BANARAS HINDU UNIVERSITY

ASSIGNMENT ON TOPIC
Search and Seizure under section 132 of
Income Tax Act,1961

SUBMITTED BY – NILOTPAL

SUBMITTED TO -.

Shweta Chaturvedi

ASSISTANT PROFESSOR OF LAW

R.N. -16225BLT036

BA LLB 9th Semester

Acknowledgement
I would like to express my sincere gratitude towards Asst. Prof. Shweta
Chaturvedi, who gave golden opportunity to work on the Topic of “Search and
Seizure under section 132 of the Income Tax Act, 1961. This assignment required
a lot of hard work, it was not possible without your guidance. I would like to
thanks God and my parents for their blessings, at last I am grateful to my friends
for their support.
Introduction
One of the important provisions of the Constitution of India is Article 265, which
provides that “no tax shall be levied or collected except authority of law” Articles
226/ 227 of the Constitution of India provides that the citizens can approach the
High Court when their fundamental rights are violated or when powers are
exercised in a manner not authorised by the law. Search and seizure is an invasion
into the privacy of the individual. A house, hut, home or castle of a person is his
/her personal property and no one has a right to enter and disturb the peace without
prior permission of the person in occupation. It was since 1956 that the provisions
of search and seizure had made its first entry into the Income Tax Act, 1961.
Finance Act, 1964 was substitutes of Section 132.

Two committees had made certain recommendations on the search and seizure
provisions that are

The Raja Chellaiah Committee and,

 The Kelkar Committee.

It is seen that the recommendations affecting the substantive law have been given
effect to in respect of majority of such recommendations; the assessee friendly
measures recommended by these committees have not been given any serious
considerations.The provisions below tells us about the search and seizures under
the Income Tax Act, 1961. In R. K. Garg v. UOI1 , the constitutional Bench
observed that: - “Another rule of equal importance is that laws relating to
economic activities should be viewed with greater latitude than laws touching civil
rights such as freedom of speech, religion etc”. It is to be acknowledged and
appreciated that the department always does lot of preparation before conducting
search proceedings. The search and seizure manual of the department contains
various checklists to be adhered to by the search parties. In most of the search
cases, department officials do follow the check lists.

1
(1981) 133 ITR 239 (SC) (255) 5
Who can conduct a raid?
According to Section 132(1) of the Income Tax Act, the : Principal Director
General or Director-General or

 Principal Director or Director or

 Principal Chief Commissioner or Chief Commissioner or

 Principal Commissioner or
Commissioner may authorize an

 Additional Director or

 Additional Commissioner or

 Joint Director or

 Joint Commissioner or

 Assistant Director or

 Deputy Director or

 Assistant Commissioner or

 Deputy Commissioner or

 Income-tax Officer to conduct a tax raid. The authorizing officer will do so, if he
has a “reason to believe” that.

 A taxpayer has failed to comply with any summons or notices sent to him by
the Department or

 He has in his possession money and secondly, such money represents either
wholly or partly income or property which has not been disclosed.
What are the circumstances in which search and seizure can
be conducted?
An income tax raid, technically known as the process of Search and Seizure, is one
of the crucial weapons that the Income-tax department possesses to check black
money. It is a measure that is known to be constitutionally valid too. A raid gets
triggered under any of the following circumstances:

 Credible information of tax evasion; for instance, any evasion coming out of
reports received from the Intelligence Wing of the Income tax department
 Information coming from government departments
 Information procured from assessment records of taxpayers
 Information received with regard to spending being disproportionate to
income of the taxpayer i.e. an instance of lavish spending without
corresponding income to match the same

132(1)

The authorized officer who is duly empowered by the Board has in his possession
any information through which he has reason to believe that –

132(1)(a)

A person to whom a summon u/s 131(1) or a notice u/s 142(1) has been served to
produce books of accounts or other documents has failed or omitted to produce or
cause to be produced the said books of accounts or other documents, or,

132(1)(b)
A person to whom a summon u/s 131(1) or a notice u/s 142(1) has been or might
be issued is not likely to produce or caused to be produced any books of account or
other document which will be useful for or relevant to any proceedings under the
Act; or

132(1) (c)

