Rights and Duties of Income Tax Department during Search and Seizure operation

[A]  Income Tax Department - Rights

        Following are the rights of the officer to whom authority is given for search and seizure:

(i)     Enter and search any building, etc. (Section 132(1)(i))

 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 or thing are kept.

The entire premises should be thoroughly searched to detect books of account and other documents (including books of account and other documents maintained in the form of electronic record), money, bullion, jewellery and other valuable articles or things.

Where free ingress cannot be obtained [Rule 112(4)]

If ingress into such building or place cannot be so obtained it shall be lawful for the authorised officer executing the authority with such assistance of police officers or of officers of Central Government , or of both as may be required, to enter such building or place and search therein and inorder to effect an entrance into such building or place, to break open any outer or inner door or window of any building or place, whether that of the person to be searched or of any other person, if after notification of his authority and purpose and demand of admittance duly made, he cannot otherwise obtain admittance.

If any such building or place is an apartment in actual occupancy of a woman [Proviso to Rule 112(4)]

Provided that, if any such building or place is an apartment in actual occupancy of a woman, who according to custom does not appear in public,(the authorised officer) shall before entering such apartment give notice to such woman that she is at liberty to withdraw and shall afford her every reasonable facility for withdrawing and may then break open the apartment and enter it.

 If ingress into vessel vehicle or aircraft cannot be obtained because such vessel, vehicle or aircrafts is moving or for any other reason [Rule 112(4A)]

 If ingress into any vessel, vehicle or aircraft authorized to be searched cannot be obtained because such vessel, vehicle or aircrafts is moving or for any other reason, it shall be lawful for the authorized officer with such assistance of police officers or of officers of the Central Government , or of both, as may be required, to stop any such vessel or vehicle or , in the case of aircraft, compel it to stop or land , and search any part of the vessel, vehicle or aircraft, and in order to effect an entrance into such vessel, vehicle or aircraft to break open any outer or inner door or window of any such vessel, vehicle or aircraft, whether that of the person to be searched or of any other person, if after notification of his authority and purpose and demand of admittance duly made, he cannot otherwise obtain admittance.

(ii)  Break open the lock of any door, etc. [Section 132(1)(ii)]

An authorised officer is empowered to break open the lock of any door, box, locker, safe, almirah or other receptacle when the keys thereof are not available. In such circumstances, he should first demand the keys from the owner, occupier, or the person in-charge and allow reasonable time and opportunity for the production of the keys. Only after the authorised officer has satisfied himself that the keys are not available despite all reasonable efforts should he break open the locks. He should in such circumstances, record the fact that the lock had to be broken open, along with his reasons for doing so.

Where a locksmith is called for this purpose, his full name, address, time of arrival and leaving the premises alongwith the sum of money paid for his services should be noted down. The note should be signed by the authorised officer, the occupant of the place or person in-charge and the witnesses to the search. This should be appended to the panchnama and made a part thereof.

Allowing access to searching officer by opening box, locker etc. [Rule 112(4B)]

The authorized officer may require any person who is the owner or has the immediate possession, or control, of any box, locker, safe, almirah or any other receptacle situate in such building, place, vessel, vehicle or aircraft to open the same and allow access to inspect or examine its contents and where the keys thereof are not available or where such person fails to comply with any such requirement may cause any action to be taken including the breaking open of such box, locker, safe, almirah or other receptacle which the authorized officer may deem necessary for carrying out all or any of the purposes specified in the authority issued under sub-rule(2).

(iii)   Search any person who is to get in or to go out [Section 132(1)(iia)]

         The authorised officer has the power to search any person who has got out of, or is about to get into, or is inside the building, place, vessel, vehicle or aircraft. He may do so if he has reason to suspect that such person has secreted about his person, any books of account, other documents, money, bullion, jewellery or other valuable ariticle or thing. Personal search should, however, not be carried out in an indiscriminate and routine manner. When such a search involves female, it should be carried out only by another female with strict regard of decency.

(iv)  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

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 as defined in section 2(1)(t) of the Information Technology Act, 2000 to afford the authorized officer the necessary facility to inspect such books of account or other documents. [Section 132(1)(iib)]

KEY NOTE

Person defaulting under section 132(1)(iib) shall be liable to rigorous imprisonment for a term which may extend to two years and shall also be liable to fine. [Section 275B].

(v)    Seize any such books of accounts, documents, money, bullion, etc. [Section 132(1)(iii)]

The Authorised Officer should apply his mind and broadly determine as to what books of account and documents are required to be seized. Detailed inventories should be prepared of cash, bullion, jewellery and other valuable articles and things found in the course of the search, whether seized or not. It is significant to mention in this connection that cash and other assets found in the course of the search can be seized only of these represent undisclosed income or property.

