INCOME-TAX AUTHORITIES

DR. P. SREE SUDHA,LL.D

ASSOCIATE PROFESSOR
DAMODARAM SANJIVAYYA NATIONAL LAW
UNIVERSITY
OUTLINE
 Appointment, Jurisdiction and Powers- (Section 116)
 Appointment of Income-tax Authorities (Section 117)

 Control of Income-tax Authorities (Section 118)

 The Central Board of Direct Taxes (CBDT)

 Appointment and Working of the Board

 Jurisdiction – Power – Jurisdiction of Income-tax Authorities (Section 120)

 Director-General or Director of Income-tax – Chief Commissioner or

Commissioner of Income-tax – Commissioner of Income-tax (Appeals) –
Return of Income [(Section 139(1)]
 Signing of Return (Section 140)

 Permanent Account Number (PAN) (Section 139A)

 Types of Assessment

 Reference to Dispute Resolution Panel (Section 144C)

 Rectification of mistakes [Section 154]

INCOME-TAX AUTHORITIES (APPOINTMENT,
JURISDICTION AND POWERS) (SECTION 116)
The Central Board of Direct Taxes, constituted under the Central
Boards of Revenue Act, 1963
(i) Directors-General of Income-tax or Chief Commissioners of
Income-tax;
(ii) Directors of Income-tax or Commissioners of Income-tax or
Commissioners of Income-tax (Appeals);
(iii) Additional Directors of Income-tax or Additional
Commissioners of Income-tax or Additional Commissioners of
Income-tax (Appeals);
(iv) Joint Directors of Income tax or Joint Commissioners of
Income-tax.
(v) Deputy Directors of Income-tax or Deputy Commissioners of
Income-tax or Deputy Commissioners of Income-tax
(Appeals);
INCOME-TAX AUTHORITIES (APPOINTMENT,
JURISDICTION AND POWERS) (SECTION 116)

