Overview of Section 132: Search and Seizure under Income Tax Act

Introduction: Section 132 of the Income Tax Act empowers designated authorities to conduct search and seizure operations based on credible information. This article delves into the initiation, authorization, powers, and procedural aspects outlined in this significant section.

Subsection (1): Authorization for Search

• Initiation of Search:

• When a designated income-tax authority, such as the Principal Director General, Director General, Principal Director, Director, Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner, possesses credible information, they may initiate a search operation.

• Grounds for Belief:

• The authority must have a reason to believe that:

• a person has omitted or failed to produce requested books of account or documents,
• a person will not produce relevant books of account or documents,
• a person is in possession of undisclosed income or property represented by money, bullion, jewelry, or valuable articles.

• Authorization of Officers:

• The designated authority may authorize specific officers, including Additional Directors, Additional Commissioners, Joint Directors, Joint Commissioners, Assistant Directors, Deputy Directors, Assistant Commissioners, Deputy Commissioners, or Income-tax Officers, referred to as authorized officers.

• Powers Granted to Authorized Officers:

• Authorized officers have the power to:

• Enter and search any building, place, vessel, vehicle, or aircraft where suspected items are kept.
• Break open locks if keys are not available.
• Search individuals if there is a suspicion of concealing items.
• Inspect electronic records maintained as books of account or documents.
• Seize books of accounts, documents, money, bullion, jewelry, or valuable articles found during the search.
• Make marks of identification on seized items.
• Create extracts or copies of books of account or documents.
• Make a note or inventory of seized money, bullion, jewelry, or valuable articles.

• Exception for Stock-in-Trade:

• Bullion, jewelry, or other valuable articles found as stock-in-trade of a business are not seized but are noted or inventoried.

• Jurisdiction Provision:

• In cases where the search location falls under the jurisdiction of a different authority, the initiating authority can still exercise search powers if delay in obtaining authorization from the jurisdictional authority is deemed detrimental to revenue interests.

• Provisions for Physical Characteristics:

• If it is not possible or practical to physically seize valuable articles or things due to volume, weight, or danger, the authorized officer may serve an order to prevent removal without prior permission.

• Restriction on Authorizations:

• No authorization can be issued after October 1, 2009, unless the officer has been specifically empowered by the Board.

• Secrecy of Reason to Believe:

• The reason to believe, recorded by the income-tax authority, is not disclosed to any person, authority, or Appellate Tribunal for confidentiality.

Subsection (1A): Extended Authorization

• Additional Authorization:

• If a higher-ranking income-tax authority has reason to suspect that items subject to authorized action are in a location not specified in the initial authorization, they may authorize officers to act in such locations.

• Reason to Suspect Confidentiality:

• The reason to suspect, as recorded by the income-tax authority under this subsection, remains confidential and is not disclosed to any person, authority, or Appellate Tribunal.

Subsection (2): Requisition of Services

• Requisition of Assistance:

• The authorized officer is empowered to requisition the services of the following:

• (i) Any police officer or officer of the Central Government, or both.
• (ii) Any person or entity approved by the Principal Chief Commissioner, Chief Commissioner, Principal Director General, or Director General, following prescribed procedures.

• Duty to Comply:

• It is the duty of the requisitioned officer, person, or entity to comply with the authorized officer’s requisition for any specified purposes under subsection (1) or subsection (1A).

Subsection (3): Order to Prevent Removal

• Impracticability of Seizure:

• When it is not practicable to seize books of account, documents, money, bullion, jewelry, or valuable articles for reasons other than those mentioned in the second proviso to subsection (1), the authorized officer can serve an order.

• Restrictions on Possession or Dealing:

• The order instructs the owner or possessor not to remove, part with, or otherwise deal with the items without prior permission. The authorized officer may take necessary steps to ensure compliance.

• Explanation – No Deemed Seizure:

• Serving such an order is explicitly declared not to be deemed as seizure under clause (iii) of subsection (1).

Subsection (4): Examination on Oath

• Examination Authority:

• The authorized officer has the power to examine on oath any person found in possession or control of books of account, documents, money, bullion, jewelry, or other valuable articles during the search or seizure.

• Usage in Proceedings:

• Statements made during such examination are admissible as evidence in any proceeding under the Indian Income-tax Act, 1922, or the current Act.

• Expanded Scope of Examination:

• The examination is not limited to the items found during the search but includes all matters relevant for investigations connected with proceedings under the Indian Income-tax Act, 1922, or the current Act.

Subsection (4A): Presumptions

• Presumptions Regarding Possession:

• When books of account, documents, money, bullion, jewelry, or other valuable articles are found during a search, certain presumptions may apply:

• (i) Belonging to the person in possession.
• (ii) The truthfulness of the contents of books and documents.
• (iii) Validity of signatures and other handwriting aspects.

• Presumption in Stamped Documents:

• For stamped, executed, or attested documents, it is presumed that they were duly stamped and executed or attested by the person indicated.

