Search and Seizure Case under Income Tax Act 1961

ind something the presence of which is suspected etc. Seize means to take possession of goods, contrary to the wishes of the owner or to take forcible possession. From income tax point of view, in common parlance search is referred to as ‘RAID’. However, there is no such term as raid anywhere in income tax law.
Search and Seizure is a very powerful tool available to Income Tax Department (ITD) to unearth any concealed income or valuables and to check the tendencies of tax evasion thereby mitigating the generation of black money. Search operations are exploratory exercises on the basis of information with the Income Tax Department to find hidden income and wealth in cases of tax payers, who have not disclosed their true financial state of affairs in discharge of their tax obligations. Seizure implies taking possession of assets, which have not been disclosed to the Income-tax Department and of accounts/documents, papers which contain details of unaccounted wealth/income not disclosed to the income tax authorities. The Income Tax Department resorts to search and seizure only in cases where there is sufficient reason to believe that the person concerned would not disclose the true picture of his income in the normal course of filing of return and regular assessment.

Search & seizure-from income tax perspective

Search operations are exploratory exercises on the basis of information with the income tax department to find hidden income and wealth in cases of tax payers, who have not disclosed their true financial state of affairs in discharge of their tax obligations.

Seizure implies taking possession of assets, which have not been disclosed to the Income-tax Department and of accounts/documents, papers which contain details of unaccounted wealth/income not disclosed to the income tax authorities. Thus, search and seizure is a very powerful weapon in the armory of income tax department to unearth any concealed income or valuables and to check the tendencies of tax evasion thereby mitigating the generation of black money.

Who can authorize (i.e., issue search warrants) proceedings u/s 132

Sec.132 empowers the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner to authorize proceedings under this section.

Who can conduct search?

Income tax authority, having power to initiate search u/s 132, can authorize its subordinate(s) (not below the rank of Income tax officer) to conduct search. Following subordinates can be authorized Authorized Officer who can conduct search Authorized from Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director, Deputy Director, Assistant Commissioner, Deputy Commissioner or Income tax officer Principal Director General or Director General or Principal Director or Director or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner Assistant Director, Deputy Director, Assistant Commissioner, Deputy Commissioner or Income tax officer Additional Director or Additional Commissioner or Joint Director or Joint Commissioner (on the basis of authorization from above authority and being empowered by the Board)

Power of authorized officer

While conducting search, authorized officer has following powers –

1. Enter and search any building, etc.: Enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept.

2. Break open the lock of any door, etc.: Break open the lock of any door, box, locker, safe, almirah or other receptacle, where the keys thereof are not available.

3. Search person: Search any person who – has got out of; or is about to get into; or is in, the building, place, vessel, vehicle or aircraft if the authorised officer has reason to suspect that such person has secreted about his person any books of account, other documents, money, bullion, jewellery or other valuable article or thing.

4. Require any person to facilitate the authorised officer: Require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record, to afford the authorised officer the necessary facility to inspect such books of account or other documents.

5. Seizure: Seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search.

6. Place marks of identification: Place marks of identification on any books of account or other documents or make extracts or copies therefrom.

7. Make inventory: Make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing.

8. Examine on oath: Examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing. Any statement made by such person during such examination may thereafter be used as evidence in any proceeding. The examination of any person may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under Act.

Time limit for release of asset

Asset or any portion thereof shall be released within a period of 120 days from the date on which the last of the authorisations for search u/s 132 or for requisition u/s 132A, as the case may be, was executed.

Interest payable to the assessee

Where the aggregate amount of money (either seized or realized through sale of assets) seized exceeds the aggregate of the amount required to meet the liabilities, Government shall pay simple interest at the rate of ½% p.m. The interest shall be payable from the date immediately following the expiry of the period of 120 days (from the date on which the last of the authorisations for search u/s 132 or requisition u/s 132A was executed) to the date of completion of the assessment u/s 153A.

