Importance of Panchnama in Income-tax Search & seizure proceedings

Panchnama is an important document because it informs the person from whose premises the articles are seized or the person searched as to the name of the person or the building etc. where the search was carried out and the officers who were authorized and had carried out the search and the articles, if any, seized. In Income Tax or GST / Customs cases or in the cases pertaining to Foreign Exchange etc., the Panchanama is a major document and could even be of evidentiary value. During investigation, it plays very important role in establishing guilt of accused. Moreover, sometimes “PANCHNAMA” becomes key document in the appreciation of evidence by the court. The reality of the situation has to be properly and correctly grasped in the panchanama. The panch (witness) may have to render accurately the facts of the scene where the documents/assets were found.

A panchanama seen and heard by the panchas and recorded by a scribe or an officer is only a modus as dictated by an officer and will not render the panchanama invalid and panchanama would be admissible in evidence.

A panchanama properly drawn and carefully incorporating facts seen and heard is an important part of an investigation. The material facts disclosed in a panchanama help in discharging the burden of proof resting on the prosecution. Presumption may stand adduced if the panchanama is clear and unambiguous.

Therefore, making of Panchnama is a means to carry out the search and/or seizure proceedings in a transparent and justifiable manner.

What is a panchnama

A panchnama is a vital document evidencing the conduct of search at a premise on the day of search in the presence of at least two witnesses whose signatures are taken on the panchnama.

The documentation of what they witness is known as the panchnama. The word 'nama', refers to a written document. Its type is usually determined by the word which is combined with it as a suffix. Examples being, nikah-nama (the written muslim marriage contract), hiba-nama (gift deed, the word hiba meaning - gift), wasiyat-nama (written will) and so on. So a panchnama is a written record of what the panch has witnessed. 

The word “PANCHNAMA” literally means a “record of observation by five people”. Panchanama is essentially a document recording certain things which occur in the presence of the Panchas and which are seen and heard by them. Panchas are taken to the scene of an offence to see and hear certain things. Therefore, panchas are liable to be examined at the trial to depose to those things and their evidence is relied upon in support of the testimony of an investigating officer.

A Panchanama is an essential document not only influencing the course of proper investigation but a record of memory and refresher of memory so that important details are not forgotten. Section 159 of the Evidence Act, 1878 says a witness may refresh his memory by referring to any writing made by himself and even written by anyone else.

A panchnama, is nothing but a document recording what has happened in the presence of the witnesses (panchas). A panchnama may document the search proceedings, with or without any seizure. A panchnama may also document the return of the seized articles or the removal of seals.

Accordingly, the panchanama must be factual incorporating what was actually seen and heard by the witnesses, written in their hand or written out or certified by him as found to be true and correct and as seen, witnessed, and heard by them.

The panchnama that is mentioned in Explanation 2(a) to section 158BE is a panchnama which documents the conclusion of a search.

 

Legal Provisions

The word ‘panchnama’ is not defined in the Act. Even the Code of Criminal Procedure, 1973, the provisions of which relating to search and seizure have been made applicable to the searches and seizures under section 132, does not define the said word. It, however, prescribes the format in which the panchnama is required to be drawn.

The drawl of Panchnama is an integral activity to carry out any search, jamatalashi or seizure proceedings of any contraband or unaccounted assets or cash etc.. Even though, in Income Tax Act, 1961 or Income Tax Rules, 1962, no legal provision for Panchnama is given but while conducting search, the provisions contained in Section 100 of the Code of Criminal Procedure are to be followed.

 

Guidelines for Preparation of panchnama

v  Neatly and legibly to be written

v  Corrections, if any, must be attested by the Panchas

v  Do not destroy a Panchanama once it is drawn

v  If any differences arise, state reasons in the same Panchanama and continue

v  Take the help of goldsmith in case of seizure of gold

Before the search is concluded, a panchnama is prepared in which an account of the entire proceedings is recorded, and all the statements recorded and inventories prepared during the search are appended to it. The panchnama contains the name and address of the person searched in whose respect search warrant has been issued. The panchnama is to be signed by the authorised officer, the person in whose case the search is being conducted and the witnesses to the search.

The form for such panchnama is provided to the search party by the Investigation Unit organising the search. This is a document of considerable evidentiary value and should be prepared with due care and caution. When the search is resumed on a subsequent day, the panchnama prepared on the subsequent day should refer to the immediately preceding panchnama and also to the fact that all the seals were inspected by the officer(s) and the witnesses and that they were found intact.