Subsection (8): Retention of Seized Documents

• Duration of Retention:

• The books of account or other documents seized must not be retained by the authorized officer for more than thirty days from the date of the assessment or reassessment or recomputation order under specified sections unless specific reasons for retention are recorded in writing.

• Approval Requirement:

• Approval for retention beyond thirty days must be obtained from the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General, or Principal Director or Director.

• Limitation on Retention:

• The authorized officers cannot retain the books of account or other documents beyond thirty days after completion of all proceedings under the Indian Income-tax Act, 1922, or the current Act relevant to the seized documents.

Subsection (8A): Limitation on Order

• Validity Period of Order:

• An order under subsection (3) is not valid for a period exceeding sixty days from the date of the order.

Subsection (9): Copying of Seized Documents

• Permission to Make Copies:

• The person from whose custody documents are seized is allowed to make copies or take extracts in the presence of the authorized officer or a person empowered by the officer. This should occur at the place and time appointed by the authorized officer.

Subsection (9A): Handing Over of Assets

• Transfer of Seized Assets:

• If the authorized officer lacks jurisdiction over the person referred to in subsection (1), the seized assets are handed over to the Assessing Officer with jurisdiction within sixty days from the last execution of search authorizations.

• Jurisdictional Powers:

• The Assessing Officer, upon receiving the assets, gains powers exercisable by the authorized officer under subsection (8) or subsection (9).

Subsection (9B): Provisional Attachment

• Provisional Attachment:

• The authorized officer, for reasons recorded in writing, can provisionally attach any property belonging to the assessee with the previous approval of the Principal Director General or Director General, and the provisions of the Second Schedule apply.

Subsection (9C): Duration of Provisional Attachment

• Limited Duration:

• Every provisional attachment made under subsection (9B) ceases to have effect after the expiry of a period of six months from the date of the order referred to in subsection (9B).

Subsection (9D): Valuation Reference

• Valuation Reference:

• The authorized officer, during the search or seizure or within sixty days from the last execution of authorizations, can refer the estimation of fair market value to a Valuation Officer or another approved person or entity, and a report must be submitted within sixty days from the receipt of the reference.

• Prescribed Procedure:

• The approval for the person or entity must follow the procedure prescribed, and the valuation report assists in determining the value of seized property for the purpose of protecting the interest of revenue.

Subsection (10): Objection to Approval

• Right to Object:

• If a person legally entitled to the seized documents objects to the approval given by the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General, or Principal Director or Director under subsection (8), the person can make an application to the Board.

• Application Contents:

• The application must state the reasons for the objection and request the return of the books of account or other documents.

• Board’s Authority:

• The Board, after providing the applicant an opportunity to be heard, has the authority to pass suitable orders.

Subsection (13): Application of Code of Criminal Procedure, 1973

• Applicability of Criminal Procedure Code:

• The provisions of the Code of Criminal Procedure, 1973, related to searches and seizure, apply, as far as possible, to searches and seizure under subsection (1) or subsection (1A).

Subsection (14): Rules by the Board

• Rule-Making Authority:

• The Board has the authority to make rules related to any search or seizure under this section.

• Rule Content:

• Rules may cover procedures for obtaining entry into locations where free ingress is not available and ensuring the safe custody of seized books of account, documents, or assets.

Explanations:

• Explanation 1: Deemed Execution of Authorization:

• For the purposes of subsections (9A), (9B), and (9D), the last authorization for search is deemed to be executed either on the conclusion of the search or on the actual receipt of books of account, documents, or assets in the case of requisition under section 132A.

• Explanation 2: Definition of Proceeding:

• In this section, the term “proceeding” refers to any ongoing or completed proceedings under the Indian Income-tax Act, 1922, or the current Act pending or completed on the date of authorization of the search. It also includes proceedings initiated after that date in respect of any year.

 Rule 112: Detailed Procedures

Sub-Rules (2) to [(14)]

• Authorization Forms:

• (2) The authorizations under various provisions of section 132 are specified in Forms No. 45, 45A, and 45B.
• (2A) Every authorization must be in writing, bear the signature of the issuing officer, and include their official seal.

• Permission and Facility for Search:

• (3) The person in charge of the premises authorized for search must allow the authorized officer free access and provide reasonable facilities for the search, upon demand and presentation of the authority.

• Forcible Entry if Necessary:

• (4) If access to the premises cannot be obtained, the authorized officer, with assistance from the police or Central Government officers, may forcibly enter the premises and conduct the search.
• (4A) Similar provisions apply to vessels, vehicles, or aircraft, allowing the authorized officer to stop, land, or search them.

• Special Consideration for Certain Occupants:

• (4) Special considerations apply if the premises are occupied by a woman who customarily does not appear in public. Notice and facilities for withdrawal must be provided before forcible entry.

• Inspection of Receptacles:

• (4B) The authorized officer may require the opening of any box, locker, safe, almirah, or other receptacle within the premises, and if necessary, may break open these items to carry out the search.

• Restrictions on Dealing with Seizable Items:

• (4C) In cases where seizing items is impracticable, an order may be served on the owner or person in possession or control, preventing them from removing or dealing with the items without prior permission.