Discharge of excess money

After discharging all liabilities if any assets or proceeds thereof left, then it shall be returned to the persons from whose custody such assets were seized.

Powers to call for Information ( section 133)

The income-tax authority [being Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner or Commissioner (Appeals)] may –

1. Require any firm to furnish him with a return of the names and addresses of the partners of the firm and their respective shares;

2. Require any Hindu undivided family to furnish him with a return of the names and addresses of the manager and the members of the family;

3. Require any person whom he has reason to believe to be a trustee, guardian or agent, to furnish him with a return of the names of the persons for or of whom he is a trustee, guardian or agent, and of their addresses;

4. Require any assessee to furnish a statement of the names and addresses of all persons to whom he has paid in any previous year rent, interest, commission, royalty or brokerage, or any annuity (not being any annuity taxable under the head “Salaries”) amounting to more than Rs.1000, together with particulars of all such payments made;

5. Require any dealer, broker or agent or any person concerned in the management of a stock or commodity exchange to furnish a statement of the names and addresses of all persons –

a) to whom he or the exchange has paid any sum in connection with the transfer of assets; or

b) on whose behalf or from whom he or the exchange has received any such sum, – together with particulars of all such payments and receipts;

6. Require any person, including a banking company or any officer thereof, to furnish information in relation to such points or matters, or to furnish statements of accounts and affairs, – which will be useful for, or relevant to, any enquiry or proceeding under this Act.

Power of Income Tax Authority

While conducting survey, income tax authority may exercise following power –

1. Enter in such place of business;

2. Require any proprietor, trustee, employee or any other person who may at that time and place be attending or helping in, the carrying on of such business or profession or such activity for charitable purpose – a) To afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place; Inspector is also considered as income-tax authority for this purpose. b) To afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein; and c) To furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act.

3. Place marks of identification on the books of account or other documents inspected by him and make extracts or copies therefrom; Inspector is also considered as income-tax authority for this purpose.

4. Impound and retain in his custody any books of account or other documents inspected by him;

5. Make an inventory of any cash, stock or other valuable article or thing checked or verified by him; Record the statement of any person, which may be useful for, or relevant to, any proceeding under this Act. Proceeding means any proceeding under this Act in respect of any year which may be pending on the date on which the powers under this section are exercised or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.

Restriction on Income-tax Authority

An income-tax authority shall not –

1. Impound any books of account or other documents without recording his reasons for doing so; or

2. Retain in his custody any books of account or other documents for a period exceeding 15 days (exclusive of holidays) without obtaining the approval of the Principal Chief Commissioner or the Chief Commissioner or the Principal Director General or the Director General or the Principal Commissioner or the Commissioner or the Principal Director or the Director thereof, as the case may be;

3. Remove or cause to be removed any cash, stock or other valuable article or thing. d) The place of business or profession cannot be sealed under survey – [Shyam Jewellers -vs.- CIT (All)]

Time for survey

An income-tax authority may enter into –

Place where business or profession is carried on During the business hours
In case of deemed place of business or profession Only after sunrise and before sunset

FAQs

Q 1. What is the distinction between income tax search/income tax raid and income tax survey?

Income tax search and income tax raid is one and the same thing. Income tax survey is another tool in the hands of the tax authorities for making investigation under the Income-tax Act. Income tax survey is comparatively milder action and can be undertaken only at business premises and no seizure of assets is permitted in the case of survey.

Q 2. How much time does it take in preparing a case for taking search action by the income tax department?

There is no time limit which can be prescribed for this purpose. It depends upon the nature of information regarding existence of undisclosed income and likelihood of seizure of assets, according to which case may be prepared for taking action of search. However, in all cases, search warrant by competent authority is required to be issued before taking action of search.

Q 3. Whether summons u/s 131 can be issued and statement of the assessee be recorded u/s 131(1A) by the authorized officer?

This is a controversial issue and judicial opinion is divided on this aspect. For detailed discussion, kindly refer to chapter on statement u/s 132(4).

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