The panchnama should mention all significant events in the search in the same sequence in which they occurred. A specimen of the brass seal used should also be put on the panchnama. Even where nothing is found or seized in the course of a search, a panchnama should be prepared in the usual manner.

 

KEY NOTE

Panchama is drawn when the search stands concluded finally or temporarily.

 

Important things to be incorporated in Panchanama 

In  Panchanama,  the   following   things   can   be   said   to   be important to be incorporated. 

· Name and place of police Station, 

· Name and rank of officer commencing panchanama, 

· Names and addresses, S/o, W/o etc. of the panchas for closer identification.

(i)     Occupation of Panchas

(ii)   Age of Panchas

(iii) Residential address of Panchas

· Details of particular place or persons, 

· Detail list of articles found in that place or from the person which are incriminating,

· Record of time when it was commenced and when it ended,

· Signatures of that officer and both of panchas. 

· All the members of the search party, before starting search, must offer themselves for being

   searched by the witnesses and / or the occupants of the premises and / or their representative(s), and   

   this fact must be clearly incorporated in the Panchnama.

It is also important that after preparation of panchanama the panchas should read its contents.  

 

Appended to the panchnama and made a part thereof

The following should also be appended to the panchnama and made a part thereof:—

(a) The following were found and seized:

(i) Books of account and documents as per inventory in Annexure ‘A’ ( ...... Sheets)

(ii) Bullion i.e. gold, silver etc. as per inventory in Annexure ‘B’ ( ...... Sheets)

(iii) Cash as per Annexure ‘C’ ( ...... Sheets)

(iv) Jewellery Ornaments etc. which have been inventorised separately for each place from where recovered, as per Annexure ‘J’ ( ...... Sheets)

(v) Silver articles and silverware as per inventory in Annexure ‘S’ ( ...... Sheets)

(vi) Other valuable lockers keys, FDRs etc. as per inventory in Annexure ‘O’ ( ...... Sheets)

(vii) Other valuable or articles deemed to have been seized under second proviso to section 132(1) of the Act as per inventory in Annexure ‘N’ ( ...... Sheets)

(b) The following were found but not seized:

(i) Books of account and documents as per Annexure, …… mark of identification were placed on these and the specimen of the marks and the pages where these have been placed are shown in the inventory prepared.

(ii) The other valuable articles or things (including money) as per Annexure 2, 3, ...... (separate inventories of jewellery, ornaments, silverware etc.) were prepared for items found in different place or claimed to be belonging to different persons.

While seizing the documents, the procedure as given below should be adopted :

(a)  All loose documents should be signed by the witnesses.

(b)  Each page of all exercise books registers, etc. must be numbered and the pages containing writing must be signed by the witnesses. The number of written pages and the pages should be separately indicated in the documents.

(c)  The first and last pages in the register, the exercise books, etc. must be signed by the witnesses. (d)  The seizing officer will also cause all seized goods to be properly sealed with the Income Tax Department seal as well as the seal of the owner (if any) if he so desires.

Person searched is entitled to obtain a copy of the Panchnama

Person searched has right to get copy of panchnama along with all annexures. A copy of the Panchnama should be handed over to the occupants of the premises or their representative(s), under proper acknowledgement. Generally it is handed over by the authorised officer to the assessee at the time of conclusion of search.

If any witness refuses to sign the panchnama or any other document

If any witness refuses to sign the panchnama or any other document, which he is required to sign, during or at the end of the search, his statement on oath should be recorded. He should be specifically asked about the reason for such refusal. The leader of the search team or any other Authorised Officer should prepare a note describing the circumstances in which the witness refused to sign the panchnama. All the members of the search team and remaining witnesses should sign the note, which should be made a part of the panchnama.

Where the conduct of a person appointed as a witness found to be in violation of the provisions of section 187 of IPC

In suitable cases, where the conduct of a person appointed as a witness is found to be in violation of the provisions of section 187 of the Indian Penal Code, the matter should be reported to the Control Room for exploring the possibility of launching prosecution against him.

Section 187 of the Indian Penal Code

“187. Omission to assist public servant when bound by law to give assistance

Whoever, being bound by law to render or furnish assistance to any public servant in the execution of his public duty, intentionally omits to give such assistance, shall be punished with simple imprisonment for a term which may extend to one month, or with fine which may extend to two hundred rupees, or with both; and if such assistance be demanded of him by a public servant legally competent to make such demand for the purposes of executing any process lawfully issued by a Court of Justice, or of preventing the commission of an offence, or of suppressing a riot, or affray, or of apprehending a person charged with or guilty of an offence, or of having escaped from lawful custody, shall be punished with simple imprisonment for a term which may extend to six months, or with fine which may extend to five hundred rupees, or with both.”

