Search & Seizure - Part 2

Continued in part II.(Search and Seizure under the Income-tax Act)

It may be recalled that in the earlier part of this article the manner search under section 132 of the Act is brought out by the Income-tax department, was explained in detail. It was also discussed therein, the genesis or nucleus for the conduct of the search and what are the situations that would warrant a search etc., In this part a detailed discussion on the further stage of search is discussed:

During the course of search, where it is found that any books of accounts, other documents, money, bullion, jewellery or other valuable article or thing are found in the possession or control of any other person, it may be presumed that

1. the books of accounts, other documents, money, bullion, jewellery or other valuable articles belong to such other person
2. that the contents of such books of account and other documents are true and
3. that the signature and every other part of such books of accounts and other documents, which purport 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, and in the case of documents stamped, executed or attested by the person by whom it purports to have been so executed or attested.

The import of this provision rendered, under section 132(4A) of the Act is that a person in possession of books of accounts and other documents, which bears his hand writing or attestation (though ostensibly claimed as belonging to some one else) including other valuables as discussed supra, could possibly be identified, as relatable the person to whom those assets belong.( this process is predominantly to curb the benami deals) This identification is very necessary so that to fasten on him/them the tax attributable to such income generated, which could have possibly been concealed and suppressed from the purview of payment of tax.

As discussed in the earlier part, in case of practical difficulties arising during the course of search, heavy volume of the materials identified for seizure it is not possible to physically lift them and retain under safe custody of the department, the authorized Officer shall issue a prohibitory order, restraining the person searched forbidding him from removing or moving or tampering with the materials identified as seized but still kept under custody duly seized and sealed at the very same premises where the search was conducted.

The prohibitory order to issued shall lapse after a period of 60 days In other words, the authorized Officer shall take necessary action to assess or quantify the extent of income generated on the basis of the seized material to reconcile the income concealed and the possible tax avoided there from. The books of accounts and other documents seized shall not be retained by the authorized Officer for a period exceeding 30 days, from the date of order of the assessing Officer, who is the jurisdictional assessing Officer, passing the Post search assessment under section 153A or clause © of section 153BC.

The books can, however be retained for an extended period on the basis of the detailed reasons recorded with the approval of the jurisdictional Chief Commissioner or Commissioner or Director General or Director, for the period for which retention of the documents was found justified. Such extension and purpose of extended retention should also be communicated to the assessee. But all said and done, the orders of the Chief Commissioner or other authorities shall not go beyond 30 days from the date all the connected proceedings under the Act, relating to search assessments are completed.

In the meantime, the person searched can make copies from the books of accounts or other documents seized, in the presence of the authorized Officer or any other person empowered by him in this behalf. The extract or copying process can be done in any place as is convenient to the authorized Officer.

The auhorised Officer shall hand over all the books of accounts and other documents, to the assessing Officer, who has the territorial jurisdiction over the person searched within 60 days from the date of search, if the authorized Officer himself is not the assessing Officer. There after the assessing Officer shall take over all the functions as were exercised by the authorized Officer, including making of assessments. If a person who is legally entitled to the books of accounts or other documents seized, objects for any reason to the approval for the continued retention of books of accounts, then he may move an application before the Central Board of Direct Taxes, clearly furnishing the reasons for such objection. The Board may after providing an opportunity adjudicate on such application, in the manner it deems fit.

In this connection Rule 112 of the Income-tax Rules,1962 provides the necessary guidelines to be followed in the manner of issue of warrants of authorization, its execution, obligation of the person searched in extending co-operation with the authorized and his team, the manner of deposit of the materials seized. In cases where money is seized from any person, It shall immediately be deposited with the Reserve Bank of India or any branch of the State Bank of India, in the Personal Deposit Account of the jurisdictional Commissioner/director concerned. The person searched shall be furnished complete details of such deposits in proof of its safe transmission to government custody.

In cases where certain sealed on which prohibitory orders were passed, boxes are required to be opened in order to locate any valuable or material, then it shall be done in the presence of the person searched who shall be afforded necessary opportunity to personally supervise such operations. The manner the searched documents are analysed and the application of the seized assets are discussed in part III of this series of article.