The term Raid in Indian Income Tax Law is incredulous and any unexpected encounter with IT sleuths generally leads to chaos and vacuity.
That, the situation can be faced with confidence and serenity, So in case you is going to experience such action it’s better to familiarise with the subject. Income Tax Raid is conducted with the sole objective to unearth tax avoidance. It is the process which authorizes IT department to search any residential / business premises, vehicles and bank lockers and stuff and seize the accounts, stocks and valuables. Essentially, So it’s extremely important to understand some nittygritty of law on the subject, with intention to face the situation efficiently. Lack of knowledge leads to panic and all the discomfort. Nonetheless, the knowledge of your legal rights and responsibilities always protects you.
Your Rights When Income Tax Search Party visits, you can check their search warrant and on top of that note the date, address and authorization and all that. You can also ask for the identification of every member of the raid team and note down their name and designation.
You have the right to personally search each member of raid team to avoid any planting of evidence.
Women can be checked only by lady members of raid team.
Women may not come forward if their religious belief do not allow them to appear in public. In case and similar valuable articles the department may leave such items after necessary sealing and all that stuff in the custody of assessee. Jewellery up to a specified limit is generally accepted. Plenty of info can be found by going online. The raid team does not have the powers to seize or take away any valuables, Therefore if it is a survey and not a search.
Whatever has been seized, double check whether they are being properly listed and described. Please also have two of your neighbors stand witness to very similar. Therefore, make that known upfront and in addition provide the name, address and identical details of the owner, I’d say if any valuables do not belong to you.
The raids can only start between sunrise and sunset.
You can place your favorite seal on the package in which seized stuff is stored.
You are also entitled to a copy of panchanama. You can also call your an or lawyer. He may not have the right to explain things on your behalf but he will ensure the raid team acts within their limits.
Your Responsibilities You should allow free and unhindered ingress into the premises.
You should identify all receptacles in which assets or books of account and documents are kept and to hand over keys to such receptacles. You should identify and explain the ownership of the assets, books of account and documents found in the premises.
You must identify every individual in the premises and to explain their relationships to the person being searched.
You shouldn’t mislead them by impersonation. Although, I know it’s an offence punishable u/s 416 of the IPC.
You shouldn’t remove any article from its place without the notice or knowledge of raid team. You shall be punishable with imprisonment or fine or both, in accordance with section 204 of the IPC, I’d say in case you destroy any document with the intention of preventing really similar from being produced or used as evidence before the court or public servant. You must answer all queries truthfully and to some quality stuff from your knowledge. Did you hear of something like that before? You shouldn’t allow any third party to either interfere or prompt while your statement now is recorded by the officer.
You shall be punishable with imprisonment or fine or both, u/s 179 of the IPC, Therefore in case you refuse to answer a question on a subject relevant to the search operation.
Whenever being legally bound by an oath or affirmation to state the truth, you shall be punishable by imprisonment or fine or both u/s 181 of the IPC, if you make a false statement. Certainly, similarly, Therefore if you provide evidence which is false and which you know or believes to be false, you shall be liable to be punished u/s 191 of the IPC. It’s a well it’s a good idea to affix your signature on the recorded statement, inventories and the panchanama.
And therefore the search action is concluded at the earliest and in a peaceful manner because You must ensure that peace is maintained throughout the duration of the search and to cooperate with the search party in all respects. As to enable the authorized officer to complete necessary follow up investigations, cooperation must also be extended even after the search action is over.
Options of Assessee After the Raid -If you feel that the action of the department is unfair, you can file a writ petition before the High Court challenging the raid.
Another option is to challenge the assessment before the Commissioner of Income Tax. Law After the Raid The Department will issue notice to assessee to furnish a return of income for six previous years preceding previous year in which search is initiated. Needless to say, action for the assessment can be taken within six years from end of assessment year, as per section 147. At any time, assessment for preceding seven years can be reopened. It’s a well the preceding seventh year is omitted u/s 153A. Of course it was held in the event of Ramballah Gupta Asst. CIT that when search takes place, the action for such year can be taken u/s 147 and for other years u/s 153A. Assessment or reassessment for past six years will have to be completed by AO within twenty months from the end of the financial year in which last of the authorization had been executed. Remember, the assessment of search year shall have to be completed as per above time limit. Only time limit for completion of assessment, This time limit can be extended in the event of special audit, stay of court etcetera There is no time limit for issue of notice for past six years.
Documents, assets found or seized belong to any other person, the concerned AO shall proceed against other person as provided u/s 153A and 153B, I’d say if any books of accounts. The assessment u/s 153C must also be completed with twenty one months from the end of the financial year when the search was conducted like assessment u/s 153A. The provision of section 234A and 234B or levy of interest shall be applicable. Now regarding the aforementioned fact… The penalty for concealment can be escaped if disclosure is made in the statement during search for the years for which the due date for filing return of income has not expired in respect of search initiated before 0106. When source of income declared u/s 132.
The Explanation 5 to section 271 isn’t applicable if of search initiated on or after 0107.
Deeming provision of concealment shall no longer apply in new searches. In order to get immunity, only requirement is that assessee should disclose additional income in the original income field. The condition is that this return of income should have been filed before due date of filing return of income. Usually, other Provisions The authorized officer can not seize stock in trade of a business. Restriction on seizure of stock in trade applies only to valuables and not cash. Power to arrest assessee isn’t entrusted to the department. The department can’t withdraw cash from bank a/c or encash fixed deposits without assessment because of search operations. Section 133A does not permit sealing of business premises. Although, it is instructed by CBDT vide letter dated 10032003 that while recording statement in the course of the course of search and seizures and survey operations, no attempt gonna be made to obtain confession as to the undisclosed income. It had been advised that there will be focus and concentration on collection of evidence for undisclosed income.
Assets which can not be seized -Immovable assets Stock held in business Assets disclosed in Income Tax and Wealth Tax returns Assets appearing in books of account Cash for which explanation can be given Jewellary mentioned in wealth tax return Gold up to 500 gm per married lady, 250 gm per unmarried woman and 100 gm per male member of the family. Jewellary as per the status of the family if so appear to the investigating officer. Anyways, assets which can be seized -Unaccounted cash, jewellary, gold, bullion, lockers, promissory notes, cheques.
Steps to Prevent Raid Compliance with Summon and Notices u/s 131, 142 The Summons or notice calls for the books of account and similar documents to be produced before the authorized officer since earlier. One shouldn’t keep any unaccounted or undisclosed money, property or income popularly known as Black Money. All unaccounted income may be declared. Fact, the chances of being trapped in a tax raid are minimized, I’d say in case such a disclosure is made before its detection by the Income Tax Department. Whether taxable fully or partially exempt, So it’s always better to make a full disclosure of one’s income, in the Income Tax Return filed.
What leads to Income Tax Raids, Search and Seizures With a view to focus on high revenue yielding cases and to make the optimum use of manpower, the Board has decided that officers deployed in the Investigation Wing must restructure their activities.
They should adhere to the following guidelines. Searches should’ve been carried out only in cases where there’s credible evidence to indicate substantial unaccounted income/assets in relation to the tax normally paid by the assessee or where the expected concealment is more than Rs.
Tax payers who are professionals of excellence shouldn’t be searched without there being compelling evidence and confirmation of substantial tax evasion, Search operation will also be mounted when look, there’s evidence of hidden unaccounted assets arising out of a conspiracy to cause public harm, terrorism, smuggling, narcotics, fraud, gangsterism, fake currency, fake stamp papers and such other manifestations.
Henceforth, search operations shall be authorized only by the concerned DGIT, who should be accountable for the action initiated by the officers working under him.
Like ‘post search’ inquiries, he should also ensure that all the work relating to search and seizure, preparation of appraisal report and handing over of seized books of account, and similar, will be completed by the Investigation Wing within a period of 60 days from the date on which the last of the authorizations for search was executed.
Therefore if issued should fail to comply, or any person who is in possession is mostly about to get into or is in the building, place etcetera if the authorised officer has reason to suspect that this kind of a person has secreted about his person or any such books of accounts and similar and suchlike or seize any such books of accounts and similar etcetera place mark of identification and suchlike and make a note or any inventory of such money, The warrant of authorisation can only be issued to certain specified authorities who alone for the purpose of making search and seizure can enter and search any building etcetera where he has reason to suspect that such books of accounts money jewellery and all that stuff, are kept, or break open the lock It’s an interesting fact that the powers are judicially approved and held to be constitutionally valid on grounds of flagrant tax evasion and huge flow of unaccounted money in the system. As a result, that being it desirable that such powers be sparingly used and when used almost any possible regulation adhered to, while we are talking about valid points one can’t equally deny the fact that these activities of search and seizure are infringement on persons liberty. The Author, CA Jain, can be contacted at, 21, Skipper House, 9, Pusa Road, New Delhi -110005, Mobile No. Mail.