SEARCH, SEIZURE AND SURVEY

About This Presentation

Title:

SEARCH, SEIZURE AND SURVEY

Description:

All India Chartered Accountants Society 6th Annual Workshop on Direct Taxes SEARCH, SEIZURE & SURVEY CA Rohit Jain Vaish Associates, Advocates * What does the Search ... – PowerPoint PPT presentation

Number of Views:866

Avg rating:3.0/5.0

Slides: 94

Provided by: Vee78

Category:

more less

Transcript and Presenter's Notes

Title: SEARCH, SEIZURE AND SURVEY

1
All India Chartered Accountants Society 6th
Annual Workshop on Direct Taxes
SEARCH, SEIZURE SURVEY
CA Rohit Jain Vaish Associates, Advocates
2
SEARCH, SEIZURE AND SURVEYA WALKTHROUGH

Search - Stages in search proceedings
Stage 1 Authorization of search
Stage 2 Actual conduct of Search Proceedings
Stage 3 Post Search Proceedings/ Assessment
Practical aspects of search
Penalty in search cases
Survey Proceedings

SEARCH - AN INTRODUCTION
Means to look for or seek out
Mechanism for gathering evidence regarding
evasion of tax and for unearthing black money
Invading the personal/ office premises of any
taxable person by surprise
THREE STAGES OF SEARCH UNDER SECTION 132
Pre-search enquiries and authorization
Actual conduct of search
Post Search - Assessment of income

4
Stage - I

Pre search enquiries
and authorization

Pre-search enquiries/ information
Summons u/s 131(1A)
Annual Information u/s 285BA read with Rule 114E
Private Sources/ Informers
Pre- search investigations
Authorization for search can be issued only
by a Competent Authority and
after satisfying prerequisite conditions
prescribed under section 132

Competent Authority

Director General
Director
Chief Commissioner
Commissioner

Additional Director/ Commissioner
Joint Director/ Commissioner

May Authorize
May Authorize

Assistant Director/ Commissioner
Deputy Director/ Commissioner
Income Tax Officer

Note Addl. Director, Joint Director are also
empowered by CBDT to issue authorization u/s 132
(1) refer Proviso to section 132(1) read with
Notification No. SO 2879(E), dated 11-11-2009
7

Notes / Observations
Additional Director/ Commissioner have been
authorized by retrospective amendment in section
132 w.r.e.f. 1.10.1998
To overcome following judicial precedents holding
that such authorities did not have authority to
authorize search-
Dr. Nalini Mahajan vs. DIT (E) 257 ITR 123
(Del.)
Pawan Kumar Garg 178 Taxman 491 (Del.)
Capital Power Systems Ltd. 222 CTR 47 (Del.)
Raghuraj Pratap Singh vs. ACIT 179 Taxman 73
(All.)

Notes / Observations
Vide Instruction No. 7/2003 dated 30.07.2003,
Board has issued following guidelines
(a) Searches shall be authorized only by DGIT
(Inv.) and search to be carried out in cases
where
(i) substantial unaccounted income/ assets
involved
(ii) expected concealment is in excess of Rs.
1 crore
(b) Tax payers who are professionals of
excellence should not be searched without there
being compelling reasons

Pre-requisite Conditions to authorize search
Competent Authority has,
in consequence of information in his possession,
reason to believe that either of the three
conditions contained in clauses (a), (b) and(c)
of section 132 are satisfied, which are
(a) Where any person was summoned u/s 131 or
was issued notice u/s 142(1) to produce books or
other documents and has failed to do so (refers
to facts which actually exist)
(b) Where any person will not, if summoned or
notice issued, comply with the same
(refers to belief likely to take place)
(c) Where any person is in possession of
any money, bullion, jewellery or any other
valuable article or thing which he has either
failed to disclose or is not likely to be
disclosed to the Income Tax Authorities (refers
to undisclosed moveable property)

