ARE INCOME TAX RAIDS TRULY TREACHEROUS & TERRIFYING?

 

 

BY CA A. K. JAIN

Through this article, I intend to share my professional experience with regards to one of the most draconian and terrifying subject, commonly mentioned as income tax raids. In legislation, this word is referred as search and seizure. I am sure many of you have passed through this traumatic experience and some of you may be expecting this due to your appreciative business success and admirable financial acquisitions and achievements. If you think it is inevitable at some time in future, please do organise yourself so that, it’s not a surprise and you sail through smoothly. Although this can be discussed in details but for the sake of general over view, I will just share a few tips to familiarise you with the subject.

REASONS :
There can be multiple reasons for initiating search proceedings. Primarily its undertaken, when tax authorities suspects large scale tax evasion or they believe to discover substantial unaccounted income and assets. Cash, Jewellery, bullion, vehicles, property papers, bank lockers, hand written diaries, computers, pen drives, luxury expenditures etc. are primary targets. The action can be set off based on specific complaints, recommendation of assessing officer. This can also happen for avoidance of notices and summons.

PROCEDURE:
Please note that no search proceedings can be commenced before sunrise and without a proper search warrant issued by an officer of the rank of Director General (Investigation) or Commissioner of Income Tax. Search proceedings once started after sunrise may continue day and night. Search can continue for 60 days and can take place in peace meal through multiple visits. You have the right to check the authenticity of search warrant and identity papers of entire search party before the search starts. A lady officer must search party before the search starts. A lady officer must accompany the search party if it is happening at a residence or if the officers wish to physically check a woman. Normally, the police accompanying the search party should remain outside the premises. You are required to call two persons of your locality, who will act as official witnesses. If you feel sick, you can also call a doctor for any health related issues. You can have your food as usual and also let the children go to school. You can make a copy of your statement given to the search party as the officers and not obliged to share their copy. A senior officer generally referred as unit-head, constantly monitors the search operations from distance. All statements signed by you are also counter signed by the head of the search party and two of your witnesses. Legal pronouncements also confirm that NRIs can also be subject of search proceedings.

RIGHTS:
As per CBDT directives every married lady can keep 500 g, unmarried lady 250 g & every male person can hold 150 grams of jewellery normally. You can request for valuation of jewellery by a registered valuer and photography of all the items seized by the search party. Seized items should be properly packed and sealed to avoid the damage, particularly the jewellery items. Please note that your business stock cannot be seized & you cannot be arrested by the search party.

DUTIES:
While the law bestows you with certain rights to safeguard you interests, it also gives you the responsibility to provide full support and cooperation to your unwanted guests. Please provide them requested information, access to all places, all keys, locker details & passwords of computer etc. & facilitate the search operation. Your Chartered Accountant or your lawyers should not interfere in such proceedings as these are not representational proceedings but an exercise undertaken to collect evidence of undisclosed wealth. It is your duty to sign the Punchnama written by the search party after the search is concluded.

SURVEY:
While discussing search operations which are undertaken under section 132 of the Income Tax Act, one should also be aware of survey proceedings, which are conducted under section 133. Surveys can be done only at the business premises and that too, during business hours and should be concluded the same day. No seizures can be done and books of accounts cannot be impounded. In survey, statements are not recorded on oath.

PRECAUTIONS & CONCLUSION:
If you are holding some third party assets in your premises, please do inform about this to the search party. Also note that your incorrect statements during the search operations are offence under section 191 of the IPC. Search can also be extended to the office of your Chartered Accountant, if they are keeping your business documents or doing your book keeping. In each case, before search operation, intelligence wing of the department collects credible information from multiple sources, which confirms your substantial tax avoid dance. Therefore, please be careful as the authorities are watching your financial transaction and their machines are quick to catch the mismatch between your income disclosures and your lifestyle. Please keep evidence of all your major financial transactions on year to year basis.

It is important to know that in several cases the Judicial authorities have declared the survey and search proceedings invalid & void due to technical lapses and procedural errors on the part of authorities. Therefore, it’s advisable to consult a good professional after the survey / search proceedings are over and officers are back to their office.

As per the legal pronouncements it is pertinent to note that if no incriminating material is collected in course of search operations, then any surrender statement given in course of search proceedings is legally unsustainable. Please also note that all reassessment and block assessment proceedings orders are appealable.

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Author : CA A. K. Jain is a practicing Chartered Accountant at New Delhi for
more then 30 years. www.tjaindia.com, e-mail : caindia@hotmail.com