BY VIMAL PUNMIYA, FCA, LLB.
I) POWER TO ENTER PREMISES:
Places where an Income Tax Authority can enter- by virtue of section 133A (not withstanding anything contained in the Income Tax Act), an Income Tax Authority [i.e., Commissioner, Joint Commissioner, Director, Joint Director, Assistant Director, Deputy Director or Assessing Officer, Tax Recovery Officer] may enter the following places-
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 or
c) Any place in respect of which he is authorized 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.
? Income Tax Authority can enter the aforesaid place at which a business/ Profession is
carried on whether or not that place is the principal place of the business or profession.
No prior notice is required- N.K MOHNOT (v) CIT [1995] 215 ITR 275 (MAD)
? Joint Commissioner, who authorizes survey, is fully empowered under section 133A to
remain present at the spot of survey for supervising and doing all that is necessary for the
purpose of the Act- N.K MOHNOT (v) CIT [1999] 104 Taxman 64/ 240 ITR 562
(MAD).
? No action under the aforesaid provision (with effect from June 1, 2003) shall be taken
by the Assistant Director or a Deputy Director or an Assessing Officer or a Tax
Recovery Officer or an Inspector of Income Tax accept with the prior approval of the
Joint Director or the Joint Commissioner, as the case may be.
NEED FOR ENTERING PLACES MENTIONED ABOVE:
On entering the aforesaid place, the Income Tax Authority may require any
proprietor, employee or any other person attending or helping in carrying on such
business or Profession-
a) To afford him necessary facility to inspect such Books of Accounts or other documents
as he may require and which may be available at such place:
b) To afford him necessary facility to check or verify the cash, stock or other valuable
articles or things which may be found therein: and
c) To furnish any such information as he may require as to any matter may be helpful for
or relevant to any proceeding under the Act.
II) POWER TO ENTER BUSINESS PREMISES:
The power of the Income Tax authority extends only to enter the Business Premises or
place of profession.
i) It is not necessary that the place where the survey is carried on is a principal place of
business.
ii) Business Premises would also include a place from where business need not be carried
on by the assessee but at such place the Books of Accounts, documents, cash stock;
valuable Article or thing is kept.
iii) The survey action has to be initiated during the business or working hours i.e. say after
the sunrise and before the sunset but once properly initiated it can carry on through the
night. There is no time limit in such case
215 ITR 275 (MAD) N.K MOHNOT (v) CIT (1995)
iv) Since survey is restricted to Business Premises, a survey cannot be conducted on days
when the Business is closed, e.g. Festive occasion, Sundays etc.
III) POWER TO ENTER RESIDENTIAL PREMISES:
? The power of survey does not confer a right to make the survey of the residential
premises.
? The Department has also issued a circular No. 7D dated 3.05.1967, according to which
the place where an entry can be made under section 133A must not be the place where
the assessee does not carry on any business.
? However if an assessee whose business premises is surveyed states that the books of
Accounts, or stock and/ or cash are available at the residence then in such case the power
of survey extends to such premises and thus survey can also be carried out at residential
Premises. Further survey can also be carried out at Residential Premises in the case the
same is shown as business address
IV) POWER TO ENTER LOCKED PREMISES:
An entry can be made only if the premises are open and that too during the hours
specified for the Business purposes.
The Income Tax Authority cannot force open any Premises where the business or
profession is carried on in case it is found locked.
V) POWER TO ENTER THIRD PARTY PREMISES:
If the Books of Accounts, documents, or any part of the cash or stock; or any other
valuable Article or thing of an assessee is stated to be kept in any place other than the
place of Business/Profession, the Income Tax Authority can survey such a place but
same may be for a limited purpose for obtaining information relating only in respect of
that assessee.
VI) POWER TO IMPOUND BOOKS:
The Income Tax Authorities with effect from 1st June 2002 are empowered to
impound and retain in its custody, Books of Accounts and other document inspected
during the survey, after recording the reasons for doing so.
i) In view of this position surveying authorities are given direct powers of impounding
the Books or documents.
ii) However such Books or documents shall not be retained for more than ten days
(exclusive of holidays) without obtaining the approval of the chief Commissioner or
Director General.
iii) Such Books of Accounts cannot be retained indefinitely “whatever might be the extent
of Power available with the surveying authorities.
DAYARAM AGARWAL vs. ITO (2003) 261 ITR 419 (ORRISSA)
In the context of impounding of Books, the following situations shall arise:
i) whether it is incumbent on the part of survey authority to provide a copy of reasons recorded by them to impound Books of Accounts and other documents on the spot?
ii) can the assessee ask for the same on the spot or subsequently?
iii) whether one line reason that the books are required for further investigation without specifying details would amount to sufficient compliance to this provision?
iv) whether the assesseee is entitled to copy of the order extending time for further retention of such books?
