Search and Seizure under Income Tax Act

Search and Seizure under Income Tax
CA. Jugal Gala

Credits and Acknowledgments
Anand N Krishna

Legends in the Presentation
AO Assessing Officer
CCIT Chief Commissioner of Income Tax
CIT Commissioner of Income Tax
DGIT Director General of Income Tax
DIT Director of Income Tax
DGIT Director General of Income Tax
PY Previous Year

Presentation Schema
Introduction
Basis for Search
& Seizure – Sec
132(1)
Authority who
can issue order
for Search and
Seizure
Powers of
Authorised
officers
Deemed
Seizure
Extension of
Jurisdiction
Requisition of
services of a
Police Officer –
Sec 132(2)
Restraint Order
- Sec 132(3)
Examination of
any person on
oath – Sec
132(4)
Retention of
Assets – Sec
132(8)
Extract of books
of account - Sec
132(9)
Board’s power
to pass order –
Sec 132(10)
Code of
Criminal
Procedure – Sec
132(13)
Power of Board
to make rules –
Sec 132(14)
Rights and
Duties
Dos and Don’ts
Judicial
Precedents

Introduction
Search operations are exploratory exercises on the basis of information with
the income tax department to find hidden income and wealth in cases of tax
payers, who have not disclosed their true financial state of affairs in discharge
of their tax obligations
Seizure implies taking possession of assets, which have not been disclosed
to the income tax department and of accounts/documents, papers which
contain details of unaccounted income not disclosed to the income tax
authorities
Thus, search and seizure is a very powerful weapon of income tax
department to unearth any concealed income or valuables and to check tax
evasion thereby mitigating the generation of black money

Basis for Search & Seizure – Sec 132(1)
• The authorising officers in consequence of information in his possession, may have reason to believe that
a) any person to whom a summons or notice was issued to produce any books of account or other
documents has omitted or failed to produce such books of account or other documents as required
by such summons or notice, or
b) any person to whom a summons or notice as aforesaid has been or might be issued will not produce
or cause to be produced, any books of account or other documents which will be useful for, or
relevant to, any income tax proceedings or
c) any person is in possession of undisclosed income or property
Explanation: It is declared that the reason to believe, as recorded by the income-tax authority, shall not be
disclosed to any person or any authority or the Appellate Tribunal
The authorising officers issue the warrant of authorisation in Form 45

Authorising and Authorised Officers
• Principal DGIT
• DGIT
• Principal Director
• Principal CCIT
• CCIT
Authorising Officers Authorised Officers
• Additional Director
• Additional CIT
• Joint Director
• Joint CIT
• Assistant Director
• Deputy Director
• Assistant CIT
• Deputy CIT
The authorising officers issue such authorization in
Form 45 in writing and shall bear the officer’s seal

Powers of Authorised officers
Right to Enter: Enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such
books of account, other documents, money, bullion, jewellery or other valuable article (hereinafter called “assets”) are kept
Break open: Break open the lock of any door, box, locker, safe, almirah or other receptacle for which the keys are not
available
Search Persons: Search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or
aircraft, if the authorised officer has reason to suspect that such person has secreted any such assets
Inspect Electronic Records: 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 record to afford the authorised officer the necessary facility to inspect such
accounts or documents
Right to Seize: Seize any such assets found as a result of such search
Identification Marks: Place marks of identification on any books of account or other documents or make extracts or copies
therefrom
Make Note: Make a note or an inventory of any such assets

Deemed Seizure
Where it is not possible to take physical possession of any valuable article and
remove it to a safe place
due to its volume, weight or due to its dangerous nature, the authorised officer
may serve an order on the person who is in immediate control thereof that
he shall not remove or otherwise deal with it, except with the previous
permission of such authorised officer and such action of the authorised officer
shall be deemed to be seizure
Assets, being stock-in-trade of the business, shall not be seized but the authorized officer shall make a note or
inventory of such stock-in-trade
The above clause shall not apply to assets being stock-in-trade of the business

