether such place be the principal place or not of such business or
profession, and require any proprietor, employee or any other person who may at that time
and place be attending in any manner to, or helping in, the carrying on of such business or
profession -
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(i) To afford him the necessary facility to inspect such books of account or other documents
as he may require and which may be available at such place,
(ii) To afford him the necessary facility to check or verify the cash, stock or other valuable
article or thing which may be found therein, and
(iii) To furnish such information as he may require as to any matter which may be useful for,
or relevant to, any proceeding under this Act.
Explanation : 1. For the purposes of this sub-section, a place where a 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 his cash or stock or other valuable
article or thing relating to his business or profession are or is kept.
(2) An income-tax authority may enter any place of business or profession referred to in subsection (1) only during the hours at which such place is open for the conduct of business or
profession and, in the case of any other place, only after sunrise and before sunset.
(3) An income-tax authority acting under this section may, (i) if he so deems necessary, place 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,
(ii) Make an inventory of any cash, stock or other valuable article or thing checked or
verified by him,
(iii) Record the statement of any person which may be useful for, or relevant to, any
proceeding under this Act.
(4) An income-tax authority acting under this section shall, on no account, remove or cause
to be removed from the place wherein he has entered, any books of account or other
documents or any cash, stock or other valuable article or thing.
(5) Where, having regard to the nature, and scale of expenditure incurred by an assessee, in
connection with any function, ceremony or event, the Income-tax authority is of the opinion
that it is necessary or expedient so to do, he may, at any time after such function, ceremony
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or event, require the assessee by whom such expenditure has been incurred or any person
who, in the opinion of the Income-tax authority, is likely to possess information as respects
the expenditure incurred, to furnish such information as he may require as to any matter
which may be useful for, or relevant to, any proceeding under this Act and may have the
statements of the assessee or any other person recorded and any statement so recorded
may thereafter be used in evidence in any proceeding under this Act.
(6) If a person under this section is required to afford facility to the income-tax authority to
inspect books of account or other documents or to check or verify any cash, stock or other
valuable article or thing or to furnish any information or to have his statement recorded,
either refuses or evades to do so, the income-tax authority shall have all the powers under
[Sub-section (1) of section 131] for enforcing compliance with the requirement made.
Explanation : In this section, - (a) "income-tax authority" means Commissioner, Joint
Commissioner, a Director, a Joint Director, or an Assistant Director or Deputy Director or an
Assessing Officer, and for the purposes of clause (i) of sub-section (1), clause (i) of subsection (3) and sub-section (5), includes an Inspector of Income-tax, if so authorised by any
such authority;
(b) "Proceeding" means any proceeding under this Act in respect of any year which may be
pending on the date on which the powers under this section are exercised or which may
have been completed on or before such date and includes also all proceedings under this Act
which may be commenced after such date in respect of any year.”
4. After carefully analyzing the provisions of section 133A of the Act, following issues
emerges:
A. WHO CAN CONDUCT SURVEY: POWER OF SURVEY
The powers of survey under section 133A can be exercised by the following:(a) Commissioner,
(b) Joint Commissioner,
(c) Director,
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(d)
(e)
(f)
(g)
(h)
(i)
Joint Director,
Assistant Director,
Deputy Director,
Assessing Officer, and
Tax Recovery Officer
TPO
B. The Income tax authorities mentioned in para 1 above enter :a. any place within the limits of the area assigned to him, or
b. any place occupied by any person in respect of whom he exercises jurisdiction,
c. any place in respect of which he is authorized for the purposes of the survey.
It means authorities having jurisdiction over the assessee must accompany the survey
party while entering for survey in the business premises otherwise survey is without
jurisdiction. Persons below the rank of Income tax Inspector like TA’s , Data Operators etc.
cann’t accompany the survey party as they are not treated as Income tax Authorities
under the provisions of Section 133A of the Act. Assessee’s are advised to see the notice
for survey and the persons named therein should only be allowed to enter the premises.
Entry of other persons is unauthorized & tantamount to trespassing for which necessary
legal action under IPC(section 447) can be taken.
C. Place of Survey
(i)
Survey at Business Places
The survey can be carried out at the place where the business is carried on. The business
place also includes such place where the books of account, any documents, any part of his
cash or stock or any other valuable article or thing relating to the business are kept.
(ii)
Survey at Residential Premises
Normally, the power of survey does not confer a right to make survey of residential
premises. If during the course of survey the income tax authority finds that some books of
account or documents or the stocks are not available at the place of business and the
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assessee makes a statement that these are available at his residence, the income tax
authority will assume jurisdiction to enter the residence for the purpose of inspecting such
books of account, documents or the stock of the business.
