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Compliance with income tax laws is an obligation for every assessee. Any leniency or ignorance in respect of the same can lead to the initiation of the required proceedings like search, seizure or survey by the relevant authorities. The present article discusses these operations as prescribed under the income tax Act[1] to provide a better understanding of all these concepts and other aspects related thereof.
Table of Contents
From the tax perspective, a search can be defined as the exploratory exercise by the authorized person to find the hidden income or wealth of an assessee who has failed to disclose their true financial state of affairs despite it being their tax obligation.
On the other hand, a seizure is an act of taking possession of the assessee’s assets, accounts/documents and papers containing details of unaccounted wealth/income not disclosed to the authorities of income tax.
The power to order for search/seizure is vested with the Principal Director General or Director General, Director or the Principal Chief Commissioner or Chief Commissioner as prescribed u/s 132 of the IT Act.
The income tax authority can authorize its subordinate(s) at a minimum rank of Income tax officer) for conducting a search.
The authorized officer has the following powers –
The authorised officer can enter and search any building or place that he suspects to find the undisclosed books of account, other documents, money, bullion, jewellery or any such valuable article or thing.
In case keys are absent from a suspected place, it is very well in the power of the authorized officer to break open the locks of such a place, locker, almirah box or any relevant item for conducting the search.
The authorized officer can conduct a personal search of a person which he suspects to have concealed the required information which was disclosed to the income tax department.
The items so found during the search operation can be seized by the authorized officer if it is deemed fit by him.
The authorized officer may ask the person found in possession or control of any books of account or any other documents maintained electronically to afford the authorised officer the necessary facility of inspecting such books of account or other documents.
Placing marks of identification on any books of account or other documents or making extracts or copies therefrom can also be done by such an officer.
Making a note or an inventory of any such bullion, jewellery money, or other valuable article or thing can be done by the authorized officer.
The final power of the authorized officer is with regard to the examination of the person found with the possession or control of any books of account, money, documents, jewellery, bullion, or other valuable article or thing. Any statement made by that person during such examination may be used as evidence in any proceeding if needed.
The tax perspective of this is discussed below.
Any jewellery, bullion or other valuable article or thing which is stock in trade cant is seized by the authorized officer, but he can still make a note in the inventory in respect of the same.
If any building place, vessel, vehicle or aircraft, person in an area isn’t falling in the jurisdiction of the authorized officer but only of Principal Chief Commissioner or Principal Commissioner or Chief Commissioner or Commissioner, and the authorized officer is of the opinion that any delay in obtaining the required authorization from the relevant officer having jurisdiction over such person can be prejudicial to the interests of the revenue, the authorised officer shall have the power to extend such an area.
The authorized person must hand over the seized documents to the jurisdictional AO within sixty days from the date the last authorization for the search was executed, after which the AO shall exercise his powers.
Extension of Authorization
If the Principal Commissioner or any other relevant officer is of the opinion that the search for any books of account, documents, money, bullion, jewellery, money or other valuable article or thing being authorized is in any other place, building, vessel, vehicle or aircraft not mentioned in the authorization, as per the information in his possession, he can extend the authorization of the authorized officer to search such a place.
The provision regarding this is given in the second proviso of Sec. 132(1)]. There are certain preconditions for the same such as in case it is impossible or impractical to physically possess any valuable article or thing and take it to a safe place due to it being dangerous, the authorised officer is not to part with, remove, or otherwise deal with such article or thing in the absence of prior permission of such authorised officer. This can be done by serving an order in respect of the same to that person, and such a seizure may be termed as a deemed seizure.
The authorized officer may provisionally attach any property of the assessee either during the course of the search/ seizure or within a period of 60 days from the date of the last of the authorizations for the search was executed, the provisions of the Second Schedule shall, mutatis mutandis, be applicable for the said purpose.
The provisional attachment can only be made upon the fulfilment of the below-mentioned conditions.
The provisional attachment shall be ineffective upon the expiration of the 6 months from the date of such order.
A reference can be made by the authorized officer to the valuation officer as provided in section 142A, who shall be responsible for estimating the property’s fair market value as per the prescribed manner elaborated in the section, followed by submitting a report of the estimation so made to the said officer within a span of 60 days from the date he received the reference.