Information
Must be something more than just rumor or a
gossip or a hunch
Some valid, definite information and not any
imaginary or invalid information
Must be authentic
Reason to believe has been analyzed in various
decisions to mean-
Belief of a reasonable man formed in good faith
and must not be mere pretence
There must be application of mind by the
competent authority
Nexus between information/ material or reason and
belief formed

Following have been held to be invalid basis
Mere knowledge about huge investment in house or
expenditure on lavish marriage/functions refer
L.R. Gupta 194 ITR 32(Del.) SLP dismissed CA
891/ 93 dated 10.8.98
Report about roaring practice or charging high
rates from customers and about standard of living
refer Dr. Nand Lal Tahiliani 170 ITR 592 (All.)
SLP dismissed 172 ITR 627 and 260 ITR 67 (Cal.)

Following have been held to be invalid basis
Mere information from CBI/Police that assessee
possess money refer Ajit Jain 242 ITR 302 (Del)
affirmed in 260 ITR 80 (SC)
Post search material cannot justify search refer
Dr. Anita Sahai 266 ITR 597 (All.), Smt. Kavita
Aggarwal vs. DIT (E) 264 ITR 472 (All.)
What are the primary contents of a Search
Warrant?
Ans. Refer Rule 112 - Form No. 45
Specifies Person
Specifies Premises
Identifies the condition on the basis of which
search is authorized
Identifies the officers authorized to conduct
search

Issues
What is the remedy if it is felt that search has
not been properly authorized?
Ans. To file writ petition challenging the
validity of search proceedings. Appellate
Authorities have no power to adjudicate validity
of the search proceedings
M.B. Lal V. CIT 279 ITR 298/ 199 CTR 571 (Del.)
Gaya Prasad Pathak vs. ACIT 162 Taxman 307 (MP)
C. Ramaiah Reddy V. ACIT 87 ITD 439 (Bang) (SB)
Promain Ltd V. DCIT 95 ITD 489 (Del) (SB)
Contra
CIT vs. Smt. Chitra Devi Soni 313 ITR 174 (Raj.)
Once search takes place, whether legal or
illegal, evidence collected can be used -
refer Pooran Mal vs. DI 93 ITR 505 (SC)

Issues
Whether search is assessee specific or premises
specific?
Ans. Search is assessee specific and not
premises specific.
Refer
Nenmal Shankarlal Parmer V. CIT 195 ITR 582
(Kar.)
Mrs. Dhiraj Suri 98 ITD 187(Del.)
Dr. Mrs. Surjit Tosaria V. JCIT 92 TTJ 338
(Del.)

15
STAGE 2

ACTUAL CONDUCT
OF
SEARCH
PROCEEDINGS

Powers of authorized officer
To enter and search the place (section 132(1)(i))
To break open locks where key not available
(section 132(1)(ii))
Search any person who is to get in or to go out
(section 132(1)(iia))
To direct facility to inspect books or other
documents (section 132(1)(iib))

Powers of authorized officer
Make inventory and/or place marks of
identification on books of account/ documents or
make extracts or copies therefrom(section
132(1)(iv) (v))
Seek police assistance (section 132 (2))
Record statement under sub-section (4)
Seize any such books of accounts, documents,
money, bullion, etc (section 132(1)(iii)).
Pass a restraint order or prohibitory order
w.e.f. 1.06.2003, stock in trade cannot be
seized at the time of search.

RIGHTS OF SEARCHED PERSON
To see warrant of authorization following
particulars must be checked -
Companies/ Directors named in the warrant
Premises specified
Designation of Competent Authority
Reason for search
Authorized Officers
In case search warrant does not contain the
requisite particulars, search can be resisted.
Aforesaid facts must be recorded somewhere for
future reference.
Searched person has a right to continue business
as usual
L. R. Gupta 194 ITR 32 (Del.)

