Income Tax 2025

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Powers of survey. ​

253(1) ​

Irrespective of anything contained in any other provision of this Act, an income-tax authority may enter any place at which a business or profession, or activity for charitable purpose is carried on, whether such place be the principal place or not of such business or profession or of such activity for charitable purpose, where such place—

  • (a) is within the limits of the area assigned to such authority; or
  • (b) is occupied by any person in respect of whom such authority exercises jurisdiction; or
  • (c) in respect of which such authority is authorised for the purposes of this section by 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, and, upon entry into such a place, may require any proprietor, trustee, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession or such activity for charitable purpose— (i) to provide the necessary technical and other assistance (including access code) to enable the inspection of such books of account or other documents, or computer system, or any other material connected with such system including virtual digital space, as may be required and which may be available at such place; (ii) to provide the necessary facility to check or verify the asset, stock, which may be found therein; and (iii) to furnish such information as such authority may require as to any matter which may be useful for, or relevant to, any proceeding under this Act.

253(2) ​

For the purposes of this section, a place where a business or profession, or activity for charitable purpose is carried on shall also include any other place, whether any business or profession or activity for charitable purpose is carried on therein or not, in which the person carrying on such business or profession or activity for charitable purpose 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 or computer system relating to such business or profession or activity for charitable purpose, are or is kept.

253(3) ​

An income-tax authority may enter any place of business or profession or activity for charitable purpose referred to in sub-section (1), only during the hours at which such place is open for the conduct of business or profession or activity for charitable purpose and, in the case of any other place, only after sunrise and before sunset.

253(4) ​

An income-tax authority acting under this section may, for the purposes of verifying that tax has been deducted or collected at source as per the provisions of Chapter XIX-B of this Act, after sunrise and before sunset, enter––

  • (a) any office, or any other place where business or profession or activity for charitable purpose is carried on, within the limits of the area assigned to such authority; or
  • (b) any place in respect of which such authority is authorised for the purposes of this section by an income-tax authority who is assigned the area within which such place is situated or where books of account or documents are kept, and on entry to such office or place, the income-tax authority may require the deductor or the collector or any other person who may at that time and place be attending in any manner to such work— (i) to provide the necessary facility to inspect such books of account or other documents, and access to electronic media or computer system, or virtual digital space, as may be required; and (ii) to furnish such information as may be required in relation to such matter.

253(5) ​

An income-tax authority acting under this section may—

  • (a) place marks of identification on the books of account or other documents inspected by such authority and make or cause to be made extracts or copies therefrom or from electronic media or computer system;
  • (b) record the statement of any person on oath which may be useful for, or relevant to, any proceeding under this Act;
  • (c) impound and retain in custody any books of account or other documents inspected by it, after recording reasons for doing so, for a period–– (i) of fifteen days (exclusive of holidays); or (ii) exceeding fifteen days (exclusive of holidays) with the prior approval of the approving authority;
  • (d) make an inventory of any asset or stock checked or verified by such authority.

253(6) ​

The income-tax authority acting under sub-section (4) shall only undertake the actions referred under sub-sections (5)(a) and (5)(b).

253(7) ​

An income-tax authority acting under this section shall, on no account, remove or cause to be removed from the place wherein it has entered, any asset or stock.

253(8) ​

The income-tax authority having regard to the nature and scale of expenditure incurred, for the purposes of verifying the expenditure made by the person in connection with any function, ceremony or event, if it is of the opinion that it is necessary and expedient to do so, after such function, ceremony or event, may—

  • (a) require the person by whom such expenditure has been incurred or any other person who is likely to possess the information regarding such expenditure, to furnish such information which may be useful for, or relevant to, any proceeding under this Act;
  • (b) record the statements of the person or any other person on oath in this behalf; and
  • (c) any statement so recorded may thereafter be used as evidence in any proceeding under this Act.

253(9) ​

If a person is required to provide facility to the income-tax authority to inspect books of account or other documents in any form or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded, either refuses or evades to do so, the income-tax authority shall have all the powers under section 246(1) for enforcing compliance with the requirement.

253(10) ​

The action under this section shall be taken by an income-tax authority with the prior approval of the Principal Director General or the Director General or the Principal Chief Commissioner or the Chief Commissioner.