Issuing an authorization u/s 132 or making a requisition u/s 132A separately in the name of each person won’t be necessary if the same has been made mentioning therein the name of more than one person, and such mentioning on the authorization or requisition won’t be deemed to construed to be issued in the name of an association of persons or body of individuals consisting of such persons.
Despite the above-mentioned scenario, the assessment or reassessment shall be made separately in the name of each of the persons mentioned in such authorization or requisition.
The time of retention of the books of accounts seized or deemed to be seized by the authorized officer shall not exceed 30 days from the order of assessment.
However, it can be seized for more than 30 days in exceptional cases, the exemption being –
In the most generic sense survey can define as the act of scrutinization and inspection. Section 133 A & B deals with the power of the survey.
A survey can be conducted Principal Commissioner or Commissioner, a Joint Commissioner, a Joint Director, a Principal Director or Director, an Assistant Director or a Deputy Director or an AO or a Tax Recovery Officer or Inspector (in certain circumstances)
However, the Assistant Director or Deputy Director or an AO or a Tax Recovery Officer or Inspector of Income-tax must seek the prior approval of the Joint Commissioner or Joint Director.
A Survey can be conducted by the income tax authority at –
The income tax authority is restricted from doing the following during a survey –
The time of the survey in case of business/profession must be during business hours, and in case of deemed place of business/profession, it must be after sunrise and before sunset.
In the event of non-cooperation or non-compliance by the person, the income tax authorities shall have the below-mentioned powers as prescribed u/s 131(1) for enforcing compliance with the requirement.
While conducting a survey, the income tax authority shall have the same powers vested with the authorized person during a search. However, apart from this, the authority has some additional powers, as discussed below –
The income tax authority can enter the place of business profession or ask the person helping the person in his business/profession to furnish the prescribed information.
The relevant income tax authority may issue a notice to the person asking him to furnish information or documents verified in the specified manner on or prior to a date to be specified in the notice.
Upon receipt of the required information by the person, the authority shall process the information or document and communicate the outcome of such processing with the AO.
The income tax authority may make a centralized scheme for facilitating the same.
Another power vested with the authority is with regard to inspection of the company’s register along with making copies of the registers of the members, mortgagees or debenture-holders of any company or of any entry in such register.
The Income-tax authorities would be competent for making any enquiry under this Act and shall have all the powers that an AO has under this Act in relation to making enquiries.
The special procedure of assessment of search cases was earlier governed by Chapter XIV of the IT Act u/s 153A – 153D. However, there has been a replacement of these sections, the substitution of existing sections 147, 148, 149 and 151 and the insertion of a new section 148A, vide the Finance Act 2021, thereby completely changing the assessment proceedings regarding income escaping assessment and assessment for search cases w.e.f. 1st April 2021 reason being the failure of the previous procedure in fulfilling the objective of early resolution of search assessments rather was proving to be highly prone to litigation.
Special procedure for assessment in search cases is discussed below-
The AO must issue the notice u/s 148 of the IT Act to the assessee, attaching a copy of the order passed u/s 148A(d) of the said Act asking him for furnishing his ITR or of the person regarding whom he is assessable during the PY corresponding to the relevant AY.
Such notice must be issued and verified in the prescribed manner along with specifying the particulars as prescribed by the Act, and the provisions of the IT Act shall, so far as may be applicable accordingly as if such return a return were required to be furnished under section 139.
The notice can be issued under circumstances wherein the information available with the AO suggests that the assessee’s taxable income has escaped assessment. However, it must be noted that prior approval of the relevant authority must be obtained before the AO can issue such notice. On the contrary, no such approval shall be needed if an order has been passed by the AO u/s 148A (d) with the previous approval of the relevant authority stating that the income is escaping assessment.
There are certain cases where it can be deemed that income has escaped assessment. However, special emphasis is being laid on the cases of search, survey and requisition.
In search, survey or requisition cases on or after 01.04.21, it shall be deemed that the AO has information suggesting that the assessee’s taxable income has escaped assessment for the 3 AYs immediately preceding the AY relevant to the previous year in the following cases:
A thorough knowledge of all these concepts is necessary to avoid confusion regarding the same. Such clarity can also help the assessee to be conscious of any fake proceeding of search, seizure or survey as the assessee shall be well aware with the authorities eligible for conducting such operations, special procedure of assessment for search cases along with the powers of such authorities.
Read Our Article: All Types of Income Tax Return Filing In India
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