Extension of Jurisdiction
then it shall be competent for him to exercise the above powers
but such authority has no jurisdiction over such person mentioned in sec 132(1)
Where any assets is within the area of jurisdiction of any authorising officer,
Provided where such authority has reason to believe that any delay in getting the authorisation (in Form 45A)
from the concerned officers having jurisdiction over such person may be prejudicial to the interests of the
revenue

Sec – 132(1A)
Where any authorising officer, in consequence of information in his possession,
has reason to suspect that any asset
in respect of which an authorised officer has been authorised to take action
under of sub-section (1) is kept in any building, place, vessel, vehicle or aircraft
not mentioned in the authorisation under sub-section (1),
such authorised persons may authorise to take action in such building, place,
vessel, vehicle or aircraft
The warrant of authorisation shall get issued in Form 45B

Requisition of services of a Police Officer – Sec
132(2)
The authorised officer may
requisition the services of any
police officer
or of any officer of the Central
Government, or of both, to
assist him for all or any of the
purposes
specified before and it shall be
the duty of every such officer
to comply with such
requisition

Restraint Order - Sec 132(3)
except with the previous permission of such officer and such officer may take such steps as may be necessary for
ensuring compliance with this sub-section
serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove,
or otherwise deal with it
The authorised officer may, where it is not practicable to seize any such assets, for reasons other than those mentioned
in section 132(1),
Explanation: It is declared that serving of an order
as aforesaid under this sub-section shall not be
deemed to be seizure of such assets under sub-
section (1)
An order under sub-section (3) shall not be in force
for a period exceeding 60 days from the date of the
order – 132(8A)

Examination of any person on oath – Sec 132(4)
The authorised officer may, during the course of the search or seizure,
examine on oath any person who is found to be in possession or control of any books of account,
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 income tax proceedings
Explanation: It is declared that the examination of any person under this sub-section may be not merely 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 income tax
proceedings

Presumption of ownership - Sec 132(4A)
such books of account, other documents, money, bullion, jewellery or other
valuable article or thing belong or belongs to such person
the contents of such books of account and other documents are true and
the signature and every other part of such books of account and other documents which
purport to be in the handwriting of any particular person or may reasonably be assumed
to have been signed by or to be in the handwriting of that particular person, and
in the case of a document 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
Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are
or is found in the possession or control of any person in the course of a search, it may be presumed that

Retention of Assets – Sec 132(8)
The books of account or other documents seized shall not be retained
by the authorised officer
for a period exceeding 30 days from the date of the order of assessment unless
the reasons for retaining the same are recorded by him in writing
and the approval of the authorising officer for such retention is obtained
Provided that authorising officers shall not authorise the retention of the books of account and other
documents for a period exceeding 30 days after all the proceedings in respect of the years for which the
books of account or other documents are relevant are completed

Extract of books of account - Sec 132(9)
The person from whose
custody any books of account
or other documents are seized
may make copies thereof, or
take extracts therefrom, in the
presence of the authorised
officer
or any other person
empowered by him in this
behalf, at such place and time
as the authorised officer may
appoint in this behalf

Handing over of seized assets – Sec 132(9A)
Where the
authorised officer
has no jurisdiction
over the person
referred to in sub-
section (1),
the assets seized
shall be handed
over by the
authorised officer
to the AO having
jurisdiction over
such person
within a period of
60 days from the
date on which the
last of the
authorisations for
search was
executed
and thereupon the
powers exercisable
by the authorised
officer under sub-
section (8) or sub-
section (9) shall be
exercisable by
such AO

