Surveys u/s 133A of the Income Tax act, 1961 are made by Income Tax Department regularly. Survey is different than search and seizure operation which is commonly known as income tax raid. But whenever there is Survey, the people often call it Income Tax raid, which is completely wrong. There are lot of differences in search and seizure operation and survey operations.
Surveys are either made by the assessing officer under whose jurisdiction the person is assessed or by the Investigation Wing of the Directorate. The surveys conducted by the Directorate Wing are very difficult to be handled and require a lot of skill and patience.
Time and Place of Survey:-
The survey can take place only during business hours of the assessee and at business place only. Therefore, survey cannot be made at the residence unless business activities are conducted from the residence. In case of survey being made in case of other places, it can be made only during sun rise and sunset. However, survey once commenced can continue up to mid night or even next day.
Seizure:-
During course of survey, the officer has no power to seize any valuable such as cash, Jewellery etc. Seizure of valuables can be made only during course of search and seizure operations only. However, the books of account and documents found during survey operation cannot be seized.
Impounding of documents and books:-
During course of survey operation, the income tax people can impound the documents and books of accounts found from the premises. In case of computer, they have power to impound the CPU or hard disc or they can impound the pen drives or CDS etc. However, the survey team shall put identification mark on the impounded documents and shall give copy of the same to the assessee as soon as the survey is over.
Proceeding during Survey:-
As soon as the survey team enters, they show their identity. Otherwise, the assessee has also every right to ask for the identity of the survey team. Immediately after entering the premises, the survey team takes full control and may take body search. They will immediately count the cash money available in the safe or Almirah. Thereafter, they will verify each and every file or document found there. Simultaneously, they will also operate the computer and may take some of the print outs from the computer. Survey team will take physical stock of the goods and make valuation of the same on the basis of documents. Thereafter, the survey team records the statement of the person who is being surveyed and make inventory of the impounded documents and books of accounts.
Care to be taken by assessee:-
During course of survey operation, the assessee must take care in respect of the following:-
1) He must cooperate with the income tax authorities.
2) If certain discrepancies are found during course of survey operations, the assessee should try to reconcile the same as far as possible.
3) He should see that cash lying in his office tallies with cash in hand as per books. In case, it does not tally, he should reconcile the same or should give suitable reply.
4) He should see that stock is taken properly otherwise, he should immediately object the stock taking method. At the end of stock taking, he should see that valuation of stock is properly made. Over valuation of stock and undervaluation of stock will be treated as his undisclosed income. If the stock has not been properly valued, either he should protest immediately and should request the officer for re-stock taking or he should sign the copy of the inventory “under protest”. If he is not allowed to do so, he should immediately file a letter next day to the higher authority in respect of stock taken by the survey team as on date of survey.
5) If more than one business is carried on in a single premises, identification of stock, cash and other valuables in respect of such business is of paramount importance.
6) He should inform his tax consultant about survey operation.
7) He should furnish necessary documents required by the survey team.
Recording of statement:-
At the end of the survey operation, statement of the assessee is recorded. The assessee must reply all the queries correctly and properly where he is sure about it. But in case he has any doubt, he should either give vague reply or should reply like this, ”I do not remember” or “ I shall tell only after going through the relevant documents” or ‘I do not know” . The replies should not be contradictory, false or wrong. It the assessee does not understand the query raised by the taxman, he should ask twice and understand the query properly before he makes reply. Statement plays an important role in post survey proceedings.
Post survey Steps to be taken by assessee:-
The assessee should immediately write down the contents of his statement immediately after survey operation is over and should meet his consultant. He should go to the Income Tax Department with his Tax Consultant to meet to Income Tax Authorities and should ensure them that he will fully co-operate them and he should also seek their co-operation. He should also request for obtaining Photostat copies of the impounded documents as well as the print out or the copy of the CD or pen drive immediately. He should furnish all the documents and details required by the officer during post survey proceeding.
Disclosure of Income:-
The survey team often insists for disclosure of income during course of survey proceedings. Sometimes, the tax men ask for a very high amount to be disclosed. In such situation, the assessee should never admit and should protest strongly. But sometimes, such amount to be disclosed is asked on the basis of seized material, the assessee should admit the same. If the amount for disclosure relates to current year, the assessee may admit the same during course of survey operation. Otherwise he should always request the concerned officer to make disclosure only after going through the impound documents properly. The disclosure of income avoids litigation and gives peace to the assessee who is surveyed.
Whether CA or Lawyer of the Assessee can be surveyed:-
The Income Tax department cannot make survey on the CA or the lawyers of the assessee only because the survey operation is made on his client. It has been held by High Court of Orissa in U.K. Mahapatra & Co VS. ITO (W.P. ( C) NO 14018 of 2008 that the pre-condition for conducting survey u/s 133A in the premises of a Chartered Accountant , lawyer, tax practitioner in connection with the survey of the client is that the client in course of survey must state that his books of accounts and records are kept in his office. However, the independent surveys can be made on the CA or Advocates or Tax Practitioners.
Post survey Proceedings:-
After survey proceedings are over, the assessing officer will select the case for scrutiny. If required, he can also re-open the assessment u/s 148 for previous assessment years. If unwarranted additions are made during course of assessment, the assessee can file appeal before the appellate authorities. The assessee can also approach settlement commission if he feels that he may be liable for penalty and prosecution on the basis of impounded documents.
Surveys of ostentatious social functions:-
From time to time, the Income Tax Department launch drive against ostentatious wedding ceremonies and other social functions which often involve blatant use of tax-evaded money. Such surveys are made after such functions are over. Such surveys are made at the business premises of the person in whose family such ceremonies were performed. Apart from this, surveys in this connection are also performed at the business premises of Event Managers, Decorators, and caterer etc. to collect informations about various other social functions.
Conclusion:-
The assessee must take full care in handling survey operation. He must keep account properly, keep cash in hand as per cash reflected in cash book and should keep stock as per stock book. The day to day accounting should be made. He should furnish his return of income correctly and also within due date. He should also pay his advance tax correctly and within due date. The survey proceedings are painful and may lead to search and seizure operation so the assessee should remain alert during survey proceedings
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