Rights recognized by Taxpayers Charter issued by
CBDT
208 ITR (St.) 5
To see the warrant duly signed and stamped
To verify the identity of each member search
party
To make personal search of all members of search
party
To insist on personal search of ladies by ladies
only
To have two witnesses (refer Rule 112 (6) and (7))

Rights recognized by Taxpayers Charter issued by
CBDT
208 ITR (St.) 5
Allow children to go to schools
To seek medical help, if required.
To have the facility of having meals at the
normal time.
To have copy of Panchnama together with annexures
To have copy of any statement used against the
person

Duties of Person Searched recognized by
Taxpayers Charter issued by CBDT - 208 ITR
(St.) 5
To allow free and unhindered entry to the search
party
To see the warrant and sign the same
To identify and explain ownership of assets or
books of account/ documents
To identify every individual in the searched
premises

Duties of Person Searched recognized by
Taxpayers Charter issued by CBDT - 208 ITR
(St.) 5
To answer queries to the best of his knowledge
To affix his signatures on statements,
inventories and Panchnama
To ensure that peace is maintained through the
duration of search
Not to remove any article from its place without
prior knowledge of the authorized officer

SEIZURE
Seizure means forcibly taking over possession
from the owner or person who has possession and
who is unwilling to part with possession refer
Tarsem Kumar 161 ITR 505 (SC)
Only an undisclosed asset could be subjected to
seizure section 132(iii)
Refer
L.R. Gupta 194 ITR 32 (Del.)
Om Prakash Jindal 104 ITR 389 (PH)
Indiscriminate search and seizure of third party
books/ assets not permissible-
H.L. Sibal vs. CIT 101 ITR 112 (PH)
S.R. Batliboi Co. vs. DIT (Inv.) 224 CTR 369
(Del.)

Modes of Seizure
Actual Seizure
Deemed Seizure/Restraint order
(second proviso to section 132(1))
Due to physical attributes, possession of any
valuable article or thing not possible or
practicable then
order served on the person in possession of such
article or thing and
person directed not to part/ deal with the
article or thing
Such action is termed as deemed seizure

PROHIBITORY ORDER (SECTION 132(3))
Where its not practicable to seize any
books of accounts/ others documents,
money, bullion, jewellery,
other valuable article or thing
order served on person in possession of above
and
such person is directed not to part or otherwise
deal with same

PROHIBITORY ORDER (SECTION 132(3))
Does not amount to deemed seizure
Search concludes when prohibitory order is lifted
and Panchnama is prepared therefor
Such order is valid for 60 days sub-section (8A)
power to extend the period has been taken away,
w.e.f. 1.06.2002

PROHIBITORY ORDERS
Articles or things referred to in sub-section (3)
of section 132 are those which the authorized
officer was empowered to search for and seized
and no other. An asset which is already known
cannot be subject to search and seizure and
consequently, cannot be subject of an order under
section 132(3) of the Act
Ramesh Chander vs. CIT ITR 244 (PH)
Moti Lal 80 ITR 418 (All)
Sardar Praduman Singh Vs. UOI and Ors 166 ITR
115 (Del.)

PROHIBITORY ORDERS
No order can be passed u/s 132(3) where
authorized officer is in doubt whether the asset
is disclosed or undisclosed
Om Prakash Jindal Vs. UOI 104 ITR 389 (PH)

Certain assets cannot be seized
Stock-in-trade of the business cannot be
seized
Section 132(1) - 3rd Proviso
Following Jewellery cannot be seized Instruction
no. 1916 dated 11.05.94
Jewellery declared in Wealth Tax
500 gms. per married lady
250 gms. per unmarried lady
100 gms. per male member

STATEMENT DURING SEARCH - Section 132 (4)
Authorized officer may examine any person on
oath during course of search
If such person is found to be in possession of
books of accounts, documents, money, etc.
Statement can be used as an evidence in any
proceedings
Recording of Statement
Questions are normally put in order to gain
further evidence to support the findings in the
search
Correct facts must be stated or time may be
sought
Such examination may be in respect of all matters
relevant for investigation connected with any
proceedings under the I.T. Act