A person is in possession of money, bullion, jewellery or other valuable article

or thing and such property represents wholly or partly income or property which
has not been disclosed or would not be disclosed.
Whether Search warrant is required?
The issue of a search warrant by the Commissioner under section 132 is not
judicial in nature. Section 132 does not require that the warrant of authorization
has to specify the particulars of documents or books of accounts. A general
authorization to search and seize documents and books of accounts is sufficient for
the purpose.
But it is very important that the warrant of authorization should indicate the name
of the person who has to be searched. If the Commissioner signs a warrant which is
blank, the search is illegal and the articles seized are to be returned.
A warrant for search or seizure can be issued even after the proceedings have been
closed. But the warrant needs to be in the prescribed form. There should be
sufficient information mentioning the names of the persons concerned.
Seizure of articles:
Sub-section (1) of section 132 provides that seizure must be physical. It can be
effected only when the authorized officer takes possession of the articles so that the
revenue can appropriate those articles to repay the amount which is due.
It was held in K. Shamsher Singh v. Union of India2 that an order issued only to
take possession of the keys to the bank locker does not amount to ‘seizure’.
The term ‘possession’ indicates physical possession only. It does not indicate legal
possession. An immovable property cannot be seized as per section 132.
Section 132 does not give power to the officers to realize the assets and convert
them into cash. When a search is conducted and the books of account are seized by
an officer, he is responsible for the safe custody of the seized articles.

Who are the Persons to be searched: From the above it is clear that the
persons to be searched are persons: (a) who have books of account or documents
which have not been produced or are not likely to be produced in response to
notices or / summons, or (b) persons who are likely to be in possession of
undisclosed income or property.

What are the basis for search and seizure? The assessing officer must
have a reason to believe that the person, whether or not a notice has been served on
him, is not likely to produce his books, etc. in such a case, the basic is that the
person will suppress books of account and other documents which may be useful

2
[1974] 95 ITR 80 (Delhi)
and relevant to an income tax proceedings. Here the authorizing authority, if
challenged, has to prove the basis of belief.

In KUSUM LATA v CIT3 There must be information with the authorizing

authority relating to two matters. One, the person should be in possession of money
and secondly such money represents either wholly or partly income or property
which has not been disclosed.

CIT v RAMESH CHANDER4 Is the assessee entitled to a copy of reasons

recorded for issuing a search warrant? Disclosure of the material or the information
to the person against whom the action is taken u/s 132(1) is not mandatory,
because such disclosure might affect or hamper the investigation. Only the High
Courts and the Supreme Court have the jurisdiction to call for and look into the
reasons recorded to decide whether the issue of the search warrant was called for.
Can search be authorized by an authorized by an authority other than
jurisdictional authority?

The Chief Commissioner/Commissioner of Income Tax has the power to authorize

a search of any building, place, vessel, vehicle or aircraft of a person which is
under his jurisdiction and also in cases where such building, place, vessel, vehicle
or aircraft is in his area of jurisdiction but he has no jurisdiction over the persons
concerned, if he has reason to believe that any delay in obtaining authorization
from the Commissioner having jurisdiction over the person would be prejudicial to
the interests of revenue. Such authorization shall be given in Form 45A. Where a
search for any books of account or other documents or assets has been authorized
by any authority who is competent to do so, and some other Chief
Commissioner/Commissioner in consequence of information in his possession has
reason to suspect that such books of account or other documents and assets etc, of
the assessee are kept in any building, place, vessel or aircraft not specified in the
search warrant issued by such authority, he may authorize the Authorised Officer
to search such other building, place, vessel, vehicle or aircraft. Such authorization
shall be given in Form 45B.

3
(1989) 180 ITR365 (RAJ) 7
4
(1974) 93 ITR 450 (PUN) 8
The powers of Search and Seizure
1. To enter and search any place, vessel, vehicle, aircraft or building, where
there is a reasonable suspicion that such books of accounts, money, bullion,
jewelry, documents, or other valuable article or thing are kept.

2. To break open the lock of any of the door, box, locker, safe, almirah or another
receptacle for exercising the powers which are conferred by clause (i) above
where the keys thereof are not available.

3. Search any person who (a) has got out of, or (b) is about to get into, or (c) is in
the building, place, vessel, vehicle or aircraft, if the authorized officer thus has a
reason to suspect that such person has secreted about his person any such books
of account, other documents, money, bullion, jewellery or other valuable article or
thing.

4. Require any person who is however found to be in possession or in control of

any books of account or any other document which is maintained in the form of
electronic records, to afford the necessary facility to the authorized officer in
order to inspect all such books of account or other documents.

5. Placemarks of identification on any of the books of account or any

other documents or make or cause to be made extracts or copies therefrom

6. Make a note or an inventory of any such money, bullion, jewellery or any

other valuable article or a thing.

