The landscape of Search and Seizure (commonly known as tax raids) has undergone a structural transformation under the Income-tax Act, 2025. Building upon the comprehensive re-codification of India’s direct tax laws, the new Act streamlines enforcement powers while resurrecting and fine-tuning past assessment mechanisms to minimize litigation.
The core provisions, governing sections, and step-by-step procedures regarding search and seizure under the current law are detailed below.
1. Statutory Framework & Governing Sections
The primary legal provisions are bifurcated into the enforcement phase (the raid) and the subsequent assessment phase:
Section 247 (Search and Seizure): This is the primary enabling provision (replacing the old Section 132 of the 1961 Act). It empowers senior tax authorities to authorize and execute search operations.
Chapter XVI-B (Clauses/Sections 292 to 301 – Block Assessment): Following the major legislative overhaul, the Act re-establishes a Block Assessment Scheme specifically for search cases. It moves away from the previous regime of reopening multiple individual years under standard reassessment windows.
2. When Can a Search Be Authorized?
An authorization (Search Warrant) can only be issued by senior officials—such as the Principal Director General, Director General, or Chief Commissioner—if they have an objective “reason to believe” that:
A taxpayer has failed to comply with previous summons or notices to produce books of accounts or documents.
The taxpayer is in possession of money, bullion, jewellery, or other valuable articles representing undisclosed income/property (either wholly or partially).
Note on “Reason to Believe”: This cannot be arbitrary or based on a hunch. It must be an honest, reasonable opinion formed on the basis of tangible, relevant material available on record.
3. Step-by-Step Procedure of the Search Operation
The execution of a search follows a strict, legally mandated protocol to ensure transparency and admissibility of evidence in court:
Step 1: Entry & Identification
The authorized team must present the Warrant of Authorization and their official government ID cards to the taxpayer.
The search must commence in the presence of two independent local witnesses to prevent allegations of evidence tampering or planting.
Step 2: The Physical Search
The team has the power to search the premises, buildings, vehicles, or lockers specified in the warrant.
They can break open locks if keys are refused, and search individuals present on the premises if they suspect evidence is hidden on them.
Digital Devices: Tax officials can access computers, hard drives, and cloud backups. While they cannot legally force password disclosure by physical coercion, non-cooperation can attract adverse legal inferences.
Step 3: Seizure vs. Restraint
What Can Be Seized: Unaccounted cash, gold, jewellery, books of accounts, and financial documents.
What Cannot Be Seized: Disclosed assets, legitimate stock-in-trade (business inventory), and personal jewellery that falls within the standard limits prescribed by the Central Board of Direct Taxes (CBDT Instruction No. 1916 issued on 11 May 1994). Specifically allowing 500g per married lady, 250g per unmarried lady, and 100g per male member.
Prohibitory Orders: If it is physically impractical to move large assets or heavy books immediately, officials can pass a restraint order, effectively freezing the asset in place.
Step 4: Recording Statements & The Panchnama
Statements of the taxpayer or employees are recorded under oath. These statements are legally admissible as primary evidence.
At the conclusion of the raid, a detailed inventory memo called a Panchnama is prepared. It lists everything found, seized, or restrained, and must be signed by the officers, the taxpayer, and the two witnesses. A copy is mandatory provided to the taxpayer.
4. Post-Search Procedure: The Block Assessment Scheme
The modern law simplifies how tax is calculated after a raid by utilizing a unified Block Period.
The Block Period: The block comprises 6 assessment years preceding the financial year in which the search was triggered, plus the period of the current financial year up to the exact date of the search.
Scope of Assessment: Unlike older regimes that required merging all incomes, the current framework focuses strictly on assessing the total undisclosed income unearthed via the search material or related information.
Application of Assets (Section 132B equivalent): Seized cash or valued assets can be legally adjusted against the taxpayer’s existing or newly determined tax liabilities. Excess assets must be returned with interest
5. Taxpayer Rights & Safeguards
To balance the sweeping powers given to the department, the law guarantees robust structural rights:
Right to Verification: The right to inspect the search warrant and verify the identities of all raiding officers.
Right to Medical Aid & Dignity: The search must be conducted decently, allowing family members to have meals, access medical care, and permit children to go to school.
Right to Counsel: The taxpayer can call their Chartered Accountant or legal counsel to remain present during the process, though they cannot halt the search waiting for them.
Right to Copies: The taxpayer is legally entitled to copies of the Panchnama, its annexures, and copies of any statements recorded under oath.
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