By
CA A. K. Jain
The term “Raid in Indian Income Tax Law” is incredulous and any unexpected
encounter with IT sleuths generally leads to chaos and vacuity. If you are likely
to experience such action it is better to familiarise with the subject, so
that, the situation can be faced with confidence and serenity. Income Tax Raid
is conducted with the sole objective to unearth tax avoidance. It is the
process which authorizes IT department to search any residential / business
premises, vehicles and bank lockers etc. and seize the accounts, stocks and
valuables.
To face the situation efficiently, it is extremely important to understand
some nitty-gritty of I.T. law on the subject. Lack of knowledge leads to panic
and all the discomfort. The knowledge of your legal rights and responsibilities
always protects you.
Your Rights
1. When Income Tax Search Party visits, you can check their search warrant
and also note the date, address and authorization etc.. You can also ask for
the identification of each member of the raid team and note down their name and
designation.
2. You have the right to personally search every member of raid team to
avoid any planting of evidence.
3. Women can be checked only by lady members of raid team.
4. Women may not come forward if their religious belief do not allow them to
appear in public.
5. In case of any health related emergency you have the right to call a
doctor of your choice. You also have the right to have your meals at proper
time.
6. Children can go to school and after clearance.
7. In case of difficulty in seizure of jewellary or other valuable articles
(except stock in trade) the department may leave such items after necessary
sealing etc. in the custody of assessee. Jewellery up to a specified limit
(e.g. 500 grams per married lady, 250 grams per unmarried lady and 100 grams
per male member of the family) is generally accepted. If it is a survey and not
a search (the warrant will specify that), the raid team does not have the
powers to seize or take away any valuables. They can only take away documents,
files etc.
8. Whatever is being seized, make sure they are being properly listed and
described. Please also have two of your neighbors stand witness to the same.
9. If any valuables do not belong to you, make that known upfront and also
provide the name, address and other details of the owner.
10. The raids can only start between sunrise and sunset.
11. You can place your own seal on the package in which seized stuff is
stored.
12. You are also entitled to a copy of panchanama.
13. You can also call your C.A or lawyer. He may not have the right to
explain things on your behalf but he will ensure the raid team acts within
their limits.
Your Responsibilities
1. You should allow free and unhindered ingress into the premises.
2. You should identify all receptacles in which assets or books of account
and documents are kept and to hand over keys to such receptacles.
3. You should identify and explain the ownership of the assets, books of
account and documents found in the premises.
4. You should identify every individual in the premises and to explain their
relationships to the person being searched. You should not mislead them by
impersonation. It is an offence punishable u/s 416 of the IPC.
5. You should not allow or encourage the entry of any unauthorized person
into the premises
6. You should not remove any article from its place without the notice or
knowledge of raid team. If you destroy any document with the intention of
preventing the same from being produced or used as evidence before the court or
public servant, you shall be punishable with imprisonment or fine or both, in
accordance with section 204 of the IPC.
7. You should answer all queries truthfully and to the best of your
knowledge. You should not allow any third party to either interfere or prompt
while your statement is being recorded by the officer. In doing so, you should
keep in mind that –
a. If you refuse to answer a question on a subject relevant to the search
operation, you shall be punishable with imprisonment or fine or both, u/s 179
of the IPC.
b. Being legally bound by an oath or affirmation to state the truth, if you
make a false statement, you shall be punishable by imprisonment or fine or both
u/s 181 of the IPC.
c. Similarly, if you provide evidence which is false and which you know or
believes to be false, you shall be liable to be punished u/s 191 of the IPC.
8. You should affix your signature on the recorded statement, inventories
and the panchanama.
9. You should ensure that peace is maintained throughout the duration of the
search and to cooperate with the search party in all respects so that the
search action is concluded at the earliest and in a peaceful manner.
10. Cooperation should also be extended even after the search action is
over, so as to enable the authorized officer to complete necessary follow-up
investigations.