(vii) Assistant Directors of Income-tax or Assistant

Commissioners of Income-tax;
(viii) Income-tax (Assessing) Officers;
(ix) Tax Recovery Officers;
(x) Inspectors of Income-tax
POWERS OF IT AUTHORITIES
(a) discovery and inspection;
(b) enforcing the attendance, including any officer of a
bank and examining him on oath;
(c) compelling the production of books of accounts and
the documents;
(d) collecting certain information [Section 133B - inserted
by the Finance Act, 1986];
(e) issuing commissions and summons.
POWERS OF IT AUTHORITIES
 The powers granted are generally quasi-judicial.
 In particular, the powers of income-tax authorities relate
to discovery, production of evidence etc., searches and
seizures, application of retained assets, power to call for
information from various parties, authorities and bodies,
powers of survey, powers relating to the inspection of the
registers of companies etc.
 Further, all proceedings under the Income-tax Act before
any income-tax authority must be deemed to be judicial
proceedings within the meaning of Sections 193 and 228
and for purposes of Section 196 of the Indian Penal
Code.
THE CENTRAL BOARD OF DIRECT TAXES
(CBDT)
(i) Power to make Rules: It has the power to make rules
(under Section 295) for carrying out the purposes of this
Act. The Rules may be made for whole or any part of India.
(ii) To issue instructions: It may issue orders, instructions and
directions to all officers and persons employed in the
execution of the Act (Section 119).
However, it cannot interfere with the discretion of the
Commissioner (Appeals), in the exercise of the appellate
functions [Section 119(1)(b)] and it cannot direct the
Assessing Officer or any other income-tax authority to
make a particular assessment or to dispose of a particular
case in a particular manner [J.K. Synthetics Ltd. v. CBDT
(1972) 83 ITR 335 (SC)] [Section 119(1)(a)].
THE CENTRAL BOARD OF DIRECT
TAXES (CBDT)
(iii) Power to relax mandatory provisions: The Board is empowered to
relax the provision relating to the charge of mandatory interest for
defaults in deduction of tax at source, or payment of such tax [under
Section 201(1A)] or payment of advance tax (Section 211) or interest
for defaults in furnishing return (Section 234A) or interest for defaults
in payment of advance tax (under Section 234B or Section 234C) or
assessment and recovery of tax. The Board is also empowered to relax
the provisions relating to the computation of total income and
deductions to be made in computing total income in cases of genuine
hardship. It can be done by a general or special order and for reasons to
be specified therein.
(iv) Power to admit belated refund application: To avoid genuine
hardship in any case or class of cases, the Board may authorise any
income-tax authority, not being Commissioner (Appeals) to admit
belated application or claim for any exemption, deduction, refund or
any other relief [Section 119(2)(b)].
THE CENTRAL BOARD OF DIRECT
TAXES (CBDT)
(v) Power to decide jurisdiction: The Board is empowered to
decide jurisdictional matters of any income tax authority and
assign to them such functions as are to be performed by them
(Section 120).
(vi) Power to disclose information: The Board may disclose
information relating to any assessee, to any officer, authority,
or body performing any functions under any tax law relating
to the imposition of any tax, duty or cess or dealing in foreign
exchange under Foreign Exchange Management Act, 1999, if
it considers such disclosure in public interest. The Board may
also authorise any other income-tax authority to disclose such
information (Section 138). The provision is intended to
facilitate exchange of information about tax evaders.
DIRECTOR-GENERAL OR DIRECTOR
OF INCOME-TAX
(a) To appoint an income-tax authority below the rank of an
Assistant Commissioner (Section 117): If so authorised by
the Central Government a Director-General or Director may
appoint an income- tax authority below the rank of Assistant
Commissioner.
(b) To delegate the powers of Assessing Officer to Joint
Commissioner (Section 120): Where Director General or
Director is so authorised by the Board, he may delegate the
powers and functions of the Assessing Officer to Joint
Commissioner.
(c) To transfer cases (Section 127): The Director-General may
transfer any case from one or more Assessing Officers
subordinate to him to any other Assessing Officer also
subordinate to him.
(D) ENQUIRY INTO CONCEALMENT
[SECTION 131(1A)]:
If the Director-General or Director or Deputy Director or
Assistant Director (w.e.f. 1.6.1988) has reason to suspect
that any income has been concealed, or is likely to be
concealed, by any person or class of persons, within his
jurisdiction, he is empowered to make any enquiry or
investigation relating thereto notwithstanding that no
proceedings with respect to such person or class of
persons are pending before him [Section 131(1A)].
(E) SEARCH AND SEIZURE [SECTION
132(1)]:
 Where the Director- General or Director or Chief Commissioner
or Commissioner in consequence of information in his
possession has reason to believe that (a) any person to whom
notice has been issued in respect of discovery and inspection etc.
[under Section 131(1)] or (b) any person to whom notice has
been issued to produce accounts or documents [under Section
142(1)], has failed to do so far he is not likely to produce such
accounts or documents, or (c) any person is in possession of
undisclosed income or property, he is empowered [under Section
132(1)] to authorise any Deputy Director, Deputy Commissioner,
Assistant Director (Assistant Commissioner w.e.f. 1.4.1989) or
Assessing Officer to enter and search any building, place, vessel,
vehicle or aircraft, where he has reason to suspect about their
availability and seize any such books of accounts
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.
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.
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.
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
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).
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
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.
ENTICK V. CARRINGTON - 19 ST. TR. 1029
 Lord Carden C.J. in that case condemned the
practice of the Secretary of State issuing a
general warrant to search a man’s property and
his premises in the following words : “The great
end for which men entered into ' society was to
secure their property. That right is preserved and
un-communicable in all instances where it has
not been taken away or abridged by some public
law for the good of the whole.”
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 member
of search party  To allow search party of enter in
 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 call doctor for the ill person  To give explanation when asked
 To send kids to school after verification of
their school bags  Restrict entry of any unauthorised
 Female to be searched by female only persons
 To have inventory of items found and seized  Move any items without
 To use phones permission of search party
 To have copy of statements recorded
 To Co Operate search party
 To have copy of books and documents seized
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.
RIGHTS OF AN ASSESSEE DURING A
RAID
(i) Raid can only start between sunrise and sunset. However, they can continue
for 48 hours .
(ii) The assessee has the right to see the search warrant and the identification of
the authorized officers
(iii) Female members can insist on being searched by female officers
(iv) Children can be allowed to go to school but officers can check their tiffin
boxes and school bags.
(v) The assessee can make copies and take extracts of the books of accounts or
documents seized.
(vi) Pardanashin ladies can withdraw from appearing.
(vii) It is the duty of the Authorized officer to have two independent witnesses
(panchas) from the locality.
(viii) It is the right of the assessee to have his statement recorded during or after
the raid.
(ix) A copy of the panchanama and list of the articles seized should be given to
the assessee.
POWER TO ARREST
 There is no power authorizing any officer of Income Tax
to arrest an assessee or any other person for possessing
unaccounted property.
 However, if an Income Tax Officer is assaulted or is
made the subject of any other offence under Indian Penal
Code, then the police can arrest the person who has
assaulted the authorized officer. It is necessary to clarify
that that the arrest would not be under the Income Tax
Law but it would be for the offence under the Penal code.
Arrest at a later stage is possible. This comes when all the
Departmental proceedings against the assessee is over
and a Recovery Certificate is issued under Section 222 of
the Income Tax Act.
NON-RESIDENTS
 Ram Kumar Dhanuka v. UOI (2001) 252 ITR 205 (Raj)
(HC), The court held that, even a non-resident Indian can be
subjected to a search under this section if the department has
definite information that the person concerned has income earned
in India which may be taxable under the Act and which might not
have been disclosed or would not be so declared.
 Prabhubhai Vastabhai Patel v. R.P.Meena (1997) 226 ITR
781(Guj.)(HC), the High Court has discussed the principles for
exercise of the power of search and seizure. The Court observed
that the person bringing gold must satisfy the Income–tax
authorities that he had the means to purchase such gold and that
income from sale would be disclosed. On the facts of that case, the
Court held that seizure of gold from the Non-resident Indians was
valid though the gold was brought within permissible limit of 5
Kgs as per the extant scheme. 
THE COURT ALSO OBSERVED THAT
  