Important Points:

• All authorizations must be in writing, with a clear indication of the authorized officer’s identity and authority.
• The person in charge of the premises must facilitate the search, and if necessary, forcible entry may be conducted.
• Special considerations apply to premises occupied by women, ensuring notice and facilities for withdrawal.
• The authorized officer has the authority to inspect and, if necessary, break open receptacles within the premises.
• Orders may be served to restrict the removal or dealing with seizable items in cases where seizure is impracticable.

• Search of Individuals:

• (5) Individuals referred to in clause (iia) of sub-section (1) of section 132 may be searched by the authorized officer, with due assistance. If the individual is a woman, another woman must conduct the search, ensuring strict regard to decency.

• Pre-Search Formalities:

• (6) Before initiating a search, the authorized officer shall:

• (a) For a building or place, call upon two or more respectable inhabitants of the locality to witness the search.
• (b) For a vessel, vehicle, or aircraft, call upon two or more respectable persons to witness the search.

• Presence of Witnesses:

• (7) The search shall be conducted in the presence of witnesses, and a detailed list of all seized items, along with their respective locations, shall be prepared and signed by the authorized officer and witnesses. Witnesses are not mandated to attend proceedings under the Indian Income-tax Act unless specially summoned.

• Occupant’s Copy of the List:

• (8) The occupant of the searched premises, including the person in charge of a vessel, vehicle, or aircraft, shall be allowed to attend the search. A copy of the list of seized items prepared under sub-rule (7) shall be delivered to the occupant, and a copy shall be forwarded to the Chief Commissioner or Commissioner.

• List for the Person Searched:

• (9) In cases where an individual is searched under clause (iia) of sub-section (1) of section 132, a list of all seized items shall be prepared and delivered to the person searched. A copy shall also be forwarded to the Chief Commissioner or Commissioner.

• Handling of Seized Items:

• (10) The authorized officer shall package and mark bullion, jewelry, and other valuable articles seized during the search. The package(s) shall bear an identification mark and the seal of the authorized officer. The occupant of the premises searched may also place their seal on the package. Copies of the list shall be provided to the occupant, and copies shall be forwarded to the Chief Commissioner or Commissioner.

• Conveyance to Custodian:

• (11) The authorized officer may convey the seized books of account, documents, and packages to the office of an Income-tax Officer, referred to as the Custodian. Any seized money may also be deposited with the Custodian.

• Safe Custody by Custodian:

• (12) The Custodian shall take necessary steps for the safe custody of books of account, documents, and packages. The Custodian may deposit packages with authorized banks or Government Treasuries. In cases where money is deposited, the Custodian may credit or remit it to the Personal Deposit Account of the Chief Commissioner or Commissioner.

• Opening of Sealed Packages:

• (13) If sealed packages need to be opened for Act-related purposes, the authorized officer may requisition them from the Custodian. The opening shall occur in the presence of two witnesses after providing reasonable notice to the person from whose custody the contents were seized.

• Powers of Assessing Officer:

• (14) The Assessing Officer to whom the books of account, documents, or assets have been handed over under sub-section (9A) of section 132 shall possess powers equivalent to those conferred on the authorized officer under sub-rules (11) and (13).

Rules112A:

Subrules (1) to (4)

• Notice to Explain or Produce Evidence:

• (1) Upon the seizure of money, bullion, jewellery, or other valuable assets, the Assessing Officer shall, within fifteen days of the seizure, issue a notice to the person concerned. In cases where assets are handed over by the authorized officer under sub-section (9A) of section 132, the notice shall be issued within fifteen days from the date of handover. The notice requires the person to attend the Assessing Officer’s office on a specified date (not earlier than fifteen days from the notice’s service). The person is either required to explain the nature of possession and the source of acquisition of the assets or produce evidence supporting their explanation.

• Production of Accounts or Documents:

• (2) The Assessing Officer may issue additional notices specifying dates for the production of accounts, documents, or evidence at specified times and places. These may be required to further elucidate the source of acquisition and nature of possession of the seized assets.

• Examination and Inquiry:

• (3) The Assessing Officer is empowered to examine individuals on oath or conduct other inquiries as deemed fit to gather relevant information regarding the seized assets.

• Show Cause Notice:

• (4) Before using any material gathered during the examination or inquiry against the person, the Assessing Officer must provide a reasonable notice to the individual. This notice serves to give the person an opportunity to show cause as to why such material should not be used against them.

Rules 112B:

• Release of Seized Assets:

• Where, pursuant to sub-section (5) of section 132, it is determined that the assets or a part thereof must be released, the Assessing Officer shall promptly deliver the assets to the person from whose custody they were seized. This delivery is to be carried out in the presence of two respectable

Conclusion: Section 132, with its detailed provisions, establishes a robust framework for search and seizure operations under the Income Tax Act. The stringent rules and procedures ensure transparency, witness presence, and proper documentation. Understanding the nuances of this section and its accompanying rules is vital for both authorities and individuals involved in the process, contributing to a fair and transparent enforcement mechanism.