The search and survey operations conducted by the income tax department, commonly known as income tax raids, have always been one of the worst nightmares of businessmen, high earners and corporates.
The reasons for this fear include heavy tax and penalty payments, possible devastating impact on the business, mental harassment faced during such raids, etc. Most of the fears are valid and the negative impacts are generally unavoidable, though the impact can be much lesser if the assessee has reasonable knowledge about various aspects of the raids.
Survey procedures
Generally, action under section 133A is called ‘survey’. However, the term survey is not defined in the Act, although the section refers to the power of survey. In the context of the Act, the term ‘survey’ means to collect information and data for the purpose of the Act on the spot, at the place of business or profession.
Although surveys are not feared as much as search and seizure operations, often it is considered to be a step towards such operations. Surveys are considered to be milder than search procedures mainly because this procedure does not involve confiscation of cash, jewellery or other assets, taking statements on oath, searching residential premises, etc.
Powers of income tax authorities while conducting the survey
- To enter the place of business during the business hours and in other places, only after sunrise and before sunset.
- To enter the place other than the business premises, if the assessee states that the cash, stocks, records and books of accounts relating to the business are lying there.
- In case of books of accounts — to place marks of identification on the books of accounts, to take extracts from such books of accounts and documents or records and to impound (confiscate) books of accounts noticed during survey w.e.f. June 1, 2002, after recording the reasons (remember, the survey teams have no power to seize assets). Budget 2008 proposes to extend the rebuttable presumption, which is currently applicable to search operations, also to books of account and other documents found in the possession or control of any person in the course of a survey operation.
In simple words, records in the books of account, other documents found during the survey operations will stand as facts unless proved otherwise. This amendment will take effect retrospectively from June 1, 2002.
- To make an inventory of any cash, stock and other valuables checked by them, to record the statement of any person, to collect information regarding the nature and quantum of expenditure incurred in connection with personal functions and events like a wedding ceremony and any other functions, to discover and production of evidence, etc - A survey can lead to a search only on the basis of information collected in survey, subject to fulfilment of certain condition of section 132(1). Normally, a survey is concluded on the same day, but if the situation warrants, it can be continued on the next day also.
- Authority can take the statement of person available at the place of survey (not on oath) if it is deemed that the statement may be useful or relevant to any proceeding under the Act.
- Similar to search and seizure, the tax officer cannot force the assessee to make any statement about his income or minimum income.
- Only an authority having jurisdiction over the assessee can conduct a survey.
Rights and obligations of an assessee being surveyed
- To permit entry to the IT officers after satisfying their identity.
- To afford facility to the tax authority to conduct survey, to cooperate during survey, to maintain equilibrium, to maintain a peaceful atmosphere.
- To assist in preparing an inventory of books of accounts or documents or cash or stock-in-trade or any other article or thing that may be found in the course of survey and to see that such inventories are detailed, exhaustive and authentic.
- To furnish requisite classification so as to let the income tax authority satisfy as to the assets found duly accounted for.
- To give statements truthfully and completely and avoid giving false or incorrect or vague answers.
- To sign the inventories and statements after carefully reading and vouching for its correctness and obtaining its copies.
- To extend facility so as to compete the survey as expeditiously as possible.
- To let the survey continue after business hours and to see that it is concluded on the same day and is not required to be resumed on the next date.
- To keep the place in an orderly manner so as to let the authorities perform their duties expeditiously.
- To keep and preserve copies of inventories, statements, and to contact the tax consultant immediately on completion of survey.
- To disclose all the material facts and to be guided by the advice of his CA or tax consultant.
- To undertake any other act or steps or retract or which may be deemed desirable by the CA or tax consultant on the facts and in totality of the circumstances.
- Not to hide such material aspects, which stand detected from the material found in the survey.
Dos and don’ts during the raids
The following dos and don’ts can assist in reducing impact of the dreaded procedure of raids.
- Maintain proper and updated books of accounts.
- Ensure that the benefit all the reliefs are availed.
- Copies of important documents like returns of income/ wealth filed, assessment orders, tax payment challans should be readily available.
- Investments made in assets should be properly accounted and supporting evidence should be available to substantiate the investment made.
- Statements recorded at the time of search are very crucial. Be cautious and careful while answering questions and person questioned should not panic.
- To be cooperative and cordial with search and survey teams.
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