1) Statements made by assessees during the course of a survey by an income tax authority surrendering undisclosed income cannot be used against the assessee. Such statements have no evidentiary value. 2) The CBDT has issued instructions that income tax authorities should not attempt to obtain confessions of undisclosed income during surveys and searches, and any actions to do so will be viewed negatively. 3) A recent ITAT ruling supported the position that additions cannot be made solely based on statements given during a survey, as such statements have no legal evidentiary value.

1. Volume XVI Part 5 September 10, 2016 3 Business Advisor
A statement recorded u/s 133A of the I.T.
Act, 1961 by an income-tax authority,
surrendering incomes, cannot be used
against the assessee
T. N. Pandey
Section 133 of the Income Tax Act, 1961 (Act) confers on
an income tax authority power of survey. The term
‗income-tax authority‘ for the purpose of conducting
survey has been defined in the Explanation, appearing
at the end of section 133A to mean a Dy. Commissioner,
an Assistant Director or an Assessing Officer and for
some specific purposes, if authorised, an Inspector of
Income Tax. The powers of these authorities are
restricted to their territorial jurisdiction resulting in
operational difficulties whenever any of the specified authorities is not
available for conducting a survey on the basis of any unexpected
information from any external source warranting immediate action.
Secondly, in the case of a big assessee, services of a number of officers may
be required. Therefore, in order to accentuate the operational efficiency of
the Dept. as also to cover large premises, the existing law has been
amended to provide that the Dy. Director, the Director and the
Commissioner will also have powers to conduct survey and an officer,
having jurisdiction over an assessee or within the limits of his territorial
jurisdiction can authorise any other officer to conduct survey. Such law is
in force from 1st July, 1995.
1.1 As a result of the insertion [i.e. from 1.6.2002] of clause (ia) in section
133A(3) by the Finance Act, 2002, an income-tax authority has been
empowered to impound and retain in his custody books of account
inspected by him for such period as he thinks fit with certain exceptions.
However, such books of account or other documents shall not be retained
for more than 15 days without obtaining the approval of the Chief
Commissioner or Director General or Commissioner or Director therefor.
2. Power of the I.T. authority conducting the survey u/s 133A (1)
Under section 133A of the Act, an Income-tax authority has been conferred
powers to enter:-

2. Volume XVI Part 5 September 10, 2016 4 Business Advisor
[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 section
133A 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 is carried on,
-whether such place be the principal place or not of such business or
profession.
2.1 According to the Explanation to section 133A(1), for the purposes of that
section, a place where business or profession is carried on shall also include
–
-any other place, whether any business or profession is carried on therein or
not,
in which the person carrying on the business or profession 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 are kept or is kept.
2.2 Power to verify cash
Under the originally enacted section 133A, the authority conducting the
survey had no jurisdiction to verify the cash position with reference to the
cash available in the till. However, under sub-sections (1)(ii) and (3)(ii) of the
Under the originally enacted section 133A, the authority
conducting the survey had no jurisdiction to verify the cash
position with reference to the cash available in the till.

3. Volume XVI Part 5 September 10, 2016 5 Business Advisor
1975 substituted section 133A, an income-tax authority acting under that
section has specifically been empowered to require the proprietor, employee,
etc., to afford him the necessary facility to check or verify the cash as also to
make an inventory thereof.
2.3 Sub-section (3) of section 133A enumerates the actions that can be
taken by an Income-tax authority during the course of survey.
[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.
[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.
3. Statements of assessees during the course of survey
Statements of the assessees, making them to surrender incomes or wealth,
cannot be recorded during the course of survey. Assurance to this effect was
given by the then FM [Shri Jaswant Singh] during 2003 Budget
presentation. Also, courts and Tribunals have decided that such statements,
even if made, will have no evidentiary value because no statements on oath
can be recorded during surveys. The recent decision [dt. 28th April, 2016] of
the ITAT, Delhi Bench, in the case of Avinash Kumar Setia v. DCIT (2016) 70
(II) ITCL 490 (Del-Trib) too supports this view.
4. Delhi Bench‘s decision (supra)
The appeal by the assessee was directed against the order of the Ld.
CIT(Appeals)-II, New Delhi, dated 14.1.2013, pertaining to AY 2009-10 on
the following ground:-
―The Ld. Commissioner (Appeals) erred in fact and in law confirming the
Statements of the assessees, making them to surrender
incomes or wealth, cannot be recorded during the course of
survey. Assurance to this effect was given by the then FM
[Shri Jaswant Singh] during 2003 Budget presentation.

