Search (Raid) & Seizure under income tax act, 1961

PUSHP KUMAR SAHU 
on 29 January 2019


Search & Seizure action by the income tax department popularly referred to as 'RAID' involves through 'looking for' or 'seeking out' through an inspection of a building , office, place , vehicle.

Basis or grounds for Search & Search and Seizure team after taking authorisation and approval from concerned income tax authority can conduct search operation in the assessee's premises. Seizure ;

Basis for search and seizure : Authorisation for search and seizure can be conducted if the income tax department, in consequence of information in his possession, has reason to believe that,

Section: 132(1)(a) - (i) summons u/s 131(1) or (ii) notice u/s 142(1), was issued to produce or cause to produced any books of accounts, or other documents which has been wilfully omitted or failed to produce such books of accounts as required by such issued summons or notice to assessee.  

Section: 132(1)(b) - any person to whom summons or notice has been issued, will not or would not produce any books of accounts which will be useful or relevant to any proceedings undertaken under the income tax act, 1961.

Section: 132(1)(c) - any person who is in possession of any money, bullion, jewellery or any other valuable things and these assets represent either wholly or partly the income or property which has not been disclosed by the person concerned for the purposes of this act.

The officer who is authorised for conducting search is referred to as Authorised officer. The authorisation is done by issuing a search warrant in Form 45.

Clauses (a spell out the circumstances under which the authorizing authority may issue a warrant of search. In order to attract clause (c) there must be information with authority relating to two matters;) , (b) , (c) of section 132(1)

  1. That any person is in possession of money, etc.
  2. That such money, etc represents either wholly or partly income  or property which has not been or would not be, disclosed for the purposes of the act.

Reasons For Income Tax Raids:

The Income Tax Department can conduct raids on individuals or groups for a wide range of reasons. The most pertinent of these are outlined below:

  • Where the department has gathered evidence substantiating that an assessee is in possession of income or assets that have not been disclosed, and where the amount of tax that would be normally paid on such income or assets exceeds Rs 1 crore.
  • Where the department has received verification of lavish expenditure at weddings or marriages
  • Where the department has gathered data or information that has been put together from the perusal of tax assessment files and records that have passed through the process of verification
  • Where the department has gathered information received from any party with an intimate relation with the assessee in question such as a member of the assessee's family, a business partner, an employee etc. This information is subject to independent questioning on the part of the Income Tax department.
  • Where the department has gathered evidence of the manipulation  of any of the following:
    • Books or ledgers showing accounting details and transactions
    • Any documentation or records
    • Any invoices
    • Any vouchers
    • Any bills
  • Where the department has gathered evidence of the possession of substantial amounts of income held with the following:
    • The assessee
    • At banks or financial institutions
    • At the residence of the assessee
    • At any business property
    • At lockers held in banks or financial institutions
    • At the residence of any member of the assessee's family
    • At the residence of any business partner of the assessee
    • At the residence of any employee of the assessee
  • Where the department has gathered information showing that the following items are not accounted for in the books of account or balance sheets of the assessee:
    • Cash
    • Assets
    • Jewellery
    • Bank balances
    • Investments
    • Shares
  • Where the department has gathered evidence of any hawala activities and transactions that have taken place within the functioning of any business
  • Where the department has gathered evidence of the assessee making investments in benami or 'non titled' property
  • Where the department has gathered evidence of undisclosed sums of money and investments held with banks under the name of the assessee or any of his or her family members, business associates, relatives etc
  • Where the department has gathered evidence of any undisclosed amounts that have been omitted or have been withheld during the time of declaration of turnover with regards to the Goods & Service Tax Department.
  • Where the department has gathered evidence of a large amount of sundry creditors every year, despite of the non-existence of any such organization, company or individual.
  • Where the department has gathered evidence of any discrepancies or anomalies in the submission of stock quantities, inventory, sales production etc
  • Where the department has gathered evidence of any discrepancies or anomalies with regards to the personal accounts of the assessee in question, wherein the accounts show large amounts of loans or cash appearing consistently and on a continuous basis every year
  • Where the department has gathered evidence of the non-filing of income tax returns by the assessee for a single year or multiple years
  • Where the department has gathered evidence of persons or individuals in possession of many Permanent Account Numbers (PAN), who file income tax returns from different locations around the country, and who declare large sums of income
  • Any other reason that may be deemed valid or confidential by the Income Tax Authorities, or in specific cases dealing with evasion of tax across state borders.

Rights Of An Assessee During An Income Tax Raid:

An assessee who has been suspected of tax evasion or concealment of undisclosed property can exercise the following rights as per law in the event of a raid conducted by the income tax authorities:

  • The authorised officers conducting the raid are duty bound to allow or permit two individuals from the local area to stand as independent witnesses
  • If assessees under suspicion are children, they must be permitted to leave for school, although their bags may be checked by the income tax officers
  • The assessee can exercise his or her right to inspect the search warrant as well as confirm the identity of the authorized income tax officer present
  • The assessee under suspicion can also insist that only authorised female tax officers shall be allowed to search the female family members of the assessee
  • The assessee is required to provide a statement at the time the raid is being carried out, or after the raid has been concluded. Should he or she not provide a statement, it will be considered as an act of silence, and could have an adverse effect on proceedings
  • If the assessee is a woman, who as per custom does not make public appearances, then she can exercise her right to not appear before the search party consisting of authorized income tax officers
  • The assessee can exercise his or her right to avail of a medical assistance should the need arise.
  • The assessee can also exercise his or her right to eat meals at standard meal times

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Category Income Tax
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