Survey u/s 133A generally results in impounding of the books of accounts as part of survey on the spot or or by calling the assessee after survey with books of accounts and impounding the books of accounts and other papers u/s 131 of teh Income tax Act is common practice by assessing officer of the income tax department.These impounded documents can be held by the A.O under Law for maximum 10 days in case of survey u/s 133A or 15 days ( excluding holidays) in case books are impounded u/s 131 of the I T Act. If A.O wants to keep the books for more than that limit , he will have to seek permission from Commissioner or chief commissioner as the case may be.
In a writ before Karnataka High court , in Subha & Prabha Builders (P) Ltd vs ITO 318 ITR 29, single judge not only held that the power to hold the books after a certain period is not with the Income Tax Authorities and it can not eb extended on whim and fancies of authorities. The single judge also order cost of Rs 25,000. The income Tax Department challenged this order of single judge before Karnataka High Court in CIT vs Subha & Prabha Builders (P) Ltd 250 CTR 106 (KAR.)/ which was dismissed by the High court .
The Facts of the Survey Case
An inventory of the book of account, documents and such other papers available was made and the papers and documents contained in as many as 30 files were seized. It is, thereafter, they issued summons on September 20, 2005, calling upon the assessee to produce the ledger, cash book, etc. The assessee appeared before the first respondent-officer the next day along with the remaining books of account which they had summoned and handed over the same to them.The income-tax authorities conducted a survey of the premises of the respondent on September 20, 2005, and in the course of the said survey, they examined the general activities of the respondent, various books of account and other documents maintained at the office premises of the respondent and as a follow up, issued a notice on the same day summoning the respondent to appear before the Assessing Officer with ledger, cash books, vouchers and bank passbooks and its details.
The said books were not returned to the assessee as contemplated under law within 15 days. The assessee requested for return of books, which was not granted. In reply to the same, the petitioner was furnished with an order dated October 27, 2005, as per annexure C passed by the Commissioner of Income-tax, Bangalore, which, indicated that he has granted permission to the Income-tax Officer to retain the books of account and documents impounded by him for the period up to March 31, 2006.
After the said retention, a request was made by the petitioner for return of documents. Several letters were written by him in this regard. In reply, what was sent to him was orders passed by the Commissioner of Income-tax with the periodic extension of time for retaining the books of account and documents. It is in these circumstances that the assessee was constrained to file the writ petition.
The Karnataka High Court held as under :
5. From the facts set out above, it is clear that the survey was conducted on September 20, 2005. On September 21, 2005, in terms of the notice, the assessee handed over all the books of account. During the course of the survey, it is the Department which had taken away the books of account and other documents after making survey. It is unfortunate, even after five long years, the Revenue did not complete the assessment still, they want to continue to retain the books by abusing the provisions contained in section 131(3)(b) of the Act, wherein the higher authorities are empowered to make orders for extension of time enabling the Assessing Officer to retain the books of account and other documents. Therefore, in the facts of the case, we are satisfied that it is a clear case of abuse of the aforesaid statutory provisions and, therefore, the learned single judge was justified in entertaining the writ petition, issuing a direction to return the books of account and impose damages of Rs. 25,000. We do not see any justification to interfere with the said order, which is just and proper, in the facts of the case. In that view of the matter, we do not see any merit in the case and accordingly, appeal is dismissed.
The aforesaid judgment will certainly open eyes of higher income tax authorities who cross the limit set by the law of land and blindly extends the time for which books of accounts or documents of assessee with the department , putting hapless assessee in great difficulties.