Search and seizure

Authority Empowered to Authorise Search

Introduction

Section 132 of the Income-tax Act empowers specified income-tax authorities to authorise and conduct search operations for detecting undisclosed income and seizing related assets. These powers may be exercised by jurisdictional authorities and, in specified circumstances, by non-jurisdictional authorities. The Act also provides for search of places not mentioned in the original warrant.

Statutory Framework

Section 132 prescribes the authorities competent to authorise a search and the officers who may be authorised to execute such search. Authorisation powers generally vest in senior officers who have either territorial or assessment jurisdiction over the concerned persons.

Authorisation by Jurisdictional Authorities [Section 132(1)]

Higher authorities empowered to authorise search

Where information exists and reasons to believe are formed that statutory conditions are satisfied, the following authorities may issue authorisation:

• Principal Director General
  • Director General
  • Principal Director
  • Director
  • Principal Chief Commissioner
  • Chief Commissioner
  • Principal Commissioner
  • Commissioner

These authorities may authorise the following officers to conduct the search:
• Additional Director / Additional Commissioner
• Joint Director / Joint Commissioner
• Assistant Director / Deputy Director
• Assistant Commissioner / Deputy Commissioner
• Income-tax Officer

Authorisation is issued in Form No. 45 as prescribed under Rule 112 .

Other authorities empowered when authorised by CBDT

Additional Directors, Additional Commissioners, Joint Directors and Joint Commissioners may also authorise searches if empowered by the Board. The CBDT has empowered all such officers working under the Director General of Income-tax (Investigation) and Director General of Income-tax (Intelligence).
These authorities may authorise the same classes of officers mentioned above to execute the search.

Authorisation is issued in Form No. 45.

Authorisation by Non-Jurisdictional Authorities [First Proviso to Section 132(1)]

Specified senior authorities may authorise a search on an assessee outside their jurisdiction if:

• Delay in obtaining authorisation from the jurisdictional authority may be prejudicial to the interests of revenue; and
  • They have jurisdiction over the premises where the search is to be conducted.

Only the following authorities may issue such authorisation:
• Principal Chief Commissioner
• Chief Commissioner
• Principal Commissioner
• Commissioner

Authorisation is issued in Form No. 45A under Rule 112.

Authorisation to Search Places Not Mentioned in Warrants [Section 132(1A)]

Where an authorised officer has reason to suspect, based on information, that relevant books, documents or assets are kept in a place not specified in the original warrant, additional authorisation may be issued.

Authorities empowered to issue such authorisation

• Principal Chief Commissioner
  • Chief Commissioner
  • Principal Commissioner
  • Commissioner

Officers who must have been originally authorised

The officer authorised to carry out the search must have been empowered by one of the following authorities:

• Principal Director General / Director General
  • Principal Director / Director
  • Principal Chief Commissioner / Chief Commissioner
  • Principal Commissioner / Commissioner
  • Additional Director / Additional Commissioner
  • Joint Director / Joint Commissioner

Confidentiality of recorded reasons

Under the Explanation to Section 132(1A), reasons to suspect recorded by the authority are not disclosable to any person or appellate authority.

Authorisation is issued in Form No. 45B under Rule 112 .

Power of Officers while Conducting Search Operations

Introduction

Section 132 of the Income-tax Act empowers authorised officers to conduct search operations for discovering books of account, documents, money, bullion, jewellery, or other valuable articles or things representing undisclosed income. These powers operate alongside Rule 112 of the Income-tax Rules and are exercised only in accordance with statutory safeguards.

Powers of the Authorised Officer

• Power to Enter and Search

The officer may enter and search any building, place, vessel, vehicle, or aircraft where there is reason to suspect that books or assets are kept.

• The “reason to believe” must be formed by the competent authority qua-assessee. Entry into specific places for search may thereafter be based on mere suspicion.
• Separate warrants are required for each distinct premise. Search cannot extend to premises not mentioned in the warrant.
• Search may commence at any time of day or night and may continue until completion.

• Free Ingress and Presence during Search

Under Rule 112(3) , any person in charge of the premises must allow free entry and reasonable facilities for the search. Obstruction may attract prosecution under Bhartiya Nyaya Sanhita, 2023. The occupant or a representative may attend the proceedings.

• Search of Places Occupied by Pardanasheen Women

In premises occupied by women who, according to custom, do not appear in public, the officer must provide an opportunity to leave before entering, as per Rule 112(4) / Rule 112(4A) . This protection does not extend to women engaged in business or professional activity.

• Forceful Entry

Where entry cannot be obtained after disclosing authority and purpose, the officer may break open doors, windows, or use assistance from police or other government officers.

• Search of Premises Not Belonging to the Assessee

Search may extend to premises not owned or occupied by the assessee if the competent authority is satisfied that books or assets relating to the assessee are kept there. Residential premises of third parties cannot be covered by survey; therefore, search may be undertaken with appropriate warrant.

• Authority to Stop and Search Moving Conveyances

Under Rule 112(4A) , an officer may stop a moving vehicle, vessel, or aircraft and enter or break open the same if necessary for conducting search.

• Power to Break or Open Locks

Section 132(1)(ii) and Rule 112(4B) authorise breaking open locks of doors, lockers, safes, or receptacles where keys are not available, after allowing reasonable opportunity to produce the keys. The officer may also open or dismantle furniture or structures if required for the search.

