Income Tax Department Survey, Search & Seizure (RAID) - When it happens & What to do? Read here to avoid fraud inspections

Usually we always afraid of such things, about which we have not any clear idea. 'Income Tax Survey & Raid' is one of that kind of things. Even many genuine taxpayers are afraid of 'Income Tax Survey & Raid' due to lack of proper knowledge and complicated law. Also you may seen in movies (like: Special 26)  that sometimes fraud inspections are happen. So, you need to know some common things about Income Tax Visits & its provisions. Let's Read:

What are the types Income Tax Visits ?

Generally Income Tax can visit your place for following purposes:

1. SURVEY or
2. SEARCH & SEIZURE (RAID)

Are SURVEY and RAID same?

No, Survey and Raid are different. But whenever there is Survey, people often call it Raid, which is completely wrong.

What are the differences between SURVEY and RAID?

SURVEY	SEARCH & SEIZURE (RAID)
It is defined under sec. 133A of I.T. Act.	It is defined under sec  132 of I.T. Act.
It can take place only at Business or Profession place. It can not take place at residencial place unless books are kept in residencial place.	It can take place at any building or place within the jurisdiction of that officer.
It can take place only during working hours on business days. It can continue even after working hours.	It can take place on any day after sunrise and continue until the procedures are completed.
Only inspection of books and verification of cash & inventory is done.	Entire place can be searched to find out undisclosed assets, locks can be break.
Officer has no power to Seize.	Oficer has power to Seize.
Personal search of a person cannot be done.	Every person in the premises can be personally searched.
The help of police officers can not be taken	The help of police officers can be taken.

What is 'Income Tax Survey' ?

As discussed above, Income Tax Survey means inspection of books and verification of cash & inventory in your business or profession place by authorised income tax officers.

Click here to read Sec. 133A of Income Tax Act and know more about Income Tax Survey 

Who can execute 'Income Tax Survey' ?

Income tax survey can be executed by income tax authority such as
Principal Commissioner or Commissioner or

a Joint Commissioner or
a Principal Director or Director or
a Joint Director or
an Assistant Director or a Deputy Director or
an Assessing Officer, or a Tax Recovery Officer

When I.T. Department can Survey ?

If I.T. Department suspect anything wrong in your books of accounts, then they can survey your business place during working hours of any business day. They can check or verify books of accounts, cash and inventory.

What is 'Income Tax Raid' ?

Income Tax Search & Seizure (Commonly known as RAID) means a search operation done by Authorised Income Tax officials at your building or place if they have any reason to believe or have any strong evidence about any Undisclosed Asset in your possession or anything suspicious about your business. If they found any undisclosed asset, they have power to seize.

Click here to read Sec. 132 of Income Tax Act and know more about Income Tax Search & Seizure (RAID)

Who can execute 'Income Tax Raid' ?

(A) Principal Director General or 

Director General or 

Principal Director or 

Director or  

Principal Chief Commissioner or 

Chief Commissioner or Principal Commissioner or 

Commissioner 

may authorise any 

Additional Director or 

Additional Commissioner or 

Joint Director, Joint Commissioner,

Assistant Director or 

Deputy Director, 

Assistant Commissioner or 

Deputy Commissioner or 

Income-tax Officer, or

(B) such Additional Director or 

Additional Commissioner or 

Joint Director, or Joint Commissioner 

may authorise any 

Assistant Director or 

Deputy Director, 

Assistant Commissioner or 

Deputy Commissioner or 

Income-tax Officer,

to Search & Seizure (Raid) any place.

When I.T. Department can Raid ?

Income Tax Department can Raid your place for any of following  reasons,

(a)  If any summon issued under section 131 of Income Tax Act or any notice issued under section 142 of Income Tax Act  or

(b) They have any reason to believe that you possess undisclosed assets.

Formats of warrant of authorisation are given below:

Click here to see Form 45
Click here to see Form 45A
Click here to see Form 45B

Rights & Duties of Assessee during Income Tax Raid ?

Taxpayer’s charter indicating rights and duties of persons searched (1994) 208 ITR (St.) 5

Rights of the person searched:

• To see the warrant of authorisation duly signed and sealed by the issuing authority.

• To verify the identity of each member 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 a 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 so stated by him have been recorded correctly.

• To have a copy of the panchanama 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 authorised 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 180 days from the date of the seizure.

Duties of the person searched:

• To allow free and unhindered ingress into the premises.

• To see the warrant of authorisation 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 authorised 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 by impersonation. 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 unauthorised person into the premises.

• Not to remove any article from its place without notice or knowledge of the authorised officer. If he secretes 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 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 authorised officer. In doing so, he should keep in mind that –

If he refuses to answer a question on a subject relevant to the search operation, he shall be punishable with imprisonment of fine or both, under section 179 of the Indian Penal Code.

Being legally bound by an oath or affirmation to state the truth, if he makes a false statement, he shall be punishable with imprisonment or fine or both under section 181 of the Indian Penal Code.

Similarly, if he provides evidence which is false and which he knows or believes to be false, he is liable to be punished under section 191 of the Indian Penal Code.

• To affix his signature on the recorded statement, inventories and the panchanama.

• To ensure that peace is maintained throughout the duration of the search, and to co-operate with the search party in all respects so that the search action is concluded at the earliest and in a peaceful manner.

• 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.

Reliefs:     

1. Stock-in-trade of the business shall not be seized but the authorised officer can make a note or inventory of such stock-in-trade of the business.
2. No arrest or detention can be made under Sec. 132. Income Tax Officers have no power to arrest. Click here to see the powers of Income Tax Authorities.
3. Search & Seizure operation under Sec. 132 can not be exercised after the assessment.It means,  No seizure of assets can be done to recover tax due once assessment is completed.

Can any assessee call his CA or Lawyer during Survey or Raid ? 

Yes, you can call your CA or Lawyer during Survey or Raid, but they have not any right to explain things or answer questions on behalf of you.

You can only ensure with your CA or Lawyer if the Survey or Raid team is acting within their legal powers.

What steps can be taken by an Assessee after Raid?

 After Search & Seizure (Raid) proceedings are over the assessee can take any of the following steps.

1. If the assesse believes that search is illegal and irregular he can challenge it in writ petition within reasonable time.
2. He can challenge the assessment before the Commissioner of Income Tax (Appeal)

So, In simple words, Income Tax Department can visit your place for either Survey or Raid. Also beware of fraud, check the Authorisation letter in case of Survey or Search warrant in case of Raid. You need not to worry if you are a genuine tax payer.

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