SEARCH & SEIZURE
HISTORY AND INTRODUCTION
"Search and Seizure", the origin of these provisions will in a few years celebrate its golden jubilee. It
was since 1956 that the provisions of search and seizure made its first entry into the Income Tax Act.
Section 132 was totally substituted by the Finance Act, 1964. After section 132 underwent a through
overhaul in the year 1976, to committees had made certain recommendations on search and seizure
provisions (i) The Raja Chellaiah Committee and, (ii) The Kelkar Committee. It is seen that the
recommendations affecting the substantive law have been given effect to in respect of majority of
such recommendations; the assessee friendly measures recommended by these committees have
not been given any serious considerations.
Who is the authorized officer to issue order for search and seizure?
a) the Director General of Income Tax, or
b) the Director of Income Tax, or
c) the Chief Commissioner of Income Tax, or
d) the Commissioner of Income Tax, or
e) any such Joint Director or Joint Commissioner of Income Tax as may be empowered by the
Board.
The Director General or Director or the Chief Commissioner or Commissioner or Joint
Commissioner or Joint Director who have been empowered by the Board can authorize any officer
subordinate to him not below the rank of Income Tax Officer to conduct search. The officer so
authorized is referred as Authorized officer and the authorization is done by issuing a search
warrant in Form 45.
What are the circumstances in which search and seizure can be conducted?
132(1)
The authorized officer who is duly empowered by the Board has in his possession any information
through which he has reason to believe that –
132(1)(a)
A person to whom a summon u/s 131(1) or a notice u/s 142(1) has been served to produce books
of accounts or other documents has failed or omitted to produce or cause to be produced the
said books of accounts or other documents, or,
12
132(1)(b)
A person to whom a summon u/s 131(1) or a notice u/s 142(1) has been or might be issued is not
likely to produce or caused to be produced any books of account or other document which will be
useful for or relevant to any proceedings under the Act; or
132(1) (c)
A person is in possession of money, bullion, jewellery or other valuable article or thing and such
property represents wholly or partly income or property which has not been disclosed or would not
be disclosed.
Who are the Persons to be searched: From the above it is clear that the persons to be
searched are persons:
(a) who have books of account or documents which have not been produced or are not likely to be
produced in response to notices or / summons, or
(b) persons who are likely to be in possession of undisclosed income or property.
What are the basis for search and seizure?
The assessing officer must have a reason to believe that the person, whether or not a notice has
been served on him, is not likely to produce his books, etc. in such a case, the basic is that the
person will suppress books of account and other documents which may be useful and relevant to
an income tax proceedings. Here the authorizing authority, if challenged, has to prove the basis of
belief.
MAMCHAND AND CO v CIT (1970) 76 ITR 217 (CAL)
KUSUM LATA v CIT (1989) 180 ITR365 (RAJ)
There must be information with the authorizing authority relating to two matters. One, the person
should be in possession of money and secondly such money represents either wholly or partly
income or property which has not been disclosed.
CIT v RAMESH CHANDER (1974) 93 ITR 450 (PUN)
Is the assessee entitled to a copy of reasons recorded for issuing a search warrant?
Disclosure of the material or the information to the person against whom the action is taken u/s
132(1) is not mandatory, because such disclosure might affect or hamper the investigation
(SOUTHERN HERBALS LTD v DIT (INVESTIGATIONS) (1994) 207 ITR 55 (KAR). Only the High
Courts and the Supreme Court have the jurisdiction to call for and look into the reasons recorded
to decide whether the issue of the search warrant was called for. (Dr. PRATAP SINGH v
DIRECTOR OF ENFORCEMENT (1985) 155 ITR 166 (SC)
13
Can material obtained during illegal search be utilized for the purpose of an ordinary
assessment?
The materials obtained during a search or seizure illegally or irregularly conducted can
nevertheless be utilized for the purpose of an ordinary assessment.(POORANMAL v DIRECTOR
OF INSPECTION (INVESTIGATION), INCOME TAX (1974) 97 ITR 505 (SC)
Can search be authorized by an authorized by an authority other than jurisdictional
authority?
