AFTERMATH OF SURVEY & SEARCH BY CA SUNIL H. TALATI M.COM., L.L.B., FCA., PAST PRESIDENT OF ICAI
1. Important points to be considered at the commencement of Search 2. Statements recorded during search / post search Action 3. Confessions in statements 4. Retraction of Confessions in Statements 5. Imposition / Revocation of Prohibitory Orders 6. Other Aspects Relating to Search and Seizure 2
Important points to be considered at commencement of search: See that the warrant is duly signed and stamped Verify the identity of each member of the search party Carry out personal search of all members of the search party (to guard against ‘Planting’) Insist upon personal search of ladies by ladies only Have two witnesses (Panchas) (Refer Rule 112 (6) and (7)) (Refer: 208 ITR (St.) 5) 3
Process of Search: Verify name and address mentioned in search warrant Ensure that only officers authorised for the purpose come into the premises being searched Authorised officer can ask for any other officers for assistance after complying with procedure but statements can be recorded only by the authorised officer. 4
Precautions to be taken with reference to Search Warrant: 1. There may be a situation where in the same premises two or more persons have similar names as mentioned in Search Warrant. e.g. Search Warrant is issued in the name of Mr. S. J. Patel living in Flat no. 109 of a building and Income Tax Department searched Flat No. 78 of another Mr. S. J. Patel of the same building. In this case Department has no jurisdiction to search Flat no. 78. 5
Sl. No. Subject What to do and Why ? • While attending to and serving the large search team be 1 Be Vigilant careful and vigilant. • Assessee may call medical practitioner if he is not well or an 2 Call your Doctor emergency. • Assessee may seek permission to call his key personnel to 3 Call your Key Personnel assist him during the course of search. • Yes 4 Have medicines in time • Assessee may call his legal advisor during the search. 5 Call your Counsel However, at initial stage of search , presence of counsel is not allowed because of the fact that the search party is fact finding authority. 6
Sl. No. Subject What to do and Why ? • Fully cooperate with search party and let them do their job 6 Co-operate • Provide all necessary facilities to inspect and copy records 7 Records on • Call the concerned person Computer • Explain the facts and circumstances assertively, but not 8 Be assertive aggressively • Don’t loose patience • If not 100% certain than tell that “we shall reply after accessing data. • Remain calm, cool and pleasant • Do not sign statement which you have not given • Be receptive 9 Don’t react • Keep track of your reactions and even body language but respond • Attack the problem, not the officer 7
Sl. Subject What to do and why? No. • It is strategic decision and depends upon facts and 10 Whether surrender is needed? circumstances of each case • It can be done till the last warrant is executed and the sealed premises, locker etc. are opened. 8
Statements recorded during search / post search Action : 1.Evidentiary Value of a Statement recorded u/s 132(4) at an assessee’s premises subjected to search 2.Evidentiary Value of a Statement recorded u/s 133A at the assessee’s other premises subjected to Survey (simultaneously with Search at the other premises) 3.Importance of Disclosing / Substantiating the manner of earning undisclosed income - with reference to : (a) Assessment Proceedings (b) Penalty Proceedings (c) Application for Settlement before Settlement Commission 9
Statement Recorded u/s 132(4): Statement u/s 132(4) is recorded on oath and its evidentiary value is high and it can be used in any proceedings under the Act Investigating officer normally puts questions in order to gain support for the ‘findings’ in 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 proceeding under the I. T. Act Recording of statement is not a memory test 10
Statement Recorded u/s 132(4): Vide Instruction F. No. 286/2/2003-IT (Inv).II dated 10/03/03, CBDT has advised search parties not to obtain confessions by adopting coercive means. However, in practice, in almost all the cases search parties insist upon getting confessions Statements must be availed as an opportunity to: (a) explain disclosed assets to avoid seizure (b) avail benefits of immunity from penalty Whether practice of disclosing income in the hands of group or individual person is advisable – it depends upon facts of each case 11
