Income Tax Raid, Search and Seizure – What, When, How

Shreya Patel

08 Sep, 2023

Introduction

Have you ever considered what could take place if everyone stopped paying taxes? What exactly deters individuals from taking this action? In the real world, one of the government’s key responsibilities is to encourage tax compliance. Any economy depends significantly on tax income. Any economy depends in a significant way on tax money; thus, if individuals stopped paying their taxes, the entire economy would suffer.

The Income Tax Act of 1961 specifies the conditions under which the Income Tax Department may undertake a tax raid. When there is a reasonable suspicion that a person or company has hidden income or assets that have not been revealed in their tax filings, the Income Tax Department has the right to execute a search and seizure operation.

What does seizure mean?

Seizure refers to taking custody of assets that have not been revealed to the Income Tax Department and accounts and paperwork that provide information about unreported wealth and income.

What does search mean?

Search means when an effort is made to find someone or something. The word search connotes that the activity is intentional and planned beforehand to find someone or something. Legally speaking, a search is when a government official meticulously searches through or studies a person, location, item, etc., in order to locate anything hidden or to find any proof of a crime.

What is an income tax raid?

An income tax raid is a search and seizure operation where in the income tax department carries out on the taxpayer’s commercial or residential properties to reveal all of the assesses’ hidden income. A tax raid is carried out in India in accordance with the requirements of the Income Tax Act of 1961¹. When there is a reasonable suspicion that a person or company has hidden earnings or possessions that have not been revealed in their tax declarations, the Income Tax Department has the right to execute a search and seizure operation.

The most efficient way to reduce and confiscate illicit black money and property that a person or business has accumulated is through an income tax raid. A team of income tax officials usually conducts an income tax raid with the assistance of the police. A person may rightfully prevent an income tax raid by complying with the income tax authorities and responding to the summonses provided by the income tax department.

Section 132 of the Income Tax Act

In circumstances where there is a reasonable suspicion that you are in possession of money or property that you have not disclosed on your tax returns, this provision gives the Income Tax Department the authority to execute a search and seizure operation.

List of Assets which can be seized and which cannot be seized

Power of Authorities at the time of income tax raid

• When there is a reason to believe or any suspicion that there is any article or valuable thing that is not disclosed, then the authorities of income tax raid have the power to enter and search any place, property, building, etc.
• The authorised officers can break locks in cases where the keys are not present.
• The authorities also allow the power to conduct a personal search of a person if they suspect any possession disclosure.
• The authorized officers have the power to make copies or extract the account books or other pertinent documents.
• The authorized officers have the power to make a complete list of all the valuable things that they have found during the income tax raid.

Who will conduct an income tax raid?

1. Principal Chief Commissioner, Chief Commissioner, or
2. Principal Commissioner or Commissioner
3. Principal Director General or Director-General, or
4. Principal Director or Director, or

They can authorize the following:

• Income-tax Officer
• Assistant Commissioner, or
• Deputy Commissioner,  or
• Additional Director, or
• Additional Commissioner, or
• Assistant Director, or
• Deputy Director, or
• Joint Director, or
• Joint Commissioner, or

Rights of the Assessee

• The Income-tax raid cannot be conducted after sunset; it has to be conducted at sunrise.
• The maximum time for the income tax raid to last is 48 hours, not more than that.
• Two individuals in the local area are to be allowed to act as independent witnesses at the time of the raid.
• After a thorough checking of the bags and other possessions, the children are allowed to go to school at the time of the income tax raid.
• The assessee has the right to medical assistance if required.
• If the women in the houses follow the custom of not appearing in front or making public appearances, then they are allowed to not show up in front of the assessing officers conducting the income tax raid.
• The meals can be taken as per the assessee’s regular routine.
• The assessee has the right to have a copy of the panchanama and the annexure.
• The female authorized tax officers can carry out a search if any female member of the family is under suspicion.
• Right to inspect the search warrant issued against him/her.
• Right, to confirm the identity of the income tax officers who have come to undertake the income tax raid.
• To obtain a copy of the statement that the Department uses against him
• To examine the confiscated books of accounts, documents, etc. or to extract information from them while any authorized officer or other person designated by him is present.
• The assessee is entitled to seal and stamp any parcels taken during the raid and to acquire a witness copy of those goods.
• To prevent the planting or manipulation of evidence, the assessee may utilize his or her right to conduct a search with authorized income tax officials.

What happens if the assessee is wrongly raided?

There can be a possibility that the Income Tax Authority raided an individual’s property and took their possessions as a result of inaccurate information or miscommunication. Additionally, if the assessee believes that the raid and seizure procedure was unlawful and unjustified, he may contest it by submitting a writ petition to the state’s High Court. The assessee must challenge or file an appeal against the raid before the Commissioner of Appeals – Income Tax if he believes that the Income Tax Authority falsely accused him of tax evasion or another infraction and placed him under suspicion.

Conclusion

In conclusion, the income tax raid plays an essential role in instances of evasion of taxes and when income is not disclosed. The Income tax raids are vital to curd the evasion of taxes by the individuals and the companies in the country. The income tax raid can only be conducted by authorized persons for a specified period. There are many rights and duties for the income tax authorities and the assessee.

Frequently Asked Questions

1. https://www.indiacode.nic.in/handle/123456789/2435?sam_handle=123456789/1362