Power of inspection, search, seizure can be easily found to be in every taxation law. The purpose of these powers is always to detect any tax evasion on the part of dealers but these powers are always ancillary to the power of collection of tax of the State and are provided only for the proper collection of tax. While exercising these powers one must keep in mind the objects of such powers.
Here the Power of inspection of accounts, search and seizure under the Punjab VAT Act, 2005 have been discussed. The powers of inspection, impounding of documents, search and seizure have been provided under section 46 of Punjab VAT Act, 2005.
Who is to exercise powers u/s 46: It is the Commissioner and the designated officer who have been given powers u/s 46 of PVAT Act to require any dealer to produce books of accounts and other informations and documents relating to business and also for that purpose to enter and search any such place of business.
Under section 3 of Punjab VAT Act Joint ETC, AETC, ETOs, DETC(Administrators), Joint Director (Enforcement)-cum-DETC (intelligence), have been authorized to act as designated officers u/s 46 of the Act. Recently Excise and Taxation inspectors have also been given powers to act as designated officer u/s 46 for a limited period till 31st December 2011.
Power of Inspection: The Commissioner and the designated officers have been given power u/s 46(1) to require any taxable or registered person or any other person to produce before him any account and document or to furnish any information, relating to stocks of goods or sale, purchase and delivery of goods or payments made or received by the person or any other information relating to his business
Where section 46(1) gives power to Department to inspect books of accounts etc of any person, sub section 2 of section 46 at the same time casts a duty on such dealers to provide for inspection such books, documents, goods etc kept in the place of business of such person at all reasonable times. The officer referred to in section 46(1) may take such copies or extracts of the said accounts, register or documents and such inventory of goods as appear to him necessary.
As per section 46(5) books of accounts, documents, cash or goods found in the possession or control of any person in the course of any search, unless contrary proved shall be presumed as belonging to such person whose place of business is inspected.
Power of search and seizure: Not only the power of inspection but the power of search and seizure has also been given u/s 46. Section 46(3) provides that if the officer referred to in section 46(1) has reason to believe that any taxable person, registered person or any other person has evaded or is attempting to evade the payment of any tax due from him, he may, for reasons to be recorded in writing, seize such accounts, register or documents as may be necessary and shall issue a receipt for the same.
Whenever any accounts, register or documents are seized a receipt for the same must be issued otherwise the seizure may be considered as illegal. Such accounts documents etc which relates to current year can be detained only for a period not exceeding 30 days and in case of old account books the detention cannot be more than 60 days. However if such books, documents etc are required for more than such period for further investigation then a photocopy of such documents can be retained after being authenticated by the person to whom these belong and such copies shall be treated as original.
Rule 61(3) of PVAT Rules also provides that any accounts, registers or documents seized u/s 46 shall not be retained beyond the period referred to in the aforesaid section.
Retention of books for a period more than a year was held to be illegal-Kersi Side Motor Factory Vs. Punjab State (1977) 39-STC-122(P&H)
Section 46(4) gives the power of search and entering not only the business place but also any other place for the purpose of exercise of powers u/s 46(2) or 46(3), if the officer has reason to believe that such person keeps or is for time being keeping any account, register or documents of his business or stocks of goods relating to his business in such other place.
The commissioner is empowered to inspect, enter, search & seize the goods found not only in the premises mentioned in the registration certificate but also in the places of business belonging to the assessee. If it turns out that the place do not belong to assessee, the authority is guilty of trespass- Sheonath Parshad Vs. State (1968) 22-STC-488 (SC)
No inspection at business premises without prior permission: It is to be noted hereby that as per proviso to section 46(4) no officer can enter or search any premises without prior permission of the commissioner or such other officer not below the rank of AETC as the commissioner may authorize in writing. Thus no inspection of books of accounts, documents, goods etc or search or seizure by entering any premises can be made except with the prior permission of the Commissioner or officer not below the rank of AETC.
No power to seize cash: It should also be noted here that no power to seize cash has been given to the officers conducting inspection or search, seizure u/s 46 of PVAT Act. It has also been held in Supreme Motor V State (1980) 46-STC-452(Ori); Sant Lal Bansal & Sons V State 1976-TTR-13(STT) that STO has no jurisdiction to verify the cash position with reference to the cash available in the cash box of the assessee
Search and seizure to be as per CrPC: As per Rule 61 of PVAT Rules, 2005 all seizures or searches u/s 61 shall be made in accordance with the provisions of the Code of Criminal Procedure and the Officer exercising power u/s 46, may take assistance of any police officer of the State.
Power to record Statement: Section 46(7) also gives power to the Officer to record statement of a person or any person connected with his business, including a bailed or a transporter during the course of exercising powers u/s 46. Section 46(7) further lays down that such statement can be used for the purpose of determining the liability to pay tax. However statement recorded under duress or undue influence may be retracted afterwards. It should also be noted here that statement not recorded on oath may also not have any evidentiary value.
Goods not accounted for may be seized: Section 46(6) provides power to the officers referred to in section 46(2),46(3) to seize any goods which are found in any place of business but not accounted for in the books, accounts, register, records and any other documents. Proviso to section 46(6) further provides that a list of all the goods seized shall be prepared by such officer and be signed by the officer and two independent witnesses and the receipt of the goods shall be given to the person from whose possession or control these are seized.
Seized goods may be handed over on sapurdari to the owner of the goods with the direction that he shall not part with goods till verification is done or enquiry is made by such officer and the officer shall make necessary verification or inquiry within a period of 15 days from the date of handling over the seized goods.
Seized goods may also be released during the course of proceedings, on furnishing security for an amount equal to the value of the goods to the satisfaction of such an officer. If after enquiry the seized goods are found to be not accounted for or that the person has attempted to evade payment of tax in respect of such goods, then penalty may be imposed after giving the person an opportunity of being heard.
What next if incriminating material is found: If any incriminating material is found during inspection against the dealer evidencing the evasion of tax then assessment of tax on the basis of material found should be done either by provisional assessment or after final assessment. It is generally seen that after inspection no notice u/s 30 for provisional assessment is issued and a general order leaving tax and penalty is passed on the basis of material found during inspection.
It is to be noted that power contained u/s 46 is only a power to production and inspection of accounts, impounding of documents, search of premises and seizure of goods. Whatever tax is to be assessed or penalty to be levied on the basis of material found during the inspection has to be assessed either by a provisional assessment u/s 30 or by a final assessment u/s 29 and under the relevant penal provisions as contained u/s 52 to 61 of PVAT Act, respectively. Therefore the proper procedure for leaving penalty and assessment of tax after inspection, search & seizure should be followed as required under the respective sections.
Provisions of section 46 applies equally to a taxable person, registered person as well as to the person who was required to apply for registration but failed to do so and also to the transporter, carrier or transporting agent.
Conclusion: Powers u/s 46 are ancillary to the power of collection of tax, and the main object of such powers is to ensure proper collection of tax and detect evasion of tax and this thing should be kept in mind by the authorities as well as the dealers. Whenever the inspection party enters the business premises the dealer should not panic. One thing should be kept in mind that the authorities cannot have any personal grudges against any dealer. The authorities do their work and they should be cooperated. The presence of a tax professional can be of great help to both the dealer and the authorities Non cooperation with the survey party may result in adverse. Whereas the cooperation with the authorities might result in wining lenient behavior from the taxman.
Amit Bajaj Advocate
Bajaj & Bajaj Advocates
128, Sangam Complex,
Milap Chowk, Jalandhar city