The authorised officials can seize the following types of assets:
(1)
Seizure of undeclared Cash
It
is significant to mention in this connection that cash found in the course of
the search can be seized only which represent undisclosed income or property.
The
cash found should be segregated according to denomination and counted in
bundles of hundred notes. The person counting the notes and the person checking
the counted notes should put their signatures on slips which should be attached
to the bundles.
Place
from where found
The
authorised officer has to note separately the cash found from each place or
room or cup-board or the box etc. and its occupants and will interrogate the
respective members of the family about the cash found from their own
possession.
Cash
from residence
Out
of cash found from the residential premises, generally a reasonable amount is
left to meet day-to-day expenses in addition to explained cash.
Cash
from business premises
In
the course of search of the business premises, the search party would first
look for the cash box where the cash is normally kept. The cash so found should
tally with the cash book or else discrepancy, if any, should be capable of
being explained on the spot with reference to imprest, petty cash with details
of any transactions during the day remaining to be posted at the time of
search. Where cash is found in excess of the balance as per books of account,
the same is seized.
Where
the person from whose possession cash is found maintains a cash book
Where
the person from whose possession cash is found maintains a cash book, the cash
balance shown in the cash book should be compared with the cash found.
If
the cash book has not been written up to date
If
the cash book has not been written up to date, the cash balance should be
determined with reference to documents like, cash vouchers, counter foils of
pay-in-slips and cheques, if found in the course of the search. The explanation
of the person searched should be obtained for the cash found at the premises.
The person searched should also be given a reasonable opportunity of furnishing
evidence in support of his explanation. Pointed queries in this regard should also
be made while recording his statement under section 132(4). The Assessing
Officer should, after taking into account all the aforesaid and other relevant factors,
decide whether the cash found or a part thereof should or should not be seized.
Where
in the course of the search, fake Indian currency is detected, information
about the same should be immediately passed on to the control room so that the
same can be communicated to the appropriate authorities for appropriate
instruction to the search party.
(2)
Seizure of jewellery represents the undisclosed income
Only
that part of the jewellery can be seized which represents the undisclosed
income of any person. Detailed inventories of the jewellery and ornaments found
in the course of the search must be prepared. It would be advisable to prepare
separate inventories for jewellery:
(a)
found and seized.
(b)
found but not seized.
(c)
found on person and seized.
(d)
found on person and not seized.
Guidelines
for seizure of jewellery
The
CBDT has vide Instruction No. 1916, dated 11.05.1994, issued guidelines for
seizure of jewellery and ornaments in course of search. The said guidelines is reproduced below:—
Subject
: Guidelines
for seizure of jewellery and ornaments in course of search
Instances
of seizure of jewellery of small quantity in course of operations under section
132 have come to the notice of the Board. The question of a common approach to
situations where search parties come across items of jewellery, has been
examined by the Board and following guidelines are issued for strict compliance:—
(i)
In the case of a wealth-tax assessee, gold jewellery and ornaments found in
excess of the gross weight declared in the wealth-tax return only need be
seized.
(ii)
In the case of a person not assessed to wealth-tax, gold jewellery and
ornaments to the extent of 500 gms. per married lady, 250 gms. per unmarried
lady and 100 gms. per male member of the family, need not be seized.
(iii)
The authorised officer may, having regard to the status of the family and the
custom and practices of the community to which the family belongs and other
circumstances of the case, decide to exclude a larger quantity of jewellery and
ornaments from seizure. This should be reported to the Director of Income tax/ Commissioner
authorising the search at the time of furnishing the search report.
(iv)
In all cases, a detailed inventory of the jewellery and ornaments found must be
prepared to be used for assessment purposes.
These
guidelines may please be brought to the notice of all the officers in your
region.
Jewellery
worn on person by the assessee or other family members can be valued and seized
during search
Such
jewellery will form part of total jewellery and will be required to be valued
along with total jewellery. But generally, such jewellery is not seized as it
forms part of total minimum jewellery not required to be seized as per
instructions of CBDT.