• Power to Conduct Personal Search

Section 132(1)(iia) empowers the officer to search any person present in, entering, or leaving the premises if there is reason to suspect possession of undisclosed books or assets.

• No separate warrant is required.
• Search of a woman must be conducted only by a woman officer.
• A list of items taken must be prepared and copies provided to the individual and relevant authorities.

• Inspection of Electronic Records

Section 132(1)(iib) authorises the officer to require necessary facility for inspection of electronic books or documents. The person in possession must provide access, including passwords or software required.

• Restoration of Deleted Data

Deleted electronic data may be retrieved using specialised tools. Presumptions under Sections 132(4A) and 292C apply unless rebutted by the person searched.

• Power to Seize

Section 132(1)(iii) permits seizure of books, documents, money, bullion, jewellery, or other valuable articles or things found during search, except stock-in-trade.

• Only material relevant to proceedings or covered by the warrant may be seized.
• Stock-in-trade cannot be seized; only inventory may be prepared.

• Power to Pass Restraint Order

Where physical seizure is impracticable due to size, weight, or nature of the asset, the officer may issue a restraint order under the second proviso to Section 132(1) read with Rule 112(4C) . This prohibits removal or dealing with the asset and is not considered a seizure.

• Power to Place Identification Marks

Section 132(1)(iv) empowers placing identification marks and making copies or extracts of any books or documents, including those not covered in summons or notices.

• Power to Prepare Inventory of Assets

Under Section 132(1)(v), the officer may prepare a note or inventory of assets, including cash or stock-in-trade, found during search to facilitate verification of their source during assessment.

Search Warrant

Introduction

A search warrant under Section 132 of the Income-tax Act enables tax authorities to conduct a search when there is credible information and a recorded “reason to believe” that a person has failed to comply with summons or notices or is in possession of undisclosed income or assets. The warrant must be issued in writing, bear the signature and seal of the issuing authority, and state the name of the person and the premises to be searched.

When a Search Warrant May Be Issued

A warrant for search may be issued only when the competent authority, based on information, forms a reason to believe that circumstances specified in Section 132(1) exist, namely:

• failure or likely failure to comply with summons under Section 131(1) or notice under Section 142(1); or
  • possession of undisclosed income or assets.

Persons Against Whom a Warrant May Be Issued

A warrant may be issued against any person falling within Section 132(1) where reason to believe has been formed.

• The person may hold assets as owner or in any other capacity, such as an agent or employee.
  • A warrant in the name of an agent or employee may be issued only where the identity of the actual owner cannot be established.

Warrant Against Owner or Person in Possession

A search warrant is issued in the name of the person in possession of undisclosed assets, even if ownership rests with another person.

• The authorising officer must have recorded reason to believe, based on credible information, that such person is in possession of undisclosed assets.
  • Assessment of income relating to seized assets is made in the hands of the true owner once established.

Search Warrant in Joint Names

Section 292CC provides that:

• a search warrant may contain names of more than one person;
  • such warrant shall not be construed as authorisation issued in the name of an association of persons or body of individuals; and
  • assessments or reassessments shall be made separately for each person named in the warrant.

Manner of Drawing Search Warrant

• Authorisation in Writing

A warrant must be issued in writing with signature and seal of the issuing authority in the prescribed form:

• Form 45– authorisation under Section 132(1) by jurisdictional authorities;
• Form 45A– authorisation under the first proviso to Section 132(1) by non-jurisdictional authorities;
• Form 45B– authorisation under Section 132(1A) for searching places not mentioned in the original warrant.

• Mandatory Particulars

The warrant must clearly mention:

• name of the person against whom it is issued; and
• address of every premise authorized to be searched.

Merely mentioning the name or the address alone is insufficient.

Rights and Duties of Taxpayers During Search

Introduction

The CBDT’s Taxpayers’ Charter outlines key rights and duties of taxpayers during search operations. These rights also stem from statutory provisions and established procedural safeguards. Taxpayers must cooperate with the search team, while officers must conduct the search fairly and transparently.

Rights of Taxpayers During Search

• Production of Search Warrant

The authorised officer must show the valid search warrant to the occupant before commencing the search. The occupant may verify that the warrant bears the requisite signature, seal, correct name, and correct premises. The taxpayer is not entitled to retain a copy of the warrant.

• Verification of Identity of Officers

The taxpayer may verify the identity of every officer in the search team. Entry may be denied to any officer who refuses to establish identity.

• Right to Conduct Personal Search of Search Team

The taxpayer may conduct a personal search of members of the search team before and after the search to ensure that no material is planted or removed. Personal search of lady officers must be conducted by women of the household with due decency.

• Personal Liberty During Search

The taxpayer may continue daily activities so long as they do not obstruct the search.

• Right to Medical Aid

If the taxpayer or family members fall ill, medical assistance from a doctor of choice may be sought, including hospitalisation if advised.

• Children to Attend School

Children may attend school or tuition, subject to the search team checking their bags.

• Meals and Worship

The taxpayer and family members may take meals and perform religious worship.

• Permission to Leave Premises

The taxpayer may leave the premises for work or other obligations, subject to cooperation with search requirements such as recording statements or providing access to lockers.

• Presence of Legal Adviser

A taxpayer has the right to engage an authorised representative under Section 288 , except when required to appear personally under Section 131 or for recording of statement under Section 132(4) , which must be attended personally.