STATEMENT DURING SEARCH (contd.)
No obligation to make a surrender (Vide F.No.
286/ 2/ 2003 dated 10th March, 2003 Board has
advised search teams not obtain confessions of
surrenders)
Statements must be availed as an opportunity to
(a) explain disclosed assets to avoid seizure
(b) avail benefits of immunity from penalty
Right to ensure correct statement has been
recorded

STATEMENT DURING SEARCH (contd.)
Post Recording
Copy of statement not made available by the
Department
Record the contents/ statement for future
reference
To ensure correct statement has been recorded
before signing the same

CONCLUSION OF SEARCH
Right to obtain a copy of Panchnama
Must ensure that it correctly states
Company subjected to search
Premises searched
Documents/ Books found and seized
Cash seized and balance Found, seized and balance
handed over
Jewellery/ Ornaments, etc

CONCLUSION OF SEARCH
Must ensure that it correctly states
Factum of personal search of search party
Factum of closure of search
Names of persons of whom statements were recorded
Factum of assessee claiming immunity from penalty
Factum of prohibitory orders passed

35
STAGE 3

Post Search
Assessment of income

Section 132
Right to obtain photocopies of the various books
of accounts and records seized by the search
party sub-section (9)
Seized Assets to be handed over to AO having
jurisdiction over the person within 60 days of
last authorization refer sub-section (9A)
Practically an Appraisal Report is prepared by
Investigation Wing

Section 132
Seized books of accounts or other documents can
be retained up to 30 days of the assessment order
passed or upto 30 days of all the proceedings
Earlier power to retain books up to 180 days from
the date of seizure
If the person legally entitled to the books of
accounts and records, objects to the seizure, he
may make an application to the Board for return
of books of account and records sub-section
(10)
For release of disclosed assets, application for
release to be filed with 30 days of seizure
refer 132 B

Post-Search Assessment
Change in the procedure for assessment of search
cases
Block Assessment under Chapter XIV-B applicable
for searches after 1.7.95 and up to 31.05.2003
Section 153A to section 153C applicable for
searches on or after 1.06.2003
Block Assessment
Introduced by the Finance Act, 1995 for searches
on or after 1.07.95

Block Assessment
For the purpose of assessment, block period
comprised of
10 years in the case where search is made before
1.06.2001
6 years in the case where search is made after
1.06.01 but upto 31.05.03
(block period includes period upto the date of
search of the relevant previous year)
Example
Search conducted on 8.10.2002
Block Period A.Y.s 1997-98 to 2002-03 and
partly A.Y. 2003-04
( 1.04.1996 to 31.03.2002 and 1.04.2002 to
8.10.2002)

Salient Features of Block Assessment
Parallel Block and Regular Assessment
Assessment of undisclosed income on the basis
of evidence found as result of search
Section 158BC Block Assessment of person
searched
Section 158BD/BC Block Assessment of any other
person based on satisfaction of AO of person
searched that any undisclosed income belong to
that person

Salient Features of Block Assessment
Taxation at Special Rate of 60 u/s 113
Separate provision for imposition of interest and
penalty u/s 158BFA
No penalty where income disclosed in block
return and tax paid thereon

Withdrawl of Block Assessment
Block Assessment gave rise to numerous litigation
on
Whether two separate and parallel assessments can
be done?
Whether income was undisclosed income or not?
Whether income to be assessed as normal income or
undisclosed income?