Jewellery
found during search should be valued by an approved valuer from the panel of
valuers
v The location, from where
the jewellery was found, should be properly recorded so as to ascertain the
ownership and other related issues.
v The valuer should be
asked to record full description of each item of jewellery, its gross weight
and net weight, basis of valuation, value and other relevant details in the
form of an inventory.
v The exercise of
jewellery valuation should be done in the presence of the authorised officer,
the witnesses and the person in whose possession the jewellery was found.
v In case any supporting
evidence is produced by the assessee or any other person, the same should be
shown to the valuer only after the valuation is done by him to minimise the
possibility of any bias.
v In case the assessee or
any other person who claims to own the jewellery produces evidences for
ownership, the authorised officer should do basic preliminary verification and
take a judicious decision and report the matter to the control room.
Bullion
found in the course of the search
Gold
or silver bullion and silver and gold coins found in the course of the search
should also be got valued by the approved valuer. In the case of bullion, the
inventory should clearly mention the markings of such bullion and its gross
weight. Where bullion with foreign marking is found, the control room should be
contacted for further course of action whether these should be seized or not or
whether the information regarding its detection needs to be communicated to any
other agency or authority.
Statutory
procedure for seizure of bullion, jewellery and other valuable articles or
things
Statutory
procedure for seizure of bullion, jewellery and other valuable articles or
things. The procedure for seizure of bullion, jewellery and other valuable articles
or things has been given in rule 112(10) of the Income-tax Rules, 1962.
Text
of Rule 112(10)
“(10) The authorised 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 authorised 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. A copy shall be forwarded to the Chief Commissioner or Commissioner
and where the authorisation has been issued by any officer other than the Chief
Commissioner or Commissioner, also to that officer.”
Consequences
of undisclosed Jewellery or other valuable articles
|
Section |
Provisions |
Consequences |
|
Section
69A -Unexplained Money |
In
a previous year the assessee is found to be the owner of any money, bullion,
jewellery, or other valuable article and same is not recorded in the books of
account |
Value
of such assets may be deemed to be the income of the assessee for such
previous year. |
|
Section
69B - Amount of Investments, etc., not fully disclosed in books of account |
In
a previous year the assessee has made investments or is found to be the owner
of any bullion, jewellery or other valuable article or Assessing Officer
finds that the amount expended on making such investments exceeds the amount
recorded in the books of account |
Excess
amount may be deemed as income of the assessee for such previous year. |
CBDT’s
Instruction No. 1497, dated 13.01.1983
Subject
: Search
and Seizure – Opening of Lockers
To
ensure that the information about lockers is available early, the authorised
officers should soon after entering the premises, record the parties’ statement
and get him/her committed about the number of lockers, contents thereof and
source of acquisition. The lockers would be opened as early as possible, but in
any case within a week. It has been decided that where the lockers sealed
cannot be opened within the period of 7 days, the reasons for the delay should
be intimated to the Director General (Investigation). The information about the
lockers which remained sealed for more than a week as on 30.11.1982 should be
sent to the Director General (Investigation)/Board so as to reach not later than
31.01.1983. The report for subsequent months should reach the Director General
(Investigation) by the 15th of the following months.
