Search and Survey

A Note On Search & Surveys

The search and survey operations conducted by the Income Tax Department are one of the worst nightmares of businessmen & individuals who have high income. Main reasons being the fear of huge    demands ,penalty  mental harassment etc.

Here I am trying to bring to your attention the powers of the department  , rights and duties of assessee etc. In a summarized form so that one can face the search and survey procedure confidently. Thus the assessee can ensure that the department is not misusing its powers & that you have rights.  

Search & Seizure Proceedings

In a search ,the department usually covers all the business premises of the assessee (in India) and the residential premises of the important & key persons of the assessee like the directors of the company etc. It can be extended up to   2-3 days. It may also cover the residential premises of the relatives, friends, business associates etc.

The Powers Of The Officer Authorized To Conduct Search Includes

       I.            Enter and search anywhere he suspects that the books of account, jewellery, documents, money, bullion etc are kept.

    II.            He or she can break open any door, locker, box, safe etc (If the key is not available.)

 III.            Search anyone who got out or about to get into or anyone inside the building or place.

IV.            Require any person who is found in possession or control of any books of accounts or other documents maintained in the form of electric record to provide the authorised officer the necessary facility to inspect such document/books.

   V.             Seize any such books of accounts , other documents, money, bullion , jewellery or other valuable article or thing found as a result of such search. (Provided that stock in trade, properly explained cash, assets disclosed in wealth tax return etc cannot be seized but a note can be made of the same.)

VI.            Place marks of identification on any books of accounts or other documents or make extracts or copies there from.

VII.            To make a note on inventory of any such money, bullion, jewellery or other valuable article or thing.

VIII.            The authorised officer may seek the help of police to perform his duties .

  

Rights of The Person Being Searched         

     I.            To see the warrant of authorisation duly signed and sealed by the issuing authority.

 II.            To verify the identity of each member on the search party.

III.            To make personal search of all members of the search party before the start of the search and on the conclusion of the search.

IV.            To have at least two respectable and independent residents of the locality as witness.

 V.            To insist on personal search of ladies being taken only by a lady with strict regard to decency.

VI.            A lady occupying an apartment being searched has a right to withdraw before the search party enters, if, according to custom, she does not appear in public.

VII.             To call a medical practitioner in case of emergency.

VIII.            To allow the children to go to school , after checking their bags.

IX.            To have the facility of having meals at the normal time.

 X.            To inspect the seals placed on various receptacles, sealed in course of search and subsequently at the time of reopening of seals.

XI.            Every person who is examined u/s 132(4) has a right to ensure that the facts so stated by him have been recorded correctly.

XII.            To have a copy of the panchanama together with all the annexures.

XIII.            To have a copy of any statement that is used against him by the department.

XIV.            To have inspection of the seized books of account, etc., or to take extracts therefrom in the presence of any of the authorised officers or any other person empowered by him.

XV.            To make an application objecting to the approval given by the CIT for retention of books and documents beyond 180 days from the date of seizure.

XVI.            To make an application under section 132(11) to the CIT against an order under section 132(5)

XVII.            To get back the assets found to be in excess of the liability determined in the order under section 132(5).

Duties of the Person Searched

I.                   To allow free and unhindered ingress into the premises.

II.                To see the warrant of authorisation and put signature on the same.

III.             To identify all receptacles in which assets or books of account and documents are kept and to hand over keys to such receptacles to the authorised officer.

IV.            To identify and explain the ownership of the assets or books of account and documents found in the premises.

V.               To identify every individual in the premises and to explain their relationship to the person being searched. He should not mislead by impersonation  If he cheats, it is an offence punishable under section 416 of the Indian Penal Code.

VI.            Not to allow or encourage the entry of any unauthorised person into the premises.

VII.         Not to remove any article from its place without notice or knowledge of the authorised officer. If he secretes or destroys any document with the intention of preventing the same from being produced or used as evidence before the court or public servant, he shall be punishable according to section 204 of the Indian Penal Code.

VIII.      To answer all queries truthfully and to the best of his knowledge. He should not allow ant third party to either interfere or prompt while his statement is recorded by the authorised officer.

