Provisions relating to search and seizure under the Income Tax Act

Section 132 of the Income Tax Act deals with the provisions relating to search and seizure. Search and seizure involve serious invasion of one’s right to privacy and to possess property. As such the proceedings are carried out strictly within the purview of the provisions.

Who can cause search and seizure?

The officer authorized by the income tax department to conduct search is known as the “Authorized Officer”.

The Director General or the Chief Commissioner or Joint Commissioner or Joint Director of  Income Tax can appoint any officer who is subordinate to him but not below the rank of an officer to carry out a search.

When search and seizure are conducted?

When an assessing officer has reason to believe that the person, irrespective of the fact whether a notice has been served upon him, is not likely to produce his books of accounts or documents, and it appears that the suppressed books of accounts and other documents may be useful for the income tax proceedings, the department can cause search and seizure.

But the authorizing authorities at times require proving the basis of their belief. The authorizing authority should have information relating to possession of money or property and such income or property has not been disclosed.

Who can be searched?

The persons who can be searched are:

(a)  People having books of account or documents not produced or are not likely to be produced in responding to any notice or summons; or

(b)  People possessing income or property which has not been disclosed.

Jurisdiction of search:

Any action as provided by the section can be taken by only the Commissioner or the Chief Commissioner having jurisdiction over the said person.

In case of books of accounts or assets relating to such person are kept in any property  situated within the area of jurisdiction of some other Commissioner or Chief Commissioner, the correct procedure is to authorize the said Commissioner or Chief Commissioner.

But the other Commissioner or Chief Commissioner can act even without authorization in case he has reason to believe that any delay in obtaining authorization might affect the interests of the revenue.

Powers conferred to the Authorized Officers:

Any action taken under section 132 of the Income Tax Act can extend to any building, whether for business or for residential purpose, vehicle or even aircraft.

The action can start at any time of the day or even at night. If the building   is locked, the authorized officer has the power to break open the locked door, locker, etc.

The authorized officer may also search any person getting inside the building, or who is in possession of books of account, etc. Such books of account or documents may be inspected by the concerned officer.

However such officer cannot seize the assets which are disclosed to the Income Tax Department.

The Authorized Officer may seek help from the police or other officials for causing a search. He has the power to examine on oath any person found to be in possession of books of accounts, documents, or valuable articles, etc. and there is reason to believe that such articles belong to him.

Whether Search warrant is required?

The issue of a search warrant by the Commissioner under section 132 is not judicial in nature. Section 132 does not require that the warrant of authorization has to specify the particulars of documents or books of accounts. A general authorization to search and seize documents and books of accounts is sufficient for the purpose.

But it is very important that the warrant of authorization should indicate the name of the person who has to be searched. If the Commissioner signs a warrant which is blank, the search is illegal and the articles seized are to be returned.

A warrant for search or seizure can be issued even after the proceedings have been closed. But the warrant needs to be in the prescribed form. There should be sufficient information mentioning the names of the persons concerned.

Seizure of articles:

Sub-section (1) of section 132 provides that seizure must be physical. It can be effected only when the authorized officer takes possession of the articles so that the revenue can appropriate those articles to repay the amount which is due.

It was held in K. Shamsher Singh v. Union of India [1974] 95 ITR 80 (Delhi) that an order issued only to take possession of the keys to the bank locker does not amount to ‘seizure’.

The term ‘possession’ indicates physical possession only. It does not indicate legal possession. An immovable property cannot be seized as per section 132.

Section 132 does not give power to the officers to realize the assets and convert them into cash. When a search is conducted and the books of account are seized by an officer, he is responsible for the safe custody of the seized articles.

Fate oftheseized assets:

Section 132B of the Act deals with applications that can be made to the Assessing Officer to release the assets. Such seized articles may be released with the approval of Commissioner or the Chief Commissioner if application is made within 30 days of the seizure and the Assessing Officer is satisfied regarding the recovery of the tax liability. The release is done within 120 days from the date of execution of last authorization.

An Assessing Officer is empowered to recover tax from the cash seized or from sale of the seized assets.