• Presence During Search Proceedings

Rule 112(8) allows the taxpayer or a representative to remain present throughout the search.

• Right to Make Copies of Seized Records

Under Section 132(9) , the taxpayer may make copies or extracts of seized books or documents.

• Right to Copy of Panchnama

A copy of the panchnama and annexures must be provided at the conclusion of the search.

• Right to Affix Personal Seals

The taxpayer may affix personal seals or marks on packages containing seized assets.

• Right to Copy of Statement Before Use

The taxpayer is entitled to a copy of any statement recorded from him before it is used in assessment, penalty, or prosecution.

• Protection Against Arrest

Search officers have no power to arrest under the Income-tax Act. For offences such as destruction of evidence or assault, police authorities may proceed under general criminal law.

• Continuation of Business Operations

Normal business activities may continue, provided the taxpayer does not obstruct the search. Movement of goods may be done with knowledge of the search team.

• Declaration of Undisclosed Income

The taxpayer may declare undisclosed income during the statement under Section 132(4) . As per Section 271AAB , concessional penalty rates may be available if the declaration and specification of manner of earning are made before conclusion of search.

Duties of Taxpayers During Search

• Allow Free Ingress

Upon production of a valid warrant, free and unhindered access must be allowed.

• Sign and Acknowledge the Warrant

The taxpayer must sign the warrant as acknowledgement of having seen it, without indicating consent.

• Identify Receptacles and Provide Access

Keys, passwords, and access to all receptacles containing books, documents, or assets must be provided.

• Explain Ownership of Assets and Documents

The taxpayer must identify and explain ownership of assets and documents found. Failure may attract presumptions under Section 132(4A) and 292C .

• Identify Persons Present and Prevent Personation

The taxpayer must identify all persons present and must not permit impersonation or false identification. Wrongful personation is punishable under Section 319 of Bharatiya Nyaya Sanhita, 2023.

• Restrict Entry of Unauthorised Persons

The taxpayer must prevent unauthorised persons from entering during the search.

• Not Remove or Destroy Material

No item found should be removed or destroyed. Destruction of evidence attracts Section 241 of Bharatiya Nyaya Sanhita, 2023.

• Answer Questions Truthfully

All questions must be answered truthfully. Refusal to answer, false statements, or knowingly giving false evidence may attract penal provisions under Sections 214, 216, and 227 of Bharatiya Nyaya Sanhita, 2023.

• Sign Statements, Inventories, and Panchnama

The taxpayer must sign the statement recorded under Section 132(4) , inventories prepared by the search team, and the panchnama.

• Maintain Peace and Cooperate

The taxpayer must maintain decorum and cooperate fully during and after the search to facilitate completion of proceedings.

Seizure

Introduction

The Income-tax authorities may seize books of account, documents, and undisclosed assets such as money, bullion, jewellery, and other valuable articles during a search under Section 132 . Disclosed assets, immovable property, and stock-in-trade are not liable to seizure. Before seizure, the assessee may be given an opportunity to demonstrate that assets are disclosed.

Scope of Seizure

The power to seize applies only in cases of search and not in surveys. Seizure involves taking physical possession of books, documents, or assets. A deemed or constructive seizure is permissible where physical removal is impracticable.

Items that May Be Seized

The authorised officer may seize books of account or documents, including loose papers, diaries, files, agreements, and other records. Undisclosed money, bullion, jewellery, or other valuable articles representing undisclosed income may also be seized. As per Board instructions, jewellery up to 500 grams for each married woman, 250 grams for each unmarried woman, and 100 grams for each male member is not to be seized. Higher limits may be allowed based on family status or customs, subject to reporting requirements. Only articles with commercial value may be seized; articles of personal or sentimental value are excluded.

Items Not Liable to Seizure

Disclosed bank deposits cannot be seized. Stock-in-trade is excluded from deemed seizure. Deemed seizure does not apply to books, documents, cash, bullion, or jewellery.

Procedure for Seizure

Panchnama must record all events of the search, including seized and found assets. Under Rule 112(9) , a list of seized items must be prepared and provided to the searched person and forwarded to the Commissioner. As per Rule 112(10) , seized valuables must be packed, sealed, and marked. Under Rules 112(11) and 112(12) , seized items or money may be handed to a designated Custodian, who ensures safe custody and deposit with specified banks or treasury. Under Rule 112(13) , sealed packages may be opened by the authorised officer in the presence of witnesses and after notice to the person searched.

Deemed Seizure

Where physical removal of a valuable article is not possible due to size, weight, or dangerous nature, the authorised officer may issue an order restraining the owner from dealing with the item, and such restraint is treated as seizure. This applies only to valuable articles that cannot be safely removed, such as heavy or large household items, carpets, paintings, or silverware.

Restraint Order under Section 132(3)

A restraint order is temporary and is used when immediate seizure is not practicable. It may apply to books, documents, or assets liable to seizure. It differs from deemed seizure, which is limited to valuable articles incapable of physical removal.

Restraint Order

Introduction

Section 132(3) empowers authorised officers to issue restraint orders during search operations when immediate physical seizure of assets is not practicable. Such orders remain valid for 60 days, and any contravention attracts prosecution under Section 275A .