Ans: These questions are obviously of importance in the context of the amended provisions, where the power of impounding is conferred by statute on the survey authority with effect from 1st June 2002. These questions need to be answered taking into consideration the decision of Supreme Court in the case of CIT vs. ORIENTAL RUBBER WORKS (1984) 145 ITR 477 (SC). It is case dealing with the extended retention of books, Documents seized pursuant to a search conducted under section 132. In this case it was held that the retention could be lawful if only the conditions as contemplated in the statute are fulfilled to the effect that:
a) reasons in writing must be recorded by the authorized Officer or the Income Tax
Officer concerned seeking the Commissioners approval.
b) The Commissioners approval for such extended retention must be obtained.
If this decision could be the guiding yardstick in respect of harsher provisions than
survey, the answers to the question are:-
i) The survey authority has to record the reasons of satisfactions reached by them to
impound the books of Accounts.
ii) The asseessee can ask for the copy of the same on the spot and even subsequently. Copy
is normally not provided on the spot.
iii) One line reasoning is not sufficient and the reasons should be specific for
sufficient compliance of the provisions. In the case of MRS RUMONA RAHMAN vs.
VOI (2004) 265 ITR 16 (GAUHATI) where the accounts books were impounded on
the ground that they “were found during the course of survey u/s 133A of the Income
Tax Act, 1961” were held to be no reasons and the accounts books were ordered to be
returned.
iv) The assessee shall be entitled to the copy of the approval extending the time for further
retention of books with the reasons recorded for the same.
VII) IMPOUNDING OF THE COMPUTER CONTAINING THE DATA AS TO
THE BOOKS OF ACCOUNTS :
The Computer containing the data as to the books of Accounts available in the business premises cannot be impounded. , The definition of “Books of Accounts is contained in the section 2 sub- section (12A) of the Act. It reads “Books or books of account” include ledgers, day books, cash books, account books and other books, whether kept in the written form or as print out of data store in floppy disc, tape or any other form of electro magnetic data storage device”. Therefore a computer cannot be called as a book of account or article. The survey authority can only insist on the information stored in the computer disc by a floppy and/ or by way of printout. Therefore it is not correct to impound the computer. As per section 43 of the Information Technology Act, 2000, if the computer is tempered by operating upon it, the provisions of the Act suggests that there could be a penalty and the possibility of an assessee invoking these provisions should not be ignored by the department, as section 81 of the said Act has overriding effect over all other Acts.
Thus from the aforesaid it is inferred that where the accounts are maintained on computer the Income Tax authority has the power to take a back-up of the same on a CD, Floppy etc. Besides this copies of incriminating ledger Accounts can also be printed out wherein the assessee may be asked to put marks of identification under his signature so that later on the evidence can be used against him.
It is to be noted that no power has been granted for seizure of cash, stock or other
valuable article during survey.
The scope of the enquiry is very wide. However it does not give authority to seize any
valuables
SHYAM JEWELLERS vs. CHIEF COMMISSIONER (1990) 196 ITR 243(ALL)
VIII) POWER TO SEAL BUSINESS PREMISES
The sealing of Business Premises during the course of survey u/s 133 or under any other provisions of Income Tax Act is not permitted as it would amount to violation of the fundamental rights guaranteed under Article 19(i) g 300 A of the constitution of India.
SHYAM JEWELLERS & ANOTHER vs. CHIEF COMMISSIONER (ADMINISTRATION) UP& OTHERS (1992) 196 ITR 243(ALL).
IX) POWER TO COLLECT TAX:
It is a well settled position of law that a competent Income Tax Authority can inspect
the business premises and record the statements under the provisions of section
133A. Such an authority cannot demand collection of Tax on the alleged undisclosed
Income then and there. Such an authority is required to send the statement of the
material collected to the Assessing Officer if he himself not the Income Tax
Authority carrying out the survey operation. It is to be noted that there is also no
provision for permitting a cross examination of the person, whose statement is
recorded during the Survey.
RAMESHWARLAL MALI vs CIT (2002) 256 ITR 536 (RAJ)
X) POWER TO TAKE THE COPIES OF BOOKS OF ACCOUNTS, DOCUMENTS
etc.
The surveying Authorities has the power to take the copies of the Books of Accounts,
Documents etc, copies of incriminating ledger Accounts are also printed out and the
assessee is asked to put marks of identification under his signature so that later on the
evidence can be used against him.
