Procedure for Search and Seizure - Section 132 - Income Tax - Ready Reckoner - Income Tax

Procedure for Search and Seizure - Section 132 1. Authority who can issue order for search and seizure i.e. issue search warrants [ Section 132(1) ] Search and Seizure can be authorised by the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. However said operation can be authorised by Such Additional Director or Additional Commissioner or Joint Director or Joint Commissioner if they are empowered by the board as may be authorised by CBDT, The authorities mentioned above is (authoring officers) can authorised to their subordinated (Authorised Officers ) mentioned below to conduct search Seizure operation. The officer so authorised is referred as Authorised Officer. The authorisation is done by issuing a search warrant in Form 45 . Authorising Officers Authorised Officer Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner Additional Director or Additional Commissioner or Joint Director , Joint Commissioner, Assistant Director or Deputy Director , Assistant Commissioner or Deputy Commissioner or Income-tax Officer Additional Director or Additional Commissioner or Joint Director, or Joint Commissioner Assistant Director or Deputy Director , Assistant Commissioner or Deputy Commissioner or Income-tax Officer . 2. When search can be authorized [ Section 132(1) ] If the above authority on the basis of information in his possession, have reasons to believe that: a. Any person to whom a summon or notice was issued to produce books of account or other documents u/s 131 or 142(1) , has wilfully omitted or failed to produce such books of account or other documents by such summons or notice; b. A person to whom a summon or a notice u/s 131 or 142(1) has been or might be issued, will not or would not, produce any books of account or other documents which will be useful or relevant to any proceedings; c. A person is in possession of any articles or things, including money bullion or jewellery or any other valuable article and these assets represents either wholly partly the income which has not been or which would not be disclosed by him. Note :- a) Reason to believe is a condition precedent to search - Reason to believe means the officer has faith or accepts a fact to exist. Belief must be genuine and not a mere pretence and has to be held in good faith and not a reason to suspect. However, the reasons to believe, as recorded by the IT Authority, shall not be disclosed to any person or any authority or the Appellate Tribunal. b) The necessity of recording of reasons for conducting search u/s 132 acts as a cushion in event of challenge being made to satisfaction reached. Such reasons enable a proper judicial assessment of decision taken by the Revenue. However, this would not confer upon the assessee a right of inspection of documents or communication of reasons at the time of issue of authorization for search. It is only at stage of commencement of assessment proceedings after completion of search and seizure. [ DGIT (Investigation) v Spacewood Furnishers (P.) Ltd. 2015 (5) TMI 483 - SC ] 3. Powers of authorised officer in course of Search and Seizure [ Section 132(1) ] Following are the powers of authorized officer: a. Enter and search any building, place, vessel, vehicle or aircraft where he has reasons to suspect that such books of account, other documents, money, bullion, jewelry or other valuable articles or things are kept; b. Power to break open the lock of any door, box, locker, safe, almirah, where the keys thereof are not available. c. Search any person who has got out of, or is about to get into, or is in, the building, vessel, place, vehicle or aircraft, if the authorized officer has reasons to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewelry or other valuable article or thing. d. Require any person who is in control of any books of account maintained in the form of electronic record, to afford the authorised officer the necessary facility to inspect such books of account or other documents. e. Seize any such books of account, other documents, money bullion, jewellery or other valuable article or thing found as a result of such search. However, 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. f. place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; g. make a note or an inventory of any such money, bullion, jewelry or other valuable article or thing. Notes: - Where the client of the auditor was subject to search and the audit firm itself has not been subject to search, on a writ petition by the auditors, it was held the search party does not have access to data of the other clients contained in the laptops of the auditor. [ S.R.Batliboi Co. v Department of Income-tax (Investigation) 2009 (5) TMI 36 - DELHI HIGH COURT ] Deemed/ Constructive Seizure:- Where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorized Officer may serve an order on the owner or the person who is in immediate possession thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such authorized Officer and such action of the authorized Officer shall be deemed to be seizure of such valuable article or thing. However, deemed / constructive seizure shall not be made of any stock in trade of the business. Power of requisition service of Police officer or officer of Central Government [Section 132(2)]:- The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified above and it shall be the duty of every such officer to comply with such requisition. Order of Restraint [Section 132(3)]:- The authorized officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewelry or other valuable article or thing, for reasons other than mentioned in Note 2 above, serve an order on the owner or the person who is in immediate possession thereof that he shall not remove, part with or otherwise deal with it except with previous permission of authorized officer. Such an order under section 132(3) shall not be in force for a period exceeding 60 days from the date of order. 4. Presumption in course of Search and Seizure Where any books of account, other documents, money, bullion, jewelry and other valuable article is found in the possession or control of any person in course of a search, it may be presumed- a. That such books of account, other documents, money, bullion, jewelry or other valuable article or thing belongs to such person. b. That the contents of such books of account and documents are true and c. That the signature and every other part of such books of account and other documents which purport 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, executed or attested by the person by whom it purports to have been so executed or attested. 