Sl. No. Subject What to do and why? • It is a double edged weapon, if admitted on the basis of 1 Statement of oath evidence • Understand the queries carefully 2 Tips and Traps • Seek clarity by asking counter questions • Don’t answer the questions recklessly – in a rash manner. • Take it as an opportunity explaining several items of assets found during the search and not as a trap 12
Sl. No. Subject What to do and why? • Take help of the books of account and other 2 (ctd..) Important Points documents and give all the possible information, which is readily available • If it is not possible to remember certain facts with accuracy, particularly those of several past years, but NEVER give inaccurate detail. Just tell I should refer and tell you. • Assessee may insist that he will give statement only 3 Take rest after taking proper rest (say till early hours of the next day). One should not get nervous. 13
Sl. No. Subject What to do and Why ? • Note the proceedings, questions and answers at the 4 Note down points time of recording of a statement • Say everything you consider necessary e.g., object of 5 Last question in the statement any books of account, documents, assets etc are brought from other places “Do you want • Your request to call your accountant, computer to say Anything ?” operator was not acceded • The facts which are not brought on record inspite of your explaining the same, may be stated correctly in this reply. 14
Sl. No. Subject What to do and Why ? • Ensure that the facts stated have been recorded correctly. 6 Verify the • Object to the irregularity in the conduct of the search, if correctness any, and record such objection in writing. • Never lie to mislead (IPC sec. 416) 7 Points to be • Not to remove or destroy any article from the place being taken care of searched (IPC 204). • Never refuse to answer. You may request to refer matter to accounts. Reply exactly what is asked. 15
Whether a letter written by a partner of a firm after conclusion of a search admitting undisclosed income can be regarded as statement u/s 132(4)? Ans: NO. CIT v. Pampapathi (2009) 310 ITR 64 (Kar) However, such letter given before conclusion of search accompanied by its reference in a subsequent statement u/s 131(1A) MAY BE considered as a binding confession made in statement u/s 132(4). 16
Evidentiary Value of Statement Recorded u/s 133A Statement u/s 133A is not recorded on oath and, therefore, in the absence of any corroborative evidence, has no evidentiary value. Refer: CIT v. S. Khader khan & Sons 352 ITR 480(SC), Paul Mathews and Sons 263 ITR 101 (Ker) Cont .. 17
Cont. …. However addition can be made on the basis of assessee’s statement in survey, if it is supported by relevant material. Refer : CIT v. P. Balasubramaniam 215 Taxman 288 [2013] Madras – High Court and Mumbai ITAT Income tax Officer v. Devji Premji Pujara & Sons 34 Taxman.com 96 [ 2013] (Both the decisions are rendered after considering the decision of S. Khadar Khan & sons) 18
Significance of Disclosure of Undisclosed Income at Surveyed Premises (when survey is carried out simultaneously with search) : When survey is carried out simultaneously with search, it is advisable to make disclosure of undisclosed income at the surveyed premises u/s 133A if such income pertains such premises. This being not an “undisclosed income” as defined u/s 271AAB , no penalty even @ 10% can be levied. 19
Brief Comparison between Search u/s 132 and Survey u/s 133A Search Proceedings u/s 132 Survey Proceedings u/s 133A Seizure of Books of account as well as money, Impounding of only Books of account and other jewellery, bullion and other valuable article documents Retention - Not exceeding 60 Days [As per Retention- Not exceeding 10 Days [As per Section139(9A)* section 133A(3)(ia)]** Statement recorded on oath and used as Statement not recorded on oath and hence, in evidence in subsequent proceedings the absence of incriminating material, no evidentiary value Retraction - Possible Retraction – Easier - As no evidentiary value Pending Assessments - Abate Not applicable Statement u/s 131(1A)- Can be recorded Statement u/s 131(1A) - Can be recorded * Books of accounts or documents shall not be retained **I t can be extended with prior approval of CCIT or by the A.O. for a period exceeding thirty days from the DGIT as the case may be. date of the order of asst. u/s 153A 20
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