Search and survey operations are conducted by the Income Tax Department defined as raid, where the department suspects an individual or business for hoarding illegal money. Powers to carry out search under section 132 and survey under section 133A are important tools in the armory 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.
Search and Seizure u/s 132
Search means a thorough inspection of the building, place, vehicle, vessel, and aircraft of the person. The authorization to carry out the search can be given by the Director General, Director of Income Tax, Chief Commissioner of Income Tax and Commissioner of Income Tax only. Seizure means taking possession under the authority of law.
Powers in exercise of search
The Income Tax Act gives very wide powers to an authorized officer to carry out the search and also to seize documents and unaccounted assets. The authorized officer has the power:
- To enter and search any building, place, etc. where he has a reason to suspect that books of account, other documents, money, bullion, jewelry or other valuable article or thing representing undisclosed income is kept;
- To break open the locks, where the keys thereof are not available;
- To carry out personal search of the person who is suspected to have secreted some item as mentioned in a) above;
- Seize the items as mentioned in a) above;
- Place marks of identification and take extracts or copies of the books of account and other documents; and
- Make a note or inventory of the valuables found during the search.
The authorized 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 authorized officer also has the right to demand the services of any Police officer or any officer of the Central Government.
Circumstances in which search can be carried out
The powers of search can be exercised when the authorized officer has reason to believe that:
- Any person has omitted or failed to produce books of account or documents as required by any summons or notice issued,
- Any person to whom, when so summoned to produce the documents, etc. will not or would not produce books of account or documents,
- Any person is in possession of money, bullion, jewelry or other valuable article or thing representing, income or property which has not been disclosed or would not be disclosed for purposes of the Income-tax Act.
Power of Survey – Section 133A
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.
Extent of powers of survey
An income-tax authority can exercise following powers during survey:
- To inspect books of account and other documents,
- To place marks of identification on books of account or documents examined,
- To make extracts or copies of books of account or documents,
- To impound books of account or other documents. However, the same cannot be retained beyond ten working days without prior approval of Chief Commissioner of Income Tax or Director General.
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 it has the power to visit and survey such place available to the officers carrying out survey.
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 ten working days without obtaining prior approval from Chief Commissioner of Income Tax or the Director General.
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, jewelry 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 has been amended retrospectively w.e.f. 1-6-2002 to provide 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. This amendment is effective retrospectively from 1-10-1975.
Authority who can carry out survey
Provisions relating to survey have been amended by Finance Act, 2003 w.e.f. 1-6-2003. Earlier no prior approval or authorization was needed to carry out a survey and an assessing officer could himself have carried out survey at place of business of his assesse without any authorization from his superior officers. With effect from 1st June, 2003, an Assessing Officer or a Tax Recovery Officer or an Inspector of Income Tax or Assistant Director or a Deputy Director cannot carry out survey without obtaining prior approval from the Joint Commissioner or the Joint Director.
Recording of statements u/ss 131 and 132(4)
The authorized 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] dt. 10-3-2003).
One can lawfully avoid tax raids by being compliant in terms of responding to summons and notices sent to him by the department and also refrain from keeping money, property undeclared.
If you would like to know more about income tax compliances and its impact assessment on your company, our team of experts can assist you.
Our team can also assist you in setting up your business in India, accounting, bookkeeping, payroll, auditing, tax assessments, tax filings, secretarial compliances, trademark registration, business structuring and advisory services. If you require any assistance, kindly click here.