Demystifying “The Income-Tax Raid”

Generally, people term it as a “raid”, but there is a difference. As per the provisions of the Income-Tax Act, 1961, The Income-Tax officials have different powers among which the following are the most popularly used by laymen for referring to “Income-Tax Raid”:

  1. Search and Seizure (Section 132 of the Income-Tax Act, 1961)
  2. Survey (Section 133A of the Income-Tax Act, 1961)
  3. Collecting Information (Section 133B of the Income-Tax Act, 1961)

We as aware citizens should know the difference among the three and our rights when the officials from the income-tax department exercise these powers. This article makes an attempt to cover each aspect of the Power of Search and Seizure”. 

Reasons for Search and Seizure by Income-Tax Department

If any of the following:

  • Principal Director General
  • Director General
  • Principal Director
  • Director
  • Principal Chief Commissioner
  • Chief Commissioner
  • Principal Commissioner
  • Commissioner
  • Additional Director
  • Additional Commissioner
  • Joint Director
  • Joint Commissioner

in consequence of information in his possession, has reason to believe that—

  • Any person to whom a
    • Summons under either
      • sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or
      • sub-section (1) of section 131 of Income-Tax Act, 1961, or
    • Notice under either
      • sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or
      • sub-section (1) of section 142 of Income-Tax Act,1961

was issued to produce/cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or

  • Any person to whom a summons or notice as aforesaid has been/might be issued would not, produce/cause to be produced, any books of account or other documents which will be useful for/relevant to any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under Income-Tax Act, 1961,
  • Any person is in possession of undisclosed income or property (any money, bullion, jewellery or other valuable article or thing which represents either wholly or partly income or property which has not been/would not be disclosed for the purposes of the Indian Income-tax Act, 1922, or Income-Tax Act, 1961)

Authorisation required

Authorisation can be given by any of the following only:

  • Principal Director General
  • Director General
  • Principal Director
  • Director
  • Principal Chief Commissioner
  • Chief Commissioner
  • Principal Commissioner
  • Commissioner
  • Additional Director (if empowered for the same by the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963)
  • Additional Commissioner (if empowered for the same by the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963)
  • Joint Director (if empowered for the same by the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963)
  • Joint Commissioner (if empowered for the same by the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963)

Authorisation may be given to any of the following only:

  • Additional Director
  • Additional Commissioner
  • Joint Director
  • Joint Commissioner
  • Assistant Director
  • Deputy Director
  • Assistant Commissioner
  • Deputy Commissioner
  • Income-tax Officer

Such authorised officer is authorised for any/all of the following:

  • Entering and searchingany 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. The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, in consequence of information in his possession, if has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised is/are kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation then such Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may authorise the said officer to take action(s) under provisions of this act.
  • Breaking open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers of entering and searching conferred, where the keys thereof are not available;
  • Searching 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 such books of account, other documents, money, bullion, jewellery or other valuable article or thing
  • Requiring 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 as defined in Section 2(1)(t) of the Information Technology Act, 2000, to afford the authorised officer the necessary facility to inspect such books of account or other documents;]
  • Seizing any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search. But any bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search cannot be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business.
  • Placing marks of identification on any books of account or other documents or making or causing to be made extracts or copies therefrom;
  • Making a note or an inventory of any such money, bullion, jewellery or other valuable article or thing. Where it is not possible/practicable to take physical possession of any valuable article/thing (which is not stock-in-trade of the business) and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order (on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing as per the Income-Tax Act, 1961.
  • Examining on oath- The authorised officer may, during the course of the search or seizure, 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 and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under Income-Tax Act, 1961.

The Board may make rules in relation to any search or seizure; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer—

  • (i) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available;
  • (ii) for ensuring safe custody of any books of account or other documents or assets seized.

Other relevant Provisions

  • Reason to believe” as recorded by the income-tax authority for search and seizure, shall not be disclosed to any person or any authority or the Appellate Tribunal.
  • Reason to suspect” as recorded by the income-tax authority for search and seizure, shall not be disclosed to any person or any authority or the Appellate Tribunal.
  • Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed
    • that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
    • that the contents of such books of account and other documents are true; and
    • that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting
    • that in the case of a document stamped, executed or attested, it may be presumed that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.
  • Where the authorised officer has no jurisdiction the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing or assets seized during search and seizure shall be handed over by the authorised officer to the Assessing Officer having jurisdiction within a period of sixty days from the date on which the last of the authorisations for search was executed.
  • The authorised officer may, during the course of the search or seizure or within a period of sixty days from the date on which the last of the authorisations for search was executed, make a reference to a Valuation Officer, who shall estimate the fair market value of the property as per law and submit a report of the estimate to the said officer within a period of sixty days from the date of receipt of such reference.

Rights of the person whose place has been raided.

  • Such person has a right to disallow or discourage the entry of any unauthorised person into the premises.
  • The person from whose custody any books of account or other documents are seized during search and seizure, may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf.
  • The books of account or other documents seized during search and seizure shall not be retained by the authorised officer for a period exceeding thirty days from the date of the order of assessment, unless the reasons for retaining the same are recorded by him in writing and the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Principal Director General or Director General or Principal Director or Director for such retention is obtained however such extension shall not exceed 30 days after all the proceedings under the Indian Income-tax Act, 1922 or Income-Tax Act, 1961 in respect of the years for which the books of account or other documents are relevant are completed.
  • Money, bullion, jewellery or other valuable article or thing which is already rightly declared and stock-in-trade of the business is exempted.
  • Where the authorised officer serves an order on the owner or the person who is in immediate possession or control of any valuable article/thing of which it is not possible/practicable to take physical possession then such an order (to not remove, part with or otherwise deal with , except with the previous permission of such authorised officer) shall not remain in force for more than 60 days.
  • If a person (legally entitled to the books of account or other documents seized) objects for any reason to the approval given, he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents.
  • On making an application of objection to the board, such person has a right to be heard.
  • Such person if aggrieved by the process, may even file a writ petition.

Duties of the person whose place has been raided.

  • Such person should not prevent/hinder the ingress of duly authorised officials into the premises.
  • Such person should co-operate while the search and seizure and should present all the books, articles and belongings as required by the duly authorised officials.
  • Such person should not abstain from identifying and explaining the ownership of the assets, books of account and documents found in the premises.
  • Such person should not abstain from identifying every individual in the premises which is known to him.
  • Such person should not mislead by impersonation as cheating by pretending to be some other person or knowingly substituting one person for another, may constitute an offence punishable under Section 416 of the Indian Penal Code.
  • Such person should not remove any article from its place without notice or knowledge of the authorised officer.
  • Such person should not destroy any document as if he destroys any document for the purpose of preventing the same from being produced or used as evidence before a court or any public servant, he shall be punishable in accordance with section 204 of the Indian Penal Code.
  • Such a person should answer all queries truthfully and to the best of his knowledge as being legally bound by an oath or affirmation to state the truth, If such a person makes any false statement, it amounts to an offence under section 181 of the Indian Penal Code.
  • Such person should ensure that there is no Interference/Prompting by any third party during recording of his statement by the authorised officer.
  • Such a person should produce evidence which he believes to be true/genuine/correct evidence as if the evidence provided is an evidence which he/she knows or believes to be false, he/she is liable to be punished under section 191 of the Indian Penal Code.
  • Such a person should peacefully affix his signature on the recorded statement, inventories and the panchnama after verifying the contents of the same.
  • Such a person should make all possible efforts to ensure that peace is maintained throughout the search process, and should cooperate with the authorised officials in all respects so that the whole process is concluded peacefully and at the earliest.

-Tushar Kaushik

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