What are the additional powers of the authorized officer?

a) Deemed Seizure 132(1) : 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 it 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.
b) Restraint Order 132(3) with explanation and section 132(8A) : where it is
not possible or practicable to seize any (a) books of accounts, or other documents,
or (b) money, bullion jewellery or other valuable articles or 9 things for reasons
other than those mentioned , the authorized officer may serve an order on the
owner or a person who is in immediate possession or control thereof that he shall
not part with or otherwise deal with it except with the previous permission of such
officer and such officer may take steps as may be necessary for compliance.

c) Power to requisition service of a police officer or officer of the Central

Government sec 132(2): The authorized officer may requisition the services of
any police officer or any of the officer of the Central Government or of both to
assist him for all or any of the purposes specified above and it will be duty of
every such officer to comply with such requirements.

d) Examination of any person on oath sec 132(4) with explanation: the

authorized officer may, during the course of search or seizure, examine on oath
any person who is found to be in possession or control of any books of accounts,
documents, money, bullion, jewellery or other valuable article or thing and any
statement made by such person during such examination may thereafter be used in
evidence in any proceeding under the I.T.Act,1961. The statement can be recorded
during the course of search and seizure or when it is over. Further, an explanation
has been added to provide that the examination of any person may be not merely
be in respect of any books of account, other documents or assets found as a result
of the search, but also in respect of all matters relevant for the purposes of any
investigation connected with any proceedings under the Income Tax Act,1961.

e) Presumption of ownership of books of accounts and assets and its

truthfulness sec 132 (4A): it may be presumed a)the books of account or other
documents and assets found in possession of any person in the course of a search
belong to such person, b) the contents of such books of accounts and other
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 handwriting of that person or which may reasonably be
assumed to have signed or written the books of accounts or other documents are
in that person’s handwriting. In case of documents 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.

f) Retention of books of account and other documents 132(8): the books of

account or other documents seized shall not be retained by the authorized officer
(if he is himself an assessing officer) for a period exceeding 30 days from the
date of the order of assessment u/s 153A or 158BC unless the reasons for
retaining the same are recorded by him in writing and the approval of the Chief
Commissioner, Commissioner, Director General or Director for such retention is
obtained. The following conditions must be fulfilled before the retention of books
for the extended period: a) the authorized officer or the concerned assessing
officer
seeking the commissioner’s approval should record the reasons for retaining the
books in writing. b) He should obtain the approval of CIT for the extended period.
g) Copies of extract of books of account and documents sec 132(9): the person
from whose custody any books of accounts or documents are seized may make
copies or take extracts therefrom in the presence of authorized officer or any
person empowered by him in his behalf, at such place an time as the authorized
officer may appoint in this behalf.

h) Handling over of seized books and assets to assessing officer sec 132(9A):
such handling over is done within the period of 60 days from the date on which the
last of the authorization for search was executed.

Seizure of jewellery: a) In the case of wealth tax assessee, gold, jewellery and
ornaments found in excess of gross weight disclosed in the wealth disclosed in the
wealth tax return only need to be seized. b) in case of person not assessee to wealth
tax, gold jewellery and ornaments to the extent of 500gms per married lady, 250
gms per unmarried lady and 100 gms per male member of the family, need not be
seized. The same is treated as explained and no addition can be made under sec 69.
the said guidelines would apply to block assessment.
 Powers, procedures followed by the authorized officer with regards to
requisition of books of accounts

a) Requisition of books of account, etc taken into custody under any other law:
11 Section 132A provides that in case where any books of account or other
documents and assets have been taken into custody by the Officer or authority
under any law e.g by the Collector of Customs, the Sales Tax Commissioner,
etc, the Director General or Director or the Chief Commissioner or
Commissioner of Income Tax may, in such circumstances as are covered by
section 132 for search and seizure, authorize in Form No 45C and Deputy
Director, Assistant Commissioner, Assistant Director or the Assessing Officer
(Requisitioning Officer) to require such officer or authority to deliver to him
such books of account or other documents and assets. This section however
does not empower to take under requisition assets and documents which are in
the custody of court.
b) When such power be invoked (Rule 112D)
When the Director General or Chief Commissioner or Commissioner has
reason to believe that
i) any person to whom summons u/s 131(1) or a notice u/s 142(1) was issued
to produce, or cause to be produced, any books of account or other documents
has omitted or failed to produce, or cause to be
produced, such books of account or other documents, as required by such
summons or notice and the said books of accounts or other documents have
been taken into custody by any officer or authority under any other law for the
time being in force, or
ii) any books of account or other documents will be useful for, or relevant to,
any proceedings under the Act and any person to whom summons or notices as
aforesaid has been or might be issued will not, or would not, produce or cause
to be produced, such books of account or other documents on the return of such
books of accounts or other documents by any officer or authority by whom or
which such books of account or other documents have been taken into custody
under any other law for the time being in force, or
iii) any assets represent either wholly or partly income or property which has
not been, or would not have been disclosed for the purposes of the Act, by any
person from whose possession or control such assets have been taken into
 custody by any officer or authority under any other law for the time being in
force.
c) Application of seized or requisitioned assets (Sec 132B) 12 -)
the assets seized shall be dealt with in the following manner
i) Seized assets may be applied towards existing and future liability (sec
132B(1)(i)
ii) Release of seized asset after meeting existing liabilities in certain
cases 132B(1)(ii)
iii) Money seized may be applied for discharging the liabilities
(sec 132B(1)(ii)
iv) Assets other than money may also be applied to discharge liabilities
(sec 132B (1)(iii) -) return of excess assets seized section 132B(3)
interest to be paid at the rate of 1/2% p.m. or part of the month non
seized money (section 132B(4) on the aggregate sum of a) the money
seized u/s 132 or requisition u/s 132A as reduced by the amount of
money if any released , and, b) the proceeds of assets sold towards the
discharge of existing liability in sec 132B(1)(i). the interest shall be
payable from the expiry of the period of 120 days from the execution of
the last of the authorizations for search till the date of completion of
assessment under section 153A or block assessment.
Assistance of Police can be taken while searching the premises as
given in sec 132(2)
Rights of the person searched –