(iii) Survey at CA’s Office & third party
Reference is invited to Circular No.7D dated 3-5-1967 which states that the place where
entry can be made under section 133A must not be a place where the assessee does not
carry on business. Residential or office premises of third parties including a Chartered
Accountant, a pleader or income-tax practitioner of whom the assessee may be a client are
not places which may be entered into for the purposes of section 133A.
Whether business/residential premises of third parties or residential premises of assessee
are places which could be entered into for the purposes of conducting survey
The place which an Income-tax Officer or an Inspector, authorised by him in this behalf, may
enter under the provisions of section 133A, must be either a place within the limits of the
area under the jurisdiction of the Income-tax Officer or any place occupied by any person in
respect of whom the Income-tax Officer exercises jurisdiction, at which a business or
profession is carried on. The provisions of section 133A make it clear that, in either case, the
place must be one where the business or profession of an assessee is carried on, although it
is not necessary that it should be the principal place of business or profession. The place,
where entry can be made under the section, must not be a place where the assessee does
not carry on business. Business or residential premises of third parties, including a chartered
accountant, a pleader or income-tax practitioner, of whom the assessee may be client, are
not places which could be entered into for the purpose of section 133A. It would be
improper for an Income-tax Officer or an Inspector, authorised by him in this behalf, to
enter the office of a chartered accountant for the purpose of inspecting the books of his
client. It is also necessary that the place entered should be the business premises and not
residential premises of the assessee and the entry should be during business or office hours.
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It may, however, be noted that the above restrictions do not apply to cases of search and
seizure specifically authorised under section 132 by the Commissioner of Incometax/Director of Inspection, which will be governed by the provisions of that section.
But in the case of searches, premises of CA’s or Advocates can be searched if persons
searched give statement that books or records are lying with the CA/advocate etc.
D. Conduct of Survey when business premises are locked
There is no provision in Section 133A enabling the surveying authority to break open any
door or lock or windows to obtain ingress. Entry can be made only if the premises are open
and that too during the normal business hours of the assessee.
E. Whether business premises can be sealed
In Shyam Jewellers & Anr v. Chief Commissioner (Admn) U.P. & Ors. (1992) 196 ITR 243,
Allahabad High Court observed that a business place cannot be sealed during the course of
survey. The Court held that sealing of business place during survey or even in course of
search under Section 132 is not permitted in view of the fundamental right to practice any
profession or carry on any trade or business bestowed under Article 300A of Constitution of
India and is also violation of Article 19(1)(g) relating to the fundamental rights of a citizen.
F. Interrupt/ stoppage of business
The authorities cannot stop the business or the normal activities of a person.
The
authorities do not have power to interrupt the ordinary business or peaceful life of citizen.
They should use the power given to them strictly within the four corners of large power.
Since the powers vested are large, even a millimeter departure there from is not allowed
(Dr. Vijay Pahwa VS DCIT 250 ITR 354 (Cal) and L. R. Gupta 194 ITR 32).
G. Timings of Survey
The survey can commence only when the business place is open for the conduct of the
business. In case of any other place, the income tax authority can enter only after sunrise
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and before the sunset. Once the survey commences then there is no time limit as to when it
should conclude.
H. Continuity of Survey
Sub-section (2) of section 133A provides that the authority may enter only during the
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 material to be
scrutinized is such as to require the survey being continued even after the business hours,
the continued presence of the authorities in the premises and continuance of the survey
cannot be regarded as “illegal”. N.K. Mohnot v. Dy. CIT (1995) 215 ITR 275 ( Mad).
I. Whether Police can accompany the survey party.
Income tax Authorities mentioned under the Income tax Act 1961 have to discharge their
duties by passing different types of Assessment / reassessment/Appellate orders, enquiries
,TEP, search & Seizure Operations, Revisionary orders u/s 263/264 etc. Except u/s 132(2) of
the Act ,there is no where mention of the services of Police Officer. Section 132(2) is
reproduced as follows:
” The authorized officer may requisition the services of any police officer or of any officer
of the central Govt. or of both, to assist him for all or any of the purposes specified u/ss
(1)[or sub-section(1A) and it shall be the duty of every such officer to comply with such
requisition. “
U/s 133A of the Act , there is no mention of the services / assistance of the police while
conducting surveys . To my mind, Income tax Authorities can’t take the services of the
Police for the purposes of survey until & unless there is law & order of problem. In a
civilized society, visit of the police to some one’s premises is treated as a social stigma and it
seems that law makers have deliberately omitted it from the section 133A. I think it is
wrong practice and no one has ever raised any objection to it. Trade Associations, Chambers
and Bar Associations should take up this matter with the Police and income tax higher
authorities and seek clarification on it.
