Survey,search and seizure provisions ppt by sh r k gupta ccit mumbai

Overview of Survey and Search and
Seizure Provisions Under Income Tax
Act 1961 And Assessment Thereof
[in the National Direct Tax Seminar on 13TH July 2013
organized by Bhopal Branch Of CIRC at Bhopal]organized by Bhopal Branch Of CIRC at Bhopal]
Presented By
Ram Krishna Gupta
CCIT Mumbai
www.simpletaxindia.net

SCOPE oF DISCUSSION
Search provisions-legal Action-validity of action-release of
explained assets
Presence of counsel -Quasi Judicial proceedings –meaning
thereof-Nature of Enquiries –
Confession –Advantages and DisadvantagesConfession –Advantages and Disadvantages
Confession -How to be made
Ingredients of Retraction
Post search Enquiry
Post search action necessarily to be taken
Assessment-how to determine income, etc
Controversies –Judicial Pronouncement

SEARCH AND SEIZURE-S.132
SEARCH - WHEN POSSIBLE
WHO CAN AUTHORIZE [U/s 132(1)
Source of information
The information may come from a variety of sources:
Professional informers, business or professional rivals,Professional informers, business or professional rivals,
disgruntled employees, unhappy wife, estranged brothers or
a disgruntled son-in-law or a harassed daughter-in-law.
The information collected during survey may also form the
basis.
The object is to get direct and clinching evidence regarding
transactions, duplicate set of books, undisclosed, concealed
income, wealth and assets.

Conditions for valid search
Prabhubhai Vastabhai Patel Vs R.P. Meena 226 ITR
781 (Guj) has summarised conditions laid down by
various judgements
Authority must have informationAuthority must have information
Reason to believe & not suspect
It must be info & not rumour or gossip or hunch.
Information must exist prior to authorisation.
reason to believe must have reasonable bearing / connection
to information.
Existence of condition precedent is open to judicial scrutiny.
But sufficiency of information is not open to judicial scrutiny.

SEARCH AND SEIZURE-S.132
VALIDITY OF SEARCH – WRIT JURISDICTION
At assessment stage: Chitra Devi Soni 313 ITR 174(Raj.)
in favour of assessee SLP dismissed.
Paras Rice Mills 313 ITR 182(P&H);Gaya Prasad PathakParas Rice Mills 313 ITR 182(P&H);Gaya Prasad Pathak
290 ITR 128 (MP) against the assessee

Illegal Search – Consequences
When a search is held as illegal by High Court :
All assets seized to be returned
Original copies of books of account or other
documents to be released.documents to be released.
No proceedings u/s. 153A or u/s. 153C t.
No presumption u/s. 132(4A) / 292C
Costs may be awarded
However, department is not precluded from using the
document [Pooranmal Vs. Director of Inspection
(1974 ) 93 ITR 505 (SC).]

PRESENCE OF COUNSEL
QUASI JUDICIAL PROCEEDINGS-MEANING
A.Investigation and collection of incriminating
evidence and relevant facts and their verification,
examination (Police inspector role-administrative)examination (Police inspector role-administrative)
B.Issuing of show cause notice to the assessee after
charges are framed (ie prosecutor’s role - to file
charge sheet before the trial court- administrative )
C.Appreciation and evaluation of the evidences
collected by him and explanation and evidences
filed by the assessee (Judge’s Role)

PRESENCE OF COUNSEL
Nature of INature of I--T proceedingT proceeding
The Madras High Court, in the G. Giribabu & Anr. (2010)
326 ITR 575 Madras) case, decided that a person
summoned cannot insist that he should be permitted to
appear with his counsel during preliminary enquiryappear with his counsel during preliminary enquiry
proceedings.. The case arose under the FEMA provisions.
The petitioners' case before the high court was that
the right to be represented by an advocate flows as the
cross examination is justified as if before a court of law. The
FEMA/I-T authorities have no jurisdiction or power to deny
the presence of an advocate. The right of fair procedure is
part of the requirement of article 21 of the Constitution of
India.

PRESENCE OF COUNSEL
Nature of Enquiry
There is great latitude allowed to an income-tax authority and the
procedure in an adversary system of proceedings cannot be
applied to him. even at the stage of collection of information.
The court held that the functions that the AOs under the IT Act
and officers of the ED under FEMA perform are of an inquisitiveand officers of the ED under FEMA perform are of an inquisitive
nature seeking and collecting information-not that of
deciding any issues.
Basically, these are information gathering exercises. When
the information gets collected through the machinery of these
provisions and it is to be put to use in passing orders, the parties
involved are to be given opportunity to have their say in
accordance with the principle of natural justice and they get full
opportunity for cross-examination and, at that stage, the
assessee/party proceeded against, can be represented by his/her
counsel-not at the enquiry stage.