Provisional attachment by authorised officer –
Sec 132(9B) & (9C)
Where, during the course of the search or seizure or within a period of 60 days from the date on
which the last of the authorisations for search was executed,
the authorised officer, for reasons to be recorded in writing, is satisfied that for the purpose of
protecting the interest of revenue, it is necessary so to do,
he may with the previous approval of the authorising officer, by order in writing, attach
provisionally any property belonging to the assessee, and for the said purposes, the provisions of
the Second Schedule (Provisions for Collection and Recovery of Tax) shall, apply
Every provisional attachment made under sub-section (9B) shall cease to have effect
after the expiry of a period of 6 months from the date of the order

Estimation by Valuation Officer – Sec 132(9D)
The authorised officer may, during the course of the search or seizure or within a period of 60
days from the date on which the last of the authorisations for search was executed,
make a reference to a Valuation Officer referred to in section 142A, who shall estimate the fair
market value of the property in the manner provided under that section
and submit a report of the estimate to the said officer within a period of 60 days from the date of
receipt of such reference

Board’s power to pass order – Sec 132(10)
and the Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit
he may make an application to the Board stating therein the reasons for such objection and requesting for the
return of the books of account or other documents
the authorising officers under sub-section (8),
If a person legally entitled to the books of account or other documents seized objects for any reason to the
approval given by

Code of Criminal Procedure – Sec 132(13)
The provisions of the Code
of Criminal Procedure,
1973 (2 of 1974),
relating to searches and
seizure shall apply, so far as
may be,
to search and seizure under
this section

Power of Board to make rules – Sec 132(14)
The Board may make provide for
the procedure to be followed by
the authorised officer
for obtaining entry into any
building, place, vessel, vehicle or
aircraft to be searched where
right to free entry thereto is not
available
for ensuring safe custody of any
books of account or other
documents or assets seized
Explanation: In this section, the word "proceeding" means any proceeding in respect of any year which may be
pending on the date on which a search is authorised under this section or which may have been completed on
or before such date and includes also all proceedings under this Act which may be commenced after such date
in respect of any year
Explanation: For the purposes of sub-sections (9A), (9B) and (9D), with respect to "execution of an
authorisation for search", the provisions of sub-section (2) of section 153B (Time limit completion of search
assessment) shall apply

Custodian of Assets – Rule 112
The authorised officer may convey the assets seized by him to the office of any income-tax authority not below
the rank of Income-tax Officer (hereinafter referred to as the Custodian).
Any money seized in the search referred to above may also be deposited with the Custodian
The Custodian shall take such steps as he may consider necessary for the safe custody of the assets conveyed
to him
The Custodian may deposit for safe custody all assets with any branch of the RBI or the SBI or of its subsidiaries
(or the authorised bank) or a Government Treasury
Where any money has been deposited with the Custodian, he may credit the money, or remit the money
through the nearest branch of the authorised bank for being credited, in the Personal Deposit Account of the
CCIT in the authorised bank at the place where the office of the CCIT is situated

Rights of Assessee
To check the warrants and
identities of the inspecting
officers
To insist that women
assessees and their
possessions are checked
only by female personnel
to ensure decency
To have at least two
respectable and
independent residents of
the locality as witnesses
To call a medical
practitioner in case of an
emergency
To allow the children to go
to school, after checking
their bags
To have the facility of
having meals, etc. at the
normal time
To have a copy of any
statement that the
Department uses against
the assessee
To inspect the seals placed
on various receptacles,
sealed in course of search
and subsequently at the
time of reopening of the
seals
To have inspection of the seized
books of account, etc., or to take
extracts therefrom in the
presence of any of the authorised
officers or any other person
empowered by him

Duties of Assessee
To allow the inspecting
team free and
unhindered entrance
into the premises
To identify all receptacles in
which assets are kept and
to hand over keys to such
receptacles to the
authorized officers
To identify and explain the
ownership of the assets,
books of account and
documents found in the
premises
To identify every
individual in the
premises and to explain
their relationship with
the assessee
Not to allow or
encourage the entry of
any unauthorized
person(s) into the
premises
Not to remove any
article without the
notice or knowledge of
the authorized officer
Being legally bound by
an oath or affirmation
to state the truth
To ensure that peace is maintained
during and after the search, and to co-
operate with the investigating officers
in all respects so that the search is
concluded quickly and peacefully
To answer all queries truthfully and to the
best of his knowledge. He should not
allow any third party to either interfere or
prompt while his statement is being
recorded by the authorised officer

