Power regarding Discovery, Production of Evidence etc. – section 131

For giving effect to the various provisions of the Income Tax Act 1961 (the Act), the above said provision clothes the Assessing Officer (AO) and other prescribed authorities including the Commissioner and the Dispute Resolution Panel (DRP as referred to in clause (a) of sub-section (15) of section 144C(15)(a) of the Act) with the same powers as are vested in a Court (under the Code of Civil Procedure 1908) when trying a suit in respect of the following matters —

  • Discovery and inspection;
  • Enforcing the attendance of any person (including any officer of a banking company and examining him on oath);
  • Compelling the production of books of account and other documents; and
  • Issuing commissions.

The above said powers can be exercised by the prescribed authorities (Principal Director General or Director General or Principal Director or Director or Joint Director or Assistant Director or Deputy Director, or the authorised officer referred to in section 132(1) of the Act) before such person takes ‘search and seizure’ action under section 132 (see below), where such authority —

  • Has reason to suspect any income has been concealed, or is likely to be concealed;
  • By any person or class of persons within his/her jurisdiction; and
  • Such powers are exercised for the purposes of making any enquiry or investigation relating thereto (notwithstanding that no proceedings with respect to such person or class of persons are pending before such or any other income-tax authority).

The above said powers can similarly be exercised for the purpose of making an inquiry or investigation in respect of any person or class of persons in relation to an agreement referred to in section 90 or section 90A of the Act, by any income-tax authority not below the rank of Assistant Commissioner of Income-tax (as notified by the Central Board of Direct Taxes), notwithstanding that no proceedings with respect to such person or class of persons are pending before it or any other income-tax authority.


Impounding and Custody of Books of Accounts etc.

Subject to prescribed rules and as provided below, such authority is also empowered to impound and retain in its custody for such period as it thinks fit, books of account or other documents produced before it in any proceeding under this Act.

An Assessing Officer or an Assistant Director or Deputy Director cannot

  • Impound any books of account or other documents without recording reasons for so doing, or
  • Retain in custody any such books or documents for a period exceeding 15 days (exclusive of holidays) without obtaining the approval of the prescribed authority (Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner or Principal Director or Director therefor, as the case may be).

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Penalty for Failure

(to answer questions, sign statements, furnish information, returns or statements, allow inspections etc.)

Section 272A of the Act imposes a penalty, a sum of Rs.10,000 for each such default or failure, on a person in the following cases —

  • Where legally bound to state the truth of any matter touching the subject of his/her assessment, such person refuses to answer any question put by an income-tax authority in the exercise of its powers under the Act; or
  • Refuses to sign any statement made in the course of any proceedings under the Act, which an income-tax authority may legally require him/her to sign; or
  • Omits to attend (in-reply to summons issued) or produce books of account or documents at the stated place or time, when so required; or
  • Fails to comply with a notice under section 142(1) or 143(2) or a direction issued under section 142(2A).


Imposition of Penalty and Reasonable Opportunity of being Heard

The above said section requires the imposition of penalty by a prescribed authority of certain rank or position in different circumstances (as discussed above), and no such penalty order can be passed unless the person on whom the said penalty is proposed to be imposed, is given an opportunity of being heard in the matter by such authority.

 

Where the prescribed authority** in consequence of information in his/her possession, has ‘reason to believe’ (as recorded by the income tax authority, is not to be disclosed to any person or any authority or the Income Tax Appellate Tribunal (ITAT) – Inserted by Finance Act 2017 and with retrospective effect from 1 April 1962) that—

  • Any person to whom a summons (section 131(1) or notice under section 142(1) of the Act) was issued to produce (or cause to be produced) any books of account or other documents, has omitted or failed to do so, or;
  • Any person to whom such summons or notice has been or might be issued, will not or would not so produce (or cause to be produced) such books of account or other documents, useful for or relevant to any proceeding under the Act; or
  • Any person is in possession^^ of any money, bullion, jewellery or other valuable article or thing and the same represents either wholly or partly income or property (collectively the undisclosed income or property) which has not been or would not be disclosed for the purposes of the Act;
    then the prescribed authorities may authorise sub-ordinate officers (the authorised officer) including an Income Tax Officer (ITO) to do the following (read with Rule 112 of the Income Tax Rules 1962)
    > Enter and search any building, place, vessel, vehicle or aircraft where he/she has ‘reason to suspect’ that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;
    > Break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred above, where the keys thereof are not available;
    > Search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has ‘reason to suspect’ that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing;
    > Require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents;
    > Seize*** any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search.
    > Place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;
    > Make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing.

