What is Income Tax Search and Seizure all about?

Introduction

One of the most important powers of the Income Tax Department is the ability to conduct a search in a tax evader’s home, followed by the seizure of any illicit money. Tax authorities have been known to conduct such raids in order to reduce tax evasion.

The ability to search and seize property is one of the most important powers that the Income Tax Department possesses. Tax authorities typically use their authority to conduct raids on individuals or groups suspected of tax evasion or in the custody of any asset or wealth pertaining to some other party that has not yet been revealed.

Goals of income tax search and seizure 

The Income Tax Department uses its search and seizure powers to accomplish the following goals:

• To guarantee that any risk to social welfare is appropriately implemented.
• To specifically address concerns and challenges that emerge as a consequence of tax evasion and avoidance.
• To confront the threat of illegal money head-on.
• To enforce laws enshrined in India’s constitution. 

Income tax Raids

According to the law, if tax evasion or undeclared possession of property or valuables is suspected, officers authorised by the Income Tax Department have the authority to conduct raids and searches on the following:

• Any residential property or establishment.
• Any property or premise used for business purposes. 
• Any vehicle or automobile.
• Any bank or financial institution lockers.
• Any books or ledgers that contain account information and transactions.
• Stocks, bonds, or shares that have been purchased or sold.
• Jewellery, gold, and other precious metals are examples of valuable items.

According to Section 132A of the Income Tax Act, authorised officers have the authority to inspect any books of accounts or valuable items seized by any other government department.

Who has the authority to carry out search and seizure?

Section 132(1) of the Income Tax Act states that the authorization might be granted by the Principal Director General or Director-General, or the Principal Director or Director, or the Principal Chief Commissioner or Chief Commissioner, or the Principal Commissioner or Commissioner to 

• Additional Director
• Additional Commissioner
• Joint Director
• Joint Commissioner
• Assistant Director
• Deputy Director
• Assistant Commissioner
• Deputy Commissioner 
• Income-tax Officer 

to carry out a tax search and seizure. The authorising official will do so if he has “reason to believe” that-

• A taxpayer has failed to comply with any summons or notices issued by the Department
• or he has money in his possession, and secondly, such money represents income or property that has not been disclosed in full or in part.

Powers 

The officer who has been authorised to carry out the raid may:

• Enter and search any building, place, or thing where he has reason to believe that books of account, other documents, money, bullion, jewellery, or any other valuable article or thing representing undisclosed income are kept.
• Break the locks in places where the keys aren’t available.
• Conduct a personal search of a person suspected of concealing the aforementioned item.
• Seize such aforementioned items.
• Make identification marks and take excerpts or copies of the books of account and other documents.
• Make a list or inventory of any valuables discovered during the search.

Rights of an Individual during tax search and Seizure

• To insist on a lady conducting a personal search for a lady, with strict regard for decency.
• At least two respectable and independent local residents must serve as witnesses.
• If a lady occupying an apartment being searched does not appear in public, she has the right to withdraw before the search party enters.
• In the event of an emergency, contact a medical professional.
• Allowing the children to go to school after they have checked their bags
• To be able to eat meals and other activities at regular times
• To inspect the seals placed on various receptacles that were sealed during the course of the search and then reopened.
• To have a copy of the panchanama as well as all annexures
• to obtain a copy of any statement used by the Department against him
• In the presence of any of the authorised officers or any other person authorised by him, to inspect the seized books of account, etc., or to take extracts from them.

Individual’s rights after Search and Seizure

In the presence of any authorised officer or other person empowered by him, the person whose custody any books of account or other documents are seized may make copies or extracts from them. If a person feels that the department’s action was unfair, he can file a writ petition in the High Court challenging the raid. He can also contest the assessment by filing an appeal with the Commissioner of Income Tax (Appeal).

Seizable Assets

• Unreported cash and jewellery
• Account books, challans, diaries, and so on
• Chips in computers and other data storage devices
• Documents pertaining to property, such as deeds of conveyance, etc.
• Assets that are not able to be seized

Non-seizable Assets

• A company’s stock-in-trade (except cash).
• Assets or cash declared to the Income Tax and Wealth Tax Department
• Assets recorded in the books of account
• Cash that is duly explained
• Jewellery declared on a wealth tax return
• Gold worth up to 500 grammes for each married woman, 250 grammes for each unmarried woman, and 100 grammes for each male member

Conclusion

Search operations are explorative activities premised on information from the income tax department to reveal additional wealth and income in the cases of tax payers that have not revealed their real financial state of affairs in order to discharge their tax obligations. Seizure entails taking possession of assets that have not been disclosed to the Income-tax Department, as well as accounts/documents, papers containing details of unaccounted wealth/income that have not been disclosed to the Income-tax Department. Thus, search and seizure is a very powerful weapon in the income tax department’s arsenal for unearthing any hidden income or valuables and putting a stop to tax evasion tendencies, thereby reducing the generation of black money.