The Chief Commissioner/Commissioner of Income Tax has the power to authorize a search of any
building, place, vessel, vehicle or aircraft of a person which is under his jurisdiction and also in
cases where such building, place, vessel, vehicle or aircraft is in his area of jurisdiction but he has
no jurisdiction over the persons concerned, if he has reason to believe that any delay in obtaining
authorization from the Commissioner having jurisdiction over the person would be prejudicial to
the interests of revenue. Such authorization shall be given in Form 45A. Where a search for any
books of account or other documents or assets has been authorized by any authority who is
competent to do so, and some other Chief Commissioner/Commissioner in consequence of
information in his possession has reason to suspect that such books of account or other
documents and assets etc, of the assessee are kept in any building, place, vessel or aircraft not
specified in the search warrant issued by such authority, he may authorize the Authorised Officer
to search such other building, place, vessel, vehicle or aircraft. Such authorization shall be given
in Form 45B.
What are the powers of the officer to whom authority is given for search and seizure?
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.
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.
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
14
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.
What are the additional powers of the authorized officer?
a) Deemed Seizure 132(1) : Where it is not possible or practicable to take physical possession
of any valuable article or thing and remove it to a safe place due to its volume, weight or other
physical characteristics or due to it being of a dangerous nature, the authorized officer may
serve an order on the owner or the person who is in immediate possession thereof that he
shall not remove, part with or otherwise deal with it except with the previous permission of
such authorized officer and such action of the authorized officer shall be deemed to be seizure
of such valuable article or thing.
b) Restraint Order 132(3) with explanation and section 132(8A) : where it is not possible or
practicable to seize any (a) books of accounts, or other documents, or (b) money, bullion
jewellery or other valuable articles or things for reasons other than those mentioned , the
authorized officer may serve an order on the owner or a person who is in immediate
possession or control thereof that he shall not part with or otherwise deal with it except with
the previous permission of such officer and such officer may take steps as may be necessary
for compliance.
c) Power to requisition service of a police officer or officer of the Central Government sec
132(2): The authorized officer may requisition the services of any police officer or any of the
officer of the Central Government or of both to assist him for all or any of the purposes
specified above and it will be duty of every such officer to comply with such requirements.
d) Examination of any person on oath sec 132(4) with explanation: the authorized officer
may, during the course of search or seizure, examine on oath any person who is found to be in
possession or control of any books of accounts, documents, money, bullion, jewellery or other
valuable article or thing and any statement made by such person during such examination
may thereafter be used in evidence in any proceeding under the I.T.Act,1 961. The statement
can be recorded during the course of search and seizure or when it is over. Further, an
explanation has been added to provide that the examination of any person may be not merely
be in respect of any books of account, other documents or assets found as a result of the
search, but also in respect of all matters relevant for the purposes of any investigation
connected with any proceedings under the Income Tax Act,1 961.
e) Presumption of ownership of books of accounts and assets and its truthfulness sec 132
(4A): it may be presumed a)the books of account or other documents and assets found in
possession of any person in the course of a search belong to such person, b) the contents of
such books of accounts and other documents are true, c) the signature and every other part of
15
such books of account and other documents which purports to be in the handwriting of any
particular person are in handwriting of that person or which may reasonably be assumed to
have signed or written the books of accounts or other documents are in that person’s
handwriting. In case of documents stamped, executed or attested that it was duly stamped and
executed or attested by the person by whom it purports to have been so executed or attested.
Amendment made in the budget:
-It is proposed to amend section 292C of the I.T.Act, so as to extend this presumption also to
books of account, other documents, money, bullion, jewellery or other valuable article or thing
found in the possession or control of any person in the course of a search u/s 132.
-Further, it is proposed to amend the said section so as to extend this presumption also to books
of account, other documents etc, found in the possession or control of any person in the course of
a survey operation. This amendment will take effect retrospectively from 1st June’2002.