Purpose and Scope of Restraint Order

Restraint orders allow the authorised officer reasonable time to decide whether to seize books of account, documents, or assets after examining evidence found during the search. This ensures adequate time to operate bank lockers, appraise assets, and determine whether they represent undisclosed income. The assessee also has an opportunity to establish that assets are disclosed or to declare undisclosed income under Section 132(4) .

Circumstances When a Restraint Order May Be Passed

A restraint order may be issued when physical seizure is not possible due to the volume, weight, physical characteristics, or dangerous nature of the item under the second proviso to Section 132(1) , which constitutes a deemed seizure. Separately, under Section 132(3) , an order may be passed when seizure is impracticable for reasons other than those specified above. The Explanation to Section 132(3) clarifies that such an order is not deemed to be seizure.

Difference Between Deemed Seizure under Second Proviso to Section 132(1) and Restraint Order under Section 132(3)

A restraint order under the second proviso applies only when it is impracticable to take physical possession due to specified physical characteristics, and such restraint is treated as actual seizure. A restraint order under Section 132(3) applies when books, documents, money, bullion, jewellery, or other valuable articles represent undisclosed income but cannot be seized for reasons unrelated to physical characteristics. Such an order is expressly not considered seizure.

Conditions for Passing a Restraint Order under Section 132(3)

The books, documents, or assets must be liable to seizure and should represent undisclosed income. Disclosed assets cannot be subjected to restraint orders. Stock-in-trade cannot be seized; hence no restraint order can be passed against it. Restraint also cannot be imposed on regular bank accounts unless they are benami or undisclosed. The authorised officer must have reason to believe that the items represent concealed income, though the presumption is that assets found during search are undisclosed unless proven otherwise.

Validity Period of Restraint Order

A restraint order under Section 132(3) is valid for 60 days from the date of the order. After expiry, the order automatically lapses, and no seizure of the restrained items can be made. There is no provision for extension of this period.

Manner of Passing a Restraint Order

The order must be in writing. Although the statute does not require recording reasons in the restraint order, the officer should document them in the panchnama or in a separate note. The officer must satisfy himself that the assets are liable to seizure and that seizure is not practicable. The officer may take necessary steps to ensure compliance, such as sealing premises, taking keys, or posting guards, though these actions are discretionary.

Consequences of Contravention

Violation of a restraint order issued under Section 132(3) is punishable under Section 275A .

Recording of Statement

Introduction

Section 132(4) empowers authorised officers to record statements on oath during search operations. Such statements have evidentiary value and may enable the assessee to obtain immunity from penalties if undisclosed income is voluntarily declared. The evidentiary weight depends on the circumstances of recording and corroborative material.

Purpose of Recording Statement

Recording statements during search enables the authorised officer to seek explanations regarding books, documents, or assets found and to verify matters relevant to proceedings under the Act. Statements are significant both for the Department, which uses them as evidence, and for the assessee, who may secure reduced penalties under Section 271AAB if undisclosed income is properly declared in the course of the search.

Evidentiary Value

A statement under Section 132(4) is one piece of evidence indicating acceptance of undisclosed income. It is not conclusive, and its weight must be assessed in light of all facts and supporting material. Courts have consistently held that final assessment depends on totality of evidence, not merely on the statement.

Manner of Recording Statement

The statement must be recorded on oath after proper administration of the oath by the authorised officer. Where the statement is not recorded in a language understood by the person, it must be explained to him before he signs. The assessee may request correction where recorded answers do not reflect what was intended. The statement must be recorded during the course of search, i.e., after commencement and before conclusion of the search. Statements recorded prior to commencement are under Section 131(1A). Statements under Section 132(4) may be recorded only from persons found in possession or control of books, documents, or assets. A person below the rank of Income-tax Officer cannot record such statements.

Signing of Statement and Supply of Copy

The statement is signed by the authorised officer and witnesses. The assessee must review the contents and ensure accuracy before signing, as refusal to sign may attract penalty under Section 272A. The statement does not form part of the panchnama, and a copy is not automatically provided; however, the assessee is entitled to obtain a copy before the statement is relied upon in assessment, penalty, or prosecution proceedings.

No Right to Counsel During Statement

Since the statement under Section 132(4) is recorded on oath and requires personal testimony, the assessee is not entitled to be represented by an authorised representative during its recording.

Retraction of Statement

Assessees may retract statements made under pressure or to expedite the search. Retractions often occur where admissions of undisclosed income are not supported by evidence. To prevent coercive confessions, the Board has instructed officers to focus on evidence gathering and avoid seeking admission of undisclosed income through undue influence.

Post Search Proceedings

Introduction

Post-search procedures include lifting restraints, collecting seized material, preparing the appraisal report, and initiating assessment proceedings. The appraisal report summarises findings and guides the Assessing Officer in determining undisclosed income. Block assessment provisions apply to searches conducted on or after 01-09-2024.

Opening of Restraints

Restraints imposed under Section 132(3) during search may relate to locked rooms, almirahs, boxes, or lockers. After concluding the search, the authorised officer visits the premises, verifies that seals are intact, opens the restraints, examines contents, and records the statement of the searched person. Two witnesses are present, and a panchnama is prepared. Any attempt to tamper with seals may lead to appropriate action.

Collecting Records from Different Locations

Searches may occur at multiple premises nationwide. Seized records and assets from all locations are gathered and forwarded to the authorised officer with jurisdiction over the searched person. The officer then examines the collected evidence and prepares the appraisal report.