Block Assessment was dispensed with by the
Finance Bill, 2003 for the following reasons
Scheme failed in its objective of early
resolution
Procedure spawned fresh stream of litigation
Scheme postulated two parallel assessment

Section 153A to 153C
Under the present scheme four sections have been
inserted
Section 153A
Section 153B
Section 153C
Section 153D

Section 153A Salient Features
Overrides sections 139, 147, 148, 149, 151and 153
AO shall issue notice to the person searched to
file ROI for 6 assessment years preceding the
year of search
ROI filed is treated as return u/s 139
AO to assess/ reassess total income for six
assessment years
Assessment/ reassessment in relation to any
assessment year -
falling within the period of such six assessment
years
pending on the date of initiation of search
shall abate

ABATE - Meaning
Blacks Law Dictionary defines the term as under
To throw down, to beat down, destroy, quash. To
do away with or nullify or lessen or diminish. To
bring entirely down or demolish, to put an end,
to do away with, to nullify, to make void.

ABATE - Meaning
K J Aiyars Judicial Dictionary, 12th Edition,
defines the term abate as under
Abate is a generic term derived from French
word Abatre and signifies to quash, to beat
down or destroy. Abate means to throw down, to
beat down, destroy or quash (Blacks Law
Dictionary, Fifty Ed.).
To diminish or take away, to prostrate, to beat
down remove or destroy also to let down or
cheapen the price in buying or selling. Encyc.
L., Stroud, p.5.

ABATE Meaning
In civil law, an abatement of a suit is a
complete termination of it. To abate a suit is to
put an end to its existence. (refer Srinibas Jena
vs. Janardan Jena, (1980) 50 Cut LT 337 (DB)).

EXAMPLE
Date of Search 2.07.2010
Assessments in progress A.Y. 2008-09 u/s
143(3)
A.Y. 2006-07 u/s 147
Pending Appeals A.Y. 2005-06 ITAT
A.Y. 2007-08 CIT(A)
Effect of Search
Proceedings u/s 153A A.Y. 2005-06 to
2010-11 6 yrs.
Abated Proceedings A.Y. 2006-07 and A.Y.
2008-09
Appellate Proceedings No effect

SECTION 153B
Limitation for assessment u/s 153A and 153C

21 months from the end of the F.Y. in which last
authorization was executed
Searched Person
21 months from the end of the F.Y. in which last
authorization was executed
Others
Later of
9 months from the end of the F.Y. in which books
handed over u/s 153C
51

Section 153C
Assessment of income of any other person
Overrides sections 139, 147, 148, 149, 151and 153
Where AO of the person searched is satisfied that
any money, bullion, jewellery or other valuable
article or thing or books of accounts or
documents seized belong to some other person
AO shall hand over the aforesaid assets/
documents to AO of such other person
AO of such other person shall proceed u/s 153A
Reference to date of search u/s153A construed as
reference to date of receipt of aforesaid assets/
documents

PREREQUISITE OF SECTION 153C
Seizure of books of account or documents or
undisclosed asset belonging to assessee is sine
qua non for assumption of valid jurisdiction
under section 153C
Vijaybhai N. Chandrani V. ACIT 231 CTR 474
(Guj.)
P. Srinivas Naik vs. ACIT 117 ITD 20 (Bang.)

PRE - REQUISITE OF SECTION 153C
Meaning of belonging to
As per Compact Oxford Dictionary, the term
belong means as under
belong -
be rightly put into a particular position or
class.
fit or be acceptable in a particular place or
situation.
(belong to) be a member of.
(belong to) be the property of

PRE - REQUISITE OF SECTION 153C
As per Blacks Law Dictionary Sixth Edition,
the term belong means as under
Belong. To appertain to to be the property
of to be a member of to be appropriate to be
own
Reference to the name of the assessee or casual
connection in the seized documents does not mean
that documents belong to the assessee refer
Vijaybhai Chandrani (supra) and P. Srinivas Naik
(supra)

Sections 153A to 153C
OTHER SALIENT FEATURES
Assessment to be completed as per normal
provisions
Taxation of income (including undisclosed income)
at normal rates
Assessment to be completed with prior approval of
Joint Commissioner section 153D
Abated proceedings revive if assessment u/s 153A
is annulled section 153A(2)
Penalty governed by section 271AAA and 271(1)(c)

