A budget proposal has armed the tax authorities with greater powers to survey the premises of a business or a trust.
Tax practioners warned this may cause greater harassment to businesses.
In a survey, tax sleuths can enter offices — it can be a business, a profession or a trust — to verify account books and other documents.
Tax practitioners want the government to review the change, which will take effect from April. The powers of conducting the survey was earlier confined to the investigation wing and the TDS wing of the I-T department.
Section 133A of the Income Tax Act enables the income tax authority to enter any place of business or profession or charitable activity within the jurisdiction to verify books of account or other documents, cash, stock or other valuable articles.
The explanation to this section — which specifies the definition of income tax authority — was amended in 2020 to include any tax authority who is subordinate to the principal director-general of income tax (investigation) or director-general of income tax (investigation) or principal chief commissioner of income tax (TDS) or chief commissioner of income tax (TDS).
In the Union budget, the explanation was expanded to include any authority that shall be subordinate to principal director-general or principal chief commissioner or chief commissioner.
“This means now jurisdictional assessing officers will also be able to conduct surveys under Section 133A, of course with the prior approval of the prescribed authority. This is a retrograde step and is likely to cause harassment to the business community. The amendment needs to be reviewed and withdrawn,” said Narayan Jain, chairman, Direct Tax Professionals Association (DTPA) Representation Committee.
Further, Finance Bill 2022 has proposed the insertion of a new section 79A to the Income Tax Act whereby in case of a search or survey, if the total income of an assessee includes any undisclosed income, losses or unabsorbed depreciation cannot be set off against undisclosed income.
K.K. Jain, president, DTPA, said that this amendment will result in higher tax payments in cases of survey and search.