5. Period of retention of books of accounts and other documents - The books of account or other documents seized under section 132 shall not be retained by the authorized officer for a period exceeding 30 days from the date of the order of assessment or reassessment under section 153A unless the reasons for retaining the same are recorded by him in writing and approval of Chief Commissioner or Commissioner for such retention is obtained. 6. Transfer of Assets Books seized to jurisdiction AO - Where the authorized officer has no jurisdiction over the person searched by him, the books of account or assets seized shall be handed over by the authorized officer to the Assessing Officer having jurisdiction over such person within a period of 60 days from the date on which search was completed. 7. Rights and duties of the person searched:- The person searched has the following rights- 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 make personal search of all members of the search party before the start of the search and on conclusion of the search. To insist on personal search of ladies being taken only by lady, with strict regard to decency. To have at least two respectable and independent residents of the locality as witnesses. A lady occupying an apartment being searched has a right to withdraw before the search party enters, if, according to custom, she does not appear in public. To call a medical practitioner in case of emergency. To allow the children to go to school, after checking their bags. To have the facility of having meals, etc; at the normal time. To inspect the seals placed on various receptacles, sealed in course of search and subsequently at the time of reopening of the seals. Every person who is examined under section 132(4) has a right to ensure that the facts to stated by him have been recorded correctly. To have a copy of the panchnama together with all the annexures. To have a copy of any statement that is used against him by the Department. To have inspection of the seized books of account, etc., or to take extracts therefrom in the presence of any of the authorized officers or any other person empowered by him. To make an application objecting to the approval given by the Commissioner of Income-tax for retention of books and documents beyond 30 days from the date of assessment under section 153A or 158BC(c) . To make an application under section 132(11) to the Commissioner of Income-tax against an order under section 132(5). To get back the assets found to be in excess of the liability determined in the order under section 132(5). Duties of the person searched are:- To allow free and unhindered ingress into the premises. To see the warrant of authorization and put signature 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 authorized 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 person being searched. He should `not mislead the personation. If he cheats by pretending to be some other person or knowingly substitutes one person for another, it is an offence punishable under section 416 of the Indian Penal code. Not to allow or encourage the entry of any unauthorized person into the premises. Not to remove any article from its place without notice or knowledge of the authorized officer. If he secrets or destroys any documents with the intention of preventing the same from being produced or used as evidence before the court or public servant, he shall be punishable with imprisonment or fine or both, in accordance with section 204 of the Indian Penal Code. To answer all queries truthfully and to 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 authorized officer. In doing so, he should keep in mind that- Penalty - i. Failure to comply with section 132(1)(iib) ii. Failure to comply with section 153A . 8. If books of accounts, etc. are kept in building not specified in the search warrant [Section 132(1A)] - Where a search for any books of account or other documents or assets has been authorized by Director-General, Director, chief Commissioner or Commissioner, Joint Director or Joint Commissioner (i.e., the authorized officer), and the Chief Commissioner or Commissioner has reasons to suspect that such books of account, other documents, money, bullion, jewelry or other valuable article or things of the assessee are kept in any building, place, vessel, vehicle or aircraft not specified in the search warrant, then such Chief Commissioner or Commissioner may authorized the authorized officer to search such other building, place, vessel, vehicle or aircraft. 9. Police assistance [Section 132(2)] - The authorized officer may requisition the services of - (i) any police officer or any officer of Central Government or (ii) any person or entity as may be approved by the PCCIT/CCIT/PDGIT/DGIT, as may be prescribed, in this regard to assist him for the purpose of search seizure. [Amended by FA, 2023] to assist him for all or any of the purposes specified in section 132(1) or (1A) and it shall be the duty of every such officer or person or entity to comply with such requisition. The following point should be noted- Keeping police officers will not amount to use of excessive force. Police officers cannot detain a person against his will without arresting him. 10. Where it is not practicable to seize books of account etc. [Section 132(3)] - where in any particular case it is not practicable to seize books of account, other documents, money, bullion, jewelry or other valuable article or thing for reasons other than those mentioned in second proviso to section 132(1), then in such a case the authorized officer may serve an order on the owner or the person who is in immediate possession or control of the books of account, etc., to the effect that such person shall not remove, part with or otherwise deal with it except with the prior permission of the authorized officer. Such authorized officer may take such steps as he deems necessary for proper compliance of his orders. Serving of aforesaid order is not to be deemed as case of seizure [Expln. to section 132(3)]. 11. Time Limit:- According to section 132(8A), the aforesaid order shall not be operative for a period exceeding 60 days from the date of order with effect from June 1, 2002. 12. Examination on oath [Section 132(4)]:- The authorized officer may during the course of search and seizure, examine on oath any person who is found to be in possession or control of any books of account, documents etc. Any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Act. However, all persons who are found at place of search are not automatically covered by action under section 132. According to Explanation to section 132(4), the examination of any person may not be merely in respect of any books of account, documents or other assets found as a result of search but also in respect of all matters relevant for the purpose of any investigation, connected with any proceedings under the Act. 13. Presumptions [section 132(4A)]:- Where any books of account, other documents, money, bullion, jewelry and other valuable article is found in possession or control of any person in the course of a search, the following presumptions can be made- a. Those books of account, other documents money, bullion, jewelry and other valuable article or thing belongs to such person. b. The contents of such books of account and documents are true. 