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The search and survey operations conducted by the Income tax department, commonly known as Income tax raids (‘raids’), has always been one of the worst nightmares of businessmen, high earners and corporates. Some reasons for this fear being heavy tax and penalty payments, possible devastating impact on the business, mental harassment faced during such raids etc. Most of the fears for such operations 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 relating to the raids.

Survey Procedures

Generally action under section 133A is called ‘Survey’. However, the term Survey is not defined in the Act although section 133A of the Act 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 seizure of cash or Jewellery or stock or other valuable article or things, taking statements on oath, searching residential premises etc. 

Powers of income tax authorities while conducting the survey

• To enter the place of business or profession 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 kept 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) and retain  books of accounts noticed during survey, after recording reasons Such impounded books can be retained in his custody for 10 days  after which he is required to take the approval of the Chief Commissioner of Director General. (It may be remembered that survey teams have no power to seize assets). .

• To make an inventory of any cash, stock and other valuables checked by him, to record the statement of any person, to collect information regarding 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 fulfillment of certain condition of section 132(1).

• Normally survey is concluded on the same day, however, where 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 his/her statements may be useful or relevant to any proceeding under the Act. – it may be noted here that, similar to search and seizure, the tax officer cannot make cross examination of the person whose statement is being recorded or force the assessee to make any statement about his income or minimum income.

•  Income tax authorities cannot take a personal search of a person during survey.

•  It may remembered that only an authority having jurisdiction over the assessee can do 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 Income tax authority to conduct survey, to co-operate during survey, to maintain equilibrium, to maintain peaceful atmosphere.

• To assist in preparing inventory of books of account or documents or cash or stock in trade or any other article or thing which 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 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 the orderly manner so as to let the authorities perform their duties expeditiously.

• To keep and preserve copies of the inventories, statements etc. and to contact the Tax Consultant immediately on completion of survey.

• To truthfully disclose all the material facts and to be guided by the sound advice of his CA / Tax consultant.

• To obtain a receipt for books of account, document etc impounded during survey.

• To do any other act or steps or retract or which may be deemed desirable by the CA / Tax consultant on the facts and in totality of the circumstances.

•  Not to hide or conceal such material aspects, which stand detected from the material, found in the survey.

DOS AND DON’TS DURING THE RAIDS

The following do’s and don’ts in nutshell can assist in reducing the impact of the dreaded procedure of raids-

• Maintain proper and updated books of accounts

• Ensure that the benefit of 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. One should be very cautious and careful while answering the question and the person questioned should not panic.

• It is important to be co-operative and cordial with the search and survey teams.

Dr. Suresh Surana

Chartered Accountant and founder of RSM Astute Group

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