TaxTMI 
TaxTMI 
Transformation of Income-tax Survey Provisions in India : Clause 253 of the Income Tax Bill, 2025 Vs. Section 133A of the Income-tax Act, 1961
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....artures in legislative approach. Objective and Purpose The legislative intent behind Clause 253 is to strengthen the powers of income-tax authorities to conduct surveys while ensuring procedural fairness and adapting to modern business environments. The provision is designed to: * Enable effective verification of income, expenditure, assets, and compliance with tax deduction/collection at source (TDS/TCS) provisions; * Expand the scope of survey to include digital records and virtual digital spaces, recognizing the prevalence of electronic documentation and digital assets; * Introduce clear procedural safeguards, such as prior approvals and time-bound retention of documents, to prevent abuse of power; * Clarify the duties and obligations of the persons surveyed, ensuring cooperation and compliance; * Provide specific powers for surveys related to verification of expenditure in social functions, ceremonies, or events; * Bring greater transparency, accountability, and legal certainty to survey actions, thereby reducing litigation and fostering voluntary compliance. The historical background reveals that Section 133A, first introduced in 1964 and amended over the years,....
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....ments, explicitly excluding impounding or inventory-making powers. This targeted approach balances enforcement with the need to avoid unnecessary disruption. 4. Powers During Survey (Sub-section 5) Clause 253(5) enumerates the specific powers of the authority during a survey: * Placing marks of identification on books/documents and making extracts or copies (including from electronic media); * Recording statements on oath relevant to proceedings; * Impounding and retaining books/documents (with reasons recorded), subject to a 15-day limit (exclusive of holidays), extendable with prior approval of the approving authority; * Making an inventory of assets or stock checked or verified. The requirement for recording reasons for impounding and retention, and the need for higher-level approval for extensions, serve as important procedural checks. 5. Prohibition on Removal of Assets (Sub-section 7) The authority is expressly prohibited from removing or causing to be removed any asset or stock from the premises. This provision is aimed at preventing overreach and ensuring that the survey remains a non-intrusive verification exercise, distinct from search and seizure operations ....
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....ound retention, and prohibition on removal of assets enhance taxpayer protections and reduce the risk of arbitrary action. * Compliance Burden: Taxpayers must be prepared to provide technical assistance (including access codes) and facilitate inspection of digital assets, which may necessitate investment in IT systems and staff training. * Event Expenditure Surveys: Individuals and entities incurring large expenditures on social functions must maintain proper records and be ready to explain sources of funds and nature of expenses. * Targeted TDS/TCS Surveys: Limiting the scope of TDS/TCS verification surveys to inspection and statement recording minimizes business disruption but emphasizes the need for strict compliance with withholding tax provisions. * Enforcement Powers: The authority to invoke Section 246(1) powers for enforcing compliance acts as a deterrent against non-cooperation. * Administrative Oversight: The requirement of high-level approval for surveys ensures accountability and helps prevent misuse of powers. Overall, Clause 253 aims to strike a balance between effective tax administration and protection of taxpayer rights, while modernizing the law to addr....
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....t, but approval can come from a wider range of authorities; reasons for impounding must be recorded. Clause 253 centralizes approval to higher authorities, potentially increasing oversight. Inventory of Assets Inventory of assets or stock checked or verified. Inventory of cash, stock, or other valuable articles checked or verified. Wording slightly modernized; substance remains similar. Removal of Assets Prohibited Expressly prohibits removal of any asset or stock from premises. Prohibits removal of cash, stock, or valuable articles; wording on books/documents removed in 2002. Both provisions maintain this safeguard, though Clause 253 uses broader terminology. Event Expenditure Verification Authority may verify expenditure on functions/events, record statements on oath, use as evidence. Similar power, but statement recording not necessarily on oath. Clause 253 enhances evidentiary value by requiring oath. Non-Compliance Consequences Authority has all powers u/s 246(1) for enforcement. Authority has all powers u/s 131(1) for enforcement. Section reference updated in Clause 253; functional equivalence maintained. Prior Approval Requirement Survey....
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....: Both provisions include Inspectors for limited purposes, but the specification and subordination to senior officers are more clearly articulated in Clause 253. Ambiguities and Potential Issues While Clause 253 represents a significant advancement, certain ambiguities and challenges may arise: * Definition of "Virtual Digital Space": The term is not defined in the clause, which could lead to interpretational disputes regarding the extent of access to cloud storage, email servers, or third-party service providers. * Technical Assistance Requirement: Mandating access codes and technical support may create friction, especially if the person present lacks the necessary knowledge or authority to provide such access, leading to delays or allegations of non-cooperation. * Overlap with Search and Seizure: Although removal of assets is prohibited, the broad powers to inspect and impound documents may sometimes blur the line between survey and search operations, necessitating clear administrative guidelines. * Data Privacy Concerns: Access to digital records may raise issues of data privacy, especially if personal or third-party data is inadvertently accessed. The provision does n....