 “We cannot accept the contention raised by Mr. Shah
that once the gold was lawfully brought in and proper
custom duty was paid, the same should not have been
pursued by the income-tax authorities. Buying gold in a
foreign country and bringing it in to this country after
paying custom duty in foreign exchange does not absolve
the person bringing the gold from abroad of his liability
to satisfy that the gold was purchased from income
lawfully earned by him and the income earned out of
sale of such gold would be disclosed for the purpose of
the Act.”
 RECOVERY OF TAX AT PRE-
ASSESSMENT STAGE.
 Section 132 relates to the pre-assessment stage, and it
cannot be invoked after an assessment is made to recover
the tax due. There can be no question of making a
seizure under section 132 of the Act and proceeding
further under the provisions of that section, once an
assessment is completed”.
 K.Choyi v. Syed Abdulla Bafakky Thangal & Ors.
(1980) 123 ITR 435 (SC) (437)
NO ARREST OR DETENTION CAN BE
MADE UNDER THIS SECTION.
 Mere failure to disclose property purchased is not
enough. No power to arrest or restraint in movement of
individual.
 “There is no power contained in the Act or the Rules
where by the movement of a person against search is
ordered can be restricted. By refusing to give permission
to the petitioner to attend his work in effect, it amounted
to his confinement which is not permissible in law”.
 L. R. Gupta & Ors. v. UOI (1992) 194 ITR 32 (Delhi)
(HC) (55) [SLP granted (1992) 194 ITR 239 (St)].
ARRESTS
  The power of arrest vests with the Customs, Central
Excise and Enforcement Officers. Income-tax Officers
have no powers of arrest. Arrests are generally resorted
to in cases where the detected offence is of a serious
nature and the case appears to be fit for criminal
prosecution. Persons are generally not arrested when the
intention is only to have departmental proceedings.
Persons are arrested when there is a gravity of offence,
evidence of personal culpability, a strong and prima facie
case and a likelihood of person tampering with evidence
by remaining at large or absconding.
 LEGALITY OF SEARCH AND
JURISDICTION
ITO v. Seth Brothers & Ors. (1969) 74 ITR 836 (SC)
 – If the action of the officer issuing the authorisation or
of the designated officer is challenged, the Officer
concerned must satisfy the court about the regularity of
his action. If the action is maliciously taken or power
under the section is exercised for a collateral purpose, it
is liable to be struck down by the court. If the conditions
for the exercise of the power are not satisfied, the
proceedings are liable to be quashed. But, where the
power is exercised with bonafide intention and in
furtherance of the statutory duties of the tax officer, any
error of judgement on the part of the officers will not
vitiate the exercise of the power.
POORAN MAL V. DIT (1974) 93 ITR 505 (SC)

Provision of search and seizure in section 132 and Rule

112 of the Income–tax Rules 1962, do not violate the
fundamental rights under articles 19(1)(f)/(g) of the
Constitution of India. Restrictions placed by any of the
provisions of section 132, section 132A or Rule 112A are
reasonable restrictions on the freedom under these
Articles. Evidence obtained in search made in
contravention of provisions can be used, unless there is
an express or necessarily implied prohibition in the
Constitution or other law, evidence obtained as result of
illegal search or seizure is not liable to be rejected.
DR. PRATP SINGH AND ANR V. DIRECTOR OF
ENFORCEMENT AND ORS (1985)155 ITR 166 (SC

 “Illegality of a search does not vitiate the evidence

collected during such illegal search. The only
requirement is that the Court or the authority before
which such material or evidence is placed has to be
cautious and circumspect in dealing with such material
or evidence”
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.
63
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

64
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).
TRIAL BY MEDIA
 When a survey or search is conducted on a well-known
business house or well-known personality – Based on the
report, media houses give their own verdict.
 But when the matter is finally decided by the Tribunal
after four years, there may not be any addition sustained
by the Tribunal. One can visualise the damage to the
reputation of a person’s business, his family members –
especially school going children.
RAJENDRAN CHINGARAVLELU (MR) V. R. K.
MISHRA, ADDL. CIT (2010) 320 ITR 1 (SC) (10)
 The apex court in  observed that “there is a growing
tendency among investigating officers (either police
or other departments) to inform the media, before the
completion of investigation, that they have caught a
criminal or an offender. Such crude attempts to claim
credit for imaginary investigational breakthrough
should be curbed”
WHETHER RECORDING OF ENTIRE SEARCH OR SURVEY BE
PERMITTED. MODERN TECHNOLOGY – WHETHER
RECORDINGS COLLECTED IN STING OPERATION IS
ADMISSIBLE AS EVIDENCE IN THE COURT?

 The tape recording of a conversation was admitted in

evidence, to corroborate the evidence of witnesses who
had stated that such a conversation had taken place.
 Yusufalli Esmail Nagree v. The State
Of Maharashtra, 1968 AIR 147 (SC) 
Court held that the contemporaneous dialogue between
the appellant and S is relevant and admissible under s. 8
of the Indian Evidence Act. The process of tape
recording offers an accurate method of storing and later
reproducing sounds. The court must be satisfied beyond
-reasonable doubt that the record has not been tampered
with.
RAM SINGH V. COL. RAM SINGH AIR
1986 SC 3 
Fazal Ali, J. for the majority laid down specific guidelines regarding the admissibility
of a tape recorded statement, fine tuning the process as follows:
(1) the voice of the speaker must be duly identified by the maker of the record or by
others who recognise his voice. In other words, it manifestly follows as a logical
corollary that the first condition for the admissibility of such a statement is to
identify the voice of the speaker. Where the voice has been denied by the maker it
will require very strict proof to determine whether or not it was really the voice of
the speaker.
(2) The accuracy of the tape recorded statement has to be proved by the maker of the
record by satisfactory evidence direct or circumstantial.
(3) Every possibility of tampering with or erasure of a part of a tape recorded
statement must be ruled out otherwise it may render the said statement out of
context and, therefore, inadmissible.
(4) The statement must be relevant according to the rules of Evidence Act.
(5) The recorded cassette must be carefully sealed and kept in safe or official custody.
(6) The voice of the speaker should be clearly audible and not lost or distorted by
other sounds or disturbances.
CASE LAW
 R.M.Malkani v. State of Maharashtra AIR 1973 SC 157 In the case
involving a demand for bribe amounting to extortion by Coroner of
Bombay, a civil servant, the court allowed admission of tape recorded
conversations obtained at the trap set up holding that it was not tainted
by coercion or unfairness.
 Z. B. Bukhari v. B. R. Mehra AIR 1975 SC 1788, an election case,
Supreme Court held that the tape records are really ‘documents’ under
Section 3 of the Evidence Act. The court therein reiterated that the same
are admissible on satisfying the following conditions:
 "(a) The voice of the person alleged to bespeaking must be duly
identified by the maker of the record or by others who knew it. (b)
Accuracy of what was actually recorded had to be proved by the maker
of the record and satisfactory evidence, direct or circumstantial, had to
be there so as to rule out possibilities of tampering with the record. (c)
The subject matter recorded had to be shown to be relevant according to
rules of relevancy found in the Evidence Act".
NARODA PATIYA CASES DT 29-08 2012
(SPECIAL COURT)
 while relying on video recordings of sting operation court held
that, extrajudicial confession in this case possesses a high
probative value as it emanates from the person who commits a
crime, which is free from every doubt. This extra judicial
confession, in case of all the three accused is relevant and
admissible in law under Sec.24 of the Indian Evidence Act.
This extrajudicial confession, considering the foregoing
discussion on its merits, is found very dependable, reliable,
having the contents full of probability and it is absolutely
found safe to convict the accused on its basis’.
 CIT v. East Coat Commercial Company Ltd. (1967)63 ITR
449 (SC)(457)
Income tax authorities are not strictly bound by the rules of
evidence
LAPTOPS SEIZED FROM AUDITOR
  It is open to the department to copy the data relating to
the specified three entities of the assessee group from the
two laptops which were seized from the possession of
auditor of firm.
DIT (Inv.) v. S. R. Batliboi & Co. &Ors. (2009) 31
DTR 187 / 227 CTR 238 / (2010) 186 Taxman 350
(SC)
SEIZURES
 Items which can not be seized
 Items Which can be Seized

