Tax Authorities have powers to summon persons and documents, and survey his premises to secure evidences of undisclosed documents or assets. Such powers have various limitations and therefore Tax Authorities have to resort to search and seizure when there is evidence of undisclosed documents or assets which have not been and would not be disclosed in ordinary course.The word “search” means “look for” or “seek out” and the word “seizure” means “dispossession of the person from whom seizure is made and assumption of possession of the seized article.”
Pre-Search Provisions
On what basis cases for search are identified:
Search Warrant- What to look for:
Who can conduct a Search?
Conduct of Search
Timing of Search?
Which premises can be searched?
What should the person whose premises are searched do before allowing search?
What are the Powers of the Authorised Officer?
General Powers
· Enter and search any building, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery, or other valuable article or things are kept.
· break open the lock of any door, box, locker, safe, almirah or other receptacle where the keys are not available.
· search such a person who has either got out of or is about to get into or is already present in the building where search is carried out.
· to require any person to afford the authorized officer the necessary facility to account/other documents maintained in the form of electronic record.
· place marks of identification on any books of account/other documents including the right to make any extracts or copies from them.
· make a note or an inventory of any such money/bullion/jewellery/other valuable article or thing.
Power of Seizure
· seize any such books of account/ other documents / money/ bullion/ jewellery/ valuable article or thing found as a result of the search conducted
· stock-in-trade of the business cannot be seized, only a note or inventory of the same can be made.
· immovable property is outside the purview of seizure.
· Cash, Computers, CD’s and pen-drive can be seized.
· Jewellery can be seized subject to certain restrictions.
· If the disclosed assets are seized even after showing the evidence of disclosure and its explained source, then such seizure is illegal.
· if it is not possible or practicle to take physical possession of any valuable article or thing due to its physical characteristic, then order deeming seizure of the same can be passed.
· In cases where it is not practicable to seize any valuable article or thing, etc. for reasons other than above, the authorized officer can pass a restraint order for a period not exceeding 60 days from the date of the order.
· Books of accounts, documents, etc can be seized up to 30 days after completion of assessment pursuant to search.
· Cash, jewellery, etc. can be kept for a maximum period of 120 days, however any existing tax liability can be adjusted against them.
Power to record Statements and Examine on oath
· Any statement made by a person during examination may be used as evidence during any proceeding under the Income Tax Act, 1961.
· The CBDT has stressed that the focus of search & seizure operations should be on collection of evidence for tax evasion and no attempt shall be made to obtain confession as to the undisclosed income.
Preparation of Panchnama
· A search and seizure under the Act 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.
What are the Rights and Duties of the person searched?
(Assisted by Amit Kaushik and Shreya Chaudhary, Advocates)
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