DR. P.

SREE SUDHA
ASSOCIATE PROFESSOR

SEARCH AND SURVEY UNDER

INCOME TAX ACT 1961
Meaning of 'Search' & 'Seizure'
 The Act has no definition of 'search' and 'seizure'. Hence,
the etymological and judicial construction of the words
could well be used in interpreting the same.
 As per Concise Oxford Dictionary, 'search' means to look
for or to seek and 'seizure' means forcibly taking
possession.
 In case of Assainar v. ITO [1975] 101 ITR 854 (Ker.), it is held
that the word 'search' in section 132, considering the object
and scope of the section, should not be given a far too
technical meaning and should be given a general meaning
which are well-known meanings attributable to the word.
Human Rights Protection
 In chief CIT v. State of bihar through the chief secretary [feb,2012]
205 taxman 232/18 taxmann.Com 70 (patna HC.):
 During search, interrogation was carried out for 42 hours
commencing at 9.30 A.M. On 8-9-2010 to 3.30 A.M. On 10-9-2010.
 The assessee and his family members were made to remain awake
when it was time for sleep. The Honourable high court held:
i.) No possible justification to continue interrogation and keep awake
till 3.30 a.m.
ii.)No reason is assigned why interrogation could not be deferred;
iii.)Human dignity and value could not be ignored
 The Hon’ble court also directed the department, should consider
issuing appropriate instructions to record the duration of
interrogation and breaks in future raids.
WHEN & WHY SEARCH IS CONDUCTED

 When any summons or notice issued by IT Dept is not responded

 When Summons is issued for production of books of accounts, however no
response is received from the asseessee.
 When Competent Authority forms belief that a person is having unaccounted
income inform of cash, bulion, jewellery, etc on the basis of information inn
his possession
 CBDT Guideline on Search & Seizure
- Searches not to be conducted casually
- Min Expected Disclosure of Rs 100.00 Lacs
- Professionals of high repute not to be searched
 Authorisation for Search
- Director of Investigation (DI)
- Deputy Director of Investigation (DDI)
- Assistant Director of Investigation
HOW SEARCH IS CONDUCTED

 Issuance of Search Warrants Specifying Person

and Places to be searched
 Time of Commencement and Continuance of
Search
 Manner of Search

 Closing of search operation

RIGHTS & DUTIES OF THE PERSON SEARCHED
 Rights  Duties
 Right to check identity of each of the  To allow search party of enter in
member of search party
 Right to have authorised representative premises without creating
 Right to have witnesses obstacles
 Right to search every person of search 
party when they leave the place
To sign search warrant

 To give explanation when asked
To call doctor for the ill person
 To send kids to school after  Restrict entry of any
verification of their school bags unauthorised persons
 Female to be searched by female only 

Move any items without
To have inventory of items found and
seized permission of search party
 To use phones  To Co Operate search party
 To have copy of statements recorded
 To have copy of books and documents
seized
Charter of rights and duties of persons
Searched
 RIGHTS OF PERSONS SEARCHED
 To see the warrant of authorization duly signed and sealed by the
issuing authority.
 To verify the identity of each member of the search party.
 To have at least two respectable and independent residents of the
locality as witness.
 To have personal search of all members of the search party before
the start of the search and on conclusion of the search.
 To insist on a personal search of female members by another
female member only with strict regard to decency.
 To have a copy of panchnama together with all the annexure.
 To put his own seals on the packages containing the seized assets.
 To call a medical practitioner if he is not well.
6. Charter of rights and duties of
persons Searched
•To have his children permitted to go school, after examining of their bags.
•To inspect the seals on various respectable placed in the course of the search
and subsequently reopened by continuation of search.
•To have the facilities of having meals etc., at the normal time.
•A woman occupying any apartment etc., to be searched, has the right to
withdraw before the search party enters, if according to the customs he
does not appear in public.
•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 make application objecting to the approval given by the Commissioner for
retention of books and documents beyond 180 days from the date of seizure
DUTIES OF PERSONS SEARCHED

 To allow free and unhindered ingress in to the premises.

 To see the warrant of authorization and put signatures on the same.
 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.
 To identify every individual in the premises and to explain their relationship to the
persons being searched. He should not mislead by impersonation. If he cheats by
pretending to be some other person or knowingly substitutes one person for other,
it is an offence punishable under section 416 of the Indian Penal Code.
 Not to allow or encourage the entry of any unauthorized 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 shall be punished with imprisonment or fine or both, in
accordance with section 204 of the Indian Penal Code
DUTIES OF PERSONS SEARCHED
 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.
 imilarly, 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 be
cooperative 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 Search manual also contains the Instruction No. 1916 dated 11-05- 1994 which
lays down the following guidelines for seizure of Jewellery:

 In the case of a Wealth Tax assessee, gold jewellery and

ornaments found in excess of the gross weight declared in the
wealth tax return only need be seized.
 In the case of a person not assessed to wealth tax, gold
jewellery and ornaments to the extent of 500 gms per married
lady, 250 gms per unmarried lady and 100 gms per male
member of the family, need not be seized.
 CIT v. Ratanlal Vyaparilal Jain (2011) 339 ITR 351 (Guj) (HC),
held that the approach adopted by the Tribunal considering
the extent of jewellery specified under the said circular to be a
reasonable quantity cannot be faulted with. Addition made
under section 69 was deleted.
Application/Release of retained assets

 The seized assets under section 132B can be applied against the existing liability
and the amount of liability determined on the completion of assessment including
any penalty levied or interest payable in connection with such assessment. Thus,
once the assessments are made, appeals are decided & the demand raised
including the penalty demand is paid, the seized assets have to be released.
 Punjab and Haryana High Court in case of Naresh Kumar Kohli v. CIT [2004] 137
Taxman 438, held that Department cannot retain the seized valuables during the
pendency of appeal filed by the Revenue against assessee before the High Court.
The seized assets can be released where the concerned person makes an
application to the Assessing Officer within 30 days of the end of the month in
which the asset was seized explaining the nature and source of acquisition of such
assets. However, for such release prior approval of Chief CIT/CIT/DIT is required.
This approval is required to be given within 120 days from the date on which the
last of the authorization for search was executed and the panchnamas is drawn
Application/Release of retained assets

 As per section 132B(4), the Government has to pay

simple interest @0.5% p.m. on the amount of money
seized which is in excess of the amount required to meet
the liabilities.
 The period of interest shall run from the date following
the expiry of 120 days from the date of last authorization
for search to the date of completion of assessment.
 Delhi High Court in case of Puran Mal & Sons v. Union of
India [2008] 166 Taxman 452 has held that interest is
payable only on money seized and not on other assets
like bullion, jewellery etc
During a raid, the Authorised officer has powers to:

(i) Enter and search any residential and business premises,

vehicles, bank lockers etc and seize the books of accounts
and other valuables.
(ii) Break open the lock of any door, box, locker, safe etc.,
where the keys are not available
(iii) Search any person who has got out of or into or is in the
premises
(iv) Seize any books of accounts, money and other valuables
found as a result of such search and make an inventory of
such articles
(v) Place marks of identification on or make copies or take
extracts of any books or documents etc.
Object of the Search Section 132
 Search and seizure action can be undertaken against any
person who is in possession of any money, bullion, jewellery
or other valuable article or thing.
 Such money, bullion, jewellery or other valuable article or
thing represents either wholly or partly income or property
which has not been disclosed or would not be disclosed for
the purpose of this Act (i.e to unearth undisclosed income or
property).
 The search and seizure Action can also be taken when there
is a failure to produce books of accounts, documents etc. in
respect of summons issued or notice issued under sec.143(2)
of the Act
1.Pre-Requisite conditions for search

 i) Possession of information: There may be two sources of

information internal sources or external sources. Internal sources
are non filling of return, frequent gifts, huge Capital
Gain/agricultural income declared in return, etc. External sources
are from professional informers, business or professional rivals,
disgruntled employees, unhappy relatives, other sources like
economic survey, festive season etc.
 Kusum Lata v.CIT [1990] 48 Taxman 401 held that the words
'information in his possession' should be constructed as some
valid, definite information in possession and not any imaginary or
invalid information.
 Dr. Nand Lal Tahiliani v. CIT [1988] 39 Taxman 127 (All.) Estimate
made by informer cannot tantamount to information
1.Pre-Requisite conditions for search

 Union of India v. Ajit Jain [2003] 129 Taxman 74 (SC)]. Mere intimation
from CBI or Police, without something more, would not constitute
information within the meaning of section 132, as it would be giving
naked powers to the authorities to order search against any person and
prone to be abused which cannot be permitted in a society governed by
rule of law
 Sikkim Subba Associates v. Union of India [2005] 147 Taxman 250
(Sikkim), CAG report is a legislative paper and is the property of the
House and its members. Such report cannot be treated to be information
for section 132 or be in possession of the concerned officer.
 But, In case of M.S. Associates v. Union of India [2005] 147 Taxman 172
(Gauhati HC.), CAG report even if not laid and/or discussed by the State
Legislature cannot restrain the Department from acting upon the same.
1.Pre-Requisite conditions for search

 Union of India v. Ajit Jain [2003] 129 Taxman 74 (SC)]. Mere intimation
from CBI or Police, without something more, would not constitute
information within the meaning of section 132, as it would be giving
naked powers to the authorities to order search against any person and
prone to be abused which cannot be permitted in a society governed by
rule of law
 Sikkim Subba Associates v. Union of India [2005] 147 Taxman 250
(Sikkim), CAG report is a legislative paper and is the property of the
House and its members. Such report cannot be treated to be information
for section 132 or be in possession of the concerned officer.
 But, In case of M.S. Associates v. Union of India [2005] 147 Taxman 172
(Gauhati HC.), CAG report even if not laid and/or discussed by the State
Legislature cannot restrain the Department from acting upon the same.
ii) Reason to Believe?
There must be rational connection between the information or material in possession
and the belief about the undisclosed income. There must be a 'reason to believe' and
not 'reason to suspect'. Belief must be bona fide.
Ganga Prasad Maheshwari v. CIT [1981] 6 Taxman 363,(Allahabad HC) held that the
word 'reason' means cause or justification and the word 'believe' means to accept as
true or to have faith in it. Thus, before the Officer has faith or accepts a fact to exist,
there must be a justification for it.
L.R. Gupta v. Union of India [1991] 59 Taxman 305 (Delhi HC) held that merely because
an allegedly lavish marriage had taken place, there could not be a basis for forming an
opinion under section 132.
Dr. Nand Lal Tahiliani v. CIT [1988] 39 Taxman 127 (All.) it was held that living in a posh
house or having a high standard of living alone cannot constitute a basis for
'reasonable belief' without anything on record.
Pawan Solvent & Chemicals v. CIT [1987] 32 Taxman 12 (Patna HC.), it was held that
belief must be honest, based on cogent material and not on anonymous calls or letters.
However, anonymous petitions disclosing information which is crucial can be acted
upon.
Search warrant
 Search warrants have been prescribed under the IT Rules to be used in different
situations in Form Nos. 45, 45A & 45B. The search warrant must specify the name of
the person on whom and the place where search is to be conducted.
 Manmohan Krishan Mahajan v. CIT [1977] 107 ITR 420 (Punj. & Har.). However,
Section 292CC inserted by Finance Act, 2012 w.e.f. 1-4-2006 has clarified that it is
not necessary that authorization should be issued separately in the name of each
person and only because name of more than one person is mentioned in the
authorization, it shall not be deemed to construe that it is issued in the name of
AOP/BOI. In such cases, assessment can be made separately in the name of each of
the persons mentioned in the authorization. •The Act and the Rules do not require:-
i.)that warrant of authorization should specify the particulars of documents and
books of account.
 ITO v. Seth Bros. [1969] 74 ITR 836 (SC). ii.)that Source of information need to be
disclosed at the stage of issue of search warrant. It is only when the authorities
concerned resolve to impose tax or penalties etc., that they would have to disclose
to the person concerned as to why tax or penalty was being imposed
Powers of Authorized Officers
•enter into and search any building, place etc.
•break open any door/locker/safe/almirah where the keys are not
available
•search the person who has got out of or about to get into any place
•require the person in possession of books/documents in electronic
form to afford necessary facility to inspect the same
•seize any books of account/ other documents /money/ bullion/
jewellery or other valuable article/things found at the time of
search (no seizure of business stock)
•place marks of identification on books/documents/take copies
there from
•Make inventory of money/stock/articles/things etc.
Powers of it officers
 •Supreme Court in case of Seth Bros. (supra), held that by the express terms of Act &
Rules, ITO may obtain the assistance of a police officer. It cannot, therefore, be said
that in keeping police officers at the time of search in the house of influential
businessman to ensure protection to the officer
 After Delhi High Court in case of S.R. Batliboi & co Vs. ADIT (Investigation) refused to
allow the unlimited access to the seized books of accounts/records. The Apex Court on
appeal by DIT directed two laptops seized from the possession of auditor firm be de-
sealed and data permitted to be examined by the Director General of the National
Information Centre or his nominee/representative in the presence of representatives of
IT Department and the EMAAR-MFG Group. IT Department was also permitted to copy
the data relating to the said group. As far as data contained in other file/folders relating
to other parties are concerned which according to AO is connected with the group and
is required for making proper assessment of the said group, the same is to be pointed
out in writing to the firm along with relevant material/reasons and thereafter it would
be open to the firm either to consent to the said claim made by the Department or to
challenge the same by appropriate proceedings and records, excessive force was used.
Powers of it authorities
 •In Dheer Singh v. Asstt. DIT [1997] 90 Taxman 392 (All.), it was held that section 132
does not confer any authority on the ITO to realize the assets and convert them into
cash. This is possible only when demand is finally quantified and the asset have to be
realized in discharge of the liability.
 In case of Avinash Bhosale v. Union of India [2010] 322 ITR 381 (Bom.), it was held that
passport cannot be impounded under section 131. b) Prohibitory/Restraint Order - As
per proviso to section 132(1), where it is not practicable to seize the account books and
valuable articles 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
person who is in immediate possession thereof prohibiting him from moving, parting
with or otherwise dealing with it except with the previous permission of such officer.
Such restraint order would be regarded as deemed seizure. However, where it is not
practicable to seize the account books and valuable articles for any other reason, the
authorized officer can serve a restraint order under section 132(3) not to remove, part
with or otherwise deal with it. Such order shall not be deemed to be seizure under
section 132(1). Such order shall not be in force for a period exceeding 60 days under
section 132(8A).
In Pooran Mal v. The Director of Inspection (Investigation), New Delhi and
Or 1974 93 ITR 505 SC

 the petitioner was a partners in number of firms, some of them doing in Bombay
and some in Delhi. His permanent residence was in Delhi. On an authorisation
issued by the Director of Inspection, his residence and business premises in Delhi
were searched on 15th and 16th October, 1971. On the 15th, his premises in Bombay
were also searched and at that time the petitioner was present in Bombay. When his
residence was searched on 15th and 16th , there were in his house the petitioner’s
wife, two or three adult sons and his father who was ailing. It was alleged on behalf
of the petitioner that the search in the residential premises was mala fide,
oppressive, excessive, indiscriminate and vexatious.
 The ground for making these allegations were that the search and seizure in his
house took place in spite of the wife’s request to postpone the search as it was a
festive day. Also, the petitioner’s wife was not informed that there was any
authorisation. Moreover, children’s small boxes containing their pocket money and
jewellery of deceased mother of the petitioner were also seized. The panchas who
helped in the search were unknown to the petitioner or the members of his family
and the search went on for long hours.
In Pooran Mal v. The Director of Inspection (Investigation), New Delhi and
Or 1974 93 ITR 505 SC

(i) The power to order search and seizure is vested in the

highest officers of the department (ii) The exercise of the
power can only follow a reasonable belief entertained by
such officer that any of the three conditions mentioned in
Section 132(1)(a), (b) and (c) exists. In this connection it may
be further pointed out that under sub rule (2) of rule 112, the
Director of Inspection or Commissioner, as the case may be,
has to record his reasons before the authorisation is issued
to the officers mentioned in sub section (1).
(iii) The authorisation cannot be in favour of any officer below
the rank of an Income Tax officer.
In Pooran Mal v. The Director of Inspection (Investigation),
New Delhi and Or 1974 93 ITR 505 SC

(iv) The authorisation is for specific purposes enumerated in (i) to (v) in sub
section (1) all of which are strictly limited to the object of the search.
(v) When money, bullion etc. Is seized the Income Tax Officer is to make a
summary enquiry with a view to determine how much of what is seized
will be retained by him to cover the estimated tax liability and how much
will have to be returned forthwith. Even with regard to the books of
accounts and documents seized, their returned is guaranteed after a
reasonable time. The person from whose custody they are seized is
permitted to make copies and take extracts.
(vi) Where money, bullion etc. is seized, it can also be immediately
returned to the person concerned after he makes appropriate provision
for the payment of the estimated tax dues under sub-section (5).
The provisions of Criminal Procedure Code relating to search and seizure
(section 96 to 103 and section 105) should apply.
Recording of statements u/s 132(4)

 Statement under section 132(4) is recorded on oath. These statements

have an evidentiary value and are used as evidence in any proceedings
under the IT Act.
 Generally, it is presumed that whatever is stated at the time of recording
of preliminary statement under section 132(4) is true and correct.
Therefore, any retraction contrary to that should be supported by strong
evidence for demonstrating that the statement recorded were under
coercion/undue influence/without material/contrary to the material.
CBDT in F. No. 286/2/2003-IT (Inv.), dated 10-3-2003 has also advised that
while recording the statement during search and seizure, no attempt
should be made to obtain confession as to the undisclosed income.
Further, in pending assessment proceedings, AO should rely upon the
evidence/material gathered during the course of search/survey
operations or thereafter while framing the relevant assessment orders.
Some of the important judicial pronouncements on interpretation of statement of
assessee recorded in course of search under section 132 or admission of assessee
in statement is as under:-

 In assessee's favour- Validity of Statement recorded

 Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC) – Admission of
factor is an extremely important piece of evidence but it can't be said that it is conclusive. It
is open to the assessee who made admission, to show that it is incorrect and the assessee
should be given proper opportunity to show the correct state of affairs.
 Kailashben Manharlal Chokshi v. CIT [2008] 174 Taxman 466 (Guj.)-In this case
i. Addition was made on the basis of statement recorded under section 132(4) at midnight on
the date of search.
ii. The same was retracted by assessee after 2 months on the ground that it was recorded
under coercion and duress.
iii. It was held that the statement of assessee was recorded under section 132(4) at midnight
and in normal circumstances, it was too much to give any credit to the statement recorded
at such odd hours. Despite the fact that the said statement was later on retracted, no
evidence had been furnished by the revenue authority. Therefore, merely on the basis of
admission of assessee, additions could not be made unless and until some corroborative
evidence was found in support of such admission.
M. Narayanan & Bros. v. Asstt. CIT [2011]
201 Taxman 207/ 13 taxmann.com 49 (Mad.)
 In this case, in the course of assessment proceedings, assessee retracted
the statement made on day of search. AO rejected the said plea and made
assessment on the basis of confessional statements given by the assessee.
 It was held that though the statement rendered at the time of search may
be used as evidence in any proceedings, but that by itself cannot become
the sole material to rest the assessment, more so when the assessee sought
to withdraw the same by producing material evidence in support of such
retraction.
 It is always open to the person who has made the admission to show that
the statement to offer income is incorrect.
 That apart, the case of the assessee also stands supported by Circular No. F.
No. 286/2/2003-IT (Inv.), dated 10-3-2003 wherein CBDT has given
categorical directions to the Departmental Officers that undue emphasis
should not be placed on the recorded statements
CIT Vs. Chandrakumar Jethmal Kochar
(2015)55Taxmann.com 292 (GHC)
 Search conducted at assessee's business premises, his statement
was recorded under section 132(4) wherein he admitted that few
benami concerns were being run by assessee in name of his
employees
 Thereafter, during assessment proceeding, he retracted from said
admission contending that it was made at mid night under
pressure and coercion - Assessing Officer, however, made addition
on basis of disclosure made by assessee in statement recorded
under section 132(4) Whether merely on basis of admission that
few benami concerns were being run by assessee, assessee could
not be subjected to such addition when despite retraction,
revenue could not furnish any corroborative evidence in support of
such admission - Held, yes
In Revenue's favour – Validity of
statement recorded
 Asstt. CIT v. Hukum Chand Jain [2010] 191 Taxman 319 (Chhattisgarh)- held
that none of the forums had recorded a finding that the statement under
section 132(4) was obtained under duress. The assessee had totally failed to
discharge the burden of proving that the statement was obtained under
coercion or intimidation. Hence, Assessing Officer was justified in assessing
the income of assessee on the basis of surrender of undisclosed income
made by assessee under section 132(4).
 CIT v. Lekh Raj Dhunna [2012] 20 taxmann.com 554 (Punj.& Har.)- held that
in case, the statement which was made by the assessee at the time of search
and seizure was under pressure or due to coercion, assessee could have
retracted from the same at the earliest. No plausible explanation had been
furnished as to why the said statement could not be withdrawn earlier. In
such a situation, the authenticity of the statement by virtue of which
surrender had been made at the time of search could not held to be bad.
Kantilal C. Shah v. Asstt. CIT [2011] 133
ITD 57/ 14 taxmann.com 108 (Ahd.)-
 Assessing Officer made additions in respect of unaccounted income
admitted under section 132(4). However, after lapse of about nine
months from date of admission, assessee through an affidavit
sought to retract from statement made under section 132(4).
 It was held that statement recorded under section 132(4) is evidence
by itself and any retraction contrary to that should be supported by
strong evidence for demonstrating that earlier evidence recorded
was under coercion. Since assessee retracted from his earlier
statement without demonstrating any evidence to establish that
statement recorded earlier was incorrect, an allegation of
compulsion or coercion must not be accepted merely on a statement
if remained unsubstantiated. Therefore, addition made on basis of
statement recorded under section 132(4) was to be upheld.
Presumption as to ownership :
 Section 132(4A) enacts rule of evidence. This section gives
discretion to the tax authorities to make three presumptions in
respect of books of account/documents/valuables found in
possession or control of any person in course of search. First
presumption is that books of account, other documents, money,
bullion, jewellery or other valuable article or things belongs to
such person. Second is that contents of such books of account and
other documents are true. Third is that the signature and
handwriting on such books of account and documents which may
reasonably be assumed to be of a particular person is assumed to
be of that person and are duly stamped and executed or attested
by the person by whom it purports to have been so executed or
attested.
This presumption is rebuttable as held
by
 •Rajasthan High Court in case of CIT v. S.M.S. Investment Corpn.
(P.) Ltd. [1994] 207 ITR 364 .
 •The Supreme Court in case of P.R. Metrani v. CIT [2006] 157
Taxman 325, held that presumption under section 132(4A) is not
available then the material seized can be used as a piece of
evidence in any other proceedings under the Act. However, this
judgment of Supreme Court is no longer valid in view of section
292C inserted by FA 2007 w.r.e.f. 1-10-1975 which provides that the
presumption under section 132(4A) which is for search proceedings
is also good for assessment proceedings.
 In view of these presumptions, it is always advisable to keep the
ornaments belonging to different members of the family along
with the list of the ornaments owned by them.
Stock in trade cannot be seized
  Seize any such books of account, other documents,
money, bullion, jewellery or other article or thing found
as a result of such search.
 Provided that bullion, jewellery or other valuable article
or thing being stock in trade of the business, found as a result
of such search shall not be seized but the authorised officer
shall make a note or inventory of such stock in trade of the
business. (w.e.f. 1-06-2003-Finance Act, 2003)
 As per the third proviso to section 132 1)(v), stock in trade
cannot be seized even in case of deemed seizure given in
the  second proviso.
Case Law

 Sri Pushpa Rajan Sahoo v. ACIT (2012) 252

CTR 113/ 75 DTR 341 (Orissa) (HC), on a writ
petition, the court directed the authorities to
release the stock in trade and return to the
party, in view of specific provision contained
in proviso to section 132(1)(iii) and third
proviso to section 132 (1)(v).
c) Requisition of books of account etc.

 - Section 132A provides that where any books of account, other

documents or assets have been taken into custody by an officer or
authority under any other law, as, for instance, Collector of
Customs, Sales Tax Commissioner etc., DIT/CIT may in
circumstances covered by section 132 authorize any
DDIT/DCIT/ADIT/ACIT or ITO to require such officer or authority to
deliver to him such books of account, other documents or assets.
 Samta Construction Co. v. Pawan Kumar Sharma [1999] 107
Taxman 198 (MP), held that a bank draft when presented for
clearing by the customer to the bank cannot be said to have been
taken into custody by the bank to attract applicability of section
132A and resultantly, the warrant of authorization requisitioning
the same by the competent authority is totally without jurisdiction.
Charter of rights and duties of persons
Searched
 RIGHTS OF PERSONS SEARCHED
 To see the warrant of authorization duly signed and sealed by the
issuing authority.
 To verify the identity of each member of the search party.
 To have at least two respectable and independent residents of the
locality as witness.
 To have personal search of all members of the search party before
the start of the search and on conclusion of the search.
 To insist on a personal search of female members by another
female member only with strict regard to decency.
 To have a copy of panchnama together with all the annexure.
 To put his own seals on the packages containing the seized assets.
 To call a medical practitioner if he is not well.
6. Charter of rights and duties of
persons Searched
•To have his children permitted to go school, after examining of their bags.
•To inspect the seals on various respectable placed in the course of the search
and subsequently reopened by continuation of search.
•To have the facilities of having meals etc., at the normal time.
•A woman occupying any apartment etc., to be searched, has the right to
withdraw before the search party enters, if according to the customs he
does not appear in public.
•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 make application objecting to the approval given by the Commissioner for
retention of books and documents beyond 180 days from the date of seizure
DUTIES OF PERSONS SEARCHED

 To allow free and unhindered ingress in to the premises.

 To see the warrant of authorization and put signatures on the same.
 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.
 To identify every individual in the premises and to explain their relationship to the
persons being searched. He should not mislead by impersonation. If he cheats by
pretending to be some other person or knowingly substitutes one person for other,
it is an offence punishable under section 416 of the Indian Penal Code.
 Not to allow or encourage the entry of any unauthorized 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 shall be punished with imprisonment or fine or both, in
accordance with section 204 of the Indian Penal Code
DUTIES OF PERSONS SEARCHED
 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.
 imilarly, 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 be
cooperative 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 Search manual also contains the Instruction No. 1916 dated 11-05- 1994 which
lays down the following guidelines for seizure of Jewellery:

 In the case of a Wealth Tax assessee, gold jewellery and

ornaments found in excess of the gross weight declared in the
wealth tax return only need be seized.
 In the case of a person not assessed to wealth tax, gold
jewellery and ornaments to the extent of 500 gms per married
lady, 250 gms per unmarried lady and 100 gms per male
member of the family, need not be seized.
 CIT v. Ratanlal Vyaparilal Jain (2011) 339 ITR 351 (Guj) (HC),
held that the approach adopted by the Tribunal considering
the extent of jewellery specified under the said circular to be a
reasonable quantity cannot be faulted with. Addition made
under section 69 was deleted.
Application/Release of retained assets

 The seized assets under section 132B can be applied against the existing liability
and the amount of liability determined on the completion of assessment including
any penalty levied or interest payable in connection with such assessment. Thus,
once the assessments are made, appeals are decided & the demand raised
including the penalty demand is paid, the seized assets have to be released.
 Punjab and Haryana High Court in case of Naresh Kumar Kohli v. CIT [2004] 137
Taxman 438, held that Department cannot retain the seized valuables during the
pendency of appeal filed by the Revenue against assessee before the High Court.
The seized assets can be released where the concerned person makes an
application to the Assessing Officer within 30 days of the end of the month in
which the asset was seized explaining the nature and source of acquisition of such
assets. However, for such release prior approval of Chief CIT/CIT/DIT is required.
This approval is required to be given within 120 days from the date on which the
last of the authorization for search was executed and the panchnamas is drawn
Application/Release of retained assets

 As per section 132B(4), the Government has to pay simple

interest @0.5% p.m. on the amount of money seized which
is in excess of the amount required to meet the liabilities.
 The period of interest shall run from the date following the
expiry of 120 days from the date of last authorization for
search to the date of completion of assessment.
 Delhi High Court in case of Puran Mal & Sons v. Union of
India [2008] 166 Taxman 452 has held that interest is payable
only on money seized and not on other assets like bullion,
jewellery etc
Prakash V. Sanghvi v. Ramesh G., Major, DDIT (Inv.) (2013) 356 ITR 426
(Karn) (HC)

  the court held that in case of trespassing of assessee’s property, the

delinquent officers may be prosecuted by a competent Criminal court.
However, warrant issued was held to be valid.
 The Act does not invest in the Deputy Director, the power to have a camp
office at the residence of the assessee and call the assessee’s attendance in
connection with proceedings under the Act. The allegation that the Deputy
Director trespassed into the house of the assessee and, thereafter, issued the
notice to him was not controverted. Therefore, the Deputy Director without
the authority of law, having trespassed into the house of the assessee
deserved to be prosecuted before a competent criminal court, if so advised.
 However, the warrant preceded the search. The assessee had time up to
March 15, 2012, to pay the advance tax and, thereafter, time to file his return
for the previous year 2011-12 (assessment year 2012-13), but that by itself did
not mean that the authorities did not have the jurisdiction to issue a warrant
and effect search and seizure under section 132.
DCIT v Mahesh Kumar Agrawal (2003)
262 ITR 338 (Cal) (HC)

 Before issue of warrant of authorisation, they

record the satisfaction and reasoning. Court
cannot sit in appeal over the opinion formed.
Existence of materials to be looked into,
Court has to examine whether on such
material a reasonable man can form opinion.
Change in life style of assessee not a material
for purpose of formation of opinion.
Space wood Furnishers Pvt. Ltd. Director General of Income Tax (Investigations) [2012] 340 ITR
0393 (Bom) / 2011-TIOL-837-HC-MUM-IT.

 Whether satisfaction note in search matters plays vital role in

establishing that the search was in accordance with the provisions of
Income Tax;

The satisfaction note contemplated therein must be based upon

contemporaneous material, information becoming available to the competent
authorities prescribed in that Section. Its availability and nature as also time
factor must also be ascertainable from relevant records containing such
satisfaction note. Loose satisfaction notes cannot meet these requirements &
said provision. The necessary live link and availability of relevant material for
considering it, has not been brought before this Court.

High growth and high profit margins, which are the matter of record
cannot be the basis for issuing search warrant.

48
M/s JEET CONSTRUCTION COMPANY Vs ACIT, IT[SS]
Appeal No.26 (Del) of 2011,2012-TIOL-11-ITAT-DEL

 Whether when Revenue searches several

persons, a combined satisfaction recorded
can be said to be legally valid for initiating
action under Sec 158BD - YES, rules ITAT

49
Space wood Furnishers Pvt. Ltd. Director General of Income Tax (Investigations) [2012] 340 ITR
0393 (Bom) / 2011-TIOL-837-HC-MUM-IT.

 Whether satisfaction note in search matters plays vital role in

establishing that the search was in accordance with the provisions of
Income Tax;

The satisfaction note contemplated therein must be based upon

contemporaneous material, information becoming available to the competent
authorities prescribed in that Section. Its availability and nature as also time
factor must also be ascertainable from relevant records containing such
satisfaction note. Loose satisfaction notes cannot meet these requirements &
said provision. The necessary live link and availability of relevant material for
considering it, has not been brought before this Court.

High growth and high profit margins, which are the matter of record
cannot be the basis for issuing search warrant.

50
SURVEY

 What is Survey ?
 How it defers from Search ?
 How it is conducted ?
 No seizures
 Disclosure and Tax Payable
Meaning of 'Survey
he Act has no definition of 'survey'. Hence, the etymological construction of the
word could well be used in interpreting the same. As per Concise Oxford
Dictionary, the expression 'survey' means 'look carefully and thoroughly at'.
As per Chambers 20th Century Dictionary, the word 'survey' means to view
comprehensively and extensively, to examine in detail. In short, the term
'survey' in context of IT Act means collection of data and information for the
purposes of the Act.
Objects of 'Survey' - Survey is an another important weapon in the armory of
the Income Tax Department to call for information of various kinds as may be
found necessary for making proper assessments. It is mainly conducted with
the object of broadening the tax base by discovering new assessees, to gather
information about possible tax evasions by assessees, spot checking of
available cash and stock and to verify in a surprise and systematic manner,
whether or not accounts are maintained properly and on day to day basis etc.
The surprise element makes survey effective and efficacious.
Kinds of 'Survey'
 No prior notice of any kind is necessary to make
surveys N.K. Mohnot v. Dy. CIT [1995](Mad.)
These could be classified as (i) Internal, and
(ii) External. Internal survey is carried out under section
133 of the IT Act by collecting information from
various sources and agencies. The information so
gathered is then collated, disseminated and utilized.
External survey implies gathering information on spot
or otherwise under sections 133A and 133B of the Act.
Survey under section 133A of the Act-

 by whom-where and when By Whom (Sub-section 1)

 An authorized officer having jurisdiction over the place/person or other officer
authorized by such officer (including inspector) authorized by such officer. Where (Sub-
section 1) At business place (may not be principal place) or where books or
documents/cash/stock/other valuable article or thing is kept (but not at the place of
Attorney/CA/Advocate)
 U.K. Mahapatra & Co. v. ITO [2009] 176 Taxman 293 (Ori.), held that the pre-condition
for conducting survey under section 133A in premises of a CA/lawyer/tax practitioner in
connection with survey of business place of their client is that the client, in course of
survey, must state that his books of account/documents records are kept in office of his
CA/lawyer/tax practitioner and unless this pre-condition is fulfilled, IT authority cannot
assume any power to enter business premises/offices of CA/lawyer/tax practitioner to
conduct survey u/s 133A in connection with survey of premises of their client
 When (Sub-section 2) During business hours and in case of any other place after
sunrise and before sunset. However, once survey has started, it can continue even after
business hours or sunset as held in case of N.K. Mohnot
Powers of authorized officer u/s133A(3)

•Place marks of identification on books of account/documents inspected

by him
• Make or cause to be made extracts or copies there from
• Impound and retain in his custody any books of account or documents
inspected by him (not exceeding 10 days except with approval of
CCIT/DG)
• Make inventory of any cash/stock/other valuable article or thing
checked/verified by him (no power to remove it)
• Record the statement of any person (without administering oath) which
may be useful for any proceeding under the Act.
Ahmedabad Tribunal in case of Ashok Manilal Thakkar v. Asstt. CIT
[2005] 97 ITD 361 held that statement of assessee recorded in survey
has no evidentiary value by following the judgment of Kerela High Court
in case of Paul Methews & Sons v. CIT [2003] 129 Taxman 416
Facility to be provided by attending person to
authorized officer u/s 133A(1)

• Inspect books of account/documents as may be required /available

• Check and verify cash/stock or other valuables found
• Furnish the relevant information as may be required If not provided
or in case of refusal for statement, all powers u/s 131 including
conversion into search (Sub-section 6)
Ceremonial Survey u/s 133A( 5) Where heavy expenditure incurred
in connection with function /ceremony /event •Required to furnish
information from assessee or any other person in possession of
information
• At any time after such function/ceremony/event
•Record statement of assessee or any other person
• Such statement be used as an evidence in any proceedings under
the Act
Mass Survey under section 133B of the
Act
 An authorized officer for the purpose of collecting
information may enter any building or place within the
limits of area assigned to him or occupied by any person on
whom he exercises jurisdiction at which a business or
profession is carried on (may not be principal place) and
require any proprietor/employee or any other person to
furnish information. The authority may enter the place of
business or profession only during business hours and on
no account, remove from the building or place any books of
account or other documents /cash /stock /other valuable
article or thing. The information is called in Form No. 45D
Can a Survey be converted to Search

 In normal Circumstances ‘No’ but in exceptional

Circumstances ‘Yes’. A survey undertaken under
Sec.133A can be subsequently converted to search only
when it meets the conditions of Sec.132. “Where survey
action u/s 133A was taken at the business and
consequent search u/s 132 was authorized at the
residential premises without recording independent
reasons for satisfaction, the search was declared
illegal”. Vinod Goel V. UOI (2001) 252 ITR 29(P&H) Dr.
Nalini Mahajan & Others Vs. DIT(Inv.)(DHC)257 ITR
123.
WHO CAN CONDUCT SURVEY – Authorised/ Authorising Officer (Expln.to
sec.133A)

I. Authorized / Authorizing Officers:

 Director /Commissioner (authorised/ authorising)

 Joint Director/ Joint commissioner (authorised/ authorising)
 Additional director/ Addl. Commissioner (authorised/ authorising) [as per
meaning of Joint Director in s.2(28D) & Joint Commissioner in s.2(28C)]
 Deputy Director / Deputy Commissioner. (authorised)
 Assistant Director / Assistant Commissioner (authorised)
 Assessing officer (authorised)
 Tax Recovery Officer (authorised)
 Inspector of Income Tax (authorised) (For certain Specific cases only i.e for
purposes of s.133A(1)(i), 133A(3)(i) & 133A(5)- as per Explanation (a) to sec.133A)
59
Jurisdiction for conducting Survey
S. 133A (1)
An Income Tax Authority may enter :
a) Any place falling in his jurisdictional area.
b) Any place occupied by any assessee falling in his jurisdiction.
c) Any place in respect of which he is authorized for the purpose of
this section by such income tax authority, who is assigned the area
within which such place is situated or who exercises jurisdiction in
respect of any person occupying such place.
at which a business or profession is carried on, not
necessarily be the principal place of business

Note: Residential premises can also be covered if some business/professional

work/document is being done / kept there.

60
 Judicial Pronouncements
U K MAHAPATRA AND CO AND OTHERS Vs.
INCOME TAX OFFICER AND OTHERS [2009] 308
ITR 0133 (Ori.)
Revenue conducts survey u/s 133A in the premises of
Petitioner, a Chartered Accountant Firm which was the
auditor of the assessee, and impounded certain files –
Held that although Explanation to Sec 133A allows survey of
any other place where the books of accounts of assessee are
kept but the precondition for conducting survey u/s 133A, is
that the client in course of survey must state that his books of
accountant/documents and records are kept in the office of
his chartered accountant/lawyer/tax practitioner.

61
Restriction of entry S. 133A(2)..

 An Income tax authority may enter any place of business or

profession ref. in s.s(1) only during the hours at which such
place is open for the conduct of business or profession and , in
case of any other place, only after sunrise and before sunset.
Mohnot (N.K.) vs. DCIT, [1995] 215 ITR 0275 (Mad)

 In respect of other place, wherein the books of accounts, other

documents, cash etc. has been stated to be kept the survey party
can enter only after sunrise and before sunset.

 The restriction is only in respect of entry in to the place of

business or profession and not related to the exit, survey may
continue after office hours and even after sun set. 62
 Contd…
Power of Survey team, vis a vis, Obligation of tax
payer, S.133A(1)

The ITA may require any proprietor, employee or any other person
attending or helping in carrying on such business or profession- to
afford him necessary facility
(i) to inspect books of accounts or other documents available at such
place. ( Power is also available with Inspector of Income Tax in
view of Explanation (a) to s.133A] )
(ii) Check or verify the cash, stock or other valuable or thing found
therein [However, An income tax authority acting under
this section shall, on no account, remove or caused to be removed
from the place wherein he has entered, any cash, stock or any other
valuable article or thing. [s.133A(4)]
(iii) May require to furnish any information as may be useful for any
proceedings under the Act
63
63
 Other Powers of Survey Team S.133A(3)
i. To place marks of identification on the books of account & can make
extracts & copies there from. ( This power is also available with
Inspector of Income Tax also in view of Explanation (a) to s.133A]

ii. To make an inventory of cash, stock or other valuable article or thing

verified by him (Section 133A(4) specially prohibits the removal of cash,
stock other valuable article or thing w.e.f. 01/06/2002 ).

iii. Record statement - Not on oath U/s 133A [ Paul Mathews & Sons vs. CIT,
[2003] 263 ITR 101(Ker)], however statement can be recorded on Oath,
only under circumstances where S. 133A(6) is invoked : United Chemical
Agency vs. R.K. Singh, ITO [1974] 097 ITR 0014 (All)

Note : There is no provision of sealing for business premises either u/s 133A or
sec. 132 or any other section of the IT Act.
Shyam Jewellers & Anr. Vs Chief Commissioner (Administration) U.P &
others (1992)196 ITR 243(All) 64
 Impounding and retention of Books of Accounts
S.133A(3)-Im133A(3)(ia)

 Impound and retain books of accounts only after recording reasons in

writing [s.s(3)(ia) inserted by Finance Act, 2002,w.e.f. 01/06/2002] please
see Mrs. Rumena Rahman vs. Union of India [2004] 265 ITR 0016- (Gau.)
 Permission from CCIT/DGIT is required in case Period of retention of books
or documents exceeds 10 days, exclusive of holidays (w.e.f. 01-06-2003),
where permission for retention should be granted judiciously, there
should be justification as to non cooperation by the assessee: Raj and Raj
Investments vs. Income-tax Officer [2007] 293 ITR 0057- (Kar)
Note: The Law is silent as to allowing any opportunity to the assessee to object
the impounding of books of accounts.

[2011] 12 taxmann.com 91 (Punj. & Har.) Bawa Gurmukh Singh & Co. v. ITO
Books or other documents and retain the same beyond 10 days after that even though the officer
conducting survey could impound the books of account approval of the Chief Commissioner, the said power
is not an absolute power. It is subject to judicial review like any other discretionary power 65 of an
administrative authority.
 Recording of Statements – Some checks
U/s 133A(3)(iii)

 As per latest circular of CBDT No. 286/2/03- IT (Inv) dt. 10/3/03- no Confessional statement to
be elicited.
 No provision under the Law to seek copy of statement from revenue at the time of recording the
same, however in case of statement being used against assessee, he may ask for its copy by relying
on principles of natural justice and equity.
 Other Provisions of CPC applicable, in case, the officers invoke section 131.
 Statement recorded during survey do not have any evidentiary value.
[CIT vs. Dhingra Metal Works (Delhi High Court) [2011] 196 Taxman 488/ [2010] 328 ITR 384]
 Statement recorded during survey have corroboratory value.
Commissioner of Income-tax v. Hotel Samrat [2010] 323 ITR 353 (KER.)
Note : If the assessee is able to explain the discrepancy in the stock found during the course of
survey by production of relevant record, the AO can not make the addition solely on the basis of
statement made by the assessee during survey. CIT Vs. S. Khader Khan Son [2008] 300 ITR 157
(Mad.), see also DCIT vs M/s Premsons (ITAT Mumbai)

66
 Judicial Pronouncements
Under survey the AO is not authorised to record a statement on oath, though
he can record the statement of any person which may be useful for or relevant
to any proceedings under the Act. Thus the said statement is only an
information and has no evidentiary value - The information so obtained can be
used only for corroboration purposes for taking a decision on an issue either in
favour or against an assessee.
Case Law : Unitex Products Ltd. vs ITO - 2008 22 SOT 429 [ITAT – Mumbai see
also (2010) 323 ITR 353 (Ker.), CIT v. Hotel Samrat]
No addition to income on the basis of disclosure could be made where the
assessee had retracted certain income after disclosing it and no material had
been found to prove this income during the survey.
Case Law : Ashok Manilal Thakkar vs ACIT – 279 ITR 143 [ITAT–AHM]
No reliance could be placed upon a statement regarding surrender of loss by
the assessee, which was retracted soon after a survey under s.133A of the
Income Tax Act 1961 was carried out. Further, the statements recorded by the
Inspector and the ITO, without reading and explaining them to the assessee
before obtaining his signature, were invalid.
Case Law : ITO vs Vardhman Industries - 99 TTJ 509 [ITAT - Jodhpur] / Kailash
Chand L/H of Late Mangilal vs ITO - 113 TTJ 488 [ITAT-Jodhpur] 67
 Judicial Pronouncements

 The statement recorded during the survey

was not signed either by the AO or by the
Inspector. No addition to income could be
made on the basis of the said statement.
Case Law : Kailash Chand L/H of Late
Mangilal vs ITO - 113 TTJ 488 [ITAT-Jodhpur]

68
Precaution while making any statement.

 Is there any evidence found during survey that

could lead to an inference of concealment ?
 Is their lies any discrepancy between the stock in
hand and the stock as per books ?
 Is it advisable to admit discrepancies in the stock?
 Are the provisions of sales tax and excise duty
along with provisions like dis-allowance u/s. 40-
A(3), 269-SS, 269-T etc have been kept in mind
before making any confession statement ?

69
Precaution while making any statement.

 Is it safer to disclose income under the head "other

sources" or "business“ ?

 Would it be desirable to declare the entire amount as

current year’s income or spread over income for many
years as any spread over may result in liability to
interest and penalty for concealment ?

 Is it possible to capitalize the disclosed amount ?

 Whether a survey would result in reopening of
assessment of earlier years?
70
Precaution while making any statement.

 Care should be taken to ensure that the

disclosure takes care to covers the discrepancies
found during the survey and also those that may
be unearthed at a later stage.

 Before making retraction the assessee must

prove beyond doubt the circumstances for such
retraction are bonafide & are not after thoughts.
Case: DCIT vs. Bhogilal Moolchand (2005) 3 SOT 211
(Ahd.)
71
Judicial Pronouncement
Dr. S.S. Gulati. v DCIT I.T.A. No.671 of 2009 [P&H HC]
 Where the appellant had himself surrendered the amount voluntarily,
paid the taxes in advance on the surrendered amount ;the allegation of
coercion and duress is baseless and it is an after thought , (since it
could have stopped the payment of cheques given in advance to the
Department, had it been convinced that the statement has been given
under coercion and duress).
 The statement given in a spontaneous and natural manner, cannot be
ignored keeping in view the facts and circumstances of the case where
there  does not appear to be any reason for the appellant for retracting
from the surrender, which it has already made during survey and on
which it has already paid advance tax voluntarily
72
Lavish and ostensible spending -Sec.
133A(5)
 If the income tax authority is of view, of any lavish
expending on any function or ceremony.
 It can call for the information from the assessee or from
any other person who is likely to be in possession of the
information with respect to the expenditure incurred.
 However, cannot call for such information before or at
the time of such function, ceremony or event
 Power prescribed be exercised only when the said
function, ceremony or event is over.
Note: All the powers given in this section are available with
Inspector also.[ Explanation (a) to s.133A]
73
73
Press Release Note dated 03/06/1989

 The Government will launch a drive against ostentatious wedding

ceremonies and other social functions which often involve blatant
use of tax-evaded money. According to Revenue Secretary,
Dr.Nitish Sengupta, such ostentation is inconsistent with the
egalitarian values of Indian society.
 
 Section 133A of the Income-tax Act, 1961, authorizes Income-tax
Officers to make surveys of marriage ceremonies and other
ostentatious social functions and to detect use of unaccounted
money. So far, this provision has not been sufficiently used to
make a visible impact on the curbing of wasteful expenditure.
 
74
Powers of Income Tax Authority In case of non-cooperation by
assessee- Sec. 133A(6)

 Where during the course of survey assessee does not-

 Afford the facility to inspect books of accounts
 Afford facility to check or verify cash, stock etc.
 Furnish any information or to have his statement
recorded.

The Income tax authority shall have all powers u/s 131(1) to
enforce compliance with the requirement made.

 For the purpose of this sub-section, the Income Tax

Authority has been empowered to record the statement of the
assessee or such other person. It is to be specifically noted
that the statement thus recorded may be used as evidence in
any proceedings under the Act. 75
Presumption as to ownership. S. 292 C

Section 292C of the Income Tax Act, 1961 states the

presumption regarding the assets, documents and books found
in possession or control of any person in the course of a
search *or survey operation [ Inserted by Finance Act, 2008,
w.r.e.f. 1/06/2002] that:

 Such book of account, other documents, money, bullion,

jewellery, other valuable article or thing belong or belongs to
such person.

 The contents of such books of account and other documents

are true.
Contd….
76
Presumption as to ownership. S. 292 C

 The signature and every other part of such books of account and other
documents which purports to be in the handwriting of any particular
person or which may reasonably be assumed to have been signed by, or to
be in the handwriting of, any particular person, are in that person’s
handwriting, and in the case of a document stamped, executed or attested,
that it was duly stamped and executed or attested by the person by whom
it purports to have been so executed or attested.

 Surendra M. Khandhar vs ACIT & Ors. (2009) 224 CTR (Bom.) 409
Assessee having failed to rebut the presumption u/s 292C , addition u/s 69
on the basis of documents seized from the possession of the assessee was
rightly made by AO & sustained by the tribunal.
77
Can survey be converted in to search?

  Under normal circumstances, “no”. However, in exceptional cases, “yes”.

 – A survey undertaken under section 133A can be subsequently converted
into a search if the conditions of this section are satisfied.
 Vinod Goel v. UOI (2001) 252 ITR 29(P&H)(HC)(40)
 – Where survey action u/s 133A was taken at the business and consequent
search u/s 132 was authorised at the residential premises without recording
independent reasons for satisfaction, the search was declared illegal.
 Dr. Nalini Mahajan and others v. DIT (Inv)(2002) 257 ITR 123 (Delhi)(HC)
 – Survey operation converted into search and seizure – No reason given for
such conversion – No independent application of mind –Search and seizure
operation was held to be invalid – Hospital premises belongs to Trust and
not assessee.
 Jinesh Farshubhai Kakad v. DIT (Inv.) (2003) 264 ITR 87 (Gau.)(HC)
Things NOT to be done after search
and seizure and survey
 1. Goods put under prohibitory order cannot
be removed.
2. Never mislead on facts.
3. Don’t try to destroy the documents or
books.
Prosecution
 Prosecution proceedings under the Income Tax Act, 1961 can
be initiate for offences that are detrimental to the interest of
the revenue and the same are listed from Section 275 to
Section 279 of the Income Tax Act, 1961.
 These offences are punishable with rigorous imprisonment
and fine for a period not less than 3 months but extending up
to 7 years.
 However, these provisions are only indicating the punishment
for offences but the mechanism for effecting punishment is
not yet provided in the Act. The Income Tax department has
to file a complaint in the normal court after which full and due
process of law would award punishment or otherwise.
Prosecution
a) Under Section 275A- Contravention of an order passed under sub-section (3)
of Section 132 shall be punishable with rigorous imprisonment, two years and
shall also be liable to fine. Section 132 (3) states that the authorized officer
may, where it is not practicable to seize any such books of accounts, other
documents, money, bullion, jewellery or other valuable article or thing, serve
an order on the owner or the person who is in immediate possession or
control thereof that he shall not remove, part with, or otherwise deal with it
except with the previous permission of such officer.
b) Under section 275B- Failure to comply with the provision of clause (iib) of sub-
section 1 of Section 132 shall be punishable with rigorous imprisonment which
may extend to two years and shall also be liable to fine. If a person who is
required to afford the authorized officer the necessary facility to inspect the
Books of Accounts or other documents as required under clause (iib) of sub-
section 1 of Section 132, fails to afford such facility to the authorized officer is
deemed to have failed to comply with the provisions. ay extend to two
Arrest of the assessee
 Arrest of Tax payer for recovery The Income Tax law,
vide under section 222 of IT Act empowers the Revenue
authorities to arrest the tax payer and to detain him in
prison for the purpose of enforcement of recovery of
arrears of tax, interest or penalty due from him
i) Attachment and sale of assessee’s movable property.
ii) Attachment and sale of assessee’s immovable
property.
iii) Arrest of the assessee and his detention in prison.
iv) Appointing a Receiver for the management of the
assessee’s movable and immovable property
Case law

 In K.T. Thomas v. C.I.T. [1988 173 ITR 283 Ker] , the

Kerela High Court upheld the decision of the CIT
for arrest of the defaulting assessee. The arrest
was made for evasion of tax payments by means of
dishonest transfer of property and concealment of
receipt of money and details of property.
 In Kuldeep Singh v. TRO [1989 176 ITR 204All], the
Allahabad High Court upheld the order of TRO for
arrest of the assessee for intentionally avoiding
payment of income tax dues.
Procedure for arrest
 The provisions of schedule II of Income Tax Act, 1961 lays down the statutory rules
governing the arrest and detention of an assessee in default.
a) Rule 73 requires a show-cause notice to be issued before any person alleged to be
in default in tax arrears is sought to be arrested and detained. This show cause
notice is mandatory
b) Rule 74 provides for a hearing to be provided to the assessee to whom the show
cause notice has been issued.
c) Under Rule 75, pending conclusion of the inquiry, the TRO may in his discretion
order that the tax defaulter be detained in custody of such officers as he may
deem fit or release him on his furnishing security to the satisfaction of the TRO for
his appearance as and when required.
Rule 77 prescribes that the maximum period for which the defaulter could be put in
civil prison, where the tax demand in arrears exceed Rs. 250 is six months and in
other cases the maximum period is six weeks. Women, persons of unsound mind
and minors cannot be arrested under Rule 81 of Schedule II of Income Tax Act,
1961.
The remedy for taxpayers who face problems of arrest and detention as part of
revenue recovery measures are listed below:

a) An appeal to the Tax Revenue Commissioner

b) b) Writ Petition in the High Court
c) Anticipatory Bail before the Sessions/High Court under
section 438 of Cr.P.C.
The assessee can resort to Writ petition in High Court for
judicial remedy to prevent arrest, if he can prove that the
recovery certificate made by the TRO is:
 Illegal
 Without jurisdiction
 Without proper application of mind
 Motivated by extraneous considerations
 High handed and arrogant
Mahmed Akhtar Husain v.State of
Gujarat, 1992 198 ITR 229 Guj
 the High Court held that the detenu who is admittedly
a tax defaulter should not be allowed to go free and
therefore even when the detenu is directed to be
released from prison, the Court can put necessary
conditions to ensure proper realization of revenue
legitimately due. While granting a writ in favour of the
petitioner the Court would also consider whether the
assessee is merely a defaulter in payment on account
of indifference or whether the defaulter had acted
malafide to wilfully evade the tax due.
2017 Developments on search and seizure
AMENDMENTS TO SECTION 132-133A OF THE ACT

(1) of section 132A to declare that the “reason to believe”

or “reason to suspect” as the case may be, shall not be
disclosed to any person or any authority or the Appellate
As per an amendment in the Bill, an explanation will be
added under the fourth proviso of Section 132(1) of the
Act. This explanation, which supplements the section,
states:
“For removal of doubts, it is hereby declared that the
reason to believe, as recorded by the Income Tax
authority, under this subsection shall not be disclosed to
any person or any authority or the Appellate Tribunal.”
2017 devlopments
 These amendments will take effect retrospectively from the
date of enactment of the said provisions viz. to sub-section
(1) of section 132 from 1st day of April, 1962 and to sub-
section (1A) of section 132 and to sub-section (1) of section
132A from

 Recording “reasons to believe” has been considered as one

of the safeguards to prevent vexatious search and seizures in
many statute...
Conclusion
 Both search seizure and survey are intrusions on the
liberties of the taxpayers and, hence, powers conferred for
these need to be exercised with a lot of care and caution.
There is a lot of difference in search and survey proceedings.
Over the years the extent of black money, i.e. , unaccounted
money and tax evasion has assumed such dimensions that
no section of the community seemed to be quite immune
from its ill effect. This evasion deserves to be eliminated
from the largest democracy of the world. It is a high time to
create an atmosphere where the taxpayers pay due taxes
and evasion of tax attracts social stigma