This write up is supplementary to my previous article ‘Impact of Finance Act 2021 on survey cases under section 133A‘ published on platform of Taxguru on 17/06/2021. It is intended to coverup the further developments through Finance Act 2022 and further notifications and judicial pronouncements. The relevant sections are section 133A, 147,148,148A,148B,149,149A,151,153 and section 79A of the Income Tax Act.
It is essential to reproduce the basic section 133A, which will be helpful to understand the relevant provisions.
Section 133A
133A. (1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter—
(a) any place within the limits of the area assigned to him, or
(b) any place occupied by any person in respect of whom he exercises jurisdiction, or
(c) any place in respect of which he is authorised for the purposes of this section by such income-tax authority, who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place,
at which a business or profession or an activity for charitable purpose is carried on, whether such place be the principal place or not of such business or profession or of such activity for charitable purpose, and require any proprietor, trustee, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession or such activity for charitable purpose—
(i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place,
(ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and
(iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act.
Explanation.—For the purposes of this sub-section, a place where a business or profession or activity for charitable purpose is carried on shall also include any other place, whether any business or profession or activity for charitable purpose is carried on therein or not, in which the person carrying on the business or profession or activity for charitable purpose states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession or activity for charitable purpose are or is kept.
(2) An income-tax authority may enter any place of business or profession referred to in sub-section (1) only during the hours at which such place is open for the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset.
(2A) Without prejudice to the provisions of sub-section (1), an income-tax authority acting under this sub-section may for the purpose of verifying that tax has been deducted or collected at source in accordance with the provisions under sub-heading B of Chapter XVII or under sub-heading BB of Chapter XVII, as the case may be, enter, after sunrise and before sunset, any office, or any other place where business or profession is carried on, within the limits of the area assigned to him, or any place in respect of which he is authorised for the purposes of this section by such income-tax authority who is assigned the area within which such place is situated, where books of account or documents are kept and require the deductor or the collector or any other person who may at that time and place be attending in any manner to such work,—
(i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, and
(ii) to furnish such information as he may require in relation to such matter.
(3) An income-tax authority acting under this section may,—
(i) if he so deems necessary, place marks of identification on the books of account or other documents inspected by him and make or cause to be made extracts or copies therefrom,
(ia) impound and retain in his custody for such period as he thinks fit any books of account or other documents inspected by him:
Provided that such income-tax authority shall not—
(a) impound any books of account or other documents except after recording his reasons for so doing; or
(b) retain in his custody any such books of account or other documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Principal Chief Commissioner or the Chief Commissioner or the Principal Director General or the Director General or the Principal Commissioner or the Commissioner or the Principal Director or the Director therefor, as the case may be,
(ii) make an inventory of any cash, stock or other valuable article or thing checked or verified by him,
(iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act :
Provided that no action under clause (ia) or clause (ii) shall be taken by an income-tax authority acting under sub-section (2A).
(4) An income-tax authority acting under this section shall, on no account, remove or cause to be removed from the place wherein he has entered, any cash, stock or other valuable article or thing.
(5) Where, having regard to the nature and scale of expenditure incurred by an assessee, in connection with any function, ceremony or event, the income-tax authority is of the opinion that it is necessary or expedient so to do, he may, at any time after such function, ceremony or event, require the assessee by whom such expenditure has been incurred or any person who, in the opinion of the income-tax authority, is likely to possess information as respects the expenditure incurred, to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act and may have the statements of the assessee or any other person recorded and any statement so recorded may thereafter be used in evidence in any proceeding under this Act.
(6) If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income-tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made :
10[Provided that no action under this section shall be taken by an income-tax authority without the approval of the Principal Director General or the Director General or the Principal Chief Commissioner or the Chief Commissioner.]