 

Serve a Summons directing to attend the Income Tax Office on specified day and time

A Summons should be served on the spot, where required, directing the owner to attend the Income Tax Office on the specified day and time for examination etc. If inspite of this Summons, the owner fails to attend the Income Tax Office within the specified time-limit for examination, etc. he is liable for action as per the provisions of the Income Tax Act.

Department could not keep search action in abeyance for a long period of almost one year from date of last authorisation, more so, when after such period of almost one year nothing was searched but only prohibitory order passed one year back was converted into deemed seizure

Section 158BE, read with section 132, of the Income-tax Act, 1961 - Block assessment in search cases - Time limit for completion of (Computation of limitation period) - A search under section 132 was conducted upon premises of assessee company on 07.11.2000 based on authorisation dated 04.11.2000. Said authorisation was executed on 08.11.2000 when search was completed and panchnama was made. On 10.11.2000 a search was conducted on basis of fresh authorisation dated 10.11.2000. On 04.12.2000, investigation team again conducted search upon assessee under same old authorisation dated 10.11.2000 and passed prohibitory order under section 132(3) and items were inventorised. On 07.11.2001, i.e. almost after a period close to one year, investigation team again visited premises under same old authorisation dated 10.11.2000 for conducting search and prohibitory order passed on 04.12.2000 was converted into deemed seizure under section 132(1)(iii). There was nothing searched on this day except passing of conversion order from section 132(3) to 132(1)(iii). Later on, A block assessment order was passed on 28.11.2003. Assessee submitted that revenue could not conduct search after almost one year on basis of an old authorisation dated 10.11.2000 and draw a panchnama concluding search. It contended that limitation under section 158BE should begin from date of last drawn panchnama i.e. 08.11.2000, and, thus, impugned assessment order passed on 28.11.2003 was barred by limitation. According to revenue, limitation would start from 07.11.2001 when order of deemed seizure was passed under section 132(iii) by virtue of Explanation 2 read with section 158BE and, hence, block assessment framed vide order dated 28. 11.2003 was within limitation period. Department could not keep search action in abeyance for a long period of almost one year from date of last authorisation more so when after a period of one year nothing was searched but only prohibitory order passed one year back was converted into deemed seizure. Therefore, panchnama dated 07.11.2001 drawn based on authorisation dated 10.11.2000 was bad in law and, therefore, limitation could not be counted from 07.11.2001 but it was ought to be counted from 10.11.2000 or at most from 04.12.2000. Therefore, assessment order dated 28.11.2003 was barred by limitation. [In favour of assessee] (Block period 01.04.1990 to 07.11.2000)

Merely visiting premises on pretext of concluding search, in which no new material was seized and drawing a second panchnama on that date would not extend period for completion of assessment

Time limit for completion of assessment under section 153A - First, search was concluded on 22-03-2007. Thus, assessment order under section 158B was to be passed before 31.12.2008. However, official visited premises on 15.05.2007 again on pretext of concluding search. Even if they found nothing new for being seized that belonged to any of searched parties, they drew a second panchnama. Such second visit and panchnama drawn up on a later date could not lead to postponement of period for completion of assessment. Therefore, assessment made on 31.12.2009 was barred by time. [In favour of assessee] (Related Assessment years : 2001-02, 2002-03, 2004-05, 2006-07 and 2007-08) – [PCIT v. PPC Business & Products (P) Ltd. (2017) 398 ITR 71 : 84 taxmann.com 10 (Del.)]

Defects in panchnamas do not affect validity of search, yet remedial steps are needed to avoid this practice - Where in course of search proceedings initiated against assessees belonging to MDLR Group, panchnama drawn did not contain their specific names, it amounted to a mere lapse on part of revenue authorities, however, said lapse would not affect validity of search or nullify notices issued under section 153A