IX.            To affix his signature on the recorded statement, inventories and the panchanama.

X.               To ensure that peace is maintained throughout the duration of the search and to co-operate with the search party in all respects so that the search action is concluded at the earliest and in a peaceful manner.

XI.            Similar co-operation is expected even after the search is over, so as to enable the authorised officer to complete necessary follow-up actions at the earliest.

Some Important Facts to be known by the Assessee

I.                   Business premises cannot be sealed by the search team. This idea has been confirmed by the honorable high court in Shyam Jewellers Vs Chief Commissioner (1992) 196 ITR 243(All)

II.                A blank warrant of authorisation makes the search illegal. This idea has been confirmed in Sibal(HL) Vs CIT (1976) 103 ITR 606 (P&H)

III.             The competent authority to issue the search authorisation shall at least be of the commissioner rank.

IV.            The department has no power to convert or realize the seized assets.

V.               Statement of anyone in control or possession of documents books etc., may be recorded and be used against the assessee at the time of assessment.

Survey

A survey is considered to be milder than search proceedings as it does not involve confiscation of cash, jewellery or other assets, taking statements on oath, or searching residential premises etc. Survey usually takes place at the place of business or profession during business hours.

Powers of Income Tax Authorities while conducting Survey.

I.                   To enter the place of business during business hours and an other places, only after sunrise and before sunset.

II.                To enter the place other than the business premises, if the assessee states that cash, stock, records and books of accounts relating to the business are lying there.

III.             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 books of accounts noticed during survey, after recording reasons.

IV.            To make an inventory of any cash, stock and other valuables checked by him.

V.               To record statements of any person.

VI.            To collect information regarding nature and quantum of expenditure incurred in connection with personal functions and events like a wedding ceremony etc..

VII.         A survey can lead to search only on the basis of information collected in survey, subject to fulfillment of certain conditions of section 132(1).

VIII.      Normally survey is concluded on the same day, however where situation warrants it can be continued on the next day also.

IX.            Authority can take a statement of anyone available at the place on survey.(not on oath) also the tax officer cannot force the assessee to make any statement about his income.

X.               Only an authority having jurisdiction over the assessee can do survey.

Rights and Obligations of an assessee being Surveyed.

I.                   To permit entry to the IT officers after satisfying their identity.

II.                To afford facility to the income tax authority to conduct survey, to co-operate during survey, to maintain equilibrium, to maintain peaceful atmosphere.

III.             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.

IV.            To furnish the requisite classification so as to let the income tax authority satisfy as to the assets found duly accounted for.

V.               To give statements truthfully and completely and avoid giving false or incorrect or vague answers.

VI.            To sign the inventories and statements after carefully reading and vouching its correctness and obtaining its copies.

VII.         To extend facility so as to complete survey as expeditiously as possible.

VIII.       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.

IX.            To keep the place in an orderly manner so as to let the authorities perform their duties expeditiously.

X.               To keep and preserve copies of the inventories, statements, etc. and to contact the tax consultant immediately on completion of survey.

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

XII.         To do any other act or steps or retract or whatever is deemed desirable by the CA/Tax consultant on the facts and in totality of the circumstances.

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

Important Facts to be known by the Assessee.

I.                   Department has no power to impound stock-in-trade, cash or jewellery.

II.                The department may impound books of accounts and other documents but cannot keep it for more than 10 days without obtaining the permission of the Chief Commissioner of Income Tax.

III.             Department cannot go to the residential premises of the assessee or its related parties unless cash or stock or books of accounts are maintained there, according to the statement of assessee.

IV.            The competent authority to issue an authorisation for survey shall atleast be of the joint-commissioner rank.

Some Do’s and Don’ts during Raids.

I.                   Ensure that all your rights are availed.

II.                Ensure that the department is not exceeding its power.

III.             Maintain proper books of accounts.

IV.            Properly account all investments.

V.               Statements recorded on oath are very crucial hence be very careful & cautious while making them.

VI.            Properly co-operate with the search and survey teams.

VII.         Inform your CA/Tax consultant immediately after the raid so as to discuss the facts and take appropriate actions.

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