Gross weight of jewellery disclosed in regular returns
was in excess of gross weight of jewellery found in search, no seizure/addition
was permissible
Unexplained moneys
(Section 69A) - Gross weight of jewellery disclosed by family in their regular
returns was in excess of gross weight of jewellery found in search, no seizure
was possible and, thus, no addition to income would consequently be permissible
merely because there was frequent remaking of old jewellery into new designs
depending on needs of family as per community customs and practices of not
repeating same design again in another function. Keeping the status of
assessee's family in mind as well as customs and practices of the community to
which the family belongs as detailed in preceding paragraphs, the benefit of
CBDT Instruction No. 1916, dated 11.05.1994, is warranted for assessee. [In
favour of assessee]
(Related Assessment Year : 2012-13) - [Nawaz Singhania (Mrs.) v. DCIT (2018)
168 ITD 478 (ITAT Mumbai)]
In terms of section 69A, assessee would be treated in
possession of jewellery, from date of opening of locker, i.e., when jewellery
was found and seized by revenue, and would be added to his income accordingly
Section
69A provides that where in any financial year, an assessee is found to be the
owner of any jewellery which is not recorded in the books of account and the
explanation offered by assessee about the nature and source of acquisition is
not satisfactory, then value of such jewellery would be deemed to be income of
the assessee in the year in which the assessee was found to be the owner of the
jewellery. Admittedly, the locker key which was seized by the department during
the course of the search on 20.03.1986, did not belong to the assessee. Thus, on
that date the quantum of jewellery in the locker of, aunt of assessee which
belonged to the assessee could not be ascertained/forecast. The normal
presumption would be that the jewellery in the locker would belong to her and
not to another person. Therefore, it is only on opening of the locker on 28.07.1986,
did the revenue find the jewellery and also that some part thereof, belonged to
the assessee as claimed by the assessee and as also declared by in her
assessment proceedings as recorded in the order of her Assessing Officer. Thus
it is only in the previous year relevant to the assessment year 1987-88, i.e.,
financial year 01.04.1986 to 31.03.1987 that the assessee was found to be owner
of the jewellery in the locker. [In favour of revenue] (Related Assessment year : 1987-88) – [Ajay R. Dhoot
v. DCIT (2015) 376 ITR 347 : 234 Taxman 351 : 62 taxmann.com 51 (Bom.)]
Approach adopted by the Tribunal considering the
extent of jewellery specified under the said circular to be a reasonable
quantity cannot be faulted with. Addition made under section 69A was deleted
Section 69A of the
Income-tax Act, 1961 - Unexplained money (Jewellery) - Addition of Rs, 3.47
lakhs made by Assessing Officer on account of unexplained jewellery found
during search proceeding was under challenge. On assessee’s appeal,
Commissioner (Appeals) restricted addition to Rs.1.01 lakhs and said addition
came to be fully deleted by Tribunal. Revenue submitted that Tribunal had
deleted entire addition by placing reliance upon CBDT circular No.1916 dated 11.05.1992.
It was urged that said circular merely lays down guidelines for seizure of
jewellery and ornaments in course of search and same does not lay down that
quantity of jewellery mentioned therein is deemed to be explained. However,
although circular had been issued for purpose of non-seizure of jewellery
during course of search, same took into account quantity of jewellery which
would generally be held by family members of an assessee belonging to an
ordinary Hindu household. Approach adopted by Tribunal in following said
circular and giving benefit to assessee, even for explaining source in respect
of jewellery being held by family was in consonance with general practice in
Hindu families whereby jewellery is gifted by relatives and friends at time of
social functions. Therefore, unless revenue could show anything to contrary, it
could safely be presumed that source to extent of jewellery stated in circular
stood explained. Thus, approach adopted by Tribunal in considering extent of
jewellery specified under said circular to be a reasonable quantity, could not
be faulted with and hence it could not be said that Tribunal had committed any
legal error so as to give rise to a question of law. [In favour of assessee] - [CIT v. Ratanlal
Vyaparilal Jain (2011) 339 ITR 351 : (2010) 2 taxmann.com 997 (Guj.)]
Assets in the possession
of assessee engaged in money lending business, belonging to third person cannot
be seized
Jewellery pledged with petitioner-firm, doing
money-lending business, was seized during search operation, alleging
unaccounted loan transactions on security of gold pledged - Legislative intent
of words ‘possession’ and ‘represents’ used in section 132(1) denots ownership
and, hence, officer authorised to conduct search under section 132 is empowered
to seize only such of those articles which absolutely belong to person in possession
of same and no property which admittedly does not belong to said person can be
seized. In
the instant case, the ownership of the seized gold ornaments belonged to the
various customers to whom the petitioner had granted loans and they were
pledged with the petitioner by way of security for the loan amount. In view of
the fact that the petitioner admittedly was not the owner of the seized gold
ornaments, notwithstanding the fact that it in a way represented the alleged
unaccounted income of the petitioner, the revenue had no right to seize the
said gold ornaments. The seizure order was, therefore, quashed and the
respondents directed to return the gold ornaments. - [Alleppey Financial
Enterprises v. Assistant Director of Income-tax (Inv.) (1999) 236 ITR 562 : 102
Taxman 309 : (1998) 150 CTR 538 (Ker.)]
