Guidelines regarding conduct of survey under Section 133 A of Income Tax Act, 1961 - Income Tax - F. No. 299/105/2014 - Dir. (Inv. IIl)/241

F. No. 299/105/2014 - Dir. (Inv. III)/241 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, 9th August, 2017 To All Principal Chief Commissioners of Income Tax (CCA) All Directors General of Income tax (Investigation) The Director General of Income Tax (I CI) Sir/ Madam, Sub : Guidelines regarding conduct of survey under Section 133 A of Income Tax Act, 1961 1. The Central Board of Direct Taxes ( Board ) had issued Survey Manual in 2007 containing detailed guidelines on survey under Section 133A of Income Tax Act, 1961. The Directorate of Income Tax (Vigilance) has recently conducted a system study as a measure of preventive vigilance in pursuance of frequent receipt of complaints with regard to conduct of survey, The findings of the system study indicate that the legal provisions contained in the statute and guidelines relating to survey under Section 133A issued by the Board are not being followed properly by the field formations. The Chairman, CBDT, has directed that proper guidelines based on the findings of the study should be issued. 2. Survey is an intrusive action and hence it is required to be exercised strictly in accordance with the provisions of the IT Act, 1961 and guidelines issued by the Board. In view of the above, the following issues are highlighted reiterating the guidelines already issued in this regard by the Board: (i) Para - 22 of Survey Manual, 2007 states, The Officer proposing to conduct a survey should record the reasons for conducting the survey in a Preparatory Note and obtain the approval of jurisdictional Joint/ Additional Commissioner of Income Tax . No approval shall be given by Joint/Additional Directors or Joint/Additional Commissioners of Income Tax without Preparatory Note in any case and no survey shall be conducted without approval of Joint/Additional Directors or Joint/Additional Commissioners of Income Tax as stipulated in Proviso below Section 133A. (ii) Para - 63 of Survey Manual, 2007 states, After completion of survey, the first work is of sending the survey report. The format of survey report is at Annexure -F. Where the survey is conducted by the officers working in the charge of Commissioner of Income Tax, it must be ensured that the copies of the survey report are sent to the Commissioner of Income Tax/ Director of Income Tax (Inv)and the Range Addl./ Joint Commissioner of Income Tax. Where the survey is conducted by the Directorate of Income Tax (Inv), copies of the survey report should be forwarded by the authority conducting the survey (through the Joint/ Addl. Director in-charge of the Investigation Unit) to the jurisdictional Commissioner and the Range Addl./Joint Commissioner under intimation to the Director of Income Tax (Investigation) within 48 hours of the conclusion of the survey . It is reiterated that such Preliminary Survey Report must be submitted in all cases invariably within the time prescribed in the Survey Manual. (iii) Para - 65 and 66 of Survey Manual, 2007, give details of post-survey investigation procedure. Para - 67 requires monthly survey report by DGsIT/ CCsIT in prescribed form to be submitted to the Board. The form has been recently revised to capture wider details for carrying out a meaningful analysis. The modified form has been circulated to all Pr. CCsIT/ DGsIT (Inv)/ DGIT (I CI) vide Board s letter no. 299/105/2014/Dir (Inv. III) dated 19.5.2017. The guidelines contained in the above mentioned Para - 65 to 67 and Board s letter may be scrupulously followed. (iv) It is found that in many cases the final survey reports are not prepared in time or sent by the Income Tax authorities conducting survey. As a result, the outcome of survey action is either not reported or not acted upon for assessment. To ensure that proper action is taken and outcome of survey is reported, all Income Tax authorities, conducting survey u/s 133A, shall submit Final Survey Report within 60 (sixty) days of conducting the survey to the Range/Unit head along with a copy to the jurisdictional Assessing Officer (if survey is conducted by an Income Tax Authority other than jurisdictional Assessing Officer) with the following details upon which the Range/Unit head shall examine correctness and send it to the DGIT/CCIT through Principal DIT (Inv)/Principal CIT;. a. Name of the case and PAN b. Date of survey c. Amount of undisclosed income detected during survey (in Rs. lakh) d. Nature of concealment detected including modus operandi and evidences gathered (in brief) e. Whether the three points for manual selection of survey cases for compulsory scrutiny, as contained in Board s Instruction issued every year in the matter of selection of cases for compulsory scrutiny, are fulfilled in the case. This will enable the DGIT/Pr. CCIT send qualitative report to the Board in a better manner. (v) Para - 58 of Survey Manual, 2007, provides, Detailed inventory should be prepared of all the books/documents and valuables found at the premises . It has been reported that in many cases it is not done. In view of the above, it is reiterated that the above may be scrupulously followed. (vi) The importance of collecting evidences in support of statement or findings of survey has been emphasized in, inter-alia, Para - 55 and 56 of Survey Manual, 2007. Para - 24 of Survey Manual, 2007, states, The Income Tax authority authorizing or conducting a survey should be clear about the objective of the survey, i.e., the type of information proposed to be obtained .... Accordingly, focus of survey should be kept on gathering relevant evidences during survey and not merely obtaining disclosure without supporting evidences. (vii) Proviso (a) to Section 133A(3)(ia) provides that reason for impounding books of accounts and other documents found in course of survey should be recorded. Similarly, it should be reported in preliminary survey report as to which of the inventorised books of account or other documents have not been impounded and the reason for not impounding those. Such non-impounding shall be examined by the Joint/Additional Directors/Commissioners of Income Tax and, if necessary, he may direct for issuing summons u/s 131 calling for such books of accounts and other documents for impounding u/s 131(3). (viii) Instruction for Compulsory manual selection of cases for scrutiny issued by the Board contains direction to compulsorily select all assessments pertaining to survey u/s 133 A excluding those cases where books of accounts and other documents were not impounded and returned income, (excluding any disclosure made during the survey) is not less than the returned income of preceding assessment year. However, where assessee retracts the disclosure made during the survey, such cases will not he covered by this exclusion . It has been found by the Directorate General of income Tax (Vigilance) that in 94.2% of the sample cases of survey examined during die system study, no scrutiny proceeding was initiated on the ground that there was no impounding of books or documents. In this context, it may be noted that as per the said Instruction, exclusion of survey cases from scrutiny requires fulfillment of three conditions, namely: . a. books of accounts and other documents were not impounded b. returned income (excluding any disclosure made during the survey) is not less than the returned income of preceding assessment year ; and c. assessee has not retracted the disclosure, made during the survey, Accordingly, it is emphasized that the requirement of fulfillment of all three conditions is a conjoint one and hence survey cases cannot be excluded from selection for the reason at (a) alone. The final survey report must contain a finding as to the fulfillment of the above three points in the case. (ix) While handing over charge, the officers must prepare Handing over Note especially in respect of survey cases undertaken in the charge which should contain brief details of the surveys conducted in which scrutiny assessments including re assessment proceedings are pending or to be initiated. 3. This may be circulated to all officers in your region/ charge. Yours faithfully, (Syamal Datta) Director Investigation III, CBDT Tele-fax : 011-23547578 Email : [email protected]