 Inventory of item Seized

 Deemed Seizure

 Utilisation of Seized Items

 Release of Seized Items

ITEMS WHICH CAN BE SEIZED
 Unaccounted cash, jewellery, gold, bullion, lockers,
promissory notes, cheques, drafts
 Books of accounts, chits, diaries etc

 Computer Hard Disks and other data storage devises

 Documents of property, title deeds etc

ITEMS WHICH CAN BE SEIZED
 Unaccounted cash, jewellery, gold, bullion, lockers,
promissory notes, cheques, drafts
 Books of accounts, chits, diaries etc

 Computer Hard Disks and other data storage devises

 Documents of property, title deeds etc

RECORDING OF STATEMENT AND DISCLOSURE
 Statement recorded on the date of search
 Financial Years for which disclosure can be taken
 Disclosure of Income
 Items and Documents Seized and Disclosure
 Items having bearing on the Disclosure
 Unaccounted assets
 Unaccounted Business Expenses – Wages / Purchases etc
 Unaccounted Personal expenses
 Production data and unaccounted sales
 Disclosure by third party
 Incidence of interest and penalty
 Proposed Purchase of fixed asset having higher depreciation
ISSUANCE OF NOTICE, TAX PAYMENT & FILING OF
RETURNS

 New scheme for assessment of Search Cases

 Time limit for issuance of Notice

 Time limit for filing of tax return

 Applicable Taxes , Interest and Penalty

 Manner of filing tax returns

ASSESSMENT OF RETURNS FILED
 Assessment procedures
 Status of pending assessments

 Areas which can be covered by the Assessing Officer

 Tax Interest & Penalty

SURVEY
 What is Survey ?
 How it defers from Search ?

 How it is conducted ?

 No seizures

 Disclosure and Tax Payable

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)
81
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.

82
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.
83
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
84
continue after office hours and even after sun set.
 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
85
85
 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
86
(1992)196 ITR 243(All)
 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 of an administrative
87
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)

88
 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]
89
 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]

90
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 ?

91
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?
92
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.)

93
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

94
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]
95
95
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.
 

96
 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. 97
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….
98
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.
99
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 TO BE DONE AFTER SEARCH
AND SEIZURE AND SURVEY
 1. Panchanama-Copy must be obtained immediately.
2. Inventory-Copy must be obtained.
3. Copies of documents seized-Make application to
furnish the copies seized.
4. Copies of statements-Make application to furnish
copies 
5. Factual error-Valuing stock-Inventory etc- Write
immediately to the concerned Officials who have
conducted the search or seizure 
6. Goods of Perishable in nature if kept under
prohibitory order-Ask to release or sell –If loss is
occurred the department is responsible.
7. Adjustment of cash-Ask adjust against tax liability. 
THINGS TO BE DONE AFTER SEARCH
AND SEIZURE AND SURVEY
 8. Disposal of assets seized-Release of assets or sell by the tax
department.
9. Damages- File petition for loss due to action of the tax Officials.
10. Retraction- Within reasonable time before the same Officials
who have taken the statement. If required copy to higher
authorities. 
11. If any valuable or documents of third party is seized-Ask the
party concerned to make an application for release and claiming
the ownership.
12. If any documents or statement is proposed to be used against
me, ask for the copies and opportunity for cross examination of the
parties who have given statements.
13. Discuss with consultant possibility of approaching Settlement
Commission advantages and disadvantages.
14. Co-operate with proceedings
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, whic
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 scot 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...
THANK YOU