SECTION 153A TO 153C - Issue
It is no longer required that addition/
disallowance must be made only on the basis of
any evidence found as a result of search as held
in the following cases
Harvey Heart Hospital Ltd. v. ACIT (2010) 36 DTR
(Chennai) (Tri.) 201
Shyam Lata Kaushik v. ACIT 114 TTJ 940 (Del)
Shivnath Rai Harnarain (India) Ltd v. DCIT 117
TTJ 480 (Del)
Contra
LMJ International Limited vs. DCIT (2008) 22 SOT
315
Anil Kumar Bhatia v. ACIT ITA No.
2660-2665/D/2009

Presumption regarding documents found during
search
Section 292C presumes that if books of accounts,
documents or any other valuable assets is found
from the possession or control of a person during
the course of search or survey then
such books or assets are presumed to belong to
that person
contents of such books or documents are presumed
to be correct
signature and contents purportedly in handwriting
of a particular person are presumed to be so
in any proceedings under the I.T. Act.

Presumption regarding documents found during
search
Comments/ Observations
Presumption is rebuttable presumption refer CIT
V. SMS Investment Corporation 207 ITR 364
(Raj.) and onus to dislodge same shall be on the
person from whose possession such seized
documents/valuables are found
Section 292C was inserted to overcome Supreme
Court decision in the case of P.R. Metrani vs.
CIT 287 ITR 209 wherein the Court held that the
identical presumptions in section 132(4A) are not
applicable to regular assessment and are
restricted to provisional assessment made earlier
under section 132(5).

Section 132B
Application of seized assets
Seized assets to be dealt with as under
Any Existing liability
Liability determined on completion of the post
search assessment
Where any disclosed asset has been seized
Application must be filed within 30 days of
seizure for release explaining the same

Section 132B
Application of seized assets
On such application such asset is to be released
within 180 days of execution of last
authorization
Any assets or proceeds thereof which remain
after meeting the aforesaid liabilities shall be
handed over to the person from whose custody the
assets were seized.

PRACTICAL ASPECTS
OF
SEARCH SEIZURE

Difficulties faced during Search
Lack of awareness about legal provisions/exemption
s
Lack of awareness about legal rights and duties
Lack of awareness about practical dos and dont
Improper accounts and/ or accounting system
Non availability of important documents

Important aspects of a Search
Covers all the business premises (all offices,
factories, etc.)
Also covers residential premises of key persons
like partners, directors, finance heads and key
employees
In case of individual/ firm - May also cover
residential premises of close relatives, friends,
business associates, etc.
Search operations may commence on any day
including Sundays/ holidays
Search may continue for days

On initiation of Search - the assessee should
Maintain cool and remain composed
Check the following facts stated in search
warrant-
Searched Person named in the warrant (i.e.
Individual/ Companies/ Directors, etc)
Premises specified
Designation of Competent Authority
Reason for search
Authorized Officers
Date of Authorization
Whether warrant completely filled up
Aforesaid facts must be recorded for future
reference

On initiation of Search - the assessee should
In case Authorization is found to be illegal -
Search should be resisted
Verify identity of Search Party and Witnesses
Avoid discussing irrelevant issues.

What does the Search Party Generally Look out
for?
Loose Papers including diaries, note books/ pads
Any Documents containing financial data
Emails, including Provisional Financial Data, MIS
Reports, etc.
Account books
Discrepancy in Cash
Discrepancy in Stock

What does the Search Party Generally Look out
for?
Production and/or Sales Records
Investments
Expenditure, particularly commission
Discrepancy in Jewellery
Details of household expenses
Lockers

Loose papers/ Documents
Third Party papers
Must be clarified during statement or otherwise
Particulars of the such third party may be given
Provisional/ Rough Documents
Factum of Provisional data must be clarified
Nature of noting must be clarified

