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Two important powers conferred on the income-tax authorities to ensure compliance of the provisions of the Income-Tax Act, 1961 (Act) and for detection of tax evasion avoidance and unearthing of black money are powers of search and survey. The power to search is of wide amplitude, infringing upon the privacy of citizens, but has been held to be constitutionally valid in wider public interest.
The word ‘survey' has not been defined in the Act. In the context of income-tax law, it means collection of data or information for the purposes of the Act.
The main objectives of survey are to widen the tax-base by including new taxpayers; to gather information about the existing taxpayers to know if they are discharging their tax obligations correctly; to do on-the-spot checking of the correctness of account books, inter-alia, with regard to inventory, cash, etc. (However, no power to impound or remove stock, cash, etc., has been conferred); to ensure that day-to-day transactions are promptly recorded in the account books); and to collect data, details, information, etc., relevant for income-tax assessments.
SURVEY JURISDICTION
As per Section133A(1), an income-tax authority may enter any place within the limits of the area assigned to him, or any place occupied by any person in respect of whom he exercises jurisdiction, or 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 exercise 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.
Ordinarily, the power of survey doesn't confer a right to make the survey of a residential premise. In case, during the course of survey, the authority finds that certain books of account or documents or stocks are not available at the place of business and the assessee states that these are available at his residence, the authority will be entitled to enter the residence for the purpose of inspecting such books of account, documents or the stocks of the business.
The survey can be carried out only after sunrise and before sunset during business hours. On entering the place, the authority may, inter-alia, impound any books of account, documents or record inspected by him, after recording the reasons for doing so.
The power relating to impounding of accounts is subject to the following conditions:
No account books, etc., can be impounded without recording reasons for the same; the impounded books of account and documents can be retained for a period of 10 days only and for retention beyond 10 days, permission of the Chief Commissioner or Director General of Income Tax is necessary.
The power of retention is not unbridled. In the case of Bawa Gurmukh Singh & Co. v. ITO (2011) 12 Taxman.Com 91 (P&H), the high court has held that though the officer conducting survey can impound books of account or other documents and retain it beyond 10 days after approval of the Chief Commissioner, the said power isn't an absolute power, and it is subject to judicial review like any other discretionary power of an administrative authority.
(The author is a former chairman of CBDT.)
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