Reasons to believe for conducting a search & seizure not to be disclosed

Sub-section (1) and Sub-Section (1A) of section 132 of the Income Tax Act, 1961 provides that where the authority stated therein, depending on the information in his custody, has ‘reason to suspect’ or ‘reason to believe’ of situations mentioned to in the the sub-sections, he might authorize the authority mentioned therein for carrying out search & seizure.

Likewise, sub-section (1) of section 132A of the Income Tax, 1961 requires that the specified income-tax authority depending on the ‘reason to believe’ could authorize other authority specified therein for requisitioning from other authority or officer for delivering assets , books of account and documents of the assessee to the tax authorities so authorised.

Sensitivity and confidentiality are the vital elements for proceedings under section 132 and section 132A of the Income Tax Act, 1961. Though, some of the judicial pronouncements have caused uncertainty with regard to disclosure of ‘reason to suspect’ or ‘reason to believe’ recorded by the tax authorities for conducting a search under section 132 of the Income Tax Act, 1961 or for making the requisition under section 132A of the Income Tax Act, 1961.

Budget Proposals 2017- Reasons for search & seizure not to be disclosed- Would the tool be used by Assessing Officers?

Present Budget Proposals 2017 therefore have proposed for inserting an Explanation to the sub-section (1) and to sub-section (1A) of section 132 of the Income Tax Act, 1961 and to the sub-section (1) of section 132A of the Income Tax Act, 1961 for declaring that the ‘reason to suspect’ or ‘reason to believe’, as the case may be, shouldn’t be disclosed to any authority or the Appellate Tribunal or any person.

All of these amendments would retrospectively take effect from the enactment date of the the provisions viz. to sub-section (1) of section 132 of the Income Tax Act, 1961 from the 1st April, 1962 and to sub-section (1A) of section 132 of the Income Tax Act,1961 and to sub-section (1) of section 132A of the Income Tax Act, 1961 from 1st October, 1975.

Now, post this amendment, neither the appellants’ could take the shelter of validity of reasons recorded u/s 132 nor the authority of tribunal could refer the said provisions at the time of deciding an appeal before it.

Such reasons, though, might have to be placed in front of the Court in case of a challenge to form the belief of the official in which the event the court will be entitled for examining the significance of the reasons for forming the belief though not the adequacy or sufficiency thereof.

Related Read- Provisions relating to Search and Seizure under Income Tax Act