Preparation of Appraisal Report

The appraisal report is an internal, confidential document submitted to higher authorities and the Assessing Officer. It outlines the basis of the search, significant events during the search, and key evidence found. It includes details of persons covered, seized documents with annexure references, enquiries conducted, modus operandi, statements recorded, preliminary findings, recommendations, and extracts of evidence. It may also include copies of panchnamas, statements, bank statements, jewellery receipts, and cash deposit or DD details. It may identify cases warranting action under Section 158BD and include separate chapters on the Black Money Act and the PBPT Act.

Handover of Report and Seized Material

Once finalised and approved, the authorised officer hands over the appraisal report and all seized material to the jurisdictional Assessing Officer.

Initiation of Block Assessment

For searches or requisitions made on or after 01-09-2024, the Finance (No. 2) Act, 2024 reintroduces block assessment under Sections 158B to 158BI. The Assessing Officer shall assess or reassess the total income for the block period of six assessment years preceding the year of search. Any pending assessments abate and merge with the block assessment. Undisclosed income is taxable at 60%. The Assessing Officer issues a notice requiring the assessee to furnish a return within 60 days after obtaining approval from higher authorities.

Issuing of Summons under Income-tax

Introduction

Specified income-tax authorities may issue summons under Section 131 to gather evidence for ongoing proceedings, investigate suspected concealment of income, or obtain information relating to DTAA matters. These authorities possess powers similar to those of a civil court under the Code of Civil Procedure, 1908.

Meaning and Purpose of Summons

A summon is a legally binding written order issued for the purpose of inquiry, investigation, or evidence gathering. Section 131 vests certain income-tax authorities with powers to enforce attendance, examine persons on oath, compel production of documents, conduct discovery and inspection, and issue commissions.

Powers Exercised Through Summons

The powers include enforcing attendance of any person, examining such person on oath, compelling production of books of account and documents, permitting inspection of documents, and issuing commissions for functions such as examining witnesses, conducting inquiries, or obtaining expert reports.

Types of Summons

Summons may be issued under three provisions:

• Section 131(1)for use during any pending income-tax proceeding such as assessment, reassessment, penalty, or appeal.
• Section 131(1A)by Investigation Wing officials to inquire into suspected tax evasion even when no proceeding is pending; an authorised officer may issue such summons only before initiating action under Section 132(1).
• Section 131(2)for inquiries relating to DTAAs or TIEAs, regardless of the pendency of proceedings.

Persons to Whom Summons May Be Issued

The authority may summon “any person,” including third parties, banking company officials, or any individual/entity possessing information or documents relevant to an inquiry or proceeding. The power is not restricted to the assessee.

Summons under Section 131(1)

These summons may be issued by authorities such as the Assessing Officer, Joint Commissioner, Commissioner (Appeals), Principal Commissioner, Chief Commissioner, and the Dispute Resolution Panel. They can be issued only when proceedings under the Act are pending. Non-compliance may result in penalty under Section 272A and may also lead to initiation of search.

Summons under Section 131(1A)

This provision empowers high-ranking authorities including the Principal Director General, Director General, Principal Director, Director, Joint/Deputy/Assistant Director, and authorised officers under Section 132. It applies where there is reason to suspect concealment of income, even if no proceeding is pending. An authorised officer may invoke this provision only before beginning a search under Section 132(1).

Distinction Between Sections 131(1) and 131(1A)

Section 131(1) requires the existence of a pending proceeding, while Section 131(1A) can be exercised without any proceeding but requires reason to suspect concealment of income. Section 131(1) is generally exercised by assessment and appellate authorities, whereas Section 131(1A) is exercised by Investigation Wing authorities and authorised officers.

Summons under Section 131(2)

These summons may be issued by income-tax authorities not below the rank of Assistant Commissioner as notified by the Board, for inquiries related to DTAAs or TIEAs. The power can be exercised even in the absence of ongoing proceedings.

Retention of Documents Obtained Through Summons

Books of account and documents produced may be impounded and retained. An Assessing Officer, Assistant Director, or Deputy Director must record reasons before impounding. Retention beyond fifteen days (excluding holidays) requires prior approval of higher authorities including Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, Commissioner, Principal Director General, or Director General, as applicable.

Presumptions in Search and Survey

Introduction

Sections 132(4A) and 292C create legal presumptions regarding books of account, documents, and assets found during search or survey. These presumptions shift the burden on the person from whose possession or control such material is found. They are rebuttable and do not extend to third parties. Presumptions relating to handwriting or signature apply to the person whose name the document bears.

Objective of Presumptions

The presumptions are intended to ensure that the person from whose possession or control books, documents, or assets are found cannot deny ownership or knowledge without credible evidence. This aligns with the principle under Section 113 of the Bharatiya Sakshya Adhiniyam, 2023, which places the burden of proof on the person from whose custody an item is found.

Nature of Presumptions under Sections 132(4A) and 292C

The provisions presume that books, documents, or assets found during search or survey belong to the person from whose possession they are found; the contents of such documents are true; the person must explain the nature, contents, and source of such materials; documents are signed or written by the person whose handwriting or signature they purport to bear; and documents have been duly stamped or executed by the person shown as executing them. These presumptions cannot be automatically extended to third parties, and the Assessing Officer must still establish that undisclosed income is attributable to the assessee.