Detailed inventories should also be prepared of all the books of account and documents found as a result of the search, whether seized or not. It is necessary to record the exact place from where the books of account and documents were found as it may be relevant to establish their ownership later on. Marks of identification in the form of the Authorised Officer’s signatures with date and seal should be placed on documents and books of account. Pages of documents should be numbered consecutively and mentioned in the inventory. Blank pages should be cancelled and numbered. Signatures of witnesses and the person from whose possession the books of account and documents have been found should be obtained. Separate inventories should be made of the books of account and documents found and seized and books of account and documents found but not seized.

Where both duplicate set of books of account and regular books of account are found, the Authorised Officer should seize both the sets. Documents and books of account pointing to an economic offence or violation should be seized.

Statement recorded under section 132(4) and the explanation offered by the person to whom the books of account and documents belong, the person in occupation of the premises or the person who wrote the books of account or documents or dealt with them (like, the accountant of the owner) could also help in deciding whether the books of account and documents should be seized or not.

Identification marks on packages and copy of list

The authorized officer shall place or cause to be placed the bullion, jewellery and other valuable articles and things seized during the search in a package or packages which shall be listed with details of the bullion, jewellery and other valuable articles and things placed therein; every such package shall bear an identification mark and the seal of the authorized officer or any other income-tax authority not below the rank of Income-tax Officer and the occupant of the building, place, vessel, vehicle or aircraft, including the person in charge of such vessel, vehicle or aircraft, searched or any other person in his behalf shall also be permitted to place his seal on them. A copy of the list prepared shall be delivered to such occupant or person.

However, from 01.06.2003, any bullion, Jewellery or other valuable article or thing being stock-in- trade of the business found as a result of search shall not be seized but the authorized officer shall make a note or inventory of such stock in trade of the business.

(vi)  Place marks of identification on any books or other documents or make or cause to be made extracts or copies there from [Section 132(1)(iv)]

         To place identification marks on such books of account and documents as may be found in the course of search and as he may consider relevant to or useful for the proceedings under the Income Tax Act and to make a list therof together with particulars of the identification marks.

(vii)  Make a note or an inventory of such money, bullion, jewellery or other valuable article of thing. [ Section 132(1)(v)]

       To make inventory of any undisclosed money, bullion, jewellery or other valuable articles or things found, whether seized or not.

(viii)  Deemed Seizure [Second proviso to Section 132(1)]

Where it is not possible or practicable to take physical possession of any valuable article or thing due to its volume, weight or other physical characteristics or due to its being of 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 the authorized officer.

KEY NOTE

(a)    Provision of deemed seizure shall not apply in case of stock in trade.

(b)   Person defaulting in second proviso to clause (1) of section 132. shall be punishable with rigorous imprisonment which may extend to two years and shall be liable to fine also. [Section 275A]

(ix)   Police Assistance [Section 132(2)]

  The Authorized officer may requisition the services of any police officer or any officer of the Central Government or both to assist him for the purposes of clause 1 and clause 1A of section 132 and it shall be the duty of every such officer to comply with such requisition

(x)   Restraint order [Section 132(3) 

The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, [For reasons other than those mentioned in the second proviso to section 132(1)] serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it 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. This sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of section 132(1).

Section 132(3) envisages a situation where seizure is not practicable. In such cases the authorized officer is empowered to serve an order on the owner of the person who is in immediate possession or control of the article that he shall not remove, part with or otherwise deal with such article except with the prior permission of such authority. However exercise of such authority does not amount to seizure. On the basis of restraint order passed under Section 132(3), searches would be kept alive and operative for as long as the authorized officer please. 

Person defaulting in section 132(3) shall be punishable with rigorous imprisonment which may extend to two years and shall be liable to fine also. [Section 275A]

(xi)  Record statement - Examination on Oath, Section 132(4)

The Authorized officer may, during the course of the search and 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 proceeding under the Indian Income Tax Act, 1961.

The examination of any person 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 proceeding under Act.

(xii) To call for the assistance of technical experts like valuers etc.

The authorized officer, during the course of the search operation may take the services of approved valuers for immediate valuation of jewellery found.

 

[B]     Income Tax Department – Duties

(i)         To show the authorization immediately on entry, to any adult member in the premises and take his signature along with date and time.

(ii)       Show their Identity Cards

(iii)      OFFER OF THEIR PERSONAL SEARCH BY THE MEMBERS OF THE SEARCH PARTY

The members of the search party should offer themselves for search by the person whose premise, etc., is being searched and recording the fact of the personal search separately.

Personal search should be done in the presence of the witnesses. Search of the lady members of the search party can be made only by a lady present in, or occupying, the premises.

(iv)     ALL THE EXIT POINTS OF THE PREMISES ARE FULLY COVERED TO PREVENT ANY POSSIBILITY OF THROWING AWAY OF ANY MATERIAL etc.

To ensure that all the exit points of the premises are fully covered to prevent any possibility of throwing away of any material etc. The occupants of the premises should be requested to lock all cupboards, etc., and hand over all the keys to the leader of the search party.