Explanation.—In this section,—
11[(a) “income-tax authority” means—
(i) a Principal Commissioner or Commissioner, a Principal Director or Director, a Joint Commissioner or Joint Director, an Assistant Director or a Deputy Director or an Assessing Officer, or a Tax Recovery Officer; and
(ii) includes an Inspector of Income-tax, for the purposes of clause (i) of sub-section (1), clause (i) of sub-section (3) and sub-section (5),
who is subordinate to the Principal Director General or the Director General or the Principal Chief Commissioner or the Chief Commissioner, as may be specified by the Board;
(b) “proceeding” means any proceeding under this Act in respect of any year which may be pending on the date on which the powers under this section are exercised or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.
Finance Act 2021 had modified the process/procedure and limitation period to assess or reassess the escaped income in cases covered U/S 133A of the Income Tax Act.
In the Finance Act 2022 significant amendments have been made relating to escapement of income detected/declared during the course of survey U/S 133A.
1. Income Tax Authority:-
Explanation occurring after sub section (6) of section 133A of the Income Tax Act provided that any Income Tax Authority who is subordinate to Principal Director General of Income Tax (Investigation) or the Director General of Income Tax (Investigation) or Principal Chief Commissioner of Income Tax (TDS) or Chief Commissioner of IT (TDS) shall only be considered as Income Tax Authorities for the purposes of section 133A.
Finance Act 2022 amended the explanation to provide that I.T. Authority shall be subordinate to Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner of income tax as the case may be specified by the Board.
Now the CBDT vide its order U/S 119 directed under F.No. 282/15/2022/IT (Inv-V) 267, Dt. 22/11/2022 directed that AO with necessary approvals will be empowered to conduct survey U/S 133A. The notification is as under:-
F.No. 282/15/2022-IT (Inv.V)/267
Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes)
Civic Centre, New Delhi- 110002 Dated 22nd Nov, 2022
ORDER Subject: Order under section 119 of the Income-tax Act, 1961
In view of clause (a) of Explanation occurring after sub-section (6) to Section 133A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) as amended by Finance Act, 2022, read with Proviso to sub section(6) of Section 133A of the Act, and in supersession of orders F.No.187/3/2020-ITA-I dated 13/08/2020, 18/09/2020, 19/10/2020 and 31/12/2021, and F. No 275/29/2020-IT(B) dated 19/10/2020, issued in this regard, the Board, in exercise of powers conferred under section 119 of the Act hereby directs that authorization for action under section 133A of the Act shall be issued by an income-tax authority not below the rank of Joint Director or Joint Commissioner with the prior approval of the Director General/Chief Commissioner in the case of Directorate of Investigation, Directorate of I&CI, Central, and IDS charges, and the Principal Chief Commissioner in case of all other charges. Where TDS charge is headed by the Principal Chief Commissioner, approval shall be granted by the Principal Chief Commissioner.
2. The Principal Commissioner of Income Tax/Commissioner of Income Tax/Principal Director of Income Tax/Director of Income Tax concerned, shall monitor and ensure that the survey action is conducted in accordance with the provisions of section 133A of the Act and guidelines/instructions issued by the Board from time to time.
3. This order shall come into force with immediate effect.
(Novel Roy)
Deputy Secretary to the Government of India
2) Non set off of Losses/ Unabsorbed Depreciation
Section 79A Notwithstanding anything contained in this Act, where consequent to a search under section 132 or a requisition under section 132A or a survey under section 133A other than under sub-section (2A) of that section, the total income of any previous year of an assessee includes any undisclosed income, no set off, against such undisclosed income, of any loss, whether brought forward or otherwise, or unabsorbed depreciation under sub-section (2) of section 32, shall be allowed to the assessee under any provision of this Act in computing his total income for such previous year.
Explanation.—For the purposes of this section, the expression “undisclosed income” means,—
(i) any income of the previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132 or a requisition under section 132A or a survey under section 133A other than under sub-section (2A) of that section, which has—
(A) not been recorded on or before the date of search or requisition or survey, as the case may be, in the books of account or other documents maintained in the normal course relating to such previous year; or
(B) not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search or requisition or survey, as the case may be; or
(ii) any income of the previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the previous year which is found to be false and which would not have been found to be so, had the search not been initiated or the survey not been conducted or the requisition not been made.]