253(11) ​

In this section, “income-tax authority” means—

  • (a) a Principal Commissioner or Commissioner, a Principal Director or Director, a Joint Commissioner or Joint Director, an Assistant Director or a Deputy Director or an Assessing Officer, or a Tax Recovery Officer; and
  • (b) includes an Inspector of Income-tax, for the purposes of sub-sections, (1)(i), (5)(a) and (8), who is subordinate to the Principal Director General or the Director General or the Principal Chief Commissioner or the Chief Commissioner, as specified by the Board
Explanation

Section Summary: ​

Section 253 of the Income Tax Act grants income-tax authorities the power to conduct surveys at places where businesses, professions, or charitable activities are carried out. The purpose is to verify compliance with tax laws, inspect books of account, documents, and assets, and gather information relevant to tax proceedings. This section ensures that tax authorities can access necessary records and information to enforce tax compliance effectively.

Key Changes: ​

  1. Expanded Scope of Survey: The section now explicitly includes virtual digital spaces and computer systems, reflecting the digitalization of records and transactions.
  2. Clarification on Entry Timings: Surveys can only be conducted during business hours for places of business or charitable activities, and between sunrise and sunset for other places.
  3. Enhanced Powers for Verification: Authorities can now verify tax deducted or collected at source (TDS/TCS) under Chapter XIX-B during surveys.
  4. Inclusion of Charitable Activities: The section explicitly covers places where charitable activities are conducted, ensuring compliance in this sector.
  5. Prior Approval Requirement: Surveys must now be conducted with prior approval from senior tax officials (e.g., Principal Director General, Chief Commissioner).

Practical Implications: ​

  1. For Businesses and Professionals:

    • Tax authorities can inspect books of account, documents, and computer systems, including virtual digital spaces, during surveys.
    • Businesses must ensure proper maintenance of records and provide access to tax authorities when required.
    • Non-compliance or refusal to cooperate can lead to enforcement actions under Section 246(1).

  2. For Charitable Organizations:

    • Charitable activities are now explicitly covered, meaning organizations must maintain proper records and be prepared for inspections.

  3. For Taxpayers:

    • Taxpayers must be aware that authorities can inspect assets, stock, and records, and may impound documents for up to 15 days (or longer with approval).

  4. For Deductors/Collectors (TDS/TCS):

    • Authorities can verify TDS/TCS compliance during surveys, requiring access to relevant records and systems.

Critical Concepts: ​

  1. Virtual Digital Space: Refers to digital records, cloud storage, or any electronic system where books of account or documents are stored.
  2. Impounding of Documents: Authorities can retain books or documents for up to 15 days (or longer with approval) after recording reasons for doing so.
  3. Prior Approval: Surveys must be authorized by senior officials, ensuring accountability and preventing misuse of powers.
  4. Enforcement Powers: If a person refuses to cooperate, authorities can enforce compliance under Section 246(1), which includes penalties or other legal actions.

Compliance Steps: ​

  1. Maintain Proper Records: Ensure books of account, documents, and digital records are up-to-date and accessible.
  2. Provide Access: Be prepared to provide access to computer systems, virtual digital spaces, and physical records during surveys.
  3. Cooperate with Authorities: Furnish required information and assist in inspections to avoid enforcement actions.
  4. Verify TDS/TCS Compliance: Ensure accurate deduction and collection of tax at source, as authorities may verify this during surveys.
  5. Document Retention: Retain records for the prescribed period to avoid issues during inspections.

Examples: ​

  1. Business Survey:

    • A tax authority conducts a survey at a retail store during business hours. They inspect the store’s books of account, verify stock levels, and access the store’s digital inventory system. The store owner provides the necessary assistance, and the authority places identification marks on inspected documents.

  2. Charitable Organization Survey:

    • A tax authority visits a charitable trust’s office to verify compliance. They inspect donation records, expenditure details, and access the trust’s digital accounting system. The trust’s trustee provides the required information and assists in the inspection.

  3. TDS Verification:

    • A tax authority visits a company’s office to verify TDS compliance. They inspect the company’s payroll records, access the digital TDS filing system, and verify that taxes have been deducted and deposited correctly. The company’s finance team provides the necessary access and information.

This section strengthens the tax authorities’ ability to ensure compliance while providing clear guidelines for taxpayers to follow during surveys.