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J. Powers during Survey
The Income Tax Authorities as mentioned in para 1 have been conferred the following
powers under section 133A(3) –
• To enter the place of business during business hours and in other places only after sunrise
and before sunset.
• To enter the place of business during business hours and in other places only after sunrise
and before sunset.
• To enter the place, other than business premises, if the assessee states that his cash,
stocks, records and books of account relating to business are lying there.
• To place marks of identification on the books of accounts.
• To take extracts from such books of accounts and documents or records.
• To make an inventory of any cash, stocks and other valuables checked by him.
• To record the statement of any person.
• To collect information regarding nature and scale of expenditure incurred in connection
with personal functions and events like birthday, marriages etc.
• To impound or retain in his custody books of accounts or other documents inspected by
him after recording his reasons for doing so. It is further provided that such books of
account or other documents shall not be retained for more than fifteen days without
obtaining the approval of the Chief Commissioner of Income Tax or Director General or
Commissioner or Director therefore. [As per amendment made by Finance Act, 2002 w.e.f
1-6-2002]
But they cannot evaluate the Building, Land etc. or call for the departmental valuer for
valuation of the same, or detain any body, persons, employees, customers etc.VO/DVO’s
are not authorities as mentioned in the section 133A of the Act.
K. Rights of Person Present in the Premises
• To verify the identity of the officials intending to carry out the survey.
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• If the survey is proposed to be carried out by an Inspector of Income Tax, to verify the
authorization and to check that the name and address of the premises and the name of the
inspector are correctly mentioned.
• To ascertain that the officer who has authorized the survey has jurisdiction over the case
or over the premises.
• To consult and be defended by a legal practitioner of his choice as per article 22(1) of the
Constitution. The counsel may also b present during survey proceedings [Nandini Satpati vs.
P.L. Dasi AIR 1978 SC 1025].
L. Duties of Person Present in the premises
He should provide the Income Tax Authority following facilities –
• Facility to inspect books of accounts and documents.
• Facility to inspect cash, stock and other valuable articles.
• Facility to inspect books of accounts and documents.
• To furnish such information as may be required in any other matter, which may be useful
in proceedings of the Income Tax Act.
• Offer clarifications that may be necessary.
M. Physical search during the Survey not permitted
The authorities conducting survey do not have right to taken physical search of any person.
There is a specific right gives for physical search in search & seizure provisions under section
132(1)(B)(iia). Practically the survey party will request the persons surveyed to keep all
their belonging in their pockets on the table and then they see the belongings. If person
denies to fulfill this request, then the survey party cannot take his physical search.
N. Impounding of Books of accounts
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The powers to impound any books of account can be exercised only after recording the
reasons to do so. The books of accounts can be retained for a period of ten days ( excluding
the holidays). For retaining the same beyond the period of ten days, the approval of the
Chief Commissioner or Director General has to be obtained.
O. Removal of assets
During the survey the income tax authority cannot remove any cash, stock or any other
valuable things. CIT v. Mool Chand Salecha (2002) 124 Taxman 898/ 256 ITR 730 (Raj.)
P. Consequences of non co-operation
S.Section 6 of section 133A empowers that authorized officer to invoke the provision of
section 131 (1) in case of non-cooperation on the part of assessee. Alternatively, If an
assessee who is being surveyed does not co-operate, either in respect of inspection or
verification mentioned above in sub-section (1) or does not supply or share the information
with the surveying officer and if the officer feels that he is deliberately avoiding such an
inspection or evades to furnish the information or to answer the question which are
material, it is likely that the survey officer may approach his superiors for authorizing a
search under section 132. All this will cause greater difficulties to him. Therefore the
assessee should co-operate fully with the survey team in respect of all matters connected
with the survey namely, inspection, verification, furnishing of information and answering
the statements recorded by the survey party.
Q. Surveys u/s 133A(5) of the Act
Survey at the time of functions and ceremonies To detect the unaccounted money being spent in extravaganza the income tax authority has
the powers to call for the details of the expenditure incurred. The information can be
obtained after such function, ceremony or event from the assessee who has incurred the
expenditure. The information can also be obtained from a person who is in possession of
such information. The statement of the assessee or that of such other person can be
recorded. The statement so recorded can be used in evidence in the proceeding in the Act.