(3)
Seizure of books of account or other documents
The
Authorised Officer is empowered to seize any books of account or documents
which in his opinion will be useful or relevant to any proceedings under the
Income-tax Act. Books of account or other documents will include loose papers,
diaries, registers, files, agreements, MOUs, affidavits, etc.
Representative also may produce books of account and otherdocuments
In this connection, it is to be noted that it is not
necessary that the person concerned himself has to produce books of account and
other documents. He may depute some other person, i.e., his relative or tax
advocate or Chartered Accountant, for this purpose also.
The
scheme of section 132 shows that two officers at two different stages have to
apply their mind, i.e., (i) by the Director of Inspection or Commissioner, when
authorizing a search, and (ii) by the authorized officer, that the book
searched or seized will be useful or relevant to any proceedings. While conducting
search authorised officer has, therefore, necessarily to apply his mind and
look for only such books of account and documents which will be relevant or
useful to any proceedings. Where the Court comes to the conclusion
that a reasonable man acting bona fide could believe that the documents seized
were useful or relevant, it will not be open to the Court to substitute its own
opinion and sit in an appeal over the judgment of the authorized officer. Seizure should
not be allowed to exceed limits of absolute necessity and over-zealousness of
searching officers is not permitted to cross permissible limits. When two
alternatives, namely, to seize books or place marks of identification and leave
them with persons concerned are available, seizure will be struck down on
ground that it is arbitrary and not in public interest. (Related ssessment
years : 1962-63 and 1963-64) - [Balwant Singh v. R.D. Shah,
Director of Inspection (1969) 71 ITR 550 (Del.)]
(4)
Seizure of Computers chips and other data storage devices
The
Finance Act, 2001, with effect from 01.06.2001 has amended the definition of
“Books of Account”. Defining ‘Books of Account’ and ‘Document’ so as to include
electronic records etc. With the passing of the Information Technology Act,
2000, it is accordingly inserted definitions of ‘books or books of account’ and
‘document’ in section 2 of the Income-tax Act, as follows:—
“books
or books of account” include ledgers, day-books, cash books, account-books and
other books whether kept in written form or as print-outs of data stored in a
floppy, disc, tape or any other form of electro-magnetic data storage device;
“document” includes an electronic record as defined in clause (t) of section 2
of the Information Technology Act, 2000.
By
this amendment, floppy, pendrive or hard disc etc. containing the financial
data would be treated as books of account and are liable to be seized.
(5)
FDRs found in the course of the search
Inventories
of the FDRs should give the names of the holders, the date of issue, the date
of maturity, its distinctive number, face value, amount payable on maturity,
rate of interest as well as the name and address of the banker who issued it.
The statement of the person concerned regarding the nature of possession and
the source of acquisition of the FDRs should also be recorded. Specific and
pointed queries in this regard should be made while recording the statement
under section 132(4). Where an FDR is to
be seized, marks of identification should not be placed on the instrument but
on a piece of paper attached thereto.
Certain
FDRs belonging to a trust were found during search at premises of assessee -
FDRs were in name of assessee being a Managing Trustee of said Trust -
Admittedly FDRs were declared under VDIS and same had been accepted by
Commissioner - However Assessing Officer made addition of said FDRs in hands of
Assessee - Assessing Officer also made addition of renewal amount of said FDRs
- In view of above facts addition made by Assessing Officer in hands of
assessee on account of these FDRs including interest which had been offered for
taxation under VDIS, should be deleted
During
the course of search and seizure operation, certain FDRs were found and seized.
A note book which allegedly mentioned certain other FDRs was also found and
seized. The value of all these FDRs even which were noted in the note book was
also brought to tax by the Assessing Officer. As mentioned earlier, a trust in
the name of ID Trust was created. The beneficiary of the trust as well as
managing trustee was the assessee. As per will of deceased, father of the
assessee, the investment various FDRs became the property of the trust. In
order to prove the genuineness of the trust, the assessee had produced the witnesses
before whom the trust deed had been executed. Even the notary had also been
examined by the Assessing Officer. As the FDRs which became the property of the
trust were not taxed earlier, the same were offered for taxation under VDIS.
