What does it mean by the term ‘search and seizure’ under Income Tax Act of India?

One of the most powerful weapons for the Income Tax Department of India is the power of search and seizure. This power enables the authorized officials of the Department to carry out raids in the houses of persons who are suspected to have concealed certain amount of income while filing Income Tax return.

What is search and seizure?

The procedure of search and seizure comes into picture whenever the assessing officer of the Income Tax Department, on the course of verification of documents and assessment of Income Tax return of an assessee, finds out something suspicious or feels that the concerned person has not disclosed all the incomes in order to escape income tax payment.

This can be related to anything starting from property possession or money or even jewelry, etc. Under such circumstances, the Income Tax officials have every right to raid the houses of the suspected persons if it becomes extremely urgent to find out the sources and details of incomes.

What Prompts Income Tax to Conduct search and seizure raids

Some reasons for Search and Seizure raids by Income Tax Department to detect undisclosed reserves and income are:

1. Adequate measures can be taken if there are any supposed threats to the social or national security.
2. Any and every kind of issues related to evasion of income tax is taken care of during the course of such raids.
3. Prevention of hoarding of black money.
4. Compliance with the laid down law by the Constitution of India.

The authorized persons who can issue the order for carrying out search and seizure are the Director General of Income Tax, the Director of Income Tax, the Chief Commissioner of Income Tax, the Commissioner of Income Tax or any such Joint Director or Joint Commissioner of Income Tax as may be empowered by the board. The later can then again authorize any of the sub-ordinate officers of at least of Income Tax officer rank to carry out search and seizure, who will then be referred to as the Authorized Officer. The raid will then be conducted as per the prescribed search format given in Form 45.

Sections 132(1), 132(1A), 132(1B) and 132 (1C) describe the circumstances that are applicable for the search and seizure to be carried out. These may include:

1. Any kind of residential property or premise held in individual possession or for some type of business purposes.
2. Vehicles or automobiles.
3. Books or account ledgers possessing details of accounts and transactions being carried out by the suspected persons.
4. Information about lockers that are held in banks or other financial institutions.
5. Expensive jewelry like gold, silver or other precious metals.
6. Stock, shares or bonds that have been traded in the market.

When can Assessing Officer Issue Warrant for Search and Seizure?

In any case, it is totally dependent upon the Assessing Officer who has reason to suspect any person is not producing sufficient documents of evidence such as books or account ledgers, etc. thereby creating suspicion about avoidance of income tax.

Therefore, the assessing authority is the prime authorized official here and if he is issuing search warrant, then it must be backed by strong evidence as well so that the same can be produced in case the assessee challenges the Assessing Officer in the future. The assessee is however, not entitled to get any copy of the search warrant or proofs, whatsoever, u/s 132(1) of Income Tax act because this may hinder the very purpose of search and seizure. The copies of the same can only be produced in the Supreme Court and High Court upon appropriate summoning of the same.

Powers of an Assessing Officer or other Authorized Official

It is very important to have an idea about the laid down powers vested upon the authorized officials from the Income Tax department, who will be coming to carry out raids for search and seizure related to undisclosed cash and other liquid assets, properties, gold, bullions, vehicles, etc. The powers as exactly mentioned under Section 132 are given below:

1. a) enter and search any building, place, vessel, vehicle or aircraft where he has reason t0o suspect that such books of accounts, other documents, money, bullion, jewellery or other valuable article or thing are kept.
2. b) Break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) above where the keys thereof are not available.
3. c) Search any person who (a) has got out of, or (b) is about to get into, or (c) is in the building, place, vessel, vehicle or aircraft, if the authorized 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.

 d) 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 records, to afford the necessary facility to the authorized officer to inspect all such books of account or other documents.

e) Seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search. However, w.e.f. 1-6-2003, the authorized officer shall have no powers to seize any bullion, jewellery or other valuable article or thing being stock-in-trade of the business found as a result of search. He shall make a note or inventory of such stock-in- trade of business.

f) Place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom.

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

The rights of an Assessee in case of search and seizure

The process of carrying out raids by the authorized officials requires the appropriate rights and at the same time, the assessee too has the following rights to exercise:

1. It is mandatory to maintain the time frame of an income tax raid that is generally between the sunrise and sunset in a day.
2. Two independent witnesses from the local area can be made available by the assessee.
3. If children are not the suspects, they must be sent to school although they have to keep behind the bags for searching by the income tax officers.
4. An income tax raid has to be finished within 48 hours.
5. An assessee has every right to check or verify the validity of the search warrant, ask for female Income Tax officers to accompany the group of officials carrying out the raid, search the officials in order to ensure no foul play is being played from the other side and also exercise caution with the objects confiscated by the officials by sealing or stamping those with appropriate security measures.

Present Scenario: There are certain amendments made in the Finance Act 2003 that has modified the assessment process to a certain extent in cases of the raids conducted by the Income Tax officials for search and seizure under Section 153A, Section 153B and Section 153C.

Assessee has to Cooperate with Tax Officials during the Search and Seizure

However, whenever there is a raid under any circumstances for carrying out search and seizure by the Income Tax officials, it is crucial to co-operate with them fully by clearly presenting all the relevant documents and other allied objects related to income declared during the time of Income Tax return filing.

In short, complete compliance has to be maintained in accordance with the laws laid down under Constitution of India by the Income tax officials whereas absolute honesty and diligence must be maintained by the assessee while filing Income Tax return because the present amendments and laws have been made even more stringent keeping in mind the cases of tax evasion and any false steps can lead to severe consequences.

Related Read- Law Governing Search and Seizure during Income Tax Raid