Income Tax Raid (Rules & Regulations)

Ashish M. Shaji

09 Jun, 2022

Rules and regulations related to income tax raid or search and seizure was first framed in the Income Tax Act, 1956 by the Income Tax Department. Here we will discuss the concept of search and seizure according to the Income Tax Act, 1961.

Officers Authorized to Issue Order for Search & Seizure

Here are the following officers who are authorized to issue an order for search and seizure under the Income Tax Act^[1]:

• The Director of Income Tax.
• The Chief Commissioner of Income Tax.
• The Commissioner of Income Tax.
• Joint Director or Joint Commissioner of Income Tax as empowered by the Board.

Such officers are allowed to authorize any officer subordinate to him but not below the rank of Income Tax Officer to perform a search and seizure if he has reason to believe that a taxpayer has failed in complying with summons or notices sent to him by the department or if he has money in possession and that money represents wholly or partially income or property that has not been disclosed.

When can Income Tax Raid be conducted?

Income tax raid is conducted when the Income Tax officer has in possession any information through which he/she has reason to believe that:

• Any person to whom a summon with reference to Section 131(1) or notice with reference to Section 142(1) has been served to produce books of accounts or other necessary documents which have been unsuccessful or omitted to produce or additional documents;
• Any person to whom a summon is issued with reference to Section 131(1) or notice with reference to Section 142(1) has been issued and which is not possible to produce or another document that will be useful for any proceedings under the Act;
• A person is in control of money, bullion, jewellery or other valuable article or thing and property represent income and which has not been disclosed or will not be disclosed.
• If there is credible information of tax evasion;
• If there is any illegal investment in real estate;
• If there is any information regarding manipulation of books   of accounts etc.

Hence, raid is one of the crucial ways that income tax department keeps a check on black money. This is also called search and seizure. An Authorized Officer would have sufficient cause to conduct a search if he has reason to believe any of the above mentioned instances.

Powers of the Authorized Officer during Income Tax Raid

Here are the following powers that are given to an Authorized Officer while conducting a search and seizure operation under the Income Tax Act:

• They are allowed to enter premises and search any building, place, vessel, vehicle or aircraft where the officer has the reason to suspect that such books of accounts, other documents, money, bullion, jewellery or other valuable article are reserved.
• They are allowed to open the lock of any door, box, locker, safe, almirah where the keys are not accessible.
• Search any person who has got out of or is about to get into or is in the building, place, vessel, vehicle or aircraft, and if the officer has reason to suspect that such person has secreted about any such books of account, other documents, money, bullion, jewellery or other precious article or thing.
• Any person who is in possession or control of any books of account or other documents maintained in the form of electronic records, to afford the compulsory facility to the authorized officer to examine all such books of account or other documents.
• Seize any such books of account, other necessary documents, money, bullion, jewellery or other precious article or thing found as a result of such search. In spite of that officer will have no powers to seize any bullion, jewellery or other precious article or stock-in-trade of the business encountered as a result of the search and seize. He/she will make a note or inventory of such stock-in-trade of business.
• Place mark of identification on any books of account or other documents or reason to be made extracts or copies therefrom.
• Make a note or an inventory of such money, bullion, jewellery or other precious article or a thing that is found during raid.

What are the rights of a person during Income Tax Raid?

The rights of a person during raid include:

• To insist search of ladies being taken only by lady with decency;
• To have two respectable and independent residents of locality as witnesses;
• To permit children to go to school after their bags are checked;
• To call a medical practitioner during emergency;
• To have meal at normal time;
•  To have a copy of statement which is used against them;
• To have inspection of seized book of accounts.

Conclusion

In order to avoid an event like income tax raid, one should always be complaint with the summons and notices that are sent to such person from time to time. Such person should also refrain from keeping money or property undeclared.

Read our article:How to manage Income Tax notices?