The Commissioner had also accepted the declaration under VDIS. Even the bank
from where the FDR were purchased/renewed had certified that certain FDRs
standing in the name of assessee were issued in her name on behalf of Trust.
Certain FDR’s were offered for taxation under VDIS and in view of their
acceptance by the concerned Commissioner, the addition of the same to the
income of the assessee did not arise. Thus, the addition on account of these
FDRs including the interest which had been offered for taxation under VDIS stood
deleted. Certain FDRs which were not in the name of the assessee had been
offered for taxation under VDIS and the Commissioner had duly accepted the
same. In view of these facts, the question of making the addition to the income
of the assessee on account of such FDRs did not arise and stood deleted.
Certain other FDRs which had been renewed several times had been already
offered for taxation under VDIS which had been duly accepted by the
Commissioner. Therefore, the question of addition of value of such FDRs did not
arose. In case of certain FDRs addition was made on basis of noting in the
seized diary. However in seized diary no number or details of FDRs were found.
Therefore, it could be held that the addition to the total income as
undisclosed income under Chapter XIV-B could not be made merely on ground of
surmises and doubts. In the case of certain FDRs the details were noted in
notebook found during the course of search but the FDRs were not found during
the course of search. Therefore, the addition of such FDRs was set aside and
the matter was restored back to the file of the Assessing Officer to make
enquiries through the bank. (Block Period 01.04.1986 to 15.11.1996) – [Smt.
Sulochana Devi Jaiswal v. DCIT (2003) 1 SOT 624 (ITAT Jabalpur)]
FDRs
cannot be encashed prematurely
Where
the FDRs are seized during the search, the income-tax authorities will have no
jurisdiction to order the encashment of the FDRs and recover the proceeds
thereof under section 132(1); they could only attach FDRs by means of a
prohibitory order under section 132(3).—[Raj Kumar v. Union of India (2000)
242 ITR 584 (P & H)]
(6)
Foreign currency found in the course of the search
In
case foreign currency is found in excess of foreign currency permitted to be kept
in accordance with the provisions of FEMA, it may be reported to the concerned
authority or Reserve Bank of India. The decision of the seizure of the foreign
currency may be taken by the authorised officer. In the inventory of foreign
currency or traveller’s cheques in such currency, important details such as,
the name of the country of origin, denomination and serial number(s) should
also be mentioned. Pointed inquiries relating inter alia to the nature
of possession and the source of acquisition should be made from the person from
whose possession these are found. His statement on oath should also be
recorded. The control room should be contacted for instructions about further
course of action whether these should be seized or not or whether the information
regarding detection of foreign currency and traveller’s cheques in foreign
currency need to be communicated to any another agency or authority.
Assessee
on being asked to explain source of foreigncurrencyfound during search had
offered no contemporaneous evidence in support of having received same as
gifts, addition of foreign exchange as unexplained was justified
Section
69A - Assessee during scrutiny assessment proceedings was asked to explain
source of foreign currency, including US $ 21,111, Euros 440, Yuan 255, Yen
2000 and UAE Dirhams 30 found during search. Assessee submitted that he
received it as gifts from donors. However at time of search when assessee was
called upon to explain nature of possession of foreign exchange he had only
stated that foreign currency was saving out of foreign tours to various
countries and there was no mention of any gift having been received. It was
only much after search operation was concluded that he gave his explanation to
Assessing Officer that he had received it as gift. Further source of earning of
donors and their bank statements was not available. Therefore, there being no
contemporaneous evidence in support of these gifts and amount being huge,
explanation offered by assessee about gifts was unacceptable and accordingly
addition of foreign exchange treating it as unexplained was justified. [In
favour of revenue] (Related Assessment year : 2006-07) – [Samir S. Sheth v.
