As per the Black Law Dictionary the expression “search & seizure” has been defined as the measures employed to discover & punish crimes, involving searching & seizing property & data that may be utilized in criminal prosecution. The purpose of search investigation and subsequent seizure, as contemplated by the use of authority, can be seen as a method for combating tax and duty evasion and uncovering undeclared wealth & gains. Income Tax Department possess the ability to search and seize, and they employ this power intelligently after conducting inquiries and acquiring initial information.
Section 132 of the Income Tax Act permits the officials of the Income Tax Department to carry out searches & seizures based on persuasive evidence.
The Tax Authorities Power of Search & Seizure
The income-tax authorities operating according to section 132 may: –
a) The officer may enter & search any building, ship, automobile, or aeroplane if they believe the presence of valuable items such as books of account, papers, cash, bullion, or jewellery.
b) If the keys cannot be obtained, break open the lock of any door, container, locker, safe, almirah, or other receptacle to exercise the rights.
c) Seize any valuable items discovered during the search, including books of account, papers, money, bullion, jewellery, etc.
d) Create an inventory of any valuable items, cash & stock, that he has authorized.
e) Recording any statements of any individual that may be pertinent to a proceeding.
Rights of Taxpayers Upon Search
a) To see proof of the search team officers’ identities.
b) To personally search each search team member.
c) To obtain medical assistance if needed.
d) Meals should be regular.
e) Right to practice customary worship.
f) Children have the right to attend school.
g) No one can be confined.
h) Permission to leave the premises due to the urgency of the situation.
I) Right to make certain that the information provided by the individual searched is accurately included in the statement recorded under Section 132(4).
j) During search proceedings, he should be present or authorize someone else to represent him in his absence.
k) Females should be searched by females.
Obligations of Taxpayers Upon Search
a) Give the search team unrestricted access to the premises.
b) To provide keys for lockers, almirahs, safes, boxes, and so on.
c) Facilitating the operation of a computer, laptop, or other device that stores data electronically.
d) To cooperate with the search team in carrying out their duties.
e) No object shall be removed from its location without the notice or consent of the authorized officer.
f) Not to conceal or erase any documentation or proof.
g) To sign the recorded statement, inventory, and panchnama.
Does Search & Seizure Procedures lead to violation of Human Rights
1. Chief Commissioner of Income Tax, v. The State of Bihar[1]– Continuous interrogation at odd hours of the night is a torturous act that violates a person’s basic human rights. The Commission remarked that the search and seizure proceedings must be carried out concerning an individual’s basic human rights since every person has intrinsic human rights that should not be violated. This decision was upheld by the Hon’ble Patna High Court.
2. M. P. Sharma and Others vs Satish Chandra[2]– A search and seizure is simply a temporary interference on the right to have the property searched & the possessions seized. Statutory regulation is required in this regard, and reasonable restrictions cannot be evaluated unconstitutional in itself.”
3. Pawan Kumar Goel v. Union of India[3]– A search conducted under Section 132 is a substantial infringement of a citizen’s privacy. Section 132(1) must be properly construed, and the authorising officer’s view or reason to believe must be obvious from the note written by him.
Survey
Income tax surveys are carried out to discover taxpayers who’ve not correctly filed their tax returns despite earning taxable income, urging taxpayers to pay the appropriate taxes, & additional penalties or interest, if required.
The Tax Authorities Power of Survey
The income-tax authorities operating according to section 133A (3) may: –
a) If he believes it is essential, he may place identifying marks on the books of account or other documents he analyses & make extracts or copies of them.
b) Record grounds for impounding and retaining books of account and documents. Keeping books for a period exceeding fifteen days requires prior consent from the Principal Chief Commissioner, Chief Commissioner, Principal Director General, or Director General or Commissioner.
c) Create an inventory of any valuable items, cash & stock, that he has authorized.
d) Recording any statements of any individual that may be pertinent to a proceeding
According to section 133 (A) (2)- The income-tax authority is permitted to visit the location of the business or profession within business hours or after dawn and before sunset.
- N.K. Mohanty vs. DCIT[4] – In this case, the court ruled that section 133A does not mandate prior notice of the survey to be served to the concerned individual. Furthermore, the court held this section allows the authority to “enter” only during business hours. Once entered, this section imposes no additional restrictions on the duration of time he can stay on the premises. If the volume of items to be examined necessitates the survey being carried out after business hours, the authority’s ongoing presence at that premises and the continuation of the survey are in no way “illegal”.
Case Laws on Lawfulness of Survey
- Dr Pratap Singh v. Director of Enforcement[5] – It was ruled that the illegality of the search did not vitiate the evidence obtained during that illegal search. The sole condition is that the court or authority before whom such material or evidence is produced use caution and circumspection while dealing with it.
- Pooranmal v. Director Inspection (Investigation)[6]– The Supreme Court ruled that evidence collected during a search that violated the restrictions can be used.
- Commissioner of Income Tax v. Kamal & Co[7]. – In this case, it was decided that material gathered during an illegal search can be used for making additions.
Section 133 (3)(A) Power of Recording Statements
Judicial Verdicts on the Recording of Statement & Retraction of Statement
1. Paul Mathews and Sons v. Commissioner of Income-tax[8] – Any statement recorded under Section 133A of the Income Tax Act does not hold any evidentiary value since the officer is not permitted to administer an oath & take any sworn statement that only has evidentiary value as envisaged by law.
