Income Tax Search and Seizure – Irregularity vs Illegal Income Tax
Any Income Tax Search & Seizure Operations should be conducted as per duly prescribed procedures. This is because, if any procedural irregularities of fundamental nature takeplace, then the same can vitiate the whole search and seizure process as being treated, “illegal”.
Referring to the Income Tax Act, 1961 (the Act) provisions namely, Section 132, we can say that it empowers income tax authorities to carry out a search and seizure of books of accounts, documents, cash, jewellery etc. Additionally, section 132A of the Act provides powers tocertain income tax authorities to requisition books of accounts, documents etc. Besides, CBDT (Central Board of Direct Taxes) also issued instructions/circulars from time to time to facilitate search and seizure operations/assessments.
But it should be noted that this can be availed on the basis of the fulfilment of certain conditions and this includes:
- The competent authority having certain information in its possession, and
- And pertaining to this information, all the conditions stipulated in sub-clauses, (a), (b) and (c) of section 132(1) of the Income Tax Act is existing. The same has been provided below:
|Section 132(1) sub-clause (a),||If a person to whom a summons under section 131(1) or such other section of the Income Tax Act has been issued for producing or cause to be produced, any books of account or other documents, and 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, or|
|Section 132(1) sub-clause (b),||If the person with the summons will not or would not produce the books of accounts or any other documents which will be useful or relevant for any proceeding under the Income Tax Act, or|
|Section 132(1) sub-clause (c),||Any person who is holding or owning or having custody of any money, jewellery, bullion or such other valuable article or thing which is representing either wholly or partly income or property which has not been or would not be disclosed by the person for the purpose of Income Tax Act.|
So, before any such search or seizure has been done it should be ensured with that such act was done by an authority who is duly authorized for the same and all conditions precedent in relation thereto is existing. Hence, the authority who is holding the responsibility to issue any search warrant with respect to any such cases shall be satisfied that search under section 132(1) is needed in respect of a definite person.
Procedures, Forms of Authorization, Manner and Other Procedural Effects of Carrying out Search and Seizure
For carrying out the search and seizure actions enumerated u/s 132 of the Income Tax Act, Rule 112 of Income Tax Rules, lays down certain procedures, forms of authorization, manner and other procedural effects which are stated below:
During the course of search there shall be certain procedural irregularities which might have crept in advertently and this includes:
i) Name of the person who is being searched is not included in the Panchnama despite of being duly recorded in the search warrant.
ii) There was apostponement causedin cancellationof prohibitory orders issued u/s 132(3) of the act but within time prescribed u/s 132(8A) of the act.
iii) There was seizure of certain documents which were irrelevant as there was an error of judgement.
iv) Some of the disclosed assets were seized inadvertently.
v) Witnesses who were called by the authorized officers were against what was offered by the person who was being searched or the searched person.
vi) There was a delay in conclusion of search proceedings.
vii) Such other procedural irregularity which has crept in except a fundamental defect which may lead to making such search action void.
Referring to various court verdicts, we can say that the procedural irregularities that have crept in during the search or seizure activity shall not vitiate the search action as void unless the defect crept in is fundamental in nature, which would then make such search action void.
In the judgment provide by the Hon’ble Delhi High Court with regard to MDLR Resorts (P.) Ltd. v. Commissioner of Income-tax , wherein the assessee challenged the Income Tax Department with respect to certain procedural defect that has crept in while the Panchnama was drawn, the court held that, though there is certainly lapse and failure to comply with the requirements of search and seizure manual as the Panchnama did not contain names of the petitioners, the same shall not affect the validity of the search made.