ACIT(C), Vadodara (2018) 92 taxmann.com 275 (ITAT Ahmedabad)]
Assessee
claimed that he purchased foreign currency with sale proceeds of agricultural
land but no bills proving such contention was given, addition was to be made in
hands of assessee
During
course of search, certain bills in name of assessee in respect of purchase of
foreign currency in cash were found. Assessee explained that said currency had
been purchased out of advance received for sale of property. Both authorities
below treated it to be income of assessee’s father under influence that he
being a Government servant would have received illegal gratification without
bringing any evidence regarding same. No addition could be made in hands
assessee’s father. Since assessee had not given any evidence that bills for
purchase of foreign currency was subsequent to date of receipt of cash against
sale of agricultural land, addition was to be made in hands of assessee. [In
favour of revenue] (Related Assessment year : 2008-09) – [Gaurav Sharma v.
ACIT (2015) 169 TTJ 46 : 63 taxmann.com 278 (ITAT Indore)]
(7)
Promissory Notes found in the course of the search
Seizure
of undischarged promissory notes may at times result in the debts becoming
time-barred and bad. Therefore indiscriminate seizure of promissory notes has
to be avoided. In case of seizure of promissory notes, bills of exchange and
other similar documents, marks of identification should not be placed on the
instrument itself but instead a piece of paper should be attached and marks of
identification should be placed thereon.
Assessee
was a finance broker. Assessee asked intended borrower to sign a requisition
slip. On said slip, intended borrower put his signature and thereby agreed with
terms of borrowing. Assessee thereupon explored prospective lenders. When deal
was materialized, a promissorynote was duly executed bearing signature of
borrower, lenders and assessee. A search operation was conducted at premises of
assessee in course of which such requisition slips were found and impounded. On
basis of seized materials, Assessing Officer formed a belief that those were
hundis and assessee had financed amount mentioned in those seized slips. He,
thus, made additions under section 69D. It was noted that one set of alleged
hundis contained only name of borrower. Another set of alleged hundis contained
neither name of borrower nor name of lender and third set of alleged hundi
contained name of lender. None of seized material complied with mandatory
requirements of a legally enforceable hundi, i.e., promissorynote and, thus,
impugned addition was to be set aside. [In favour of assessee] (Related
Assessment year : 2012-13) – [DCIT(C), Raipur v.
Sumit Daga (2018) 95 taxmann.com 164 (ITAT Raipur)]
Assessee’s
explanation that hundis/promissorynotesfound during search were obtained either
as securities or counter-guarantees against some trade/loan transactions duly
appearing in regular books of account was duly supported and substantiated,
amount of said hundis/promissorynotes could not be treated as assessee's
undisclosed income for block period
During
search conducted at the assessee's premises certain incriminating documents
including promissorynotes/hundies were found. In the return of income the
assessee surrendered only a part of investment in said hundis/promissorynotes
which according to the assessee was actually advanced by the assessee on
hundies, whereas, no surrender was made in respect of the remaining amount
reflected in the promissorynotes/hundies, as according to him those hundies
were obtained either as securities or counter-guarantees against the some
trade/loan transactions duly appearing in the regular books of account. The
Assessing Officer did not accept the assessee's explanation and treated the
amounts of hundies as investment made by the assessee from his undisclosed
income and the same was added to the undisclosed income of the assessee for the
block period. On appeal, the Commissioner (Appeals) deleted the addition
holding that the explanation of the assessee of having obtained the relevant
promissorynotes/hundies as collateral security/guarantee for the trade/loan
transactions already recorded in the regular books of account was duly
supported and substantiated. The Tribunal affirmed the order of the
Commissioner (Appeals). Held that the findings recorded by the Commissioner
(Appeals) and affirmed by the Tribunal were based on proper appreciation of
facts and were not perverse, being correlated with each and every transaction.
Thus, the issue was purely question of facts. Therefore, the order of the
Tribunal was to be upheld. Block assessment in search cases. [In favour of
assessee] (Block Period 01.04.1987 to 14.11.1997) – [Mangalchand Parekh v. CIT
(2012) 248 CTR 171 : (2013) 33 taxmann.com 669 (Chhattisgarh)]
In
a search, two promissorynotes executed in favour of assessee were recovered -
Assessing Officer was of opinion that from those promissory notes it was not
possible to discern date of their execution and as search took place in
relevant account year it represented income of that year only - On appeal,
Tribunal found that certain noting made on reverse of promissory notes bore
date 01.05.1982, and, accordingly, held that promissorynotes were executed in
year 1982 and deleted addition – Findings recorded by Tribunal were findings of
fact and, no referable question of law arose therefrom
A
search was carried out at the residential premises of the assessee on 14.10.1986,
during the course of which three promissorynotes executed in favour of the
assessee were found. The three promissory notes were of the denomination of Rs.