Presumption Against the Person Having Possession or Control

The burden lies on the person in possession or control to explain the material found. Mere denial is insufficient. If the person claims that the documents belong to someone else, he must provide credible evidence showing to whom they belong and how they came into his possession.

Possession vs. Control

Possession and control may lie with different persons. Documents relating to business affairs found with an employee may actually relate to the employer who exercises control. Conversely, personal documents found with an employee may relate solely to that individual. The presumption applies based on the person who truly has control over the material.

No Mechanical Application of Presumptions

The term “may be presumed” indicates that presumptions should not be applied mechanically. Facts and circumstances must be evaluated in each case. For example, cash found with a cashier at the workplace is not presumed to be his, whereas cash found at his residence may give rise to presumption of ownership unless explained.

Rebuttable Nature of Presumptions

The presumptions are rebuttable. The person concerned may provide oral, documentary, or circumstantial evidence to rebut them.

No Presumption from Dumb Documents

No addition can be made based on documents that lack clear meaning or evidentiary value. Loose papers containing scribbles, rough figures, or uncorroborated notings cannot form the sole basis of assessment. The Assessing Officer must avoid making estimations based on conjectures without supporting evidence.

Presumption Regarding Signature and Handwriting

Presumptions relating to signatures or handwriting apply only to the person whose name or handwriting appears on the documents, not necessarily the assessee in whose possession the documents are found.

Sections 132(4A) vs. 292C

To remove earlier doubts about the scope of Section 132(4A), Section 292C was introduced with retrospective effect from 01-10-1975 to clarify that such presumptions apply in any proceeding under the Act, including regular assessments. Section 292C also extends presumptions to material found during survey. Both sections contain substantially identical language, and Section 292C has wider applicability.

Retention and Provisional Attachment of Assets Seized Under Search

Introduction

Section 132(8) empowers retention of books and documents seized during search until assessment is completed. Section 132(9A) mandates handing over seized material to the Assessing Officer within 60 days. Section 132(9B) provides for provisional attachment of property for six months to safeguard revenue. Section 132(9D) authorises reference to a valuation officer for estimating the fair market value of seized property.

Retention and Release of Books or Documents [Sections 132(8) and 132(10)]

Books and documents may be retained until completion of assessment and other proceedings under the Act, subject to recording reasons and obtaining approval of higher authorities. The authorised officer may retain books for one month beyond the end of the quarter in which assessment or reassessment is completed without approval, according to prescribed timelines. Retention beyond this period requires written reasons and approval of higher authorities. The assessee may object to such extension before the Board under Section 132(10). Assessees may obtain photocopies of seized books under Section 132(9), though no statutory time limit exists for supplying such copies.

Time Limits for Retaining Books and Documents

Books may be retained up to the last day of the month following the quarter in which the assessment order under Section 143(3), 144 , 147 or 158BC is passed. Extensions require reasons recorded by the Assessing Officer and approval from authorities such as the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, Commissioner, Principal Director General, or Director General. Retention cannot exceed 30 days after completion of all proceedings under the Act.

Obtaining Copies of Books Seized [Section 132(9)]

The person from whose possession books or documents are seized may obtain copies for compliance, business operations, audit, or finalisation of accounts. No time limit is prescribed for providing copies, and delays are common. The need for statutory rationalisation has been acknowledged.

Handing Over Seized Books or Assets to Assessing Officer [Section 132(9A)]

As search operations are investigative, the authorised officer collecting evidence must transfer seized material to the jurisdictional Assessing Officer within 60 days from execution of the last authorisation. Thereafter, powers relating to retention and supplying of copies are exercised by the Assessing Officer. Materials belonging to other persons must also be routed to the jurisdictional Assessing Officer of the person searched, who then transfers them to the appropriate Assessing Officer.

Provisional Attachment of Property [Sections 132(9B) and 132(9C)]

The authorised officer may order provisional attachment of property to protect revenue interests. Such order may be passed during the search or within 60 days after execution of the last authorisation, with reasons recorded and prior approval of higher authorities. Provisional attachment remains valid for six months and cannot be extended. After six months, jurisdiction typically passes to the Assessing Officer, who may exercise powers of provisional attachment under Section 281B.

Attachment of Disclosed Assets

Section 281B allows provisional attachment of any property, including disclosed assets, during assessment proceedings. As the power under Section 132(9B) parallels Section 281B, authorised officers may also attach disclosed assets such as bank accounts or stock-in-trade to protect revenue.

Valuation of Seized Assets [Section 132(9D)]

For accurate estimation of undisclosed income represented by investments or property, the authorised officer may refer the matter to a valuation officer under Section 142A. The valuation officer must furnish the report within 60 days. This valuation report is forwarded along with the appraisal report for use in assessment.

Application and Release of Assets Seized Under Search

Introduction

Section 132B provides the framework for applying assets seized during search to recover existing and future tax liabilities under various Direct Tax Acts. Surplus assets are released to the assessee after adjustment of liabilities. The assessee is entitled to interest at 0.5% per month or part thereof on excess money retained.

Purpose and Scope of Section 132B

The provision enables application of seized money or assets to (i) recover existing liabilities under all Direct Tax Acts, (ii) apply disclosed assets seized during search, (iii) adjust undisclosed assets against tax, penalty, and interest determined post-assessment, (iv) realise assets in kind for tax recovery, (v) release any surplus assets, and (vi) pay interest on excess retained funds.