STATEMENTS/CONFESSION
Statement on oath-Meaning thereof
Sec.8 of INDIAN OATHS ACT, 1969: Persons giving
evidence bound to state the truth: Every person giving
evidence on any subject before any Court or any personevidence on any subject before any Court or any person
authorized to administer oaths and affirmation shall be
bound to state the truth on the subject.
Name of Old act - The Indian Oaths Act, 1873

Binding nature of a statement
made on oath
an admission in statement recorded on oath is an
extremely important piece of evidence but it cannot be
said that it is conclusive : Pullangode Rubber
Products Co. Ltd. (91 ITR 18)(SC),Krishnan vs.Products Co. Ltd. (91 ITR 18)(SC),Krishnan vs.
Kurushetra University (AIR 1976 SC 377) )(SC)
a statement recorded u/s.132(4) at midnight cannot be
considered a voluntary statement if it is subsequently
retracted by the assessee and necessary evidence is laid
contrary to such admission: Kailashben Manharlal
Chokshi (174 Taxmann 466)( Gujrat):

Statement made on oath
C.I.T. vs. Radhakishan Goyal (278 ITR 454)(
Allahabad) that it is a matter of common knowledge,
which cannot be ignored that the search is being
conducted with the complete team of the officers
consisting of several officers with the police force. Usuallyconsisting of several officers with the police force. Usually
telephone and all other connections are disconnected and
all ingress and egress are blocked. During the course of
search person is so tortured ,harassed and put to a mental
agony that he loses his normal mental state of mind and at
that stage it cannot be expected from a person to pre-empt
the statement required to be given in law as a part of his
defence.

Statement made on oath
VIOLATION OF HUMAN RIGHTS : Chief
Commissioner of Income-tax (CCA) v. State of
Bihar Through The Chief Secretary, [2012] 18
taxmann.com 70 (Pat.):Due regard to human dignitytaxmann.com 70 (Pat.):Due regard to human dignity
and value cannot be ignored.

ASPECTS RELATING TO SURRENDER OF UNDISCLOSED
INCOME
Why to make surrender?
To avoid penalty
To mitigate rigors of search, To wrap up the search
proceedings
Conditions of surrender under section 132(4)Conditions of surrender under section 132(4)
r.w.s 271AAB
State the manner how undisclosed income has been
derived
Substantiate the manner
Pay the taxes before the specified date.

Retraction of Surrender
To be made at the earliest
Department may view it adversely
Ultimately nature of evidences will decide
Challenging valuation, not retraction
Challenging calculation, not retraction
Conditional surrender- fulfilling conditions
Consequences of retraction.
In case of retraction burden of proof on assessee : Krishan
Lal Shiv Chand Rai v. CIT (1973) 88 ITR 293 (P&H).

Surrender- consideration
Cover incriminating material found
Creation of capital
Generation of income v. Application in assets
Set-off of losses
Assets acquired prior to seven financial yearsAssets acquired prior to seven financial years
Current year income not recorded, advance tax not paid
Conditional surrender
Principle of Peak Balance
No surrender for third party

SURRENDER OF UNDISCLOSED INCOME: How to be
made during the course of search
A paragraph mentioning that the surrender letter
submitted by the assessee is in the nature of statement
of the assessee u/s.132(4).
To mention that the declaration is subject to no penalTo mention that the declaration is subject to no penal
consequences.
To mention broad manner of earning undisclosed
income and to substantiate it to the extent possible.
Surrender letter to be signed by of the person/entity
making the surrender. In case a person makes
declaration on behalf of other person, he should be
authorized to do so.

SURRENDER OF UNDISCLOSED INCOME:
Surrender of undisclosed income to be made in the hands of the
person/entities against whom search warrant has been issued.
To ensure that surrender letter is given prior to the date of
conclusion of search with respect to the concerned
person/entity.
In case declaration is made amending or improving upon anyIn case declaration is made amending or improving upon any
earlier declaration, this fact should be clearly mentioned.
In case there is seizure of cash, assessee should state and
request to treat the amount of cash seized as payment of
advance tax in the hands of concerned person/entity.
A line mentioning that surrender of undisclosed income is being
made to buy peace and to settle the dispute.