50,000, Rs. One lakh and Rs. One lakh. The Assessing Officer found that the
promissorynote of Rs. 50,000 was bearing the date of 02.06.1982, and did not
relate to the assessment year 1987-88, However, he was of the opinion that from
the other two promissorynotes it was not possible to discern the date of their
execution and having regard to the fact that search took place during the
financial year 1986-87 the amount represented by the two promissorynotes. Rs. 2
lakhs was brought to tax by making additions in the income of the assessee for
the assessment year 1987-88. The assessee contended that the addition of the
amount represented by the promissorynotes in question had already been added to
the income of the assessee for the assessment year 1983-84 and the same amount
could not again be taxed in the assessment year 1987-88. The Commissioner
(Appeals) referring to certain noting made on the reverse of the
promissorynotes which bore the date 1-5-1982, held that the promissorynotes
were executed in 1982 and referring to the assessment order for the assessment
year 1983-84 made on 30-3-1988, deleted the additions made on account of income
represented by the promissorynotes as the same had already suffered tax in the
assessment year 1983-84. On appeal by the revenue, the Tribunal upheld the
decision of the Commissioner (Appeals). The reference application made by the
revenue was also rejected. On an application under section 256(2).
Held
: From the facts it was apparent that the deletion of addition of Rs. 2 lakhs
had been founded on the finding of fact that the promissorynotes were executed
sometime in 1982 and the income represented by these promissorynotes had been
already subjected to tax for the assessment in the assessment year 1983-84.
These findings did not give rise to any question of law. So also the
disallowance on the supposed accrued income on the amount of promissorynotes
had been deleted on the ground that the assessee was not maintaining his
accounts on the mercantile system, therefore, the income arising from the
investment made in the panchnama should be taxed on the basis of actual
receipts only also did not give rise to any question of law as the primary
findings on the basis of which the answer depended was a finding of fact. The
Tribunal was therefore right in rejecting the reference application made under
section 256(1). [In favour of the assessee] (Related Assessment year : 1987-88)
– [CIT v. Arvind H. Shah (1999) 239 ITR 189 : 155
CTR 154 (Guj.)]
(8)
Keys found in the course of the search
Whenever
any key is seized in the course of a search, its number should be recorded to
facilitate identification at a later stage. In case it is not admitted that the
key pertains to a bank locker, the number alone should be mentioned without any
reference to any bank locker. The place from which the key was found should
also be mentioned. Where the bank locker or other receptacles to which the key
found pertains has been identified, full particulars like, bank locker number,
name of the bank and branch, particulars of receptacles and its location, etc.,
should be recorded. The name of the person in whose name the locker stands and its
contents should also be mentioned. Each key found and seized should be
separately tagged and marks of identification placed thereon together with
signatures of witnesses and the person concerned. Inventory of all keys found
and seized in the course of a search should be carefully prepared.
Where
keys pertain to bank lockers, the control room should be informed about the same immediately. All efforts
should be made to get information about bank lockers soon after the
commencement of the search, in the course of the initial statements of the
persons concerned. As soon as the information is received, all efforts should
be made to obtain the keys of the lockers, which should then be seized. This is
because a separate warrant of authorisation is needed for the search of lockers.
It is, therefore, necessary that the control room is informed as early as
possible about the existence of bank lockers and keys thereof so that the
appropriate authority can take a decision in the matter and prevent operation
of the bank locker in the mean time. Where a warrant of authorisation is issued
for search of the locker, the same should be executed immediately. Where it is
not possible to search the locker immediately an order under section 132(3) can
be issued and the bank locker sealed by the authorised officer.
A search was conducted upon ‘K’
group. On physical surveillance during such search, movement of cash from
assessee's premises by motorcycle borne couriers was observed. Thus, premises
of assessee was identified to likely have incriminating evidence. Accordingly,
a search was conducted upon assessee-during which a locker key was recovered.