Dos and Don’ts
Ornaments belonging to different members of the family should be kept separately. Valuation report of a jeweller can be obtained. Additionally,
records including tax records, substantiating such ownership should be available at residence premises
Be cooperative and cordial with the search and survey teams
Be very cautious and careful while answering the questions and the person under question should not panic
Investments made in assets should be properly accounted for and supporting evidence should be available to substantiate them
Copies of important documents like returns of income filed, assessment orders, and tax payment challans should be readily available
Return of income should be filed within the due date and copies of return should be properly documented
Maintain proper and updated books of accounts, in legit manner

Judicial Precedents
Principal Commissioner of Income-tax, (Central) Bengaluru V Associated Mining Co.
[2019] 108 taxmann.com 564 (Karnataka)
•Any search conducted at premises in which assessee may not be carrying on business would not
nullify search. In search proceedings, location of premises is in relation to satisfaction reached by
authorities mentioned therein
•The authorised officer can search any place mentioned in authorisation where he suspects that
books of account belonging to assessee are kept
•Mere change of address of assessee even being in know how of income tax department by itself
would not vitiate or invalidate search conducted under section 132

Judicial Precedents
Assistant Commissioner of Income-tax, Central Circle-2(2), Bangalore V Dr. Ranjan Pai
[2019] 109 taxmann.com 90 (Bangalore - Trib.)
•A search and seizure was carried out in residential premises of assessee. Apart from assessee's case,
search proceedings were also carried out in case of another person 'A', in course of which, a document
was seized showing that A had made payment to assessee of Rs. 4.50 crores for purchase of land
•On basis of said document, AO made addition of Rs. 4.50 crores to assessee's income
•For the purposes of making any document to be evidence, it is necessary that document should be
found from lawful custody of a person who is lawfully and naturally responsible for possessing it
•The assessee had denied of the execution of this document and also the content. The document is
required to be proved in accordance with principle of Evidence Act as applicable in Income Tax
proceedings, either by primary evidence or secondary evidence
•In the present case, none has been done by the revenue to prove seizure of document and contents
thereof, so as to enable revenue to build up its case for the purpose of treating the document to be
incriminating document
•The document relied upon by the revenue has not been proved by the revenue that it belong to the
assessee nor was it proved that it contain incriminating material on the basis of which addition can be
made. Therefore, the order passed by AO was to be set aside

Judicial Precedents
Shah E Naaz Judge V Additional Director of Income-tax (Inv)-Unit-VI [2018] 100
taxmann.com 346 (Delhi) HIGH COURT OF DELHI
• Search and seizure operation were conducted on premises of one, KSJ, who was cousin of assessee
• During search, keys of three lockers belonging to assessee were found at premises of KSJ. Additional
Director of Income-tax issued a warrant of search authorisation along with satisfaction note in name
of assessee to search said lockers
• Satisfaction note did not state that any attempt was made to verify and ascertain facts in respect of
assessee's locker post discovery of locker keys
• It was noted that Additional Director had not disclosed any material or information on basis of
which he had entertained belief that lockers contained jewellery or other articles representing
undisclosed income
• Further, there was no business connection, link and association established between assessee and
KSJ who was subjected to search and seizure operations
• On facts, issuance of search warrant in respect of assessee's lockers was unjustified and same was to
be set aside

Search and Seizure under Income Tax Act

In this document

More Related Content

What's hot

Similar to Search and Seizure under Income Tax Act

More from DVSResearchFoundatio

Recently uploaded

Search and Seizure under Income Tax Act