India: What To Do When Taxmen Get Search Warrant?

Last Updated: 19 May 2017
Article by Gagan Kumar, Amit Kaushik and Shreya Chaudhari

Tax Authorities have powers to summon persons and documents, and survey his premises to secure evidences of undisclosed documents or assets. Such powers have various limitations and therefore Tax Authorities have to resort to search and seizure when there is evidence of undisclosed documents or assets which have not been and would not be disclosed in ordinary course.The word "search" means "look for" or "seek out" and the word "seizure" means "dispossession of the person from whom seizure is made and assumption of possession of the seized article."

Pre-Search Provisions

On what basis cases for search are identified:

Generally, when an officer not below the rank of the Joint Director/Joint Commissioner has in consequence of information in its possession reason to believe that any person is in possession of any undisclosed documents or assets or has omitted or failed or will not produce such documents, etc. required by such authorities, then such officer may give authorization for search. The officer authorizing search are called authorization officers.

As per CBDT Instructions,Searches should be carried out only in cases where the expected concealment is more thanRs. 1 crore.

A search authorization can be issued against any person including a non-resident whose income is liable to tax in India.

The expression 'information' must be something more than a mere rumour or a gossip or a hunch.

Search Warrant- What to look for:

A search action has to be 'person specific'.

All the family members are separate assessable legal entities under the Act and in a case where search warrant has been issued in the name of 'Assessee and Family, it cannot be stretched to cover all the family members, namely spouse and children.

The authorisation of search in the case of a company could not be treated to be authorisation of search in the case of individual directors.

A search warrant can be issued in joint name.

Separate search warrant for each premise to be searched is required.

Issue of Blank warrant is illegal.

The Search Warrant must be produced to the person search before the commencement of the search; however copy of the same is not required to be given.

Who can conduct a Search?

The authorizing officer authorizes an income tax authority for conducting search.

Such officer is called as Authorised Officer.

An income tax inspector cannot be an Authorized Officer.

Search Warrant has to be in the name of Authorised Officer.

Conduct of Search

Timing of Search?

A search may be commenced anytime.

Which premises can be searched?

The premises for which search warrant is issued can only be searched.

What should the person whose premises are searched do before allowing search?

Check the warrant of authorization for seal and signature of the issuing authority.

Verify the identity of each member of the search party.

Conduct personal search of all members of the search party before the start of the search and on conclusion of the search.

Have at least two respectable and independent residents of the locality as witness.

What are the Powers of the Authorised Officer?

General Powers

  • Enter and search any building, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery, or other valuable article or things are kept.
  • break open the lock of any door, box, locker, safe, almirah or other receptacle where the keys are not available.
  • search such a person who has either got out of or is about to get into or is already present in the building where search is carried out.
  • to require any person to afford the authorized officer the necessary facility to account/other documents maintained in the form of electronic record.
  • place marks of identification on any books of account/other documents including the right to make any extracts or copies from them.
  • make a note or an inventory of any such money/bullion/jewellery/other valuable article or thing.

Power of Seizure

  • seize any such books of account/ other documents / money/ bullion/ jewellery/ valuable  article or thing found as a result of the search conducted
  • stock-in-trade of the business cannot be seized, only a note or inventory of the same can be made.
  • immovable property is outside the purview of seizure.
  • Cash, Computers, CD's and pen-drive can be seized.
  • Jewellery can be seized subject to certain restrictions.
  • If the disclosed assets are seized even after showing the evidence of disclosure and its explained source, then such seizure is illegal.
  • if it is not possible or practicle to take physical possession of any valuable article or thing due to its physical characteristic, then order deeming seizure of the same can be passed.
  • In cases where it is not practicable to seize any valuable article or thing, etc.for reasons other than above, the authorized officer can pass a restraint order for a period not exceeding 60 days from the date of the order.
  • Books of accounts, documents, etc can be seized upto 30 days after completion of assessment pursuant to search.
  • Cash, jewellery, etc. can be kept for a maximum period of 120 days, however any existing tax liability can be adjusted against them.

Power to record Statements and Examine on oath

  • Any statement made by a person during examination may be used as evidence during any proceeding under the Income Tax Act, 1961.
  • The CBDT has stressed that the focus of search & seizure operations should be on collection of evidence for tax evasion and no attempt shall be made to obtain confession as to the undisclosed income.

Preparation of Panchnama

  • A search and seizure under the Act has to be carried out in the presence of at least two respectable inhabitants of the locality where the search and seizure is conducted. Those respectable inhabitants are witnesses to the search and seizure and are known as 'panchas'. The documentation of what they witness is known as the 'panchnama'.
  • Thus, a panchnama is nothing but a document recording what has happened in the presence of the witnesses.

What are the Rights and Duties of the person searched?

To have a copy of panchnama together with all the annexures.

To put his own seals on the packages containing the seized assets.

To inspect the seals on various respectable placed in the course of the search and subsequently reopened by continuation of search.

To have a copy of any statement before it is used against him in an assessment or prosecution proceedings.

To inspect books of account etc. seized or to take extracts there from in the presence of any of the authorised officers or any other person empowered in this behalf.

To allow free and unhindered ingress in to the premises.

To identify all receptacles in which assets or books of account and documents are kept and to hand over keys to such receptacles to the authorised officer.

To identify and explain the ownership of the assets, books of account and documents found in the premises.

Not to allow or encourage the entry of any unauthorised person in the premises.

Not to remove any article from its place without notice or knowledge of the Authorised Officer. If he secrets or destroys any document with the intention of preventing the same from being produced or used as evidence before the Court or public servant, he may be punished with imprisonment or fine or both, in accordance with section 204 of the Indian Penal Code.

To answer all questions truthfully and the best of his knowledge. He should not allow any third party to either interfere or prompt while his statement is being recorded by the Authorised Officer. In doing so, he should also keep in mind that:-

  • If he refuses to answer a question on a subject relevant to the search operation, he shall be punishable with imprisonment or fine or both, under section 179 of the Indian Penal Code.
  • Being legally bound by an oath or affirmation to state the truth or affirmation to state the truth, if he makes a false statement, he shall be punishable with imprisonment or fine or both u/s 181 of the Indian Penal Code.
  • Similarly, if he provides evidence which is false and which he knows or believes to be false, he is liable to be punished u/s 191 of the Indian Penal Code.

To affix his signature on the recorded statement, inventories and the panchnama.

To ensure that peace is maintained throughout the duration of the search, and to co-operative with search party in all aspects so that the search action is concluded at the earliest and in a peaceful manner.

Similar co-operation should be extended even after the search action is over, so as to enable the Authorised Officer to complete necessary follow-up investigations at the earliest.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.