Application of seized assets (Sec 132B)
The assets seized shall be dealt with in the following manner
i) Seized assets may be applied towards existing and future liability (sec
132B(1)(i)
ii) Release of seized asset after meeting existing liabilities in certain cases
132B(1)(ii)
iii) Money seized may be applied for discharging the liabilities (sec 132B(1)(ii)
iv) Assets other than money may also be applied to discharge liabilities (sec
132B (1)(iii)132B (1)(iii)
Return of excess assets seized (section 132B(3)
the interest shall be payable from the expiry of the period of 120 days from
the execution of the last of the authorizations for search till the date of
completion of assessment under section 153A or block assessment.

RELEASE OF ASSETS
Application for release of disclosed assets, if seized :
The first and second proviso to section 132B(1)(i), provides :
to make application to the Assessing Officer for release of asset within thirty days
from the end of the month in which the asset was seized. explaining source of
acquisition of the asset
The amount of any existing liability referred to in clause (i) of section 132B(1) may
be recovered out of such asset.
The remaining portion, if any, of the asset may be released with the prior approval
of the Chief Commissioner or the Commissioner.with-in a period of one hundred
and twenty days from the date on which the last of the authorizations for search was
executed.
Delay in release of assets – Remedies with the assesee
Approach to the higher administrative authorities.
Writ to the High Court claiming compensation for delay in release of the assets.
File petition with the office of Ombudsman

POST SEARCH LETTERS
request to appropriate cash seized toward advance tax. Now not
possible from 1st June 2013
Application u/s.132B for release of disclosed assets if any seized
along with all the relevant evidences.(Refer 1st and 2nd proviso to
132B(1)(i)
Letter requesting to give photocopies of all the documents, papers
or books of account seized. Delay in supplying copies of seized
material – Levy of interest not justified.[Refer Board order issuedmaterial – Levy of interest not justified.[Refer Board order issued
u/s119(2)(a)] reported in 219 ITR 169 (ST)
Letter for release by person/entity not covered in the search, in
case any books of account or assets belonging to them have been
seized.
Letter with complete evidences regarding disclosure of jewellery or
assets in case restraint order u/s.132(3) has been passed but assets
have not yet been seized.
Letter for release of jewellery against deposit of equivalent amount
of cash /furnishing of bank guarantee.

Presumption as to ownership. S. 292 C
[Inserted by Finance Act, 2008, w.r.e.f. 1/06/2002].
Presumption regarding
Belongingness of book of account, other documents,
money, bullion, jewellery, other valuable article or thing
Truthfulness of the contents
regarding signature and handwriting and stamping and
execution or attestation.
regarding signature and handwriting and stamping and
execution or attestation.
NOTE: This concept is in line with the principle given
under Indian Evidence Act. Section 110 of Indian Evidence
Act. 1872 reads as under :“ when the question is whether any
person is owner of anything of which he is shown to be in
possession, the burden of proving that he is not the owner is
on the person who affirms that he is not the owner”.

HANDLING OF ASSESSMENT IN SEARCH CASES
Systematically and chronically arrange all the seized
documents entities wise and Assessment year wise . For that,
get the transactions entered in excel sheet preferably in the
following columns. Name of Entity, Date, amount ,narration
of expenditure, narration of income, narration of investment
and premise wise,and premise wise,
Benefit of telescoping /peak credits
Where any undisclosed income is offered in the return filed
u/s 153A then the expenditure incurred to earn that income
may also be claimed.
Below the computation of income put the suitable and
appropriate notes-provide flexibility , no allegation of non
disclosure etc

RELEVANT ISSUES UNDER SECTION 153A / 153C (made after
31/5/03)
Assessment for the preceding seventh year prior to the
year of search can be reopened under section
148.Ramballabh Gupta v. Asstt. CIT(2007) 288 ITR 347
(MP).
Fresh assessments to be framed for all the preceding six
years whether assessment proceedings are abated or not.years whether assessment proceedings are abated or not.
Notice under section 143(2) within time limit as
prescribed is mandatory in case of proceedings under
section 153A :Asstt. CIT v. Hotel Blue Moon (2010) 321 ITR
362 (SC).

RELEVANT ISSUES UNDER SECTION 153A / 153C
Recording of satisfaction before invoking provision of section
153C :Manish Maheshwari v. Asstt. CIT (2007) 280 ITR 341
(SC).
Jurisdiction under section 153C can be assumed when seized
material belong or belongs to other person :Vijaybhai N.
Chandrani v. Asstt. CIT (2010) 38 DTR (Guj.) 225.
Reference to departmental valuation officers in search cases.Reference to departmental valuation officers in search cases.
Reference for special audit under section 142(2A).
Reliance on statement recorded by authorized officer during
search.
No addition for investment in jewellery upto specified limit
not required to be seized.
Assessment in the case of retraction surrender of
undisclosed income.