Options of Assessee After the Raid –
1. If you feel that the action of the department is unfair, you can file a writ
petition before the High Court challenging the raid.
2. Another option is to challenge the assessment before the Commissioner of
Income Tax (Appeal).
Law After the Raid
The Department will issue notice to assessee to furnish a return of income for
six previous years preceding previous year in which search is initiated. As per
section 147, action for the assessment can be taken within six years from end
of assessment year. So at any time, assessment for preceding seven years can be
reopened. However, the preceding seventh year is omitted u/s 153A. It has been
held in case of Ramballah Gupta v. Asst. CIT (288 ITR 347) (MP) that when
search takes place, the action for such year can be taken u/s 147 and for other
years u/s 153A. Assessment or reassessment for past six years will have to be
completed by AO within twenty months from the end of the financial year in
which last of the authorization has been executed. The assessment of search
year shall have to be completed as per above time limit. This time limit can be
extended in case of special audit, stay of court etc. There is no time limit
for issue of notice for past six years; only time limit for completion of
assessment.
If any books of accounts, documents, assets found or seized belong to any
other person, the concerned AO shall proceed against other person as provided
u/s 153A and 153B. The assessment u/s 153C should also be completed with twenty
one months from the end of the financial year when the search was conducted like
assessment u/s 153A.
The provision of section 234A and 234B or levy of interest shall be
applicable. The penalty for concealment can be escaped if disclosure is made in
the statement during search for the years for which the due date for filing
return of income has not expired in respect of search initiated before
01.06.2007. When source of income declared u/s 132(4) is not questioned in the
statement, the immunity cannot be denied on the ground that assessee did not
indicate the source of deriving undisclosed income. (CIT v. Radha Krishan (278
ITR 454) (All).
The Explanation 5 to section 271(1)(c) is not applicable in case of search
initiated on or after 01.07.2007. So deeming provision of concealment shall no
longer apply in new searches. In order to get immunity, only requirement is
that assessee should disclose additional income in the original income field.
The condition is that this return of income should have been filed before due
date of filing return of income.
Other Provisions
1. The authorized officer can not seize stock in trade of a business. However,
restriction on seizure of stock in trade applies only to valuables and not
cash.
2. Power to arrest assessee is not entrusted to the department.
3. The department cannot withdraw cash from bank a/c or encash fixed deposits
without assessment as a result of search operations.
4. Section 133A does not permit sealing of business premises.
5. It has been instructed by CBDT vide letter dated 10.03.2003 that while
recording statement during the course of search and seizures and survey
operations, no attempt should be made to obtain confession as to the
undisclosed income. It has been advised that there should be focus and
concentration on collection of evidence for undisclosed income.
Assets which cannot be seized –
1. Immovable assets
2. Stock held in business
3. Assets disclosed in Income Tax and Wealth Tax returns
4. Assets appearing in books of account
5. Cash for which explanation can be given
6. Jewellary mentioned in wealth tax return
7. Gold up to 500 gm per married lady, 250 gm per unmarried woman and 100 gm
per male member of the family.
8. Jewellary as per the status of the family if so appear to the investigating
officer.
Assets which can be seized –
1. Unaccounted cash, jewellary, gold, bullion, lockers, promissory notes,
cheques, drafts.
2. Books of accounts, chits, diaries, etc.
3. Computer hard disks and other data storage devices
4. Documents of property, title deeds, etc.
Steps to Prevent Raid
(i) Compliance with Summon and Notices u/s 131(1), 142(1) and other relevant
sections.
(ii) The Summons or notice calls for the books of account or other documents to
be produced before the authorized officer as soon as earlier.
(iii) One should not keep any unaccounted or undisclosed money, property or
income popularly known as Black Money.
(iv) All unaccounted income should be declared. If such a disclosure is made
before its detection by the Income Tax Department, the chances of being trapped
in a tax raid are minimized.
(v) It is always better to make a full disclosure of one’s income, whether
taxable fully or partially exempt, in the Income Tax Return filed.
Source:- www.tjaindia.com
