In this article, you will get insights on Raids conducted by Income Tax Department. In India, Raid is a deadly situation for any assessee/person as it leads to lawful possession of all his assets, property, money etc. by Income Tax Authorities when he fails to produce the sufficient reason for owning the same.
Provisions Governing The Income Tax Raid:
Section 132 of the Act empowers the following officials of Income Tax Department,
- Principal Director General / Director General,
- Principal Director / Director,
- Principal Chief Commissioner / Chief Commissioner,
- Principal Commissioner / Commissioner,
- Additional Director / Additional Commissioner,
- Joint Director / Joint Commissioner
to authorize the officials of department to conduct Raid or one can simply say that only the above mentioned persons can issue the search warrants.
Triggers Behind Income Tax Raid:
(a) If any person to whom a notice under Section 142(1) is issued and he failed to reply appropriately.
- Section 142(1): A notice under this section is issued to those assessees who either fails to file the return within the prescribed time or to those assessees whose information is not sufficient for the completion for the assessment. So, Assessing Officer, for the want of documents, may issue a notice under this section. The notice under this section can be issued only for the maximum of 3 years.
- If the asseessee do not reply to the notice or improperly submit his reply than this can become the reason behind raid.
(b) If any person is in possession of any money, bullion, jewellery or other valuable article or thing and the assessee do not disclose the same and also do not have any sufficient explanation/documents evidencing the possession of these things. These are termed as undisclosed assets because these assets are either purchased from the undisclosed money or are a part of undisclosed property.
(c) If any person to whom summons under section 131 is issued for the production of certain documents but the person fails to do so.
The above three points are not sufficient for the raid until and unless the Income Tax Authority has “reason to believe” that the person has actually concealed the income or he is having unlawful assets/property.
Importance of Reason to Believe:
One incident of raid can spoil the image of the person and his business completely. Therefore, the authority after confirming from their end via hidden sources or investigating anonymous complaints, that the information they have is accurate, takes the decision of conducting Raid but the authority is not bound to disclose the reasons neither to any person or authority or Appellate Tribunal.
Conducting Income Tax Raid:
Now, this is the point which everyone knows very well that how the department conducts raid such as entering any building, break doors of almirah, lockers etc.
So, let me tell you something different and interesting apart from this.
- Apart from the building, the official can also enter any ship, vessel, aircraft if he has a reason to believe that the person has kept his suspected books of accounts in them.
- The official can also search any person who is not present at the premises during search.
- The official can seize anything, but he cannot seize the stock in trade.
What After Search?
After the conclusion of search, if the official finds some property which should be seized then he will take the same in his possession.
Here is one more stringent provision: If within 60 days from the date on which the last of the authorizations for search was executed, the authorized officer is satisfied that for the purpose of protecting the interest of department, it is necessary to attach the property then he can provisionally attach any property belonging to the assessee. So, we can say that even after the conclusion of raid, there is a lot of risk for the person till the 60th day.
This provisional attachment is valid for 6 months from the date of provisional attachment of property.
But what if a seizure is required of an asset which cannot be seized due to practical limitations?
So, in this case, the department has 2 remedies:
- The first remedy is, where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorized officer may serve an order on the owner or the person who is in immediate possession that he shall not remove that article without his prior permission. So, it is a kind of seizure where the things will be kept with the owner but the possession is transferred to the department.
- The second remedy is, where the article cannot be seized, for reasons other than those mentioned above, then the officer may serve an order on the owner or the person who is in immediate possession that he shall not remove it except without his prior permission but the order cannot be issued for more than 60 days under this point.
Presumptions During Raid:
This is something which can be funny for a reader and deadly for the person on whose premised the raid is conducted.
Just suppose, your friend has kept his jewellery at your home for safety reasons as she is out of the town. Now, if the department conducts the raid at your home, then you have to prove that the jewellery do not belongs to you and if you will be unable to prove then that jewellery will be added to your undisclosed income and will be seized by the department. Although, this can be sorted in further proceedings but there are lot more funny examples on the internet which are of course not funny for the suspected people.
So, like above there are following presumptions behind the raid:
- The books of account, other documents, money, bullion, jewellery or other valuable article or thing found during search belongs to such person.
- The contents of such books of account and other documents are true.
- Any stamped or signed document is signed or stamped by such person.
Assessment Procedure In Case of Raid:
Section 153A governs the assessment procedure in case of search, which states the following:
(a) The assets/books/articles etc. seized by the official has to be handed over to the Jurisdictional Assessing Officer within 60 days.
(b) The Assessing Officer shall issue notice to the person which require him to file the Income Tax Returns for last 6 years.
Note: The notice can be issued for 10 years in the following cases:
(a) If the income escaped assessment is more than 50 lacs and
(b) The search is initiated after April 1, 2017
(c) If the assessment/reassessment of any last 6/10 years is pending in the following sections, then the same shall abate (end) and assessment shall be made under Section 153A:
(a) Section 143(3): Scrutiny (Detailed checking of some assessees identified by the system)
(b) Section 144: Best Judgement Assessment (This is done by the dept. itself when assessee do not file the income tax returns, produce documents and audit report as directed and raid is not the solution due to non-involvement of material/higher amounts or absence of reason to believe)
(c) Section 147: Assessment or Reassessment of income escaping assessment.
(d) The Income Tax Return for the year of search shall be filed in normal course which means that Assessing Officer can issue notices under Sections 143(3)/144 for that year.
(e) In case the order made under section 153A is cancelled by the higher authorities in any appeal then, the assessments which was abated under Sections 143(3), 144 and 147 for the last 6/10 years (as mentioned under point number c) will start again.
(f) After the completion of assessment under this section, the books of accounts of the person shall be released within 30 days.
One More Interesting Point:
Do you remember that friend’s jewellery which was seized by the department during the raid at your home?
Now, what if that friend couldn’t produce the satisfactory documents in respect of that jewellery?
So, interestingly or unfortunately that friend will also have to face the same consequences as being faced by you. The same notice will be issued to him too under Section 153A. Now feeling relaxed?
Just joking 😊 Let it be an example only.
So, this was all about the Raid.
Disclaimer: The above article depicts the personal views of the author. It is in no way reflects the views of his employer organization or any other person. Further, The article must be treated for informational purposes only. Author is not responsible for any kind of damage in case of its use as a professional advice.
For any queries in the above article, the author can be contacted at ca.atulkhurana@yahoo.com or 9888855340 (WhatsApp only).
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