However, assessee was unable to give satisfactory answers/explanation in
respect of contents of such locker. On this basis, a fresh warrant of
authorisation (WoA) was issued under section 132(1) against assessee in respect
of such locker - During search in said locker jewellery valued at Rs. 1 crore
was found and seized. Assessee contended that impugned search conducted upon
bank locker of assessee was unjustified as same was not related with search of
primary person, i.e. ‘K’ group. It was noted that since assessee did not give
any satisfactory explanation or information relating to contents of said
locker, there was indeed material to form reason to believe that locker contained
articles/cash/jewellery/other materials which represented undisclosed income of
assessee. Further, search proceeding in respect of locker of assessee was under
a new and separate WoA where assessee was party being searched and not a
consequential warrant issued in pursuance of search operation of primary person
i.e., ‘K’ group, thus, any connection, link and association between assessee
and ‘K’ group was not required to be established. On facts, impugned new
warrant of search issued against assessee under section 132(1) was justified.
[In favour of revenue] – [Shilpa Chowdhary v. Principal Director of Income
Tax (Investigation)-I, New Delhi (2021) 430 ITR 218 : 277 Taxman 576 : 124
taxmann.com 509 (Del.)]
(9)
Antiques, paintings or works of art are found in the course of the search
A
true antique (Latin: antiquus; “old”, “ancient”) is an item perceived as
having value because of its aesthetic or historical significance, and often defined
as at least 100 years old (or some other limit). The customary definition of
antique requires that an item should be at least 100 years old and in original
condition. Antiques being in the nature of valuable article or thing can be
seized.
Where
in the course of a search, an article is found which prima facie appears
to be an antiquity or of such an artistic or aesthetic value as worthy of being
declared an “art treasure”, the authorised officer should get in touch with the
control room. The in-charge of the latter should advise the authorised officer
with regard to further appropriate action in the matter. He should also take
steps to report the matter to the appropriate authority, such as, the
Superintending Archaeologist and seek his advice. For proper identification, a
white sheet of paper should be pasted either behind or below each article and
the signatures of witnesses and the person concerned should be obtained
thereon. The authorised officer should also make inquiries regarding the source
of acquisition of each article.
Seizure
of such items can be either under section 132(1)(iii) by taking physical
possession or under second proviso to section 132(1) by passing an order of
deemed seizure.
No
sale or auction of antiques or work of art
Income-tax
authority cannot undertake any sale or auction of antiques or work of art in
view of the provision of Antiquities and Art Treasures Act, 1972 and any
auction in this respect at any stage has to be taken in accordance with the
provision of this Act.
(10)
Deemed seizure of the valuable article or thing [Second proviso to section
132(1)]
Where
it is not possible or practicable to take physical possession of any bullion,
jewelry or other valuable article or thing, being not stock-in-trade of business
and remove it to a safe place due to its volume, weight or other physical
characteristics or due to its being of dangerous nature, then, authorized
officer may serve an order for not removing or parting or otherwise dealing
such order shall be considered as deemed seizure in accordance with the second proviso
to section 132(1). This is called deemed seizure of the valuable article or
thing.
KEY NOTE
(a) Provision of deemed seizure shall not apply in
case of stock in trade.
(b) Person defaulting in second proviso to Section 132(1) shall be punishable with rigorous imprisonment which may extend to 2 years & shall also be liable to fine. [Section 275A]
Disclosure subsequent to seizure of incriminating material is not voluntary
Any
disclosure made subsequent to seizure of incriminating material would be
treated as not voluntary. Merely because assessee cooperated in deciphering
documents, it would not mean that revenue authorities could not have deciphered
same; test would be whether any incriminating material was found. Under section
273A(4), party applying must make out a case of genuine hardship and in absence
of placing any material on hardship, assessee cannot be heard to complain that
there was non-compliance by Commissioner in considering its case under section
273A(4). (Block assessment years 1970-71 to 1987-88) – [Shardadevi P.
Jhunjhunwala v. CIT (2010) 327 ITR 211 : 236 CTR 142 : 190 Taxman 194
(Bom.)]