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 are in that person s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped, executed or attested by the person by whom it purports to have been so executed or attested. Section 292C has been amended with retrospective effect from October 1, 1975 so as to extend these presumptions also to books of account, other documents or assets which have been delivered to the requisitioning officer in accordance with the provision of section 132A . 14. Time-limit for retention of seized books of account, etc. [Section 132(8)]:- When the books of account or other documents are seized, then authorized officer cannot retain the possession thereof for a period exceeding 30 days from the date of the assessment under section 158BC or 153A . Retention for a period exceeding (30 days) can be made only if reasons are recorded in writing and the approval of the Chief Commissioner, Commissioner, Director-General or Director is obtained/ Moreover, the Chief Commissioner, Commissioner, Director-General or Director cannot authorize the retention beyond 30 days after all the proceedings under the Act in respect of years for which books of account, etc., are relevant are completed. However, if the person legally entitled to the books of account or other documents, etc., objects to the approval given by the Chief Commissioner, Commissioner, Director-General or Director, he may make an application to the Board stating therein the reasons for the objection and requesting for return of books of account etc. The Board shall pass such order as it thinks fit after providing an opportunity of hearing of the applicant. [ Section 132(10) ] 15. Taking copies of seized documents [Section 132(9)]:- The person from whom the books of account or other documents were seized is permitted to make copies thereof, or take extracts therefrom, in the presence of the authorized officer or any other person empowered by him in this behalf and at such place and time as the authorized officer may provide. 16. Section 132(9A) - Where the authorized officer has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c) of section 132(1), the books of account or other documents, or any money, bullion, jewelry or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as the assets) seized under that sub-section shall be handed over by the authorized officer to the Assessing Officer having jurisdiction over such person within a period of sixty days from the date on which the last of the authorizations for search was executed and thereupon the powers exercisable by the authorised officer under section 132(8) or (9) shall be exercisable by such Assessing Officer. 17. Section 132(9B) - Where, during the course of the search or seizure or within a period of 60 days from the date on which the last of the authorisations for search was executed, the authorised officer, for reasons to be recorded in writing, is satisfied that for the purpose of protecting the interest of revenue, it is necessary so to do, he may with the previous approval of the Principal Director General or Director General or the Principal Director or Director, by order in writing, attach provisionally any property belonging to the assessee, and for the said purpose, the provisions of the Second Schedule shall, mutatis mutandis, apply. 18. Section 132(9C) - Every provisional attachment made u/s 132(9B) shall cease to have effect after the expiry of a period of six months from the date of the order referred to in section 132(9B). 19. Section 132(9D) - The authorised officer may, during the course of the search or seizure or within a period of 60 days from the date on which the last of the authorisations for search was executed , make a reference to (i) a Valuation Officer referred to in section 142A , or (ii) any other person or entity or any valuer registered by or under any law for the time being in force, as may be approved by the PCCIT/CCIT/PDGIT/DGIT, as may be prescribed, in this regard, [Amended by FA, 2023] who shall estimate the fair market value of the property in the manner provided under that section and submit a report of the estimate to the said officer within a period of 60 days from the date of receipt of such reference. 20. Assessee should not be prevented from inspecting and making out copies - The authorized officer has no jurisdiction to refuse the inspection. 21. Documents of department cannot be shown at preliminary stage - Where during the course of arguments the petitioner wanted to see the records (documents) maintained by the department including the information and the noting s on the basis of which the authority had arrived at his satisfaction for conducting the search and seizure, the aforesaid documents could not be shown to the petitioners at that stage as their disclosure would hamper the enquiry pending against the petitioner. 22. Partners of firm - Partners of firm can make copies of books seized during search without being required to give undertaking that books belonged to them. 23 Apply Code of Criminal Procedure - The provisions of the Code of Criminal Procedure, 1973, relating to searches and seizure shall apply, so far as may be, to searches and seizure under section 132(1) or (1A). [ Section 132(13) ] 24. Board may make rules regarding Search Seizure - The Board may make rules in relation to any search or seizure under this section ; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer- ( i ) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available ; ( ii ) for ensuring safe custody of any books of account or other documents or assets seized. [ Section 132(14) ] Explanation 1 - For the purposes of sections 132(9A), (9B) and (9D) w.e.f. 1st day of April, 2022 , the last of authorisation for search shall be deemed to have been executed, (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; or (b) in the case of requisition under section 132A , on the actual receipt of the books of account or other documents or assets by the authorised officer. [Amendment vide F.A. 2023 ]. Explanation 2 - Proceeding means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922, or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.