A search and seizure operation against the petitioners was initiated who belonged to one MDLR Group. The address mentioned in the warrant and the panchnama need not be the registered office or the head office of company but it has to be the place where the search has to be conducted and has been conducted. The address at which search could be conducted would be the place or location, where books of account, documents, jewellery, unaccounted assets etc. could be located/found. There is certainly lapse and failure to comply with the requirements of search and seizure manual as the panchnama did not contain names of the petitioners and does not record any suspension of search. Even the obstruction and presence of third persons were not mentioned in the panchnamas. But this would not affect the validity of the search. The Court recorded that the panchmanas in the present case to this extent are defective, but the search or initiation of search cannot be disputed. However, the respondents should take remedial steps and ensure that such lapses do not occur in future, otherwise similar allegations will get repeated, entailing litigation. Where in course of search proceedings initiated against assessees belonging to MDLR Group, panchnama drawn did not contain their specific names, it amounted to a mere lapse on part of revenue authorities, however, said lapse would not affect validity of search or nullify notices issued under section 153A. [In favour of revenue] - [MDLR Resorts (P) Ltd. v. CIT (2014) 361 ITR 407 : 265 CTR 356 : 221 Taxman 83 (Del.)]

Where last panchnama was merely a release order, same could not extend period of limitation for completing block assessment order

A search was conducted on 03.02.1999 at assessee's premises and books of account and other documents were seized; an order under section 132(3) was passed in respect of an almirah of assessee and accordingly panchnama was drawn on said date. On 13.04.1999 prohibitory order relating to said almirah was withdrawn and a fresh panchnama was drawn on 13.04.1999. Accordingly block assessment order was passed on 27.04.2001. Commissioner (Appeals) as well as Tribunal treated last panchnama just an empty formality and accordingly, considering date of first panchnama dated 03.02.1999 held that block assessment was barred by limitation. Since panchnama dated 13.04.1999 itself revealed that nothing was seized on that date nor was anything found on that date, last panchnama dated 13.04.1999 being merely a release order same could not extend period of limitation. Therefore impugned order passed by Tribunal did not call for any interference. [In favour of assessee] – [CIT, Jodhpur v. Om Prakash Mandora (2013) 262 CTR 646 : 37 taxmann.com 426 : (2014) 222 Taxman 138 (Raj.)]

Clerical or technical mistakes in the Panchnama cannot make the search invalid under law.—[P.P. Jewellers (P) Ltd. and Ors. v. ACIT (2006) 111 TTJ 187 [ITAT Delhi]

Merely mentioning in the panchnama that a search has been temporarily suspended does not ipso facto continue the search

Normally, a search must be continuous. If it cannot be continuous for some plausible reason, the hiatus in the search must be explained. If no cogent or plausible reason is shown for the hiatus in the search, the second or resumed search would be illegal. Merely mentioning in the panchnama that a search has been temporarily suspended does not ipso facto continue the search. It would have to be seen as a fact as to whether the search continued or had concluded. Merely because a panchnama is drawn up on a particular date, it does not mean that a search was conducted and/or concluded on that date. The panchnama must be a record of a search or seizure for it to qualify as the panchnama. - [CIT v. S.K. Katyal (2009) 308 ITR 168 (Del.)]

Mere mentioning of name in panchnama does not lead to a valid search

Mere mentioning of name in panchnama does not lead to conclusion that a valid search was conducted against assessee. Further mere search of premises owned by assessee but rented to another concern does not by any implication prove conduct of search as enumerated under section 132 against assessee. - [J.M. Trading Corp. v. ACIT (2008) 20 SOT 489 (Mum)]

 

In The State of Maharashtra v. Kacharadas D. Bhalgar, a panchnama was stated to be “a memorandum of what happens in the presence of the panchas as seen by them and of what they hear”. – [The State of Maharashtra v. Kacharadas D. Bhalgar MANU/MH/0222/1978 : (1978) 80 BOM LR 396]

The Gujarat High Court in the case of Valibhai Omarji v. The State, noted that

"[a] Panchanama is essentially a document recording certain things which occur in the presence of Panchas and which are seen and heard by them." – [Valibhai Omarji v. The State MANU/ GJ/ 0067 / 1963 : AIR 1963 Guj 145]

In Mohanlal Bababhai v. Emperor, Beaumont, C. J. and Sen. J., observed :

“A panchnama is merely a record of what a panch sees. The only use to which it can property be put is that when the panch goes into the witness box and swears to what he saw, the panchnama can be used as a contemporary record to refresh his memory.” – [Mohanlal Bababhai v. Emperor, 43 Bom LR 163 : (AIR 1941 Bom 149)]

In Mohan Lal v. Emperor, it was observed that “the panchnama is merely a record of what a panch sees....” – [Mohan Lal v. Emperor MANU/MH/0124/1940 : AIR 1941 Bom 149]

 

                                                                       PANCHNAMA

(To be prepared in quadruplicate)

A. Warrant in the case of ....................................................................................

B. Warrant to search (Details & Ownership of place of search) Telephone Number ……………..

C. (A) and (B) stated to be assessed by ...........................................................

D. Search Party consisting of

AUTHORISED OFFICERS

S. No.	Authorised Officer	Name	Full Designation
1
2
3

 

OTHER OFFICIALS WHO ASSISTED THE AUTHORISED OFFICERS

4
5
6

E. Name and complete address of Panchas :

1.                                                                                 2.

1. On being called by Shri ........................................... on ..................................... at ........... a.m./p.m.: we, the above named Panchas, presented ourselves at the above place of search. The authorised officer Shri .............................. showed the warrant of authorisation dated .............................. issued under section 132 of the Income-tax Act, 1961/37A of the W.T. Act, 1957 in the case of (A) above, to search the place mentioned at (B) above and duly signed and sealed by the Principal Director of Income Tax (Inv.), …………../ Principal Commissioner of Income-tax, .................………/Addl./Joint Director of Income Tax (Inv.), ...................………to Shri/Smt............................... who was present in the said place at the time and who after reading the said authorisation/after the authorisation was explained in local language, viz., ............................. by Shri/Smt. .....................................signed in, in our presence and along with us, in token of having perused the same.

2. As today’s search was in continuance of the proceedings on us, along with the aforesaid authorised officers, before the commencement of proceedings today, inspected the seals which had been placed on the date and found them to be intact/tampered with as narrated in the enclosure.

3. The above-mentioned search party offered themselves for personal search before commencing the search, which was taken/declined.

4. A search of the above-mentioned place was carried out by the said party in our presence in an orderly manner without hurting the sentiments of any of the occupants of the premises. Nothing untoward/the events narrated in the enclosure, happened in the course of search.

5. In the course of the search:

(a) The following were found and seized :

(i) Books of account and documents as per Annexure A ................ (sheets)

(ii) Bullion, i.e. gold, silver, etc., as per Annexure B .............(sheets)

(iii) Cash as per Annexure C ...................(sheets)

(iv) Jewellery, ornaments, etc., which have been inventorised separately for each place from where recovered, as per Annexure J ..................(sheets).

(v) Silver articles and silverware as per Annexure S ............... (sheets)

(vi) Other values, locker keys, FDs., etc., as per Annexure O ........... (sheets)

(b) The following were found but not seized:—

(i) Books of account and documents as per Annexure............. Marks of identification were placed on these and specimen of the marks and the pages where these have been placed are shown in the inventory prepared, viz., Annexure ................

(ii) The other valuable articles or things (including money) as per Annexure .......... (Separate inventories of jewellery, ornaments, silverware, etc., where prepared for items found in different places or claimed to be belonging to different persons.)

6. In the course of the search, the authorised officer Shri ....................................... recorded the statement(s) of Shri .................................................................. on solemn affirmation/oath, in our presence. No coercion, threat, inducement, promise or other undue influence was brought to bear on the above deponent. The statement was read over/explained in the local language, viz, ............... to the deponent who signed the statement in token of having understood its contents and of agreeing that it had been correctly recorded.  The deponent has made a statement under Explanation 5 to section 271(1)(c) of the I.T. Act/18(1) of the W.T. Act about unaccounted assets and income of Rs. .........................

7. The following other important persons were present in the place of search and either took an active part in or helped the search proceedings:

S. No.	NAME	RELATIONSHIP
1.
2.

 

8. The search commenced on ....................... at..............a.m./p.m. The proceedings were closed on........................at................a.m./p.m. as finally concluded/as temporarily concluded for the day to be commenced subsequently for which purpose seals were placed on the entire place/on in our presence.

9. An order under section 132(3) of the Income Tax Act, 1961 in respect of the sealed premises/............................... was served on Shri/Smt. ............................. by the said authorised officer.

10. An order under second proviso to section 132(1) was served on Shri/Smt. ……….................................................………. by the said Authorised Officer. (Annexure N)

11. Before leaving the above-mentioned place of search, the entire search party again offered themselves for personal search which was taken/declined. The above panchnama has been read by us/explained to us in local language.................................. by Shri/Smt. ......................................................... and it is certified that it has been correctly recorded.

Signature of the Panchas with dates :

 

Witness-1	Witness-2

 

Signature of the Authorised officer	Signature of the person receiving copy of Panchnama
Name: Designation	Name : Position in relationship “A”
Date:	Date:

Seal: