A search and seizure under
the Income Tax Act, 1961 has to be carried out in the presence of at least two
respectable inhabitants of the locality where the search and seizure is
conducted. Those respectable inhabitants are witnesses to the search and
seizure and are known as ‘panchas’. The documentation of what they witness is
known as the ‘panchnama’. Thus, a panchnama is nothing but a document recording
what has happened in the presence of the witnesses.
Before starting the
search, the authorized officer has to call at least two respectable inhabitants
of the locality, who will witness the search and remain present at the premises
throughout till the operation comes to an end. Such witnesses have the duty to
examine the operation and make sure there is no illegality, for instance, undue
coercion in the record of statements). No need for the witnesses to attend the Court,
unless specifically summoned
The provisions of the Criminal Procedure
Code have been made applicable and by virtue thereof and of rule 112 the search
has to be conducted in the presence of two or more independent and respectable
persons of the locality to witness the search.
Appointment of witnesses
Before making a search of a
building or a place, the Authorised Officer is required to call upon two or
more respectable inhabitants of the locality in which the building or place to
be searched is situate to attend and witness the search. The term ‘locality’
has to be understood in its natural meaning. It means immediate vicinity.
It is mandatory to appoint two independent witnesses
before commencing conduct of search
It is a mandatory requirement and
the entire search proceedings are conducted in the presence of two independent
witnesses. The Authorised Officer should issue an order under rule 112(6) in
writing to the person selected to attend and witness the search.
Text of Rule 112(6)
“(6) Before making a search, the authorised officer
shall,—
(a) where a building or place is to be searched, call
upon two or more respectable inhabitants of the locality in which the building
or place to be searched is situate, and
(b) where a vessel, vehicle or
aircraft is to be searched, call upon any two or more respectable persons, to
attend and witness the search and may issue an order in writing to them or any
of them so to do.”
Text of Rule 112(7)
“(7) The search shall be made in
the presence of the witnesses aforesaid and a list of all things seized in the
course of such search and of the places in which they were respectively found
shall be prepared by the authorised officer and signed by such witnesses; but
no person witnessing a search shall be required to attend as a witness of the
search in any proceedings under the Indian Income-tax Act, 1922 (11 of 1922),
or the Act unless specially summoned.”
It is not the right of the assessee to select
witnesses of his choice
It is not the right of the assessee
to select witnesses of his choice. However, in practice, selection of witnesses
is made by the authorised officer with the consent of the assessee so that
whole proceedings may be carried out smoothly.
Authorised officer cannot forcibly require any person
to act as witness
It is not possible to forcibly require
any person to act as witness. However, a person refusing to act as witness
without any justifiable cause, inspite of direction of the authorised officer
may be prosecuted for his denial.
Selection of witnesses by the
Authorised Officer
The
selection of the witness is done by the Authorised Officer. While selecting
witnesses, the Authorised Officer should ensure the following norms:—
(i)
The person selected as a witness should not have a bad reputation.
(ii)
The person selected as a witness should be sufficiently educated to understand
the process of search.
(iii)
No person with a criminal record should be appointed as a witness.
(iv)
A friend or a relative or an employee of the person whose premises are being
searched should not be appointed as a witness.
(v)
The person selected as a witness should be major and a citizen of India (above
18 years).
(vi)
The witness should not be a business rival or a disgruntled employee or a
person hostile to the person(s) in whose case the search is being carried out
or the person who is in the occupation or control of the premises being
searched.
(vii)
The person selected as a witness should be free from any such physical or
mental infirmities as would affect his functioning as a witness.
(viii)
The legal advisor or consultant of the person(s), whose premises are being
searched, should not be appointed as a witness.
(ix) Religious sentiments of the
person(s) whose premises are being searched or who are in occupation or control
of the premises being searched should be kept in view while selecting
witnesses.
(x)
An employee of the Income Tax Department should not be selected as a witness.
KEY NOTE
Even though witnesses are to be
selected by the Authorised Officer, if the person in whose case the search is
to be conducted or the person in occupation and control of such premises raises
any objection against selection of a particular person as a witness, the
Authorised Officer should take such objection into account before taking a
final decision.
Panchas (Witnesses) should :
'Panchas'
should be independent and respectable people. They should normally belong to
the locality and/or neighborhood of the place where the panchanama is drawn.
There is however no bar in getting panchas from distant places also if need be
or to overcome the non-availability of local panch witnesses. The panchas should,
however, be,-
(a)
Intelligent
(b)
Literate as far as possible
(c)
Respectable citizens
(d)
Should possess an understanding and of
impartial nature
(e)
Must be with good antecedents. No
convictions earlier.
(f)
Should
not be interested /prejudiced in the matter they are attending to.
(g)
Should
not be easily influenced by pecuniary / other considerations.
(h)
Should not be a minor.
(i)
Acceptable to the religious sentiments
of the owner of the house.
(j)
Free
from contagious diseases and infirmities as to effect their being proper
panchas (for instance
deaf,
mute, blind etc.)
(k)
Should have no relationship either with
the place or persons searched.
(l)
Complainant or owner of the house
should not be made a pancha.
(m)
Well-to-do or affluent persons may not necessarily be respectable persons,
(n)
No objection if panchas are Government
servants,
(o)
Other Important things regarding Panchas:-
(i) Panchas
should be present from the time of entry into the premises.
(ii) They
should have knowledge of the purpose of the search.
(iii) Should be present from the beginning to the
end of the search.
(iv) Should initial the documents/records for
identification of having seen it at the time of search
for use at a later date.
(v)
They may be explained that they should
carefully watch the proceedings in the search.
Female Panch witness may be included where female members are
present in the place of search
Where
female members are there in the place of search, try to include female panch
witness also. Explain to the panchas the purpose of the search. Introduce the
owners to the panchas. Identify the suspect in the panchanama by taking his
full name, his father's/husband’s name etc., occupation, residential address,
identification marks, if any. Take the signatures of the panchas and the owner
on the warrant or the authorization for search and specify the details of the
said documents in the panchanama and state that the same has been dated and
signed by the panchas.
Functions of the Witnesses
(a)
Present from time of entry into the
premises
(b)
Should have knowledge of the purpose of
the search
(c)
Present from beginning to the end of the
search
(d)
Initial the documents / records for
identification of having seen it at the time of search
(e)
Carefully watch the proceedings in the
search
Duties of a Witness
The
main duties of a witness to the search are, in brief, as under:—
(i)
He should read and understand the warrant of authorisation.
(ii) He should witness the search
carefully right from its commencement to its closure. His role as an independent
and impartial witness demands that he carefully observes whether—
(a)
The search and seizure operations are being carried out in an orderly manner
and in accordance with the law, without any interference and tampering or
destruction of any evidence or valuables;
(b)
Statements on oath of persons are being recorded properly; without any undue
influence or coercion;
(c)
Personal search of a female occupant is being taken only by female members of
the search team with a strict regard to decency;
(d)
Facts relating to the search and seizure are being recorded correctly and
accurately in the panchnama, inventories and all other relevant documents; and
(e)
In case of continuance of a search on a subsequent date, the seals are intact
at the time of entry and are being broken in his presence for re-entry to
continue the search.
(iii)
He should not leave the premises without the permission of the Authorised
Officer. Refusal by a witness to stay till the end of the search constitutes an
offence under section 187 of the Indian Penal Code. Atleast one of the
witnesses should remain in the search premises throughout the duration of the
search.
(iv) He should read everything
before putting his signature in all documents. He should affix his signature on
all packets containing seized bullion, jewellery, etc. and documents and
statements like, body of the warrant of authorisation, copy of the Taxpayers’ Charter
containing the rights and the duties of the persons being searched, inventories
of books of account, documents and valuables, panchnama and its various
annexures.
(v)
He should attend as a witness under the Act, only if and when summoned. [Rule
112(7), which provides that no person witnessing a search shall be required to
attend as witness to the search in any proceedings under the Act unless
specifically summoned]
(vi)
Ensure that any untoward incident during the search, should feature in the
Panchnama.
KEY NOTE
If a witness raises any objection
or makes any point relating to the process or procedure of search or any matter
related thereto, the leader of the search team should consider and decide the
same.
Search starts after arrival of witnesses
Usually the warrant is executed on
assessee after witness are called and all the three the assessee and witness
signatures are taken on the warrant, so it is executed at that time. As a
general practice Department use to execute warrant as and when strike at the
premises and practically there is always some gap between this and arrival of
witnesses.
Steps are as follows:
(1)
Appointment of witnesses.
(2)
In presence of the witnesses warrant of authorisation is executed to the
party.
(3)
When the staze (2) is achieved it is said that search has began.
When the witness turns hostile
If a witness turns hostile, the
Authorised Officer should record his statement. He should be specifically asked
to explain his conduct. The services of a hostile witness should be dispensed
with. If because of one or more witnesses turning hostile, the number of
witnesses becomes less than two, other respectable persons of the locality may
be appointed as witnesses.
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.”
Objection that panchas were not
present at the time of search - Cannot be raised for first time before CIT(A)
after a period of three years from search conducted. Contention about presence
of panchas could not be raised in appeal, unless it was first raised before
Assessing Officer
Assessee was a partnership firm
carrying on business of jewellery. A search under section 132 was conducted at
business premises of assessee and residences of partners. During search, huge
stock of silver and gold ornaments not disclosed in books of account was found.
Further, certain documents were recovered which showed a consistent practice of
sale of ornaments by estimate slips, with books of accounts reflecting only 10
per cent of actual sales. Accordingly, additions were made on that basis
estimating turnover at ten times from that seen from books of account. During
first appeal, assessee raised a contention that search conducted upon assessee
was invalid for reason that panchas were absent during search and at time of recording
of statement under section 132(4). It was noted that panchas had specifically
stated that they were present during search, and recording of statement. Further,
contention about non-presence of panchas was not raised before Assessing
Officer and it was raised for first time before first appellate authority after
a period of three years from search conducted. Contention about presence of
panchas could not be raised in appeal, unless it was first raised before
Assessing Officer. Therefore, impugned search could not be held invalid. [In
favour of revenue] (Related Assessment years : 2003-04 to 2009-10)—[Rajan
Jewellery v. CIT (2019) 414 ITR 621 : 308 CTR 602 : 266 Taxman 357: 177
DTR 369 (Ker)]
Panchas are material witness and
can be cross-examined
An issue raised by the appellants
was that the search was conducted both in their shop and in their house and
that the search warrant was limited to the shop. The Panchas to the search
were, therefore, material witnesses in this behalf. That they were not produced
for cross-examination, though asked for, is not disputed. There has, therefore,
in our view, clearly been a breach of natural justice. On this count alone, the
order of the High Court must be set aside. We are unimpressed by the argument
that no prejudice was caused to the appellants by reason of the non-production
of the Panchas which, it would appear, was what the High Court seemed to think.
- [Arya Abhushan Bhandar v. Union of India (2002) 143 ELT 25 (SC)]
It is not necessary for search party to employ same witnesses on all dates of search
The assessee challenged the assessment on the grounds
that the search should be considered as having been concluded on 13.12.1995,
that the same witnesses were not employed by the search party on the subsequent
dates and that the assessment completed on 28.02.1997 was barred by limitation.
Held
: It is quite possible that the search operation may continue over a long
period of time. It may not, therefore, be possible to employ the same witnesses
throughout the search operation. The witnesses may have their personal
inconveniences to be present at the spot of search for a very long period. What
is required under the law is that the search operation should be witnessed by
some respectable persons and the law does not at all require that the same
witnesses must continue. Therefore, the assessee’s argument on this issue was
not justified. – [T. S. Chandrashekar v. ACIT (2000) 113 Taxman 26 (ITAT Bangalore)]
On
search certain gold biscuits and primary gold was stated to be recovered from
premises of assessee – Department made additions with regard to value of
aforesaid items and also imposed penalty – Tribunal recorded a finding of fact
that in view of affidavits filed by witnesses to search memo it could be said
that items in question had not been recovered from premises of assessee – Since,
aforesaid finding of Tribunal had not been challenged by revenue, it could be
said that assessee had discharged onus placed on him by Explanation to section
271(1)(c) – Therefore, no penalty could be levied on assessee in respect of
aforesaid additions
The
Central excise authorities conducted a raid on the business and residential
premises of the assessee and during the course of search recovered gold
biscuits and primary gold. The assessee denied having owned them and he also
denied the recovery of these items from his premises. However, the Assessing
officer added these items in the total income of the assessee and also
initiated penalty proceedings under section 271(1)(c). On appeal the Tribunal
recorded a finding of fact that in view of the affidavits filed by the witness
to the search memo it could be said that gold biscuits and primary gold had not
been recovered from the premises of the assessee and that they were not
acquired by the assessee. Thus, the penalty so imposed was deleted by the
Tribunal. On reference :
Held
: The Tribunal having found that there was nothing to suggest that these goods
had been acquired by the assessee during the year under consideration and that
the assessee had discharged the onus placed on him by the Explanation to
section 271(1)(c) and such finding not having been specifically challenged by
the revenue in instant reference, it could be said that no exception could be taken
to the view taken by the Tribunal that the assessee having discharged the onus
that lay upon him under the Explanation, no penalty could be levied despite
additions having been made with regard to the value of gold biscuits and
primary gold. [In favour of the assessee]. – [CIT v. Onkar Nath Agarwal (1993)
201 ITR 1061 : (1992) 108 CTR 69(All.)]
Assessee cannot complain that the witnesses suggested
by them were not respectable persons of the locality
In
Naraindas v. CIT, the petitioner contended that the action of the authorised
officers in making search and seizure was illegal and out the following
irregularities : (i) respectable persons of the locality were not called as
witnesses, (ii) inventory of the books of account and documents was not made,
(iii) boxes were not sealed, and (iv) ornaments were also seized from the
ladies in the family. The Hon'ble Court held as under:
“In
our opinion, none of these objections can be reasonably sustained or can make
the search and seizure illegal. It is stated in the return that the names of
the witnesses were suggested by the petitioners. They wanted that outsiders
should not be called as that would have affected their credit and prestige. The
petitioners cannot now complain that the witnesses suggested by them were not
respectable persons of the locality. – [Naraindas v. CIT (1984) 148 ITR 567 :
(1983) 35 CTR 310 : 14 Taxman 447 (MP)]
Assessee is right in objecting to the witness chosen
by the Assessing Officer as not belonging to the locality, and not being
respectable
Respectable means impartial and independent. It could be a common man also. If it were proved that the witnesses were not respectable, it would only be an irregularity, which would reduce the weight of evidence. - [Sunder Singh v. State of UP AIR 1956 SC 411]
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