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The concerned authority on the basis of the information gathered or the statement
recorded by him may make addition under section 69C for unexplained expenditure.
However in view of the above case, the onus of proving the incurring the above expenditure
lies on the assessing officer and no addition can be sustained when made on estimated
basis only. The wordings of sub section (5) empower the authority to verify the expenditure
of an assessee, therefore it can be inferred that this sub-section does not apply to those
who are not assessees.
R. An Income Tax Inspector has the following limited powers:a. To inspect the books of account or other documents,
b. To place marks of identification on the books or account or other documents inspected by
him
c. To enquire regarding the expenditure incurred in any function, ceremony or event and to
record a statement.
The inspector of income tax can act only up to the extent of authority given to him by the
authorized authority under section 133A and such empowered authority can authorize
inspector only for limited purpose. The inspector when authorized under section 133A,
then he can require proprietor, employee or any other person who may at that time and
place be attending to afford him the necessary facility to inspect such books of account or
other documents as he may require and which may be available at such place.
S. Powers cannot be given to Inspector
The Inspector can act and exercise the powers only to the extent he is authorized by the
empowered authority. The Inspector of income tax cannot be authorized to exercise
following powers and purpose:
(i) To make an inventory of any cash, stock or other valuable article or thing checked or
verified by him and
(ii) To record the statement of any person which may be useful, for, or relevant to any
proceeding under this Act. [ITO vs. Jewells Emporium (1994)48 ITD 164 (Ind.)]
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Further the Inspector cannot be authorized to require any proprietor, employee or any
other person attending such place.
(i) To afford him the necessary facility to check or verity the cash, stock or other valuable
article or thing which may be found therein and
(ii) To furnish such information as he may require as to any matter which may be useful for,
or relevant to any proceedings under this Act.
T. Statements recorded
It is commonly found that income tax authorities record the confessional statements and/or
obtained admission from person surveyed. [Polat Marmo Agglomerates Ltd vs. Union of
India (1994) 73 ELT 536 (Raj.)]. [Ambalal vs. Union of India (1983)13 ELT 1321 (SC)]. [Orient
Enterprises vs. Collector (1986) 23 ELT 507 (Tri)].
Section 133A only permits the income tax authority only to record a statement of any
person which may be useful but does not authorize for taking any sworn in statement.
Paul Mathew & Sons v. CIT (2003) 129 Taxman 416 (Ker).
The Hon’ble High Court of Madras in the case of Commissioner of Income tax vs. S. Khader
Khan Son (2008) 214 CTR 589 has held that Section 133A does not empower any IT
authority to examine any person on oath, hence, any such statement has no evidentiary
value and any admission made during such statement cannot, by itself, be made the basis
for addition. This view is clearly supported by CBDT Circular dated 10.03.2003.
Hon ’ble Delhi High Court in the case of
CIT Vs M/s Dhingra Metal Works
(2010TIOL693HC Del-IT) held as
1. From a reading of Section 133A, it is apparent that it does not mandate that any statement
recorded u/s 133A of the Act would have evidentiary value. In the High Court’s view, for a
statement to have evidentiary value, the survey officer should have been authorised to
administer oath and to record sworn statement. This would also be apparent from Section
132(4) of the Act. From the perusal of section 132(4), it is apparent that while Section
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132(4) of the Act specifically authorizes an officer to examine a person on oath, Section
133A does not permit the same;
2. Moreover, the word 'may' used in Section 133A(3)(iii) of the Act clarifies beyond doubt that
the material collected and the statement recorded during the survey is not a conclusive
piece of evidence by itself;
3. In any event, it is settled law that though an admission is extremely important piece of
evidence, it cannot be said to be conclusive and it is open to the person who has made the
admission to show that it is incorrect;
Hon’ble Supreme Court of India, Different High Courts and Tribunal are having considerate view
that in absence of corroborated evidence a confession/ admission by way of statement could
not attain evidentiary value in the eyes of law. It is settled that if the department willing to use
statement, department has to prove it with other evidences and assessee is free to prove it
contrary/against the department. In my opinion statement gives only clue to prepare or made
up case against the assessee for example a cup of tea required raw tea, milk and sugar but
without fire all these things cannot cocked good tea. Raw tea can leave its flavor, and colour
but not aroma with fresh water and will take long time and will not provide tea satisfaction. In
the same way statement is a helping verb, which required verb (corroborative evidence) to
complete sentence. Statement can utilize by the clever assessee in his favour because
statement is interpretable.
U. Legal assistance during survey
Law does not permit an assessee to insist the tax authorities not to conduct survey till
arrival of the Tax Consultant irrespective of an Advocate, Chartered Accountant or a Tax
Practitioner. However, an Assessee may request and if permitted may call for, to assist in
proper conduct of the survey. Section 288(1) of the Act provides that any assessee, who is
entitled or required to attend before any Income-tax authority or the Appellate Tribunal in
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connection with any proceeding under the Act, otherwise than when required under section
131 to attend personally for examination on oath or affirmation, may subject to the other
provisions of section 288 attend by an authorized representative.
The said section does not entitle an authorized representative to attend the survey
proceedings. The said section does not help in seeking personal presence in survey
proceedings.
Practically it has been experienced that after persuasion the consultant is
allowed to be present but he is not allowed to interfere in the proceedings.
V. Chits/ slips found during survey:
a. When there chits /slips found during the survey the issue comes up is if these chits/ slips
belong to the assessee. Second can these chits/ slips can be called as documents. Third is
the figures in these chits / slips without any narrations or details represents income the
assessee. These issues are answered in para 23 & 24 of 39 ITD 183 (Delhi) in the case of
Ashwani Kumar V ITO.
b. There is nothing in 133A unlike u/s 132(4A) which presumes that whatever is found is
belonging to the assessee. More over all things physically present inside the place of a
person may not be in that person’s control & possession. For proving possession it is
necessary to show that the person concerned had the intentio possessendi.
c.
If the slips/chits can be called as documents is also an issue. Document has been defined
in section 3(18) of the General clauses Act to include any matter written, expressed or
described upon any substance by means of letters figures or marks or by more than one
of those means which is intended to be used or which may be used for the purposes or
recording that matter. If the slips/chits do not indicate whether the figures refers to
quantities of money or quantities of goods and if so which side represents receipts and
which side represents outgoing. Where there is no narration the chits can be called, as
dumb documents without indicating any meaning cannot be treated as document.
W. Surrender of amounts during survey
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It is a common experience of the assessee whose premises are surveyed under section 133A
of the Income Tax Act, 1961, that irrespective of whether any apparent discrepancy in cash,
stock or books of account is found or not, they are asked to make surrender towards
concealed income. They do so by referring to section 132(4) and the Explanation 5 to
section 271(1) (c) assuring him that if he so surrenders he will not be subjected to penalty,
etc. But such is not the correct position of law. The immunity granted under the Explanation
5 to section 132 and not under section 133A. Delhi Tribunal in Amir Chand v. ITO – 49 ITD
606 held that penalty u/s 271(1)(c), Explanation 5 cannot be pressed into service while
dealing with a case of survey u/s 133A but is applicable only in search proceedings u/s 132.
The proper course for the assessee under such circumstances is to assure that he will
reconcile the discrepancy noticed by the surveying authorities or he will return the amount
representing the discrepancy as his income of the current year.
X. Whether a computer containing books of accounts or data can be impounded?
As per section 2(12A) “books or books of account” includes ledgers, day books, cash books,
account books and other books, whether kept in written form or as print out of data stored
in floppy disc, tape or any other form of electro magnetic data storage device”. Therefore,
it seems that the computer cannot be called as books of account or article. One may argue
that computer cannot be impounded.
Y.
DISCREPANCY IN STOCK:
This is one of the most common and major problem faced by the assessee during survey
and in subsequent assessment proceedings. It may be in the form of excess stock or
shortage in stock.
Income Tax authority normally values excess stock at market value, instead of the actual
cost, i.e. the amount invested/utilised to acquire such excess stock, for the purpose of
determination of additional income. One needs to consider the accounting treatment of
such excess stock, implications of provisions of section 40A(3) as such excess stock could
represent purchases in cash out of undisclosed income and implications of section 69C
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with regard to disallowance of unexplained expenditure. Reasons for excess stock may be
due to calculation of lower GP rate than as per records, certain purchases for which
deliveries are received but bills are not received, certain sales are made but delivery is not
dispatched. Certain materials received for job work or on sale or return basis, Certain
stock which is obsolete which may be overvalued by the authorities, goods received on
consignment, difference in valuation.
Similarly shortage of stock may be due to
consumption, samples sent to customers, pilferage, mis-appropriation, theft, non-delivery
of goods purchased, goods send on consignment, difference in valuation.
If the reasons for discrepancies are brought on record at the time of survey, there may not
be much difficulty during the course of assessment
In case of shortage, normally income tax authority treats it as undisclosed sales and the
sale value is declared as income. The assessee can content that only the profit element
included in such sale should be taxed. The accounting treatment of this is very important
as it can change the percentage GP, it may affect Sales Tax, Excise & other levy.
[51 TTJ (Del) 743, 28 TTJ(JP) 128, 201 ITR 608 (Cal), 100 CTR 204 All 258 ITR 654, 60 ITD
531 (Mad), 40 ITD 180 (JP), 66 TTJ 695 (Pune).]
Z. DISCREPANCY IN CASH: This discrepancy arises due to difference in physical cash available and balance as per
Books of Accounts. Excess cash may be due to cash sales yet to be recorded, assessee’s
personal money lying in business premises, recovery from debtors, advances received or
other receipts remaining to be recorded for the past few days, money received for safe
keeping. Generally such excess cash, being unexplained, is treated as additional income.
Similarly shortage in cash may be due to withdrawal by partners/ proprietors, which is yet
to be recorded, pending entries of payments made, advances given etc. Generally even in
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cases of shortages a declaration of income is obtained from the assessee. 30 Taxman 389,
27 TTJ ITO 170 (All).
AA. INCOMPLETE BOOKS AND RECORDS AT THE TIME OF SURVEY
In many of the cases, at the time of survey, the books and records are incomplete or not
written at all. By and large identification marks are placed by the income tax authority on
the basic documents. However some documents might go unnoticed or may be received /
obtained subsequently. In such cases the Assessing Officer raises an issue whether books
of accounts produced by assessee are reliable for determining his correct income and thus
may reject the same. The Assessing Officer cannot reject the books prepared on basis of
genuine documents merely on the ground that the books were incomplete on the date of
survey.
AB. Treatment of undisclosed turnover
During the course of survey some material may lead to existence of undisclosed turnover.
In such a case, it is important to keep in mind the fact that for every unaccounted sale
there must be corresponding unaccounted purchase without which sale is not possible. If
the assessee is in a position to prove that purchase cost of goods sold has not been
recorded in the regular books of account, the whole of sales proceeds cannot be treated as
income but only the income component embedded in the unaccounted sales can be liable
to tax. Again here proviso to section 69C is to be considered carefully. [CIT v. S. M. Omer
– 201 ITR 608 and Ashok Kumar Rastogi v. CIT – 59 Taxman 82.]
AC. Treatment of income declared without specifying the nature thereof
When declaration of income is made without specifying the nature of income, then such
income may be taxed, under the head ‘Income from other sources’. It is advisable to
specify the nature of income disclosed because if facts indicate that the income is
generated in business, a case then can be made out to get it taxed as business income
and benefits of depreciation and other deductions can be availed.
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AD. Retraction of Statements
A statement made during survey operations is normally binding on the person who made
the statement only if it is voluntary and without threat, undue influence,
misrepresentation, coercion or misunderstanding. If that were so, it would not be binding
on the person making the statement. However, if he claims that the statement is not
voluntary, onus would be on him to prove the same and must show to the authority
concerned the reasons leading to making the statement.
Besides, after the survey, when the person making declaration finds that the declaration is
not substantiated with facts found, it should be retracted within a reasonable time. For
instance when certain facts by nature take time to be available, then time taken for
retraction in such cases may be held to be justified. On the other hand, when a declaration
is made to buy peace and not retracted within a reasonable time, its retraction later on
may not be efficacious.
Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala – 91 ITR 18 held
that an admission though is an important piece of evidence cannot be said to be conclusive
and it is open for the person making admission to show that it is incorrect.
Similarly, Mumbai Tribunal in Pushpa Vihar v. Assistant Commissioner of Income Tax –
48 TTJ 389 after considering its own judgment in Kishore A.Meswani (ITA No.7161/B/87
dated 7.8.1990) as also the Supreme Court judgment in Krishna v. Kurushetra University
– AIR 1976 SC 376 held as under:
“that merely on the basis of assessee’s offer for being taxed, the assessment cannot be
sustained. The Apex Court in the case of Krishna v. Kurushetra University (supra) has held
that any admission made in ignorance of legal rights or under duress cannot bind the
maker of the admission. It is an accepted position that what is admitted by the party to be
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true, must be presumed to be true, unless the contrary is demonstrated. However, mere
admission cannot be bedrock or foundation of an assessment. It is always open to the
assessee who made the admission to show that what he admitted was not correct. Thus,
it can be said that the admission made by a person is relevant in deciding the matter. But
it is not always conclusive. The person who admitted the fact is at liberty to explain or
clarify the circumstances and the nature of statement and also the correct facts. It is well
settled that the effect of an alleged admission depends upon the circumstances in which it
was made. Therefore, it can be said that an admission is the best evidence that Revenue
can rely upon and though not conclusive, is decisive of the matter unless successfully
withdrawn and proved erroneous.”
AE. Precaution during Survey & after Survey
The Assessee should not be unduly influenced by the pressure tactics exerted by the
survey team and must maintain his mental state cool and observe the following points:
(a) The assessee must satisfy himself about the identity and genuineness of the
person
conducting the survey and for this he must ask for his identification or may contact his
superior to find out the real facts. He may also ask for the copy approval of the Joint
Director or Joint Commissioner for verification and return.
(b) The assessee and the concerned persons must co-operate with the official and try to
give all the available facts. Any evasive tactics on
the part of the assessee may lead to
search and seizure operations by the department.
(c) The assessee, in order to avoid the production of books of account or documents or
stock or cash or any other asset, should not take up a plea that they are laying at
residence. Such a statement may prove to be suicidal and invite the authorities at his
residence because of his own foolishness.
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(d) If during the course of survey, discrepancies are found, as for instance the actual cash
does not tally with the amount in the books of account, the assessee shouldn’t get panicky
but should try to reconcile the difference and give appropriate explanation to the official to
his satisfaction.
(e) As the books of accounts and other documents and valuable things can be impounded
only on non-cooperation by the assessee, he must cooperate with the income-tax authority
conducting the survey.
(f) Surrender of any income or asset as income in a statement recorded under section 133A
should be avoided, as no immunity is available under Explanation 5 to Section 271(1)(c) as
advocated by survey team. Even if pressed, the assessee should avoid surrendering of any
income during the course of survey. Ultimately if any income is surrendered, the income so
surrendered should be included in the current year's income to be returned.
(g) If the authorised representative is not present during survey operations, the assessee
must keep and preserve copies of the inventories, statements etc. and to contact his Tax
Advisor immediately on completion of survey. The Assessee would be running a great
degree of risk if he hides or conceals such material aspects, which were detected by survey
party in survey. If any of the statements are not available, they must be gathered from the
Income Tax authorities as they are bound to be used against the person surveyed during
the course of assessment by the concerned official.
(h) The Assessee must disclose all the material facts to his Tax Advisor and act as per the
best advice of his Tax Advisor and to do any other act or step which may be in the facts and
after considering the prevalent circumstances.
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(i) If assessee feels that officials of the survey party exceeded their jurisdiction, send an e
mail to the Chairman CBDT(chairman@incometaxindia.gov.in ) during the survey or
immediately after the survey. It will help the assessee from the repercussion of the survey.
AF. Tax Authorities should refrain from doing the following acts:

To remove or seize cash, stock-in-trade and other valuable article or thing etc. found
during the course of the survey.


To harass and resort to coercion and related tactics.
To exert pressure on the assessee to declare and surrender exorbitant amount under
the pretext that there would be no liability for interest, penalty etc. if the assessee
surrendered as per the sweet will of the survey team.


To collect cheque for tax applicable to amount of declaration.
To act in a manner which is against the provisions of law or travel beyond his
jurisdiction?


To interrupt incoming telephone calls or to deny usage of telephone etc.
To physically search person or the persons present at the place of survey and to stop
ingress or exit of any person inside the place at the time of survey.

Not allowing meals, rest, medical facility whenever required.

Detaining of employees

Not giving copies of statements.

Breaking lock of any cupboard or room.

Not to carry police with them.

Not to accompany data operators & TA’s, Stenos & peons etc.
Important Case Laws and References
• CIT v. Manorajyam (1995) 54 ITD 116 (Coch-Trib)
It was observed that survey party is not empowered under Section 133 A, to draw inferences
and conclusion to support its report in addition to collection of the required information.
• Sugan Chand Vinod Kumar v. CIT (1989) 175 ITR 273(Raj)
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It was held that where no reasons for impounding the books were recorded under section 131
(3), the impounding would be in contravention of the legal provisions and therefore not
justified.
• Dr. Vijay Pahwa v. Dy. CIT (1996) 84 Taxman 416(Cal)
The Calcutta High Court imposed a personal penalty on the leader of the survey party for
arbitrary exercise of power under section 133 A. As summons under Section 131 (1) can be
served only in the case of obstruction by the person concerned or when some sort of hindrance
is put up by him but in the instant case there was no pending adjudication where the
summoning power can be used at all. Further, it can be said that the assessee's books were
seized, without any apparent authority. The assessing Officer and authorities do not have any
power to interrupt the ordinary peaceful citizens of the country in any manner they like by
utilizing the large powers given to them without keeping themselves strictly in the four corners
of those large powers.
• Rajkumar Jain v. Asstt. CIT (1994) 50 ITD 1(All-Trib)
He relied on the decision of Hon'ble Punjab & Haryana High Court in case of M/s Kim Pharma
(P) Ltd. V. CIT, ITA No.106 of 2011 (O&M) wherein the Court held that in case of surrendered
income brought forward losses can not be set off under sections 70 & 71 of the Act against the
surrendered income.
CIT Vs M/s Dhingra Metal Works (2010TIOL693HC Del-IT)
1. From a reading of Section 133A, it is apparent that it does not mandate that any statement
recorded u/s 133A of the Act would have evidentiary value. In the High Court’s view, for a
statement to have evidentiary value, the survey officer should have been authorised to
administer oath and to record sworn statement. This would also be apparent from Section
132(4) of the Act. From the perusal of section 132(4), it is apparent that while Section 132(4) of
the Act specifically authorizes an officer to examine a person on oath, Section 133A does not
permit the same;
2. Moreover, the word 'may' used in Section 133A(3)(iii) of the Act clarifies beyond doubt that
the material collected and the statement recorded during the survey is not a conclusive piece of
evidence by itself;
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3. In any event, it is settled law that though an admission is extremely important piece of
evidence, it cannot be said to be conclusive and it is open to the person who has made the
admission to show that it is incorrect;
CIT vs. Uttamchand Jain 320 ITR 554 (Bom),
it was held the retracted confession can be relied only there is independent and cogent
evidence to corroborate the statement.
Paul Mathews 263 ITR 101 (Ker) and Kader Khan 300 ITR 157 (Mad)
For a statement to have evidentiary value, the survey officer should have been authorised to
administer oath and to record sworn statement as under s.132 (4). While s. 132(4) specifically
authorizes an officer to examine a person on oath, s. 133A does not permit the same.
Vinod Solanki vs. UOI Civil Appeal No. 7407 of 2008 arising out of SLP (C) No. 3537of 2008
dated
18th
December,
2008
UOI
(233)
ELT
157
(S.C.))
(i) The retracted statement must be substantially corroborated by other independent and
cogent evidences, which would lend adequate assurance to the court that it may seek to rely
thereupon;
(ii)
The initial burden to prove that the confession was voluntary in nature would be on the
Department.
(iii) The burden is on the prosecution to show that the confession is voluntary in nature and
not obtained as an outcome of threat, etc. if the same is to be relied upon solely for the
purpose
of
securing
a
conviction.
(iv) With a view to arrive at a finding as regards the voluntary nature of statement or
otherwise of a confession which has since been retracted, the Court must bear in mind the
attending circumstances which would include the time of retraction, the nature thereof, the
manner in which such retraction has been made and other relevant factors. Law does not say
that the accused has to prove that retraction of confession made by him was because of threat,
coercion, etc. but the requirement is that it may appear to the court as such.
Hon’able Supreme Court of India, Different High Courts and Tribunal are having considerate
view that in absence of corroborated evidence a confession/ admission by way of statement
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could not attain evidentiary value in the eyes of law. It is settled that if the department willing
to use statement, department has to prove it with other evidences and assessee is free to
prove it contrary/against the department. In my opinion statement gives only clue to prepare
or made up case against the assessee for example a cup of tea required raw tea, milk and sugar
but without fire all these things cannot cocked good tea. Raw tea can leave its flavor, and
colour but not aroma with fresh water and will take long time and will not provide tea
satisfaction. In the same way statement is a helping verb, which required verb (corroborative
evidence) to complete sentence. Statement can utilize by the clever assessee in his favour
because statement is interpretable.
The last and most important thing is that one should not panic when survey parDisclaimer:
Views expressed hereinabove are my personal views and readers are advised to see relevant
sections, Board’s Circulars and Court Judgments before forming their opinion on any of the
contents of this article.
Always advise your clients to pay due taxes as no country can run and progress without taxes.
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