The provisions of the Code of Criminal Procedure (CrPC) 1973 relating to searches and seizure apply (as far as may be) to the above said searches and seizure under the Act.

Proceeding” means any proceeding in respect of any year under the Act, which may be pending on the date on which a search is authorised or which may have been completed on or before such date, and includes also all proceedings under the Act which may be commenced after such date in respect of any year.

**Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner.

^^Bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search cannot be seized, but the authorised officer is required to make a note or inventory of the same.

^^^In case where jurisdiction over the such building, place, vessel, vehicle or aircraft of any Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner subsists, but not over the concerned person, it will still be competent to exercise the powers above in all cases where such authority has reason to believe that any delay in getting the required authorisation from the authority with jurisdiction over such person may be prejudicial to the interests of the revenue.

***Where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order (does not apply in case of any valuable article or thing, being stock-in-trade of the business) on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing as stated above.

Where the prescribed authority (i.e. any Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner) in consequence of information in his/her possession, has ‘reason to suspect’ that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the relevant authority (Principal Director General or Director General or Principal Director or Director or any other Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner) to take action as discussed above, are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the relevant authorisation, such officer may similarly be authorised to take such action in respect of such building, place, vessel, vehicle or aircraft.


Non-Seizure Order

The authorised officer, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned above, may serve an order on the owner or the person who is in immediate possession or control thereof that he/she shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance.

  • Such serving of an order shall not be deemed to be seizure of such books of account etc.; and
  • Such order cannot be in force for a period exceeding 60 days from the date of the order.


Examination on Oath and Evidentiary Value

The authorised officer during the course of the search or seizure, may examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing, and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Act.

  • The examination of such person may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act.


Legal Presumption

Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed

  • Such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
  • Contents of such books of account and other documents are true; and

Signature and every other part of such books of account 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, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.


Period of Retention

Such seized books of account or other cannot be retained by the authorised officer for a period exceeding 30 days from the date of the order of assessment under section 153A (or section 158BC(c) of the Act, as the case may be) unless the reasons for retaining the same are recorded by him/her in writing and the required approval (of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director) for such retention is obtained.

No such authorisation can be given for a period exceeding 30 days after all the proceedings under the Act in respect of the years for which the books of account or other documents are relevant are completed.


Objection Application, Transfer of Seized Material, Provisional Attachment, Valuation reference etc.

A person legally entitled to such seized books of account or other documents may object for any reason to the approval so given, through an application to the Central Board of Direct Taxes (CBDT or the Board) and stating therein the reasons for such objection, requesting for their return. The Board after giving the applicant an opportunity of being heard, may pass such orders as it thinks fit.

  • Where the authorised officer has no jurisdiction over the said person, the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing (the assets) seized are required to handed over to the Assessing Officer (AO) having jurisdiction over such person within a period of 60 days from the date on which the last of the authorisations for search was executed and thereupon the above said powers shall be exercisable by such AO.
  • During the course of the search or seizure or within a period of 60 days from the date on which the last of the authorisations for search was executed, the authorised officer (for reasons to be recorded in writing) is satisfied that for protecting the interest of revenue it is necessary, may with the previous approval (of the Principal Director General or Director General or the Principal Director or Director) by order in writing, attach provisionally any property belonging to the concerned Assessee (the provisions of the Second Schedule shall mutatis mutandis apply). Such provisional attachment will cease to have effect after the expiry of a period of 6 months from the date of the said order.
  • Such authorised officer during the course of the search or seizure or within a period of 60 days from the date on which the last of the authorisations for search was executed, may make a reference to a Valuation Officer (referred to in section 142A) to estimate the fair market value of the property and submit a report of the estimate to the said officer within a period of 60 days from the date of receipt of such reference.

