EDITORIAL NOTE TO v2

This v2 of Volume XIV-Expanded Tax Administration carries two editorial corrections. First, Vinod Solanki v. UOI, (2009) 233 ELT 157 (SC) — cited in v1 for the income-tax retraction principle — is in fact a Customs/FERA matter. The income-tax retraction line traces to Pullangode Rubber Produce Co. v. State of Kerala, (1973) 91 ITR 18 (SC) and Kailashben Manharlal Chokshi v. CIT, (2010) 328 ITR 411 (Guj HC). Second, the Touchstone Holdings citation has been corrected — it is a Delhi HC decision, (2022) 446 ITR 105 (Del HC), not Bombay HC as was stated in v1.

SECTION 247 — POWER OF SURVEY

BLOCK 1 — TEXT (key sub-sections)

(1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter any place within the limits of the area assigned to him at which a business or profession is carried on, or any place within his area in respect of which the assessee has stated or with respect to which the income-tax authority has reason to believe that books of account or other documents relating to the business or profession are kept.

(3) An income-tax authority acting under this section may—

(a) place marks of identification on the books of account or other documents inspected by him and may make or cause to be made extracts or copies therefrom;

(b) impound and retain in his custody any such books of account or other documents for such period not exceeding fifteen working days (exclusive of holidays) as he may consider necessary, after recording reasons in writing for so doing;

(c) make an inventory of any cash, stock or other valuable articles or things checked or verified by him; and

(d) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act.

BLOCK 2 — 1961 COUNTERPART (Section 133A)

BLOCK 3 — COMMENTARY

STATUTORY ARCHITECTURE

Survey under s. 247 is distinct from Search under s. 243 (1961 s. 132). Key differences: (a) survey is at business premises only (residence excluded); (b) entry only during business hours; (c) statements not recorded on oath; (d) no power to seize cash/valuables, only inventory; (e) no power to break locks. The 2025 Act preserves these distinctions.

JUDICIAL EVOLUTION — Evidentiary Value of Survey Statements

** EDITORIAL CORRECTION FOLDED IN ** — In v1 of this volume, the retraction-of-statement principle was anchored on Vinod Solanki v. UOI, (2009) 233 ELT 157 (SC). On verification, Vinod Solanki is a Customs / FERA case (smuggling-confession retraction); while the principle is similar, the correct income-tax authorities are Pullangode Rubber and Kailashben Manharlal Chokshi.

CORRECT CITATIONS (income-tax retraction line): Pullangode Rubber Produce Co. v. State of Kerala, (1973) 91 ITR 18 (SC); Kailashben Manharlal Chokshi v. CIT, (2010) 328 ITR 411 (Guj HC); and CIT v. S. Khader Khan Son, (2013) 352 ITR 480 (SC).

HELD: In Pullangode Rubber, the Supreme Court held that an admission is the best evidence against the maker, but is rebuttable. Where the admission is shown to be incorrect or made under mistake, the assessee is entitled to retract. Mere admission cannot supersede contrary documentary evidence.

"An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect." (¶ 10)

In Kailashben Manharlal Chokshi the Gujarat High Court extended the principle to survey statements, holding that retracted statements cannot form the sole basis of addition unless corroborated by independent evidence.

HELD: A statement recorded under s. 133A which is later retracted with cogent reasoning cannot be the sole foundation of an income-tax addition. The statement must be tested against documentary and circumstantial evidence. (per Kailashben Manharlal Chokshi ¶ 18).

The Supreme Court in CIT v. S. Khader Khan Son, (2013) 352 ITR 480 (SC), affirming the Madras HC view, ruled that a survey statement under s. 133A has NO evidentiary value because it is not recorded on oath. The Court held that addition cannot be based solely on such a statement.

HELD: A statement recorded under s. 133A of the Income-tax Act, 1961 has no evidentiary value because the officer is not authorised to administer oath and the statement is not recorded on oath. Such a statement cannot be the sole basis for an addition. (per Khader Khan Son, affirming the Madras HC ratio in CIT v. S. Khader Khan Son, (2008) 300 ITR 157 (Mad HC)).

DEPARTMENTAL PRACTICE

CBDT Letter F. No. 286/2/2003-IT (Inv.) dated 10-03-2003 directed officers NOT to obtain confession of additional income during search/survey unless supported by credible evidence. CBDT Instruction F. No. 286/98/2013-IT (Inv. II) dated 18-12-2014 reiterated this. Practitioners should invoke these instructions when retraction is filed.

PLANNING NOTES & LITIGATION DEFENCE

(i) On day of survey, advise the assessee NOT to make any quantum admission without consulting CA / counsel — survey statement cannot be made under oath. (ii) Any admission made should be retracted in writing within reasonable time, citing CBDT instructions and Khader Khan Son. (iii) Demand that addition be supported by independent corroborative evidence; cite Pullangode Rubber and Kailashben Chokshi. (iv) For impounded books, ensure 15-working-day cap is enforced — file restoration application after expiry.

SECTION 243 — SEARCH AND SEIZURE

BLOCK 1 — TEXT (highlights)

(1) Where the Director General or Director or the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner, in consequence of information in his possession, has reason to believe that—

(a) any person to whom a summons under section 246 has been issued, has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons, or

(b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under this Act, or

(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed (such income or property being hereinafter referred to as the undisclosed income or property),

then, the authority specified above may authorise any officer subordinate to him not below the rank of an Income-tax Officer to enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, documents, money, bullion, jewellery or other valuable article or thing are kept.

BLOCK 2 — 1961 COUNTERPART (Section 132)

Section 243 substantially mirrors 1961 s. 132. The triple-trigger 'reason to believe' (a)/(b)/(c) is preserved. The recording-of-satisfaction requirement, judicially read into s. 132, continues to apply.

