1. Search and Survey
Power to carry out search under section 132 and survey under section 133A are important tools in the armoury of the Income–tax department for detecting and preventing tax evasion. Though the need to have such tools cannot be grudged, the department has to use it sparingly and in deserving cases and after complying with necessary guidelines and safeguards. A search is violation of personal privacy and rights of a citizen and its use should only be in rarest of rare cases.
2. Search and Seizure u/s. 132
‘Search’ means a thorough inspection of the building, place, vehicle, vessel, aircraft and of the person.
‘Seizure’ means taking possession under the authority of law.
2.2 Powers in exercise of search
The Income-tax Act gives very wide powers to an authorised officer to carry out the search and also to seize documents and unaccounted assets. The authorised officer has the power to:
The authorised officer is also permitted to pass orders placing prohibition on the person in possession or control of the valuable article or thing from removing, parting with or otherwise dealing with such article or thing without prior permission. The authorised officer also has the right to demand the services of any Police officer or any officer of the Central Government.
2.2.1 The authorised officer cannot seize stock-in-trade of a business and he can only make a note of inventory of such stock-in-trade. Irrespective of nature of business and stock held for such business whether it is jewellery, bullion or any other valuable article or thing, if such material is held by person searched as stock-in-trade of his business, the same cannot be seized. Also, bar on seizure applies irrespective of whether the person searched is able to explain the source of acquisition of such stock; in common parlance, whether stock is disclosed or undisclosed is immaterial and the same cannot be seized in any circumstance. However, restriction on seizure of stock-in-trade applies only to valuables and not cash. Unaccounted cash, even if forming part of stock-in-trade of business for an assessee, say carrying on money lending business, can be seized, if other conditions are satisfied.
2.3 Circumstances in which search can be carried out
The powers of search can be exercised when the authorised officer has reason to believe that:
2.4 Who can authorise search
The authorisation to carry out the search can be given by the Principal Director General, Director General, Principal Director of Income Tax, Director of Income Tax, Principal Chief Commissioner of Income Tax, Chief Commissioner of Income Tax and Commissioner of Income Tax only.
2.5 Authority who can execute and carry out search
However, the search warrant can be executed by any Additional Director or Additional Commissioner, Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income Tax Officer and they can be authorised to carry out actual search and seizure.
2.6 Adjustment of Assets seized u/s.132 or requisition u/s. 132A
Section 132B provides that the asset seized u/s.132 or requisition u/s. 132A may be adjusted against the amount of existing liability under the Income-tax Act, Wealth Tax Act etc. and the amount of liability determined on completion of assessment.
2.7 Guidelines for seizure of jewellery and ornaments in course of search
The CBDT has vide instruction No. 1916 dated 11th May, 1994, issued guidelines for seizure of jewellery and ornaments in course of search. The said guidelines, which is reported in (1994) 120 Taxation (St.) 98, is reproduced below.
‘Instances of seizure of jewellery of small quantity in course of operations under section 132 have come to the notice of the Board. The question of a common approach to situations where search parties come across items of jewellery, has been examined by the Board and following guidelines are issued for strict compliance:—
These guidelines may please be brought to the notice of all the officers in your region.’
3. Rights and Duties of the person searched3.1 Rights of the person searched
3.2 Duties of the person searched
4. Do’s and Don’ts for assessees
The powers under provisions of survey, though not very wide as powers of search, are wide enough to effectively detect evasion of tax on income earned. The preconditions which need to be satisfied by the Income Tax Authority before exercising the power of survey are limited.
5.2 Extent of powers of survey
An Income Tax Authority can exercise following powers during survey:
Though the survey party can visit during survey only a place of business, but if the party surveyed states that any books or other things relating to business are kept at a place other than place of business, then power to visit and survey such place is also available to the officers carrying out survey.
5.2.1 An Income tax authority can exercise the power of survey to verify that tax has been deducted at source or collected at source in accordance with the provisions of the act.
Income Tax Authority can enter after sunrise and before sunset any office or any other place were business and profession is carried on were books of account or documents are kept to inspect such books of account or other documents and to furnish such information as may require in relation to such matter. However under such survey, no action can be taken to impound and retain any books of account or other document or to make inventory of cash, stock or other valuable article or thing.
5.3 Whether books, cash, valuables, etc. can be seized or impounded during survey
By Finance Act, 2002, law has been amended to empower the Income Tax Authority to impound and retain in his custody books of account or other documents inspected by him during survey, after recording his reasons for doing so. However the power to impound is restricted to only books and documents and does not extend to cash, valuables and other assets found. Further, books of account and documents so impounded cannot be retained beyond fifteen (exclusive of holidays) working days without obtaining prior approval of the Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax or Principal Director General or Director General or Principal Commissioner or Commissioner or the Principal Director or Director.
5.4 Presumption in respect of seized/found books of account, documents, etc.
According to S. 292C of the Act, where any books of account, other documents, money, bullion, jewellery or other valuable articles are found in the possession of any person during a search, it is presumed that such documents, etc. belong to that person. This presumption is rebuttable.
This section provides that such presumption will also apply in respect of books of account, documents, etc. in the possession or control of any person in the course of survey operation u/s. 133A. This presumption is also extended to books of account, documents etc. delivered to the requisition officer u/s. 132A.
5.5 Authority who can carry out survey
An Assessing Officer or a Tax Recovery Officer or an Inspector of Income Tax or Assistant Director or an Deputy Director cannot carry out survey without obtaining prior approval from the Joint Commissioner or the Joint Director.
6. It is important to note that neither under the provisions of search nor of survey, there is power to arrest the assessee for offence, if any, of concealment of income.
7. Recording of statements u/ss. 131 and 132(4)
The authorised officer has the right to examine on oath any person who is found to be in possession of books of account, etc. or valuable article or thing. A statement on oath may be used as evidence in any proceedings under the Act.
Recently a circular has been issued directing officers carrying out search to desist from recording confessional statements offering income in such statements. (F. No. 286/2/2003-IT [Inv] dated. 10-3-2003)
8. The Survey Party to give details of Senior Officers to the assessee before start of Survey Operation
The Survey Party is required to give name, address and phone numbers of the Principal Chief Commissioner of Income Tax, the Chief Commissioner of Income Tax, Commissioner of Income Tax, Additional Commissioner of Income Tax to the assessee who is under Survey. This transparency will enable the party to speak to senior officer in case of any pressure or coercion during the survey.
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