 


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The above said provision empowers an ‘income tax authority’ to enter

  • Any place within the limits of the area assigned to him/her, or
  • Any place occupied by any person in respect of whom he/she exercises jurisdiction, or
  • Any place** in respect of which he/she is authorised for the above said purposes by such income tax authority (who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place),
    where a business or profession or an activity for charitable purpose is carried on (irrespective of such place being the principal place or not of such business or profession or of such activity for charitable purpose) and require any proprietor, trustee, employee or any other person who may at that time and place be attending in any manner or helping in the carrying on of such business or profession or such activity for charitable purpose to —
    (a) Afford him/her necessary facility to inspect such books of account or other documents as may be required and which may be available at such place,
    (b) Afford him/her the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein***, and
    (c) Furnish such information as may be required as to any matter which may be useful for, or relevant to, any proceeding under the Act.
  • Entry into such place of business or profession can only be undertaken during the hours at which such place is open for the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset.

**Place where a business or profession or activity for charitable purpose is carried on shall also include any other place, whether any business or profession or activity for charitable purpose is carried on therein or not, in which the person carrying on the same states that any of the said books of account or other documents or any part of his cash or stock or other valuable article or thing relating to such business or profession or activity for charitable purpose are or is kept.

***An income tax authority conducting ‘survey’ cannot remove or cause to be removed from the place wherein he/she has entered, any cash, stock or other valuable article or thing.


TDS/TCS Verification

An income tax authority may for the purpose of verifying that tax has been deducted or collected at source (in accordance with the provisions under sub-heading B of Chapter XVII or under sub-heading BB of Chapter XVII of the Act, as the case may be) may enter after sunrise and before sunset, any office or any other place where business or profession is carried on (within the limits of the area assigned, or any place in respect of which he/she is authorised for the above said purposes by such income-tax authority who is assigned the area within which such place is situated) where books of account or documents are kept and require the deductor or the collector or any other person who may at that time and place be attending in any manner to such work —

  • Afford necessary facility to inspect such books of account or other documents as may be required and which may be available at such place, and
  • Furnish such information as may be required in relation to such matter.


Additional Powers for Survey

An ‘income tax authority’ conducting ‘survey’ action may —

  • Where deemed necessary, place marks of identification on the books of account or other documents inspected and make or cause to be made extracts or copies therefrom,
  • ^^Impound and retain in custody for such period thought fit any books of account or other documents so inspected.
  • Such income-tax authority cannot
    (a) Impound any books of account or other documents except after recording reasons for so doing; or
    (b) Retain in custody any such books of account or other documents for a period exceeding 15 days (exclusive of holidays) without obtaining the prescribed approval (of the Principal Chief Commissioner or the Chief Commissioner or the Principal Director General or the Director General or the Principal Commissioner or the Commissioner or the Principal Director or the Director therefor, as the case may be).
  • ^^Make an inventory of any cash, stock or other valuable article or thing checked or verified,
  • Record the statement of any person which may be useful for, or relevant to, any proceeding under the Act.
  • Having regard to the nature and scale of expenditure incurred by an Assessee, in connection with any function, ceremony or event, the concerned income tax authority (of the opinion that it is necessary or expedient so to do) may at any time after such function, ceremony or event, require the said Assessee (by whom such expenditure has been incurred) or any person who in the opinion of the income-tax authority is likely to possess information as respects the expenditure incurred, to furnish such information as may be required as to any matter which may be useful for, or relevant to, any proceeding under the Act and may have the statements of the said Assessee or person recorded and any statement so recorded may thereafter be used in evidence in any proceeding under this Act.
  • Where such person required to afford facility under the above said provision to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income tax authority has all the powers under section 131(1) of the Act for enforcing compliance with the requirement made.

^^No action there under can be taken by an income tax authority acting for the purposes of TDS/TCS verification as discussed above.

Income tax authoritymeans a Principal Commissioner or Commissioner, a Joint Commissioner, a Principal Director or Director, a Joint Director, an Assistant Director or a Deputy Director or an Assessing Officer, or a Tax Recovery Officer, and for the prescribed purposes includes an Inspector of