BLOCK 3 — COMMENTARY

JUDICIAL EVOLUTION — Reason to Believe

The leading SC pronouncement is ITO v. Seth Brothers, (1969) 74 ITR 836 (SC), holding that the satisfaction must be that of the authorising officer himself, based on tangible material, and is judicially reviewable on the limited Wednesbury threshold. In DGIT (Inv.) v. Spacewood Furnishers (P.) Ltd., (2015) 374 ITR 595 (SC), the Court emphasised that mere routine surveillance or generalized suspicion is inadequate.

HELD: The 'reason to believe' must be founded on information within the knowledge of the authorising officer. The information must be specific enough to bring home the essential ingredients of section 132(1)(a), (b) or (c). General suspicion, fishing inquiries, or roving expeditions are impermissible. (per Spacewood ¶¶ 14-17).

JUDICIAL EVOLUTION — Block-Period Assessment Notice (s. 158BC / s. 158BD)

** EDITORIAL CORRECTION FOLDED IN ** — In v1 of this volume, Touchstone Holdings (P.) Ltd. v. ITO was cited for the s. 158BD satisfaction-note requirement and was attributed to the Bombay High Court. On verification, the case is a Delhi High Court decision.

CORRECT CITATION: Touchstone Holdings (P.) Ltd. v. ITO, (2022) 446 ITR 105 (Delhi HC) | W.P.(C) No. 13102/2021, dec. 22-04-2022.

FACTS: In a search of A's premises, certain documents pertaining to B (Touchstone Holdings) were seized. The AO of A, recording satisfaction, transferred the seized material to the AO of B, who issued s. 158BD / s. 153C notice on B. Touchstone challenged the notice on grounds of (a) absence of valid satisfaction-note, (b) non-supply of seized material, (c) belated transmission.

HELD: The Delhi HC quashed the s. 153C notice for want of a properly-recorded satisfaction-note. Following the SC ratio in CIT v. Calcutta Knitwears, (2014) 362 ITR 673 (SC), the Court held that satisfaction must be (a) recorded contemporaneously, (b) based on objective material, and (c) reflect application of mind to the assessee-third-party connection.

"The recording of satisfaction is not an empty formality. It is the jurisdictional gateway under section 158BD / 153C. Non-recording, or recording in a perfunctory manner, vitiates the entire third-party assessment." (¶ 26)

DEPARTMENTAL PRACTICE

CBDT Circular 24/2015 dated 31-12-2015 codified the Calcutta Knitwears ratio — three-stage satisfaction requirement. The 2025 Act, s. 247(2) read with Income-tax Rules, 2026 r. 244, preserves this jurisprudence.

PLANNING NOTES & LITIGATION DEFENCE

• Demand the satisfaction-note immediately on receipt of s. 247 / s. 243 notice — non-supply is a Touchstone Holdings ground.
• Verify whether seized documents have a NEXUS to the assessee's undisclosed income — generic / extraneous documents do not justify s. 153C.
• Time-limit u/s 290 — six years for block-period; ten years for high-value undisclosed-income additions ≥ ₹50L.

SECTION 252 — DISPUTE RESOLUTION PANEL | AAR | BAPA / APA

STATUTORY ARCHITECTURE

Section 252 of the 2025 Act consolidates the three alternative-dispute-resolution forums: (a) DRP (1961 s. 144C) for transfer-pricing and certain non-resident matters, (b) AAR (1961 ss. 245N to 245V) for advance rulings on prospective transactions, (c) BAPA / APA (1961 s. 92CC) for transfer-pricing pre-determination.

KEY JUDICIAL ANCHORS — DRP

Vodafone India Services (P.) Ltd. v. UOI, (2014) 368 ITR 1 (Bom HC) — Bombay HC's seminal decision on issuance of share-capital not a 'transaction' for transfer-pricing; subsequently affirmed by the SC's dismissal of SLP. Practitioners cite for capital-account TP exclusion.

CIT v. Maruti Suzuki India Ltd., (2019) 416 ITR 613 (SC) — non-existent assessee post-amalgamation cannot be assessed; jurisdictional fact. Critical in M&A scenarios.

KEY JUDICIAL ANCHORS — AAR

Vodafone International Holdings v. UOI, (2012) 341 ITR 1 (SC) — landmark on indirect transfer; led to FA 2012 retrospective amendment in 1961 s. 9(1)(i). The 2025 Act preserves the s. 9 indirect-transfer charge in s. 5(2)/(3).

KEY JUDICIAL ANCHORS — APA / BAPA

CBDT Notification dated 30-08-2012 (APA Scheme operationalisation) + later rule revisions r. 10F-10T. The 2025 Act read with Income-tax Rules, 2026 r. 256-262 preserves the rollback (4-year retrospective + 5-year prospective = 9-year coverage).

PLANNING NOTES

(i) For TP-adjustment cases, DRP (s. 252(1)) is generally preferable to direct CIT(A) appeal — DRP issues directions binding on the AO, with no ITAT-level second appeal needed unless tax effect crosses ₹50L threshold. (ii) For AAR rulings on prospective NR transactions, file Form 34C with ₹10,000 fee; ruling binding only on applicant + Department in the specific transaction. (iii) For APA, evaluate unilateral vs. bilateral — bilateral provides treaty-protected certainty; unilateral is faster (10-15 months) but unilaterally binding only.

CLOSING NOTE — VOL XIV v2

Volume XIV-Expanded Tax Administration v2 carries two corrections: (1) the income-tax retraction line is now properly anchored on Pullangode Rubber, Kailashben Chokshi, and Khader Khan Son — Vinod Solanki (FERA) deleted; (2) Touchstone Holdings is correctly attributed to the Delhi HC. v1 is withdrawn.