This amendment relating to non-adjustment of losses or unabsorbed depreciation against undisclosed income on account of search and survey is aimed to ensure that proper tax is paid on income detected due to search or survey resulting in increased deterrence against tax evasion. (Applicable weft.A/Y 2022-23).
3) Provisions relating to Re-assessment amended.
a) Section 133A(5) provided that the Income Authority could carry out survey in order to find out the nature and scale of expenditure incurred on or in connection with any function, ceremony or event. Thus, as per Explanation 2(ii) as inserted by Finance Act, 2021, a survey carried out under Section 133A(2A) and 133A(5) did not result in any deemed information for enabling the AO to assume jurisdiction to issue a notice U/S 148.The Finance Act, 2022 has omitted the expression ‘or sub section (5)’ from Explanation 2(ii), which will now have the effect that survey carried out under Section 133A(5) will also constitute deemed information enabling the AO to initiate action under Section 148/148A. This amendment is effective from 1st April, 2022.
b) Earlier the scope of deemed information as a result of search/survey was confined to only 3 assessment years immediately preceding the assessment year relevant to the previous year in which search is initiated, etc. Now the concept of deemed information applies to all 10 assessment years as a result of the search/survey. This amendment is made retrospective effect from 01/04/2021.
c) Insertion of New Section 148B.
Prior approval of assessment, re assessment or recomputation in certain cases- No order of assessment or re-assessment or re computation under this Act shall be passed by an Assessing Officer below the rank of Joint Commissioner, in respect of an assessment year to which clause (i) or clause (ii) or clause (iii) or clause (iv) of Explanation 2 to section 148 apply except with the prior approval of the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director.
d) Amendment of Section 149
Scope of re-opening of assessment for 10 years is widened- In place of existing section 149(1)(b). Following clause is inserted:
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of-
i) An asset;
ii) Expenditure in respect of a transaction or in relation to an event or occasion, or
iii) An entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount of fifty lakh rupees or more.
The effect of this amendment is that hitherto the scope of application of section 149(1)(b) was restricted to escaped income which was Rs. 50 lakhs or more and was represented in the form of an asset. After the amendment, the scope of this clause has been extended to escaped income not only in the form of an asset but also in the form of expenditure “in respect of a transaction or in relating to an event or occasion” and in the form of “an entry or entries in the books of accounts” which is likely to Rs. 50 Lakhs or more. Therefore, the AO can open the assessment after 3 years only when there is information that escaped income of Rs. 50 Lakhs or more is in the form of an asset or expenditure, or an entry.
Further sub section (1A) to section 149 has been inserted to enhance the scope of re-assessment in survey cases which reads as under:-
(1A) Notwithstanding anything contained in sub-section (1), where the income chargeable to tax represented in the form of an asset or expenditure in relation to an event or occasion of the value referred to in clause (b) of sub-section (1), has escaped the assessment and the investment in such asset or expenditure in relation to such event or occasion has been made or incurred, in more than one previous years relevant to the assessment years within the period referred to in clause (b) of sub-section (1), a notice under section 148 shall be issued for every such assessment year for assessment, reassessment or recomputation, as the case may be.]
Conclusion
The above mentioned amendments have substantially enhanced the scope of re-assessment in survey cases. Suppose in a given case escaped/declared income is Rs. 50 Lakhs or more in the current year, the AO is now empowered to reopen the case beyond three years upto 10 years even if the suggested information of escaped income is Rs. 1,00,000/- during that year. The taxpayers are likely to feel the heat of these amendments in the coming days.
Author Bio
The conclusion drawn appears to be not correct. Sub section (1A) refers to clause (b) of sec. 149(1) which puts a cap of Rs. 50 lakhs. Unless the escaped income or asset or expenditure is or is likely to exceed Rs. 50 lakhs, it would not fall under clause (b) and consequently under sub-sec. (1A). (1a) simply empowers the department to take action in differnt years if the total amount is above the threshold even if it may be spread over different financial years.