ASSESSMENT U/S.153A IN THE CASE OF CONCLUDED
ASSESSMENTS
ASSESSMENT U/S.153A HAS TO BE MADE ON THE BASIS OF
INCRIMINATING MATERIAL ONLY IN THE CASE OF
CONCLUDED ASSESSMENTS
All Cargo Global Logistics Ltd. vs. DIT, 2012-TIOL-391-ITAT-Mum-
SB, i.e., on the basis of undisclosed income/property/books of
accounts/ documents found during 132/132A operation.
A.C.I.T. vs. Pratibha Industries Ltd., [2012] 28 taxmann.com 246
(Mum.)(Mum.)
Jai Steel (India) vs. Assisstant Commissioner Of Income Tax
(dt.24.05.2013)(Raj.) held
(a) the assessments or reassessments, which stand abated in terms
of II proviso to Section 153A of the Act, the AO acts under his
original jurisdiction, for which, assessments have to be made; (b)
regarding other cases, the addition to the income that has already
been assessed, the assessment will be made on the basis of
incriminating material and (c) in absence of any incriminating
material, the completed assessment can be reiterated and the
abated assessment or reassessment can be made.

Penalty Provisions
For earlier years U/s 271(1)(c)
For specified years U/s 271AAA Introduction of Section
271AAB by Finance Act, 2012 w.e.f.1st july 2012
Penalty for undisclosed income even for specified
previous year in staggered manner:-previous year in staggered manner:-
Declared during search in statement under section
132(4) – 10%
Declared in the return of income filed under section 153A
– 20%
Not Declared, addition made during assessment – 30%-
90%

Survey Under Income Tax Act,
1961
Jurisdiction Of Income tax authority for conducting
survey s. 133A (1)
Territorial Jurisdiction
Assessee specific Jurisdiction
Authorized Jurisdiction
The place of the business or profession shall include
any other place where the books of accounts or otherany other place where the books of accounts or other
documents or any part of the cash or stock or other
valuable article is kept.(Business related material)
Expln.to Sec.133A defines an Income Tax Authority :
Director /Commissioner to Inspector level however If
authorized by Joint/Addl. Director/ commissioner then
Deputy / Assistant Director / Commissioner ITOs ,Tax
Recovery Officer,Inspector of Income Tax (For
certain Specific purpose)

Jurisdiction:
Residential premises can also be covered if the
assessee states that business/professional
work/document/assets is there
Survey is possible even to enquire about tax deducted at
source : Reckitt and Colman of India Ltd. vs. ACIT [2001] 251
ITR 306 (Cal)..
Business or residential premises of third parties,Business or residential premises of third parties,
including a Chartered Accountant, a pleader, or Income Tax
Practitioner, of whom the assessee may be a client, are
not places which could be entered into for the
purpose of section 133A. (Circular no. 7- D dt
3/5/1967),however if it is found that assessee’s books of
accounts/documents are there than for that limited purpose
it can also be covered.
Note : Survey team has no power to break open any locked
premises as power to break open any lock is not conferred u/s
133A as against specific provisions contained u/s 132.

APPLICATION TO SETTLEMENT COMMISSION
Pre-requisite for Filing Application –
1. An application before the Settlement Commission can be made only
if the additional income disclosed exceeds Rs 10 lakhs in normal case
and in search case if disclosure exceeds 50 lakhs.
2. Application can be made only at the stage of the pendency of the
original assessment proceedings before the assessing officer (AO).original assessment proceedings before the assessing officer (AO).
3. No application can be made when proceedings are initiated for
assessment or reassessment under Section 148 of the Income-Tax Act,
1961
4. Proceedings for making fresh assessment when original assessment
was set aside either by the Commissioner or by the Tribunal will also be
outside the purview of the application for settlement.
5. An application can be made by an assessee for settlement before the
Commission only once in a lifetime.
Advantage: Order is conclusive and final. Waiver of penalty and
prosecution under Income Tax Act can be given

There are two kinds of people, those who
do the work and those who take the credit
, try to be in the first group, there is less
competition.
ThanksThanks
31

Survey,search and seizure provisions ppt by sh r k gupta ccit mumbai

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (20)

En vedette

En vedette (20)

Similaire à Survey,search and seizure provisions ppt by sh r k gupta ccit mumbai

Similaire à Survey,search and seizure provisions ppt by sh r k gupta ccit mumbai (20)

Plus de PSPCL

Plus de PSPCL (20)

Dernier

Dernier (20)

Survey,search and seizure provisions ppt by sh r k gupta ccit mumbai