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:

Generally, when an officer not below the rank of the Joint Director/Joint Commissioner has in consequence of information in its possession reason to believe that any person is in possession of any undisclosed documents or assets or has omitted or failed or will not produce such documents, etc. required by such authorities, then such officer may give authorization for search. The officer authorizing search are called authorization officers.

As per CBDT Instructions,Searches should be carried out only in cases where the expected concealment is more thanRs. 1 crore.

A search authorization can be issued against any person including a non-resident whose income is liable to tax in India.

The expression 'information' must be something more than a mere rumour or a gossip or a hunch.

Search Warrant- What to look for:

A search action has to be 'person specific'.

All the family members are separate assessable legal entities under the Act and in a case where search warrant has been issued in the name of 'Assessee and Family, it cannot be stretched to cover all the family members, namely spouse and children.

The authorisation of search in the case of a company could not be treated to be authorisation of search in the case of individual directors.

A search warrant can be issued in joint name.

Separate search warrant for each premise to be searched is required.

Issue of Blank warrant is illegal.

The Search Warrant must be produced to the person search before the commencement of the search; however copy of the same is not required to be given.

Who can conduct a Search?

The authorizing officer authorizes an income tax authority for conducting search.

Such officer is called as Authorised Officer.

An income tax inspector cannot be an Authorized Officer.

Search Warrant has to be in the name of Authorised Officer.

Conduct of Search

Timing of Search?

A search may be commenced anytime.

Which premises can be searched?

The premises for which search warrant is issued can only be searched.

What should the person whose premises are searched do before allowing search?

Check the warrant of authorization for seal and signature of the issuing authority.

Verify the identity of each member of the search party.

Conduct personal search of all members of the search party before the start of the search and on conclusion of the search.

Have at least two respectable and independent residents of the locality as witness.

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 upto 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?

To have a copy of panchnama together with all the annexures.

To put his own seals on the packages containing the seized assets.

To inspect the seals on various respectable placed in the course of the search and subsequently reopened by continuation of search.

To have a copy of any statement before it is used against him in an assessment or prosecution proceedings.

To inspect books of account etc. seized or to take extracts there from in the presence of any of the authorised officers or any other person empowered in this behalf.

To allow free and unhindered ingress in to the premises.

To identify all receptacles in which assets or books of account and documents are kept and to hand over keys to such receptacles to the authorised officer.

To identify and explain the ownership of the assets, books of account and documents found in the premises.

Not to allow or encourage the entry of any unauthorised person in the premises.

Not to remove any article from its place without notice or knowledge of the Authorised Officer. If he secrets or destroys any document with the intention of preventing the same from being produced or used as evidence before the Court or public servant, he may be punished with imprisonment or fine or both, in accordance with section 204 of the Indian Penal Code.

To answer all questions truthfully and the best of his knowledge. He should not allow any third party to either interfere or prompt while his statement is being recorded by the Authorised Officer. In doing so, he should also keep in mind that:-

  • If he refuses to answer a question on a subject relevant to the search operation, he shall be punishable with imprisonment or fine or both, under section 179 of the Indian Penal Code.
  • Being legally bound by an oath or affirmation to state the truth or affirmation to state the truth, if he makes a false statement, he shall be punishable with imprisonment or fine or both u/s 181 of the Indian Penal Code.
  • Similarly, if he provides evidence which is false and which he knows or believes to be false, he is liable to be punished u/s 191 of the Indian Penal Code.

To affix his signature on the recorded statement, inventories and the panchnama.

To ensure that peace is maintained throughout the duration of the search, and to co-operative with search party in all aspects so that the search action is concluded at the earliest and in a peaceful manner.

Similar co-operation should be extended even after the search action is over, so as to enable the Authorised Officer to complete necessary follow-up investigations at the earliest.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.