Precautions
Document/ Paper must contain appropriate
indication of its nature like Provisional,
Estimate, Rough, Projections, etc.
Working Notes/ Provisional Data should be
periodically reviewed
Periodical review and cleansing of irrelevant
papers/ documents
Irrelevant emails should be deleted from the
system
Data on digital diaries, pen drives, etc., should
be reviewed periodically
Loose sheets or papers should be dispensed with
Unnecessary working papers/ documents should not
be retained

Account Books and Cash in Hand
Books of accounts should be updated regularly
Nature/ Sources of unrecorded transaction should
be explained like investment, gift, personal
transaction, etc.
Old Books should be updated with final audited
accounts
Proper reconciliation of cash found should be
given to avoid seizure
Nature of un-reconciled cash should be stated
like Third Party, Advances, etc.

Stock in trade
Initially assessee asked to furnish details of
Stock like shares, etc.
Item wise physical verification is carried out
Inventory of Stock in trade is prepared
Exemption from the seizure
(a) Irrespective of nature of business
(b) Even if unexplained
Precautions
Periodical physical verification of stock and
reconciliation with the books
Identification of Stock in trade to avoid seizure

Stock in trade
Precautions
Carefully oversee/ watch procedure followed by
Search Party to ensure that
Stock found is normally valued on the basis of
the purchase bills produced.
Method of valuation
Quantity
Rates applied for valuation
Arithmetical accuracy
Error must be immediately brought to the notice
of the Search Party

Jewellery
Weighment and Valuation usually by accompanying
Valuers
Carefully oversee/ watch procedure followed by
Search Party
Precautions
Following Jewellery must be identified to the
Search party
Stock in trade
Disclosed in the wealth tax return
Wealth tax return disclosing jewellery should be
readily available
Copies of bills and source of purchases should be
readily available

Jewellery
Precautions
Critically check the report prepared by the
valuer
Jewellery received as gift on occasions must be
specified
Request for exemption of following jewellery
where wealth tax return not filed
500 gms. per married lady
250 gms. per unmarried lady and
100 gms. per male member of the family

Statement u/s 132(4)
Statement Whose, When and Why?
Whose - All key persons like proprietor, partner,
director, finance employees
When On commencement, during search and before
conclusion
Why To gather further evidence
Precautions
Remain cool and composed during statement
Insist on choice of language if not comfortable
in English

Statement u/s 132(4)
Precautions
Request for assistance of consultant
Avoid wrong answers - seek time, if required
Opportunity to explain disclosed assets to avoid
seizure
Before signing the statement
Check its correctness
Mention date and time

Retraction of Statement
Assessee entitled to retract from admission and
explain the incorrect statement made
Pullangode Rubber Produce Co. Ltd V. State of
Kerala 91 ITR 18 (SC)
K.T. M. S. Mohd. V. UOI 197 ITR 196 (SC)
Evidence brought by confession, if successfully
retracted, must be corroborated by independent
and cogent evidences
Vinod Solanki 2009 (233) ELT 157 (SC)
K.T. M. S. Mohd. V. UOI 197 ITR 196 (SC)

Retraction How, when, etc.
No specific form - Affidavit, letter, etc.
Earliest Opportunity minimum time gap
Reasons for retraction like knowledge of
incorrect facts
Circumstances leading to retraction must be
specified like inducement/ threat/ coercion, etc.
with evidence
Documents/ Evidence in support of retraction like
VDIS certificate, confirmations, etc.
Information to Higher Tax Authorities like CBDT,
DGIT, DIT, etc.
Appropriate note/ disclosure in the return of
income

Penalty in Search cases
Applicable Provisions-

Date of search Relevant Provisions Applicable Rate Immunity
1.01.1997 to 31.05.2003 158BFA (2) Upto 3 times of tax on undisclosed income (tax _at_ 60) Proviso to 158BFA (2)
1.06.2003 to 31.05.2007 271 (1)(c) Upto 3 times of normal tax on undisclosed income Explanation 5 to section 271 (1) (c)
1.06.2007 onwards 271AAA 271 (1)(c) 10 of undisclosed income for specified years upto 3 times of normal tax on undisclosed income 271AAA (2)
80

IMMUNITY FROM PENALTY
Eligible Undisclosed Income-
income not disclosed
expense found to be false
Eligible previous year
Year of search
Year preceeding the search, if-
(i) due date of filling of ROI u/s 139 (1) not
expired and
(ii) ROI not filed by the assessee

Conditions for claiming immunity
section 271AAA (2)
(a) Undisclosed income is admitted in statement
u/s 132(4) and
(b) Manner of deriving undisclosed income
specified and substantiated and
(c) Tax along with interest is paid

SURVEY
SECTION 133A

83
SURVEY SECTION 133A

Survey can be conducted by jurisdictional
Commissioner
Director
Joint Commissioner
Joint Director
Deputy Director
Assistant Director
Assessing Officer
Tax Recovery Officer
Inspector (only for inspection of books)

After approval of Joint Director/ Commissioner
84

Survey can be conducted
Only at business premises and
Any other place where assessee states that books/
cash/ stock/ valuable article or thing of
business are or is kept
Survey team can enter
Business premises During business hours
Any other place After sunrise and before
sunset

Survey team can
Inspect books/ other documents, place marks of
identification and/ or make copies thereof
Impound, after recording reasons, such books/
other documents for 10 days (excl. holidays)
period can be extended by Chief Commissioner/
Director General
Verify and make inventory of cash/ stock/ other
valuable article/thing cannot remove them
Record statement of any person (not on oath)

IMPOUND MEANING
Blacks Law Dictionary defines impound as
under
impound, vb. 1. To place (something, such as a
car or other personal property) in the custody of
the police or the court, often with the
understanding that it will be returned intact at
the end of the proceeding.
2. To take and retain possession of (something,
such as a forged document to be produced as
evidence) in preparation for a criminal
prosecution

Issues
Whether any time limitation for exit of the
Survey Team?
Ans. No.
refer N.K. Mohnot 215 ITR 275 (Mad.)
Whether statement recorded during has evidentiary
value?
Ans. No
refer S. Kader Khan Sons 300 ITR 157 (Mad.)
Paul Mathews Sons 263 ITR 101 (Ker.)
Ashok Manilal Thakkar vs. ACIT 279 ITR 143
(AT) (Ahd.)

Issues
Survey of premises of lawyer/ CA not permissible
unless the client whose premises is surveyed
states that his books of accounts/ documents and
records are kept in office of lawyer/ CA
U.K. Mahapatra Co. 308 ITR 133 (Ori.)
Bar on removal of cash, stock or other valuable
thing/ article under section 133A(4) is absolute
- CIT V. Mool Chand Salecha 256 ITR 730 (Raj.)

Issues
Whether records, documents pertaining to third
parties (say A, B, C, etc) found in possession of
X (another third party), who is subjected to
search and seizure operation under section 132 in
connection with search on Y (searched party) be
seized by the Search Party?
Whether search/ survey can be carried out at the
premises of Chartered Accountant/ Lawyer, etc.?
S.R. Batliboi Co. vs. DIT (Inv.) 224 CTR 369
(Del.)

Penalty - Issue
Non-mentioning of manner of earning income is not
fatal to claim of immunity. It is incumbent upon
the Authorised officer to put a specific question
with regard to the manner in which income has
been derived and it is not expected from the
person to suo-moto make a statement in this
regard.
CIT v. Sri Radha Kishan Goel 200 CTR 300 (All.)
CIT vs Manmohan Goel 149 Taxman 578 (All.)
CIT vs Nem Kumar Jain 151 Taxman 187 (All.)
ACIT V. Smt. Lad Devi Kothari 97 TTJ 421
(Jaipur)
DCIT V. Sunil Tolaram 90 TTJ 48 (Mum.)
Dy. CIT vs Sunder Lal 24 DTC 174 (Del.)