4. Volume XVI Part 5 September 10, 2016 6 Business Advisor
addition of Rs 1,25,00,000, which is not only bad in law but also against the
facts and circumstances of the case‖.
The brief facts of the case are that the assessee filed his return of income on
4-10-2010, declaring income at Rs 4,43,912. In this case, survey u/s 133A
was carried out on 20.10.2008, wherein the assessee made a voluntary
disclosure of additional income of Rs 1,25,00,000 but the same was not
declared by the assessee in his return. Accordingly, this case was taken up
for scrutiny and AO issued notice u/s 142(1)/143(2) along-with
questionnaire dated 25.10.2010 for fixing the case of the assessee for
1.11.2010. In response to the same, AR of the assessee appeared from time-
to-time and filed requisite information/ documentary evidence. The AO
summoned the assessee as to why this information was not declared in the
return. The assessee in his statement had submitted that the return of
income was filed on the basis of the books of account based on actual facts
and figures. Assessee further stated that the part declaration was given to
the Investigation Dept. under pressure. It was also stated by him that no
incriminating documents were found during the course of survey and,
therefore, he retracted from his declaration at that time and also at the time
of filing the return. The AO considered the reply filed by the assessee along
with other documentary evidence and held that the assessee has not shown
any valid reason for not including Rs 1.25 crore, which he has voluntarily
surrendered in his return of income during the survey. The AO further held
that the documents were found during survey and in response to the
document, assessee has made a declaration after such a long time at the
time of filing of the return, the retraction made was an afterthought. As far
as surrender made originally was concerned, it was not under duress or
coercion particularly when the surrender was not made on the very first day
of survey itself. To presume pressure or coercion even after 2 months is
against the commonsense. It is possible that after having made surrender
they had manipulated their accounts so as to negate the surrender, which
was voluntarily made. Finally, the AO added the amount of Rs 2.25 crore as
undisclosed income of the assessee in addition to the income as returned by
him and completed the assessment on 29.12.2011 u/s 143(3)/147 of the
I.T. Act.
4.1 The CIT(A) confirmed the AO‘s order. Thereafter, the appeal before the
Tribunal was filed. The Tribunal reversed the order of the CIT(A) with the
following observations:-
―At the time of hearing, Sh. UN Marwah, FCA/AR of the assessee stated that
the similar issue has been adjudicated and decided in favour of the assessee
by the ITAT in the case of M/s IIBS Infonet (P) Ltd. v. ACIT, 2016 (4) TMI 346,

5. Volume XVI Part 5 September 10, 2016 7 Business Advisor
ITAT, Delhi, vide order dt. 8.3.2016 [in which the JM is the Author of the
order] has held that the addition made by the AO on the basis of the
statement recorded u/s 133A of the I.T. Act, 1961 without bringing any
corroborative material on record is not sustainable in the eyes of law. He
further stated that in the order dt. 8.3.2016 the Bench has also held that
the addition cannot be made on the basis of the statement recorded during
the survey u/s 133A of the I.T. Act in view of the various decisions, wherein
it has been held that such statement does not have any evidentiary value
especially the decision of the Madras HC in the case of CIT v. Khader Khan
Son (2008) 300 ITR 157, which has been upheld by the Hon‘ble SC in the
case of CIT v. Khader Khan (2012) 25 taxmann.com 413 (SC) and appeal filed
by the Revenue was dismissed by holding that section 133A does not
empower any ITO to examine any person on oath. In addition to these cases,
he relied upon the following cases also:-
*Pullangode Rubber Produce Co. v. State of Kerala (1973) 91 ITR 18 (SC)
*Ravinder Kumar v. DCIT (2008) 33 SOT 25 (Delhi HC)
*TDI Marketing (P) Ltd. v. ACIT (2008) 28 SOT 215 (Delhi HC)
*Mahesh Ohri v. ACIT (2013) 23 ITR 522
*CIT v. P. Balasubramanian (2013) 33 taxmann.com 130 (Madras HC)
*ITO v. Surender Kumar Jain, ITA No.3871/Del/2011
*Gajjam Chinna Yellappa v. ITO (2015) 370 ITR 671 (T&AP (HC)
*CIT v. Uttam Chand Jain (2010) 320 ITR 554
*R. Arun v. ITO (2016) (3) TMI 321 ITAT, Chennai
4.2 CBDT‘s instructions
The CBDT has issued instructions on this issue on 10th March, 2003
[No.286/2/2003/IT(INV)], which reads as under:-
―To
All Chief Commissioners of Income Tax
[Cadre Contra]
&

6. Volume XVI Part 5 September 10, 2016 8 Business Advisor
All Directors General of Income Tax
Sir,
Subject: Confession of additional income during search and seizure and
survey operation – regarding
Instances have come to notice of the Board, where assessees have admitted
that they have been forced to confess the undisclosed income during the
course of the search & seizure and survey operations. Such confession, if
not based upon credible evidence, are later retracted by the concerned
assessees while filing return of income. In these circumstances, confessions
during the course of search & seizure and survey operation do not serve any
useful purpose. It is therefore, advised that there should be focus and
concentration on collection of evidence of income, which leads to
information on what has not been disclosed or is not likely to be disclosed
before the Income Tax Dept. Similarly, while recording the statement during
the course of search & seizure and survey operation, no attempt should be
made to obtain confession as to the undisclosed income. Any action shall be
viewed adversely.
Further, in respect of pending assessment proceedings also, AOs should rely
upon the evidences/ material gathered during the course of search/ survey
operations or thereafter while framing the assessment orders. Yours
faithfully, Sd/- S.R. Mahapatra, Under Secretary (Inv. 11)‖.
5. Concluding comments
The foregoing discussion clearly brings out the position that the statements
of assessees are not to be recorded during the course of surveys, declaring
undisclosed incomes. Even if these are recorded, these will have no
evidentiary value for being held against the assessees.
(T. N. Pandey is Former Chairman, Central Board of Direct Taxes.)
―…while recording the statement during the course of search
& seizure and survey operation, no attempt should be made
to obtain confession as to the undisclosed income. Any action
shall be viewed adversely.‖