All about Income Tax Raid

One should not keep any unaccounted or undeclared money, jewellery or any kind of wealth, commonly known as black money. All such income should always be declared. If such disclosure is made before the Income Tax Department, the chances of being raided by the Income Tax Department are lowered. A tax raid is generally conducted against a person who possesses undisclosed income or property even though it  does not belong to him but belongs to someone else. It is important for such a person who possesses someone else’s money or other assets to ensure that those are accounted for.

Types of Assets that can be seized: The Income Tax department is authorized to seize the following types of assets –
1. Undeclared cash, jewellery, cheques, drafts;
2. Books of accounts, challan, diaries, etc.;
3. Computer chips and other data storage devices;
4. Documents relating to property, deed of conveyances, etc.

Types of Assets that cannot be seized: The Income Tax department is not authorized to seize the following types of assets –
1. Immovable assets;
2. Business stocks;
3. Assets or cash which are disclosed before the Income Tax and Wealth Tax Department;

4. Assets declared in books of account;

5. Cash which are duly explained;

6. Jewellery provided in wealth tax return;
7. Gold up to 500 gm for each married lady and 250 gm for each unmarried woman;

How can one prevent raid?

One can lawfully avoid tax raid by complying with summon and notices sent to the assessee by the Department under section 131(1), 142(1) and other sections. The Summons sent for calling of the books of account or other documents which are required to be produced before the authorized officer should be properly complied. One should not keep any undeclared money, or property which is called “Black Money”. All income should be declared. One should avoid concealing of any income from whichever source it might be. One should always disclose his total income, whether taxable or exempt, in his Return filed.

Who can conduct a raid?

According to Section 132(1) of the Income Tax Act, the Commissioner of Income Tax or Chief Commissioner or Director General or Director or any other authorized person can conduct a tax raid if he has,  as a result of any information,  in his possession ” reason to believe” that the assessee has failed to comply any summons or notice sent to him by the Department or he has in his possession what is called “black money”. In such cases the officer can proceed to raid. It cannot be conducted merely on fancies but only on the basis of some just information and after satisfying the essential conditions. The precedent conditions are enumerated in 132(1) Of the Act.

There are instances where a tax raid is done  in violation of law, merely on the basis of a rumor or due to suspicion. Sub-section (1) of section 132 states that the authorities have been empowered to issue a warrant for search in respect of any person only based upon any information they have  a valid reason to believe that the said person has unaccounted money or property in his possession.

Rights of an assessee during a tax raid:

When Income Tax department conducts a raid, an assessee has the right to check the search warrant and note the date, address, etc. One can also ask for the identification of the members of the raid team along with their designation.

One can also rightfully search every member of raid team personally to avoid planting of evidence by them. Women should be checked only by female members of the raid team.  Women have the right not to appear before the officials if their religious belief prohibits them to appear in public.

In case of an emergency, one has the right to ask for a doctor of his own choice. One has the right to take meals at proper time when a raid is going on. Children can go to school but they are liable to show their bags before leaving for school.

When there is any difficulty in seizure of jewellery or other assets, the department may leave them sealed in the custody of the assessee concerned. Jewellery up to a limit which amounts to 500 grams for each married lady is generally accepted. If it is a survey, the officials do not have the powers to seize any valuables. But they can take away documents.

Whatever is being seized, they should be properly listed and described. One can keep neighbors to witness the same. If any valuables belong to someone else, one must provide the name, address and other details of the actual owner.

The raids should be conducted between sunrise and sunset. One can place his personal seal on the package in which seized articles are stored. One can also have a copy of the panchanama. An assessee can also call ask for his lawyer. He has the right to ensure the officials are acting within their limits.

Rights of an assessee after a tax raid:

An aggrieved person can file a writ petition before the High Court challenging the raid if he feels that the action of the department was unfair. He can also challenge the assessment and file an appeal before the Commissioner of Income Tax (Appeal).