(i) To see the warrant of authorisation duly signed and sealed by the
issuing authority.
(ii) To verify the identity of each member of the search party.
(iii) To have at least two respectable and independent residents of the locality as
witness.
(iv) To have personal search of all members of the search party before the start of
the search and on conclusion of the search.
(v) To insist on a personal search of female members by another female
member only with strict regard to decency.
(vi) To have a copy of panchnama together with all the annexures.
(vii) To put his own seals on the packages containing the seized assets.
(viii) 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.
(ix) To call a medical practitioner if he is not well.
(x) To have his children permitted to go school, after examining of their bags.
(xi) To inspect the seals on various respectable placed in the course of the search
and subsequently reopened by continuation of search.
(xii) To have the facilities of having meals etc., at the normal time.
(xiii) To have a copy of any statement before it is used against him in
an assessment or prosecution proceedings.
(xiv) 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.
(xv) 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 person searched:-

(i) To allow free and unhindered ingress in to the premises.

(ii) To see the warrant of authorisation and put signatures on the same.
(iii) 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.
(iv) To identify and explain the ownership of the assets, books of account and
documents found in the premises.
(v) 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.
(vi) Not to allow or encourage the entry of any unauthorised person in the
premises.
(vii) 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.
(viii) 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:-

(a). 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.
(b). 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.
(c). Similarly, if he provides evidence which is false and which he knows or
believes to be false, he is liable to be punished u/s 191 of the Indian Penal
Code.

(viii). To affix his signature on the recorded statement, inventories and the
panchnama.
(ix) To ensure that peace is maintained throughout the duration of the search,
and to co-operative with search party in all aspects so that the search action is
concluded at the earliest and in a peaceful manner.
(x) 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.
Judicial Status In India:
In the case of Vipan Kumar Jain v UOI5 Phrase “Reason to believe” was
interpreted in this case court ruled that: -

The information must be something more than a rumor or gossip. The information
must be specific, rather than vague information.

The info on opinion shall have rational connection with the opinion.

The belief must be bonafide.

In another case, Ajit Jain v U.O.I.6

The court held that the information must exist before the opinion is formed. The
information who form his belief is not only authentic but capable to give rise the
inference that the person is in possession of money etc. which is not disclosed.

Legality of search and Jurisdiction

Pooran Mal v. DIT7– 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 15
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. 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.

Sibal v CIT8 , The court held that sec 132 conferred enormous power to the IT
authority regarding search and seizure which invade the right to privacy and

5
(2005) 9 SCC 579 5 2000
6
2000 (2) ARBLR 264 Delhi, 84 (2000) DLT 1, 2000 (52) DRJ 645
7
(1974) 93 ITR 505 (SC)
8
1975
freedom of tax payer. So it has to be exercised keeping statutory requirement and
principle of natural justice.

CONCLUSION
The basic Idea that we draw from the study of Search and Seizure under the
Section 132 of The Act is that there needs to be reasonable apprehension in order
to conduct a search so as to not be in violation of Fundamental Right.

The current scenario of our nation is such that large hoardings of black money is
kept under the carpet and in a general businessmen usually evade away from tax
slabs by showing or minimializing their income. In these cases, search and seizure
is and will be an important tool for the Department of Income Tax.

The action plan as discussed in the project shouldn’t be such as violative of Third
part of the Indian Constitution. The balance needs to be maintained between both
the heads i.e. Income Tax evasion and individual privacy.

On other hand, people should come forward and fill up their income tax and should
not in any way cause or mislead department of Income Tax.
Bibliography

1. Dr. Kailash Rai(2015) “Taxation laws”, Allahabad Law Agency

2. https://www.hrblock.in/guides/income-tax-raid
3. https://taxguru.in/income-tax/search-seizure-survey-income-tax-act-
1961.html
4. THE INCOME-TAX ACT, 1961