Recovery of Existing Liability

Seized assets may be applied towards recovery of existing tax, interest, or penalties under the Income-tax Act, Black Money Act, and repealed Direct Tax Acts. “Existing liability” excludes advance tax, as clarified by CBDT, which applies prospectively. Liability arising from an application before the Settlement Commission may also be recovered.

Application of Disclosed Assets Seized During Search

Disclosed assets may be seized when the assessee fails to produce evidence at the time of search. Under the first proviso to Section 132B(1)(i), such assets may be used to recover existing liabilities. The assessee may apply for release of disclosed assets within 30 days from the end of the month of seizure and must satisfactorily explain their nature and source. After adjusting existing liability, the balance is released with approval of higher authorities, and the release must occur within 120 days of executing the last authorisation. In practice, this procedure is rarely implemented, and assets are seldom released.

Application of Undisclosed Assets Against Liabilities Determined

Seized assets may be applied towards liabilities determined for search-related assessments, including tax, interest, and penalty for the block period. Although assessment may conclude within the prescribed time, assets are often retained until penalty proceedings or appellate proceedings are finalised.

Application Only When Assessee is in Default

Seized assets may be adjusted only if the assessee is in default or deemed to be in default for payment of tax. Demand must be due and unpaid.

Realisation and Application of Assets in Kind

Where assets are not in monetary form, they may be sold for recovery of liabilities. Section 132B(2) affirms that tax recovery may also proceed via other modes such as attachment or sale through the Tax Recovery Officer under the Third Schedule. For this purpose, seized assets are treated as under distraint under Section 226(5).

Release of Surplus Assets

Under Section 132B(3), any surplus assets or sale proceeds remaining after discharging all liabilities, including penalty and interest, must be released to the assessee. Commissioner’s approval is not required for release of surplus, although approval is required for release of disclosed assets under the proviso to Section 132B(1)(i).

Release of Seized Cash and CBDT Instructions

Frequent delays in releasing seized cash led to Board instructions mandating strict timelines. Where the assessee explains the nature and source of seized cash, it must be released after adjusting existing liability within the statutory timeline. If not released, cash lying in the Personal Deposit (PD) Account must be released within one month of the assessment order after adjusting existing and assessed liabilities and retaining amounts only for expected penalty. Upon appellate orders or penalty orders, balances must be reviewed and released within one month. Commissioners must ensure no cash is retained merely because the Department has filed appeals.

Release of Jewellery and Perishable Items

Jewellery and perishable items may be released on furnishing an unconditional bank guarantee equal to their value. The guarantee must cover the full value, be valid until assessment completion, and be enforceable at any time.

Release of Assets in Presence of Witnesses

Rule 112B requires release of assets in the presence of two witnesses to the person from whose custody they were seized, unless assets relate to another person under Section 158BD, in which case release is made to the rightful owner.

Authority to Release Assets

The power to release seized assets rests with the Assessing Officer, not the authorised officer who conducted the search.

Delay in Release

For delays, the assessee may approach higher authorities, file a writ petition before the High Court, or approach the Income Tax Ombudsman for relief.

Payment of Interest on Excess Money Retained

Section 132B(4) mandates simple interest at 0.5% per month or part thereof, calculated from the expiry of 120 days after execution of the last authorisation until completion of assessment. Interest is payable on surplus money remaining after deducting disclosed money released, proceeds applied towards existing liabilities, and all tax, interest, and penalty liabilities arising from assessment and penalty proceedings.

Requisition under Section 132A – Condensed Version (No Line Spacing)

Introduction

Section 132A empowers income-tax authorities to requisition books of account, documents, or assets from other government authorities. Once delivered, such material is treated as seized under Section 132, and all related search provisions apply to the person to whom the requisitioned assets belong. Assessments are made under Section 158BC as in the case of a search.

Scope and Purpose of Section 132A

This provision allows the Income Tax Department to take delivery of incriminating material seized by any other authority under any law. It is an overriding power that enables requisition without requiring orders from other authorities. After delivery, the original custodian is treated as searched under Section 132.

Authorities Empowered to Authorise Requisition

The following officers may authorise requisition upon having reason to believe that required conditions exist: Principal Director General, Director General, Principal Director, Director, Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner. They may authorise Additional/Joint/Assistant/Deputy Directors or Commissioners and Income-tax Officers to execute the requisition. Reasons recorded cannot be disclosed except before constitutional courts if directed.

Circumstances in Which Requisition May Be Authorised

Requisition may be authorised when:

• A person fails to produce books or documents required by summons under Section 131(1) or notice under Section 142(1);
• A person possesses assets representing wholly or partly undisclosed income;
• Such books, documents, or assets are in custody of another authority, and the competent officer has reason to believe they represent undisclosed income.

Requisition cannot be issued mechanically; the competent authority must satisfy the existence of conditions similar to those for authorising a search.

Procedure for Issuing Requisition

Authorisation is issued in Form 45C under the signature and seal of the competent authority. The requisitioning officer issues a written requisition to the delivering officer, accompanied by a copy of the authorisation. A copy is also forwarded to the person to whom the assets belong. Non-service on the assessee does not invalidate the requisition. Requisition may be made to any officer or authority under any law.

Handling and Delivery of Requisitioned Material

The delivering officer prepares a list of books, documents, or assets being handed over. Bullion, jewellery, or valuables must be sealed in a package with identification marks of both officers, and the assessee may place his seal. Copies of the list are supplied to the assessee and sent to superior authorities. The Custodian ensures safe custody and may deposit valuables in authorised banks or treasury. Packages may be opened by the authorised officer in the presence of witnesses after notice to the assessee.