(v)       TO IMMEDIATELY TAKE CONTROL OF ALL THE TELEPHONES INCLUDING MOBILE PHONES, FAX MACHINES.

·         Where the premises being searched has telephones, intercom. Telex, FAX, public address or computer systems, the leader of the search party should take over their control.

•        Where the premises being searched has telephones, intercom systems, telex systems, FAX, public address systems or computer systems with Internet or network facility etc., there is no such communications through them between any person occupying the premises and any other person, inside or outside the premises as would jeopardise the purpose and conduct of the search.

•        Where the premises being searched has a computer, no one gets an opportunity to manipulate the system or damage it or erase any data stored therein.

(vi)     To conduct the search in the presence of atleast 2 witnesses. (Rule 112 (6) of Income Tax Rules, 1962)

(vii)    Not to threaten, abuse or use any indecent language against the person searched.

(viii)  Not to get provoked and maintain a cool and calm temperament and to be alert.

(ix)     To avoid using the items of personal use of the assessee like Bed, T.V. etc. and also avoiding making the private calls from the assessee’s telephone.

(x)       DECLINE THE ASSESSEE’S OFFER OF FOOD OR REFRESHMENT POLITELY IN ORDER TO AVOID ANY POSSIBLE DRUGGING

No food or refreshment should be accepted from any occupant or the premises being searched as it would be improper to accept such hospitality. Secondly, there is also a risk of the members of the search party being drugged.

(xi)     CHILDREN SHOULD NOT BE PREVENTED FROM GOING TO SCHOOL

To allow the school going children to attend the school. However, their school bags should be searched to ensure that they do not contain any documents, locker keys, valuables, etc.

(xii)    To allow the assessee and other occupants of the premises to take their meals and medicines at the normal time and also allowing the old members of the family to take rest at their normal hours.

(xiii)  Leave the premises only after informing the assessee . Not to leave the premises without informing the assessee.  

Other steps to be taken by the authorised officer, the leader of the search party

(a)  The authorised officer, the leader of the search party along with other members of the party should work as a team.

(b)  There is optimum utilisation of available manpower and that the search is conducted in an efficient, fair and orderly manner.

(c)  Money, assets and documents etc., are not thrown out of the premises or taken out of the premises or are not destructed or damaged in any manner by any occupant, being searched.

(d)  No outsider, (except a medical practitioner, in case required), should be allowed to enter the premises during the course of the search operations.

(e)  Where the premises being searched is an office, only those employees who are likely to be of use in explaining or producing the relevant documents etc., should be allowed to remain in the premises.

(f)  Movements of servants, drivers, other employees etc., should be restricted to the minimum and if they are allowed by the authrised officer to leave the premises, their personal search should be taken before they leave.

(g)  The occupant or person in-charge of the building, place, vessel, vehicle or aircraft or any other person acting on his behalf should be permitted to be present throughout the search. However, the aforesaid persons are not entitled to have their legal/tax advisors to be present during the search.

If during the course of the search any evidence of an illegal activity leading to an offence under any of the following statutes or any other law is discovered, the concerned authorities are immediately informed so that they can take appropriate action against the offenders:

(i)    The Antiques and Art Treasures Act, 1972;
(ii)   The Arms Act, 1959;
(iii)  The Wild Life (Protection) Act, 1972; and
(iv)  The Foreign Exchange Management Act, 1999.

Power – Discovery - Production of evidence - The Assessing Officer is empowered to visit the house of the assessee for the purpose of examining him on oath, by camping at the residence of the assessee

During the search proceedings, cash of Rs. 40 lakhs was found from the residence of the Assessee. The Assessing Officer drew the Punchnama on the same day and issued notice to assessee to be present at his residence for examination on oath. The assessee challenged the action of the Assessing Officer before the High Court in a Writ Petition. The Single Judge held that action of the Assessing Officer amounts to “trespass” and the Assessing Officer is to be prosecuted. On appeal by the department, the division bench held that the Assessing Officer under section 131(1A) empowers the Assessing Officer to appear before him at his office or he can go to the place of such person and examine him on oath. [DCIT(Inv.) v. Prakash V. Sanghavi (2016) 236 Taxman176 (Karn)]

Discovery - Production of evidence – Summons can be issued under section 131(1A) even after the search proceedings are initiated

High Court upheld the validity of the summons issued under section 131(1A) after the search proceedings initiated under section 132. HC held that summons can be issued before or even after the search proceedings are initiated. HC held that the words ‘referred to in section 132(1) before he takes action under clauses (i) to (v) of that sub-section’ in Section 131(1A) qualify the words ‘authorised officer’ only and not the other specified authorities named in the section. - [Emaar Alloys (P) Ltd. v. DGIT (Inv) & Ors. ( 2016) 288 CTR 413 : 235 Taxman 569 (2015) 138 DTR 54  (Jharkhand)]