An Income Tax Survey is a tool used by the Income Tax Department of India to gather information about a business or individual. It’s done to verify income, check records, and ensure that tax laws are being followed.
It is less invasive than a raid (search and seizure), but more serious than a normal tax notice.An income tax survey is an investigative procedure carried out by the income tax department to ascertain the actual income earned by a taxpayer for a financial year. Income tax surveys are conducted to obtain a detailed understanding of a taxpayer’s financial position. The Income Tax Act mandates certain rules to be followed while conducting an income tax survey.
Types of Income Tax Survey
- A specific survey is conducted on the business premises of the taxpayer.
- Survey of ostentatious expenditure is performed to inspect the nature and scale of expenditure on various events like marriages, birthday parties etc.
- A door-to-door survey is conducted on-premises where business and commercial activities are being pursued.
Powers of Income Tax Officer to Conduct Survey
Authorisation for Income Tax Survey
Income tax survey can be conducted by an authorised income-tax authority. An authorised income tax authority can be any of the following:
- Commissioner
- Joint Commissioner
- Director
- Joint Director
- Assistant Director
- Deputy Director
- Assessing Officer
- Tax Recovery Officer
- Inspector of Income-tax
Before conducting an income tax survey, the concerned officer must get prior approval from an officer not below the rank of a Joint/Deputy Commissioner.
Powers of Officer for Income Tax Survey
During an income tax survey, the authorised income-tax authority or officer has the following powers:
- To inspect books of account and other documents and make a mark of identification on them.
- To verify cash, stock or other valuables.
- To make an inventory of cash or other valuable articles.
- To obtain relevant information or record of a statement.
- To approach a higher authority for the conversion of a survey into a search and seizure action.
However, the Income-tax officer’s role is limited when it comes to the survey. He may inspect the books of account or other relevant documents available on the premises. He can make identification marks on the books of account or documents. However, removing inventories during a survey does not factor among the responsibilities of an income tax officer. Any evidence or relevant documents found must be dealt with the laws of taxation and not by the officers conducting the survey. An officer cannot function beyond recording statements and issuing a summons.
Rights to enter Premises
An income-tax authority may enter any of the following places during an income tax survey:
- Within the designated area limits.
- Any premises of an assessee where the authority exercises jurisdiction.
- Any designated premises pursuing business, commercial or charitable activities.
No surveys shall be conducted after business hours. However, if the survey has already been initiated before the close of the office day, surveys can extend beyond hours.
Purpose of an Income Tax Survey
- To check if income is being properly declared.
- To verify books of accounts and documents.
- To collect information about undisclosed income, cash, stock, or property.
- To confirm if TDS is properly deducted and deposited.
FAQs
Who Conducts It?
It is conducted by officials from the Income Tax Department under Section 133A of the Income Tax Act, 1961.
When is a Survey Done?
- The department suspects tax evasion.
- There’s a mismatch in income declared vs. actual business activity.
- There’s a tip-off or specific information received.