I-T department scales up surveys in Nagpur circle

The income tax department has stepped up surveys in the Nagpur region and is getting astonishing results with several assessees admitting to undisclosed income and thereby paying additional tax.

"It is less painful than a full-fledged search and seizure operation for both the parties - the assessee and the income tax department," said a chartered accountant, whose client was recently visited by the investigation wing of the department.

Mounting a search and seizure operation has to be done on specific information as the assessee can also challenge the department's action and take it to court if the raid did not yield anything. Harassment, mental agony and deliberate intent to damage reputation are some of the grounds on which search and seizure operations have been challenged in the past.

The chartered accountant said the onus of proving that the I-T officials had enough reasons to raid lies with the department. However, in case of a survey the department is only seeking to examine records and check certain transactions that it finds dubious.

A survey, tax practitioners said, is limited to scanning of documents and books of accounts in the assessees business premises. A search and seizure, on the other hand, can also be extended to the residential premises of the assessee and valuables and cash can also be seized.

Tax practitioners said the department must have netted a cool Rs 9 crore in survey operations conducted in the past few months. They said the investigation wing had started preferring survey operations and conducted a record number of surveys this fiscal than any time in the past.

Over 10 independent surveys have already been held during the current financial year. A number of assessees have promised to pay additional tax by declaring concealed income.

The rise in the number of surveys is also attributed to an amendment in the Income Tax Act brought about in 2003. The amendment empowers the department to impound documents during a survey.

"This has proved to be a very effective provision in our hands as we can now verify the entries and check the paper trail to expose vital information about undeclared income," said a senior I-T officer. He said the department had started taking advantage of the provision from this financial year.

Tax practitioners have opposed the department and said it was unfair on the part of the government to take an assessee's records and then hound him. They have also got a few assessees to write to the Union Finance Minister complaining about some survey operations.

"Most of these surveys are not backed by any solid information. There is no cause for suspicion too. But just because somebody in the department feels jealous of some assessee flashing too much of wealth, a survey operation is mounted," said another chartered accountant.

He said, the Institute of Chartered Accountants of India (ICAI) was also studying the matter closely and may write to the Finance Ministry and the Central Board of Direct Taxes if it finds the Department overstepping its brief.

He said that taxmen have always been feared by businessmen and when an officer randomly quotes a figure telling the assessee to agree to the concealed income, they generally arrive at a settlement.

"This is a strange practice, how can the officer predetermine the amount to be declared," questioned the chartered accountant.

Interestingly, the department has been focusing on newer categories of assessees. Survey operations have been carried out on promoters of professional educational institutions, doctors, restaurateurs, and a furniture dealer.