Guidelines for conducting survey u/s 133A(5). - Income Tax - 1865/1990

INSTRUCTION NO. 1865/1990 Dated: November 14, 1990 Sub-section(5) of section 133A of the Income-tax Act, 1961 empowers an Income-tax authority to make enquiries and collect information in respect of expenditure incurred by a person in connection with any function, ceremony or event. The Income-tax authority is empowered to record statements of the person concerned or other persons, who are likely to possess information with regard to the expenditure incurred, after the function, ceremony or event is over. 2. In the context of the above, Member(Inv.) has already emphasised the need to make more effective and frequent use of the provisions of section 133A(5). Each Director of Income-tax(Inv) has been directed to conduct 50 such surveys during the year 1990-91. 3. To enable the income-tax authorities to conduct such surveys in a more effective and meaningful manner, it is necessary to lay down certain guidelines which may be of use to the officials conducting such survey. While actual enquiry and conducting of survey would depend upon the facts and circumstances of each case and the ingenuity exhibited by the concerned income-tax official, the guidelines laid down in the succeeding paragraphs would be of assistance. 4. It is not possible to give an exhaustive list of functions, ceremonies and events which can be covered under section 133A(5). However, a list of some such functions, ceremonies and events is given below:- (1) Marriage and other connected functions and ceremonies. (2) Inauguration of new business. (3) Inaugurations of new houses. (4) Birthday and other such functions. (5) Social parties and gatherings like New year Eve Parties; filmpremiers/functions to celebrate launching or success of a film etc. (6) Functions and ceremonies to celebrate festivals and occasions like Diwali, Holi, New Year, Christmas which, inter-alia, involve expenditure on costly gifts. (7) Functions for introduction/launching of new commercial products etc. 5. For the purpose of identifying and selecting a case to be covered by survey under section 133A(5), intelligence may be gathered from the following sources: (i) Printing presses primarily engaged in printing of invitation cards. (ii) Prominent hotels and guest houses. (iii)Prominent clubs. (iv) Barat Ghars/Marriage halls. (v) Caterers. (vi) Decorators. (vii)Tent houses and tent suppliers. (viii)Prominent band agencies. (ix) Musical parties, entertainment parties etc. Intelligence from the above sources may also be gathered with regard to advance booking made, amount of advance paid, mode of payment of advance, name and address of the person who has made the booking or on whose behalf the booking has been done nature and extent of services to be availed of. It is needless to mention that such an enquiry has to be conducted very discreetly. An attempt should be made to select such cases where substantial expenditure is likely to be incurred. 6. Although intelligence gathering, which would help in identifying a function, ceremony or event to be selected for survey, may precede the functions, ceremony or event, the actual survey, including recording of statements of the assessee and other witnesses, is to be conducted only after the function, ceremony or event is over. This would be in accordance with the provisions of section 133A(5). The time gap between recording of statements of various persons should, however, be kept minimum without at the same time inviting any hostilities. The statements should be matched and compared with one another with a view to detecting discrepancies and ascertaining the correct factual position. 7. The information, which would help in quantifying expenditure incurred on the function, ceremony or event, may be collected in respect of expenditure on the following items: (a) Invitation cards. (b) Sweets etc. distributed alongwith invitation cards. (c) Stay of guests in hotels, guest houses, clubs, houses taken on hire, Barat-ghar/marriage halls etc. (d) Catering and food supplied by the hotels, clubs, caterers, sweets shops etc. (e) Illumination, decoration and furniture taken on hire. (f) Travelling expenses including air travel, rail travel, engaging of buses, taxies etc. (g) Hiring of bank. (h) Engaging of musical parties, singers, stage artists, qawalls etc. (i) Photography including video photography. (j) Gifts and presents given to the bride, bridegroom and guests. (k) Purchase of jewellery. (l) Expenses in connection with travelling and stay of bride and bridegroom immediately after marriage. 8. In the statement of the assessee, recorded immediately after the function, ceremony or event is over, it is necessary to make him commit on the quantum of cash gifts received by him so that the amount admitted is not inflated subsequently for the purpose of explaining the expenditure. 9. The enquiries conducted and information collected should be followed by further investigation by collecting evidence from outside agencies who have supplied goods and services in connection with the function, ceremony or event. This will include collecting of information from the concerned printing press, sweet shop, hotel, club, barat ghar/marriage hall, decorator, tent supplier, florist, electric shop engaged for illumination work, Indian Air lines/Vayudoot, taxi and bus operator, photographer, jewellery shop etc. Information regarding the amount finally paid, mode of payment of the amount and the services availed of should be collected alongwith necessary evidence. 10. After the expenditure incurred on the function, ceremony or event has been quantified, the concerned assessee may be confronted with the same. Requisite enquiry with regard to source of funds for expenditure should also be made from him. A logical conclusion should be drawn with regard to the quantum of expenditure incurred by the assessee and also the source thereof. 11. It may also be pointed out that Surveys under section 133A(5) are to be conducted only by the Investigation Wing of the Department. If the Commissioner of Income-tax is of the opinion that powers under section 133A(5) should be exercised in respect of any particular function, ceremony or event, he may have the survey conducted through the Investigation Wing. 12. Before undertaking a survey under section 133A(5), the Assistant Director of Income-tax (Inv) should clearly record his opinion that it is necessary or expedient to collect information with regard to expenditure incurred in connection with the function, ceremony or event selected for the purpose. After the completion of survey, a report about the operation and contain the following information: (i) Name and address of the assessee. (ii) P A NO., if alloted and designation of the Assessing Officer. (iii) Object of the survey, giving nature and date of function, ceremony or event. (iv) Brief naration of work done and material found during survey. (v) Details of statements recorded. (vi) Assessment Year(s) for which the information will be relevant. (vii) Comments. The self contained report should thereafter be put up to the Director of Income-tax (Inv). through the concerned Deputy Director of Income-tax(Inv). The Director of Income-tax (Inv) should then give his specific recommendation about the assessments to be taken up for scrutiny and should forward the report to the concerned Commissioner of Income-tax under intimation to the Director General of Income-tax(Inv) 13. Enquiries in connection with survey under section 133A(5) should be supervised by the Directors of Income-tax(Inv). These cases should be monitored by the Directors General of Income-tax (Inv). 14. The Directors General of Income-tax (Inv). should, in appropriate cases, issue press releases giving broad details of the results achieved without mentioning the names of the persons covered in the survey under section 133A(5). No name of any official should be mentioned in any press release. 15. As already directed, a quarterly report giving the number of cases covered under section 133A(5) by each Director of Income-tax(Inv). and the names of the cases alongwith the quantum of expenditure found to be incurred should be furnished by the Directors General of Income-tax(Inv) so as to reach the Board by the 15th of the month following the quarter. Details of note worthy cases should also be brought to the notice of the Board through separate reports.