2. Commissioner of Income-tax Vs. S. Khader Khan Son[9] – The statements recorded in the survey hold no evidentiary value.
3. Sanjeev Agarwal vs Income Tax Settlement Commission[10] – A voluntary statement given by the petitioner under Section 133A of the Act can serve as the foundation for an assessment. The petitioner’s statement cannot be considered unacceptable just because he retracts it. The burden of proof lies on the petitioner to prove that the statement he made during the survey was incorrect and that there was no extra income.
4. Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala[11] -The Supreme Court ruled that an admission is a piece of evidence, but it is not conclusive. As a result, a voluntary statement made under Section 133A of the Act cannot be retracted except if the assessee provides proof that the admission made in the statement during the survey was incorrect and inconsistent with the material on record.
5. Unitex Products Ltd. vs ITO[12] – In a survey under s.133A, the officer is not authorized to record statements on oath. However, they can record statements of an individual that might be relevant to any proceedings under the Act. Thus, the aforementioned statement is merely information and has no evidentiary value. The information received through a statement during a survey can only be utilized for corroboration reasons when making a decision in Favor or against an assessee.
6. Ashok Manilal Thakkar vs ACIT[13] –No addition to income could be made on the foundation of disclosure if the assessee retracted specific income after revealing it and no evidence to support it was discovered during the survey.
7. Kailash Chand L/H of Late Mangilal vs ITO[14] – The statement recorded in the survey wasn’t signed by the Assessing officer or the Inspector. No additions to Income can be made based on this statement.
8. Sanjeev Kumar v. ITO[15] – If an assessee retracts from his statement recorded during a survey, claiming coercion, and the department rejects additional evidence supporting their assertions, no addition will be allowed.
9. ITO vs Devji Premji Pujara & Sons[16] – If a statement is afterwards retracted, the onus lies on the assessee & only denial does not constitute a legitimate retraction under the law.
Evidentiary Value of Admission
1. Navdeep Dhingra v. CIT[17] – An admission is considered significant evidence of a fact within the taxpayer’s knowledge. If not retracted within a reasonable time frame, it can be used against them.
2. Kottakkal Wood Complex v. DCIT[18] – Assessments solely centred on recorded statements under Section 133A of the Act are unsustainable. Still, if the person who made the statement reiterates the statement and the assessee does not provide evidence to demonstrate that the statement was erroneous the assessment cannot be considered illegal.
3. CIT vs Dhingra Metal Works[19]– Admission is significant evidence, it is not considered conclusive.
Can a Survey operation be converted into a Search Operation?
1. Vinod Goel & Other vs. Union of India[20] -The survey conducted at the petitioners’ premises under Section 133A, as well as the subsequent conversion of that operation into a search operation with permission granted by the Additional Director listed in Section 132’s list of Directors, cannot be deemed illegal.
2. Nalini Mahajan (Dr.) v. Director of Income Tax (Inv.)[21] -A search or seizure won’t be allowed unless it can be proved that the authority conducting the search or seizure has the necessary authorization & all conditions precedent related to it existed.
Conclusion
The search and seizure procedure of the Income Tax Act, notably Section 132, is governed by strict controls and safeguards to avoid abuse and guarantee that they are carried out following the law. While search and seizure operations may result in temporary infringement of rights, the primary objective is to prevent evasion of taxes and protect the integrity of the tax structure, which is judged necessary in the public interest.
[1] Chief Commissioner of Income Tax, v. The State of Bihar 2012 SCC Online (Patna) 1519
[2] M. P. Sharma and Others vs Satish Chandra 1954 AIR 300
[3] Pawan Kumar Goel v. Union of India 2019 2019 Taxman 265 25
[4] N.K. Mohanty vs. DCIT [1995] 215 ITR 275
[5] Dr. Pratap Singh v. Director of Enforcement [1985] 155 ITR 166
[6] Pooranmal v. Director Inspection (Investigation) [1974] 93 ITR 505
[7] Commissioner of Income Tax v. Kamal & Co. 2009 ITR (Raj) 308 129
[8] Paul Mathews & Sons vs CIT [2003]263 ITR 101
[9] CIT v. S. Khader Khan Son [2008] 300 ITR 157
[10] Sanjeev Agrawal v. Income Tax Settlement Commissioner, [2015] 56 taxmann.com 214
[11] Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala, (1973) 91 ITR 18
[12] Unitex Products Ltd. vs ITO – 2008 22 SOT 429
[13] Ashok Manilal Thakkar vs ACIT – 279 ITR 143
[14] Kailash Chand L/H of Late Mangilal vs ITO – 113 TTJ 488
[15] Sanjeev Kumar v. ITO [2014] 50 taxmann.com 114
[16] ITO vs Devji Premji Pujara & Sons [2013] 34 taxmann.com 96
[17] Navdeep Dhingra v. CIT [2015] 56 taxmann.com 75
[18] Kottakkal wood complex v. DCIT in High Court of Kerala [2016] 72 taxmann.com 63
[19] CIT vs Dhingra Metal Works [2011] 196 Taxman 488 (Delhi)
[20] Vinod Goel & Other vs. Union of India (2001) 252 ITR 29
[21] Nalini Mahajan (Dr.) v. Director of Income Tax (Inv.), (2002) 257 ITR 123
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