No Limitation Period for Delivery

There is no time limit for other authorities to deliver requisitioned materials. They must deliver such items either immediately or once retention is no longer required for proceedings under their respective laws.

Applicability of Search Provisions

Upon delivery, the requisitioned material is treated as seized under Section 132(1). Sections 132(4A)–(14) and Section 132B apply, covering legal presumptions, retention and release of documents, obtaining copies, handing over material to the Assessing Officer, provisional attachment, valuation, objections to retention, applicability of CrPC search rules, powers under Rule 112 , and application of seized or requisitioned assets.

Search Provisions Not Applicable to Requisition

Certain provisions applicable to search do not apply to requisition, namely:
Section 271AAB (penalty for undisclosed income), Section 132(2) (use of police services), Section 132(3) (restraint orders), and Section 132(4) (recording of statements). There is no provision requiring the assessee’s explanation before issuing a requisition.

Correspondence Between Search and Requisition Dates

For determining block period and procedural timelines under Section 158BC, corresponding dates are aligned as follows:

– Date of search warrant = date of requisition authorisation;
– Commencement of search = date of serving requisition;
– Conclusion of search = date of receiving last delivery of requisitioned material;
– Period of search = period from serving requisition until actual delivery.

Although delivery may occur much later, the block period is determined with reference to the date of requisition, not the date of actual delivery.

Assessment of Other Person

Persons whose assets are requisitioned are treated as if searched under Section 132. Assessments are made under Section 158BC for the block period of six assessment years preceding the year in which the requisition is made, irrespective of the delay in actual delivery. Notices are issued accordingly, and assessments are completed following the law applicable to search cases.

Release of Assets

Under Rule 112C , any surplus assets or sale proceeds remaining after liabilities are discharged must be released to the person from whose custody the assets were seized, in the presence of two witnesses.

Survey under Section 133A

Introduction

Section 133A empowers income-tax authorities to conduct surveys for collecting information and verifying tax compliance. Surveys are less intrusive than searches and allow inspection of books, marking of documents, recording statements, and verification of cash and stock. Authorities cannot seize assets during a survey, nor can they convert a survey into a search without conditions prescribed under Section 132.

Scope of Survey and Investigative Powers

A survey may be conducted at any place where business, profession, or charitable activity is carried on, or where books, documents, cash, stock, or valuables are kept. Authorities may inspect books and documents, make copies, mark them for identification, verify stock and cash, and record statements. Surveys assist in gathering information for assessment or reassessment proceedings.

Authorities Empowered to Authorise and Conduct Surveys

Approval to conduct a survey must be obtained from the Principal Director General, Director General, Principal Chief Commissioner, or Chief Commissioner. Surveys may be conducted by Principal Commissioners, Commissioners, Directors, Joint/Assistant/Deputy Directors, Assessing Officers, and Tax Recovery Officers. Inspectors may conduct surveys only for inspection, marking documents, making extracts, or verifying expenditure at functions or events.

Jurisdiction for Conducting Survey

For verification and information collection, authorities may enter premises within their assigned area, premises of persons over whom they exercise jurisdiction, or premises authorised by competent authorities. For TDS/TCS verification, authorities may enter any premises within their area or those specifically authorised for such purposes.

Places Where Survey May Be Conducted

A survey may be conducted at any business premises or other location where books, documents, cash, stock, or valuables relating to business or charitable activity are kept. For TDS/TCS verification, surveys may be conducted at offices or any places where relevant documents are kept.

Obligations of the Person in Charge

Persons present during the survey must provide access to books and documents, permit verification of cash and stock, and furnish information required for proceedings under the Act. For TDS/TCS matters, deductors or collectors must provide access to books and furnish relevant information.

Timing of Survey

For general surveys, entry is permitted only during business hours when the premises are open. For TDS/TCS surveys, entry is permitted only after sunrise and before sunset.

Powers of Survey Authorities

Authorities may place identification marks on books, make extracts or copies, impound and retain books after recording reasons, and retain them for more than 15 days only with approval of higher authorities. They may inventory cash, stock, or valuables but cannot remove them. They may record statements relevant to proceedings. For TDS/TCS verification, authorities may mark books, make extracts, and record statements. For verification of expenditure on functions or events, authorities may require information and record statements after the event has concluded.

Power to Issue Summons

If a person refuses to afford the required facilities or furnish information, authorities may issue summons under Section 131(1) for enforcing attendance, compelling production of documents, discovery and inspection, and issuing commissions. Failure to comply may justify initiating search proceedings subject to statutory conditions.

Conversion of Survey into Search

A survey cannot be converted into a search unless conditions for search under Section 132 are satisfied and a search warrant is obtained based on recorded “reason to believe.” Survey teams cannot initiate search on their own.

Difference between Search and Survey

Surveys may be conducted only at business premises, whereas searches may extend to residential premises. Surveys cannot involve seizure of assets, though books may be impounded; searches permit seizure of undisclosed assets. Searches require recorded “reason to believe,” while surveys do not. Surveys occur during business hours; searches have no such limitation. Statements during search are recorded on oath and have higher evidentiary value. Searches mandate block assessments under Section 158BC; surveys do not.