Income Tax Search vs Survey: Is There a Difference & What Rights Do You Have?

IT officials said they were conducting a survey, not a raid at BBC offices, but questions remain.

What is the difference between tax officers' powers of search and survey?

(Photo: iStock/Altered by The Quint)

Income Tax (IT) officials, on Tuesday, 14 February, turned up at the offices of BBC in Delhi and Mumbai for a 'survey operation.'

This comes on the heels of a controversy surrounding a two-part documentary by the broadcaster on the Gujarat Riots, focusing on Prime Minister Modi who was then the chief minister of the state.

The IT department investigation pertains to alleged "tax evasion" and the relevant business documents are being inspected, officials reportedly told news agency PTI.

BBC India employees were asked to hand over their phones to the officials half an hour later, sources told The Quint.

So how exactly is a 'survey' supposed to be different from a 'search'? What are the rights that a person has during either? And what can you do if you think things haven't gone by the book?

Section 132 vs Section 133A: Differences of Degree

Searches and surveys are distinct operations, and the powers to conduct them come from different sections of the Income Tax Act 1961.

The power to conduct a search comes from Section 132 of the Income Tax Act, and from its very basic text, it is clear that it is a more invasive and exhaustive power than a survey, the power for which comes from Section 133A.

This is perhaps only natural, given the circumstances in which a search under Section 132 is conducted, and when a survey is conducted under Section 133A.

A search is to be conducted when a senior officer of the Income Tax Department believes that a person has committed an offence of tax evasion or is not disclosing their assets, and, if a raid is not conducted, the information required by the tax authorities will not be provided to them.

Tax officials have the power to issue notices and summons to a person if they think they have failed to provide relevant documents about their business and earnings, or if they want them to provide specific documents for inspection. When they issue a summons or notice, there is no automatic need to conduct a search.

It is only when the senior tax officer thinks that these notices and summons are going to be ignored, or that a person is in possession of "money, bullion, jewellery or other valuable article or thing" which are not being declared, that a raid for search and seizure is to be authorised.

A survey, on the other hand, is a much more basic exercise, where a tax officer can go to a business and ask to inspect their books of accounts, and verify what cash, stock and other valuables are there at the premises.

The gravity of a Section 132 search is clear from the things that the tax officials can do when they go to conduct one:

• Enter and search any building or vehicle or vessel (commercial or residential/personal) where they think they might find relevant information or assets;

• Break open locks to get at such information or valuables;

• Physically search any person found at the place of search and make them furnish any information related to the search; and

• Even seize books of accounts or other relevant documents, or any "money, bullion, jewellery or other valuable article or thing".

These invasive powers are absent when it comes to a Section 133A survey, which grants them access to a place of business (or the offices of a charity – not a residence), and once there, to its books of accounts and other documents and information. It does not allow a power of search of an individual present at the scene.

While books of accounts and other such information can be impounded for inspection, money and valuable items can't be seized.

This is not something which Section 133A appears to envisage. The tax officials may no doubt claim that in the modern digital age, the business information they are allowed to inspect under Section 133A could even be on a personal phone, but if the information was available on the office devices, there would be no authority for them to demand that employees hand over his individual devices as well.

This is particularly important in the context of a journalist or a journalistic organisation, where work devices can have privileged information that is required to be kept confidential. At most, when it came to personal devices, the officers could have asked for access, and then to take specific documents, but not all the data.

The power to just access all his personal or journalistic data wouldn't even necessarily exist under the search power in Section 132.

Some Clear Distinctions: Attachment & Timing

There are some other clear-cut distinctions between a search and a survey that are important to recognise.

In addition to the right to seize any documents or valuables which are connected to the tax offence for which a Section 132 search is conducted, the tax officials also have the power to provisionally attach anything they find if they think this is "in the interest of the revenue".

This exceedingly wide power of provisional attachment was added to the law in 2017, adding to the already wide power of seizure under a search.

When it comes to a survey, on the other hand, no such power to attach a person's property is given to the tax authorities. They can impound books of accounts or documents which they need to inspect, but not any valuables which they believe are undisclosed.

