Direction for not collecting payment of taxes etc. in any form during search u/s 132 or survey u/s 133A of Income Tax Act, 1961 - Income Tax - F. No. 299/105/2014-IT (Inv. Ill)/162

F. No. 299/105/2014-IT (Inv. lll)/162 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes ARA Centre (Ground Floor), E-2; Jhandewalan Extension, New Delhi - 110055 Dated, the 10th July, 2017 To All Principal Chief Commissioners of Income Tax (CCA) All Directors General of Income tax (Inv) The Director General of Income Tax (I CI) Sir/Madam, Sub : Direction for not collecting payment of taxes etc. in any form during search u/s 132 or survey u/s 133A of Income Tax Act, 1961 This is brought to the notice of all concerned that the Hon ble Delhi High Court has passed stricture in its judgment dated 15.5.2017 in the case of Digipro Import Export Pvt. Ltd vs. Union of India in W.P. (C) 3070/2017 CM No. 13393/2017, in a case under Central Excise Act, 1944, against collection of post-dated or undated cheques purportedly given voluntarily by assessee as tax payable on income declared voluntarily during visit to premise . 1.1. The Court has particularly noted that there was no provision to do so under Central Excise Act 1944 or Rules or any circular or notification. It further noted that such an act of collecting payment by undated or post dated cheques meant, inter alia, that the visiting officials had the power to assess and decide on the spot what was the evaded amount, to collect payment themselves by cheque. The Court has referred to an earlier judgment in the case of Capri Bathaid Private Limited vs. Commissioner of Trade Taxes 2016 (155) DRJ 526 where it was held, The tax demand crystallizes only upon an assessment. In any event, even if a dealer volunteers to deposit the disputed tax amount, he should be asked to deposit the said amount in the counter designated for that purpose. There is no question of the members of the search team collecting such payment, 1.2. The Hon ble High Court has flagged its concern on the issue to the Central Vigilance Commissioner by noting, The CVC is probably aware that there is a pattern in several Departments of the Government which are entrusted with powers of collection of duties and taxes, and vested with search and seizure powers, resorting to such illegal practice of collecting cheques some time undated and some time even cash from persons and entities who may have evaded payment of taxes and duties. 1.3. The CVC, in its letter dated 15.6.2017 to CBDT, has written, While handling several other cases relating to Income Tax Department, it has been noticed that similar situations arise in Income Tax Department also when authorized officers conducting searches/ surveys collect post-dated cheques toward future demands or as self-assessment tax/ advance tax . 2. The matter has received serious attention of the Board. Neither the Income Tax Act, 1961 nor any instruction issued by the Board authorizes any Income Tax authority to collect payment of taxes etc. in any form during search/survey in respect of income of past period(s) disclosed during search/survey or as advance tax or self assessment tax. What is emphasized (Para - 55 and 56 of Survey manual and Para - 3.126(7) of Search Seizure Manual read with Board s instruction vide letter nos. 286/2/2003-IT (Inv. II) dated 10.3.2003 and 286/57/2002-IT (Inv. II) dated 3.7.2002 is collection of evidence even when assessee has admitted concealment of income. 3. In view of the above, it is reiterated that no Income Tax authority shall collect payment of tax, interest, penalty etc of any nature in any manner including cheque under any circumstance during search/ survey/ other investigation and they will restrict themselves only to the actions permitted under the law. If assessee wants to pay any tax against past income disclosed in statement u/s 132(4)/133A or advance tax on current income, search/ survey officials shall not accept such cheques and, instead, guide or advise the assessee to deposit the cheque(s) in bank. 4. Income Tax authorities approving search/ survey shall mention following words in the authorization letter, This authorization shall not confer any authority to collect payment of any tax in any manner including cheque in respect of any income even if disclosed by a person in statement during action under this authorization . 5. It will be the responsibility of the authorized officer conducting survey/ search to ensure that this is followed and they will be held accountable for lapse. Any deviation in this regard shall be viewed seriously. 6. This may be circulated widely among all officials of the Department. (Syamal Datta) Director Investigation III, CBDT Tele-Fax: 011-23547587 Email: [email protected]