- It is also proposed to amend section 42D of the Wealth Tax Act to extend this presumption to
books of account, other documents or assets which have been delivered to the requisitioning
officer in accordance with the provisions of section 37B of the Wealth Tax Act. This amendment
will take effect retrospectively from 1st October,1975.
f) Retention of books of account and other documents 132(8): the books of account or other
documents seized shall not be retained by the authorized officer (if he is himself an assessing
officer) for a period exceeding 30 days from the date of the order of assessment u/s 153A or
158BC unless the reasons for retaining the same are recorded by him in writing and the
approval of the Chief Commissioner, Commissioner, Director General or Director for such
retention is obtained. The following conditions must be fulfilled before the retention of books
for the extended period: a) the authorized officer or the concerned assessing officer seeking
the commissioner’s approval should record the reasons for retaining the books in writing. b)
He should obtain the approval of CIT for the extended period.
g) Copies of extract of books of account and documents sec 132(9): the person from whose
custody any books of accounts or documents are seized may make copies or take extracts
therefrom in the presence of authorized officer or any person empowered by him in his behalf,
at such place an time as the authorized officer may appoint in this behalf.
h) Handling over of seized books and assets to assessing officer sec 132(9A): such
handling over is done within the period of 60 days from the date on which the last of the
authorization for search was executed.
Seizure of jewellery:
16
a) In the case of wealth tax assessee, gold, jewellery and ornaments found in excess of gross
weight disclosed in the wealth disclosed in the wealth tax return only need to be seized.
b) in case of person not assessee to wealth tax, gold jewellery and ornaments to the extent of
500gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the
family, need not be seized. The same is treated as explained and no addition can be made
under sec 69. the said guidelines would apply to block assessment.
Explain the powers, procedures followed by the authorized officer with regards to requisition
of books of accounts ?(sec 132)
a) Requisition of books of account, etc taken into custody under any other law:
Section 132A provides that in case where any books of account or other documents and assets
have been taken into custody by the Officer or authority under any law e.g by the Collector of
Customs, the Sales Tax Commissioner, etc, the Director General or Director or the Chief
Commissioner or Commissioner of Income Tax may, in such circumstances as are covered by
section 132 for search and seizure, authorize in Form No 45C and Deputy Director, Assistant
Commissioner, Assistant Director or the Assessing Officer (Requisitioning Officer) to require such
officer or authority to deliver to him such books of account or other documents and assets. This
section however does not empower to take under requisition assets and documents which are in
the custody of court.
b) When such power be invoked (Rule 112D)
When the Director General or Chief Commissioner or Commissioner has reason to believe that
i) any person to whom summons u/s 131(1) or a notice u/s 142(1) was issued to produce, or
cause to be produced, any books of account or other documents has omitted or failed to
produce, or cause to be produced, such books of account or other documents, as required by
such summons or notice and the said books of accounts or other documents have been taken
into custody by any officer or authority under any other law for the time being in force, or
ii) any books of account or other documents will be useful for, or relevant to, any proceedings
under the Act and any person to whom summons or notices as aforesaid has been or might be
issued will not, or would not, produce or cause to be produced, such books of account or other
documents on the return of such books of accounts or other documents by any officer or authority
by whom or which such books of account or other documents have been taken into custody under
any other law for the time being in force, or
iii) any assets represent either wholly or partly income or property which has not been, or would
not have been disclosed for the purposes of the Act, by any person from whose possession or
control such assets have been taken into custody by any officer or authority under any other law
for the time being in force.
c) Application of seized or requisitioned assets (Sec 132B)
-) the assets seized shall be dealt with in the following manner
17
i) Seized assets may be applied towards existing and future liability (sec 132B(1)(i)
ii) Release of seized asset after meeting existing liabilities in certain cases 132B(1)(ii)
iii) Money seized may be applied for discharging the liabilities (sec 132B(1)(ii)
iv) Assets other than money may also be applied to discharge liabilities (sec 132B (1)(iii)
-) return of excess assets seized (section 132B(3)
-) interest to be paid at the rate of ½% p.m. or part of the month non seized money (section
132B(4) on the aggregate sum of a) the money seized u/s 132 or requisition u/s 132A as reduced
by the amount of money if any released , and, b) the proceeds of assets sold towards the
discharge of existing liability in sec 132B(1)(i).
the interest shall be payable from the expiry of the period of 120 days from the execution of the
last of the authorizations for search till the date of completion of assessment under section 153A or block assessment.
CAclubindia