This is something that any organisation being 'surveyed' but particularly those who might have privileged information on their premises (like journalists or lawyers) should keep in mind, as they have a right to object to attempts by the authorities to scoop up and clone the entire contents of all computers and devices at their place of business.

Another key difference between a search and seizure, which once again demonstrates the difference in degrees of seriousness, is when these powers can be exercised.

A search under Section 132 can take place at any time, and can last for as long as necessary. However, when it comes to a survey, the officers can only enter a place of business during its working hours, or after sunrise and before sunset.

Lawyer Mustn't Be Present – But That Doesn't Mean You Have No Rights

One of the things which happens whenever the taxman knocks, is that they always say you don't get to call a lawyer or have a lawyer present while the search or survey is going on.

On the face of it, this is wildly unfair, but also makes a lot of sense.

On the one hand, you could certainly use the help of a lawyer to understand what is going on and what rights you have, as there is no obligation or duty for the tax officers to give you any reasons for the raid, or even tell you what you can or can't do while it all happens.

On the other, if your lawyer or accountant is in on some nefarious scheme you've been involved in, a call to them could easily lead to some convenient destruction of evidence.

Considering the fact that a search in itself is not an interrogation, and does not amount to punitive action without further proceedings, the courts in India have held that a person does not have a right to have their lawyer present when a search or survey happens.

However, this doesn't mean that you aren't allowed to have any contact with a lawyer, no matter what the tax officers may tell you. A lack of a right to have a lawyer present does not equate to a prohibition against speaking with your lawyer, though such a call would have to be supervised or monitored by one of the officers present.

The current nebulous state of affairs is no doubt useful for the tax authorities, as many people are unlikely to push for the ability to make a call to their lawyers for advice.

However, this is again something journalists in particular should keep in mind since their lawyer will be able to advise them on how to ensure that privileged information is not taken by the tax authorities. This is the case for not just surveys, but searches as well.

Going by the provisions of Section 133A, given the limited powers of the tax authorities, this should also mean that a person present at the scene of a survey has a lot more freedom than someone at the scene of a search. Technically, there should be no restrictions on their movement, for instance, though in practice if the officers want specific information from a person, they may need to be present throughout the survey.

Conversely, because a search under Section 132 is so exhaustive, there are also a number of rights that a person present at the scene has. The important ones include:

• To see the warrant authorising the search and verify the identity of the search party.

• To have two independent witnesses from the locality present during the search.

• To eat one's meals at normal times and to call a doctor if one needs medical attention.

• Children are to be allowed to go to school once their bags have been checked.

• Women and girls can only be physically searched by a female officer.

• To get a copy of the panchnama and inventory note of all items seized or attached, to take extracts or copies of any books of accounts which are being seized, and to see a copy of your statement as recorded by the tax officers.

What Remedies Does a Person Subjected to a Search or Survey Have?

This is another example where there is a clear difference between a search and a survey.

When it comes to a search under Section 132, since it requires there to have been some proper reasons for the search to take place, the very search itself can be challenged by a person under the Income Tax Act.

These challenges could earlier be filed before the specific tax authorities like the Income Tax Appellate Tribunal, but following those 2017 amendments, the reasons for carrying out a raid cannot be disclosed to any person or authority or even the ITAT. This means that this ability to challenge the basis of the search itself will only really exist in the high courts.

When it comes to a survey under Section 133A, there is no such power to challenge the basis for the survey – which once again demonstrates the difference in degree and invasiveness between the two.

At the same time, if there are any discrepancies in the way a survey is conducted, this can be raised as an issue in the high courts.

The grounds for challenge can include not just violation of the Income Tax Act's provisions (rendering the officers' actions without authority), but also allegations of a violation of the right to privacy. A failure to follow the procedures for both a search and seizure could also arguably become grounds for challenges under Article 14 of the Constitution (equal treatment under the law).

(This piece has been updated in view of IT Department 'surveys' in BBC offices. It was first published in November 2021 after a similar IT-Department 'survey' was carried out at the offices of Newslaundry and Newsclick.)