Income TaxUndisclosed Income Rate of Income Tax for Receivables, Creditors and Inventory Admitted in a Survey Under Section 133A

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The Tax Publishers Income Tax--Undisclosed Income Rate of Income Tax for Receivables, Creditors and Inventory Admitted in a Survey Under Section 133A V.K. Subramani During the course of survey under Section 133A, invariably the taxpayers admit some additional income which they may not admit otherwise. The additional income could be attributable to (i) presence of inventory holdings on the date of survey more than what is recorded in the books of account; (ii) expenditures incurred in contravention of Section 40A(3); and (iii) Occasionally, the actual receivables being more than what is accounted in the books of account. This write-up discusses the applicable tax rate in respect of inventory and receivables admitted during the course of survey, besides the eligibility for set-off of losses of earlier years in the context of the legal amendments made in the recent times. 1. Introduction In income-tax law one of the draconian provisions in the statute book disliked by the taxpayers is Section 132 which deals with search. It shatters the confidence of the taxpayers for the rigidity and severity with which it is executed by the tax administration. Survey under Section 133A is yet another tool in the armoury of tax administration which is gainfully used at the end of the financial year to mobilize tax resources by visiting the business premises of the taxpayers to ascertain the actual state of affairs. During the course of survey under Section 133A, invariably the taxpayers admit some additional income which they may not admit otherwise. The additional income could be attributable to (i) presence of inventory holdings on the date of survey more than what is recorded in the books of account; (ii) expenditures incurred in contravention of Section 40A(3); and (iii) Occasionally, the actual receivables being more than what is accounted in the books of account. This refresher discusses the applicable tax rate in respect of inventory and receivables admitted during the course of survey, besides the eligibility for set-off of losses of earlier years in the context of the legal amendments made in the recent times. 2. Legal provisions Section 133A empowers an income-tax authority to enter any place within the limits of the area assigned to him at which a business or profession is carried on by the taxpayer. Any person who may at that time and place be attending in any manner in carrying out such business or profession must afford the necessary facility to the income-tax authority (including his team) to inspect the books of account or other documents which is required and which is available at such place. The survey team can check or verify cash, stock or other valuable article or thing which may be found therein and seek furnishing of information which may be useful or relevant to any proceeding under the Act. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Income Tax--Undisclosed Income

Rate of Income Tax for Receivables, Creditors and Inventory Admitted in a Survey Under Section 133A

V.K. Subramani

During the course of survey under Section 133A, invariably the taxpayers admit some additional income which they may not admit otherwise. The additional income could be attributable to (i) presence of inventory holdings on the date of survey more than what is recorded in the books of account; (ii) expenditures incurred in contravention of Section 40A(3); and (iii) Occasionally, the actual receivables being more than what is accounted in the books of account. This write-up discusses the applicable tax rate in respect of inventory and receivables admitted during the course of survey, besides the eligibility for set-off of losses of earlier years in the context of the legal amendments made in the recent times.

1. Introduction

In income-tax law one of the draconian provisions in the statute book disliked by the taxpayers is Section 132 which deals with search. It shatters the confidence of the taxpayers for the rigidity and severity with which it is executed by the tax administration. Survey under Section 133A is yet another tool in the armoury of tax administration which is gainfully used at the end of the financial year to mobilize tax resources by visiting the business premises of the taxpayers to ascertain the actual state of affairs.

This refresher discusses the applicable tax rate in respect of inventory and receivables admitted during the course of survey, besides the eligibility for set-off of losses of earlier years in the context of the legal amendments made in the recent times.

2. Legal provisions

Section 133A empowers an income-tax authority to enter any place within the limits of the area assigned to him at which a business or profession is carried on by the taxpayer. Any person who may at that time and place be attending in any manner in carrying out such business or profession must afford the necessary facility to the income-tax authority (including his team) to inspect the books of account or other documents which is required and which is available at such place. The survey team can check or verify cash, stock or other valuable article or thing which may be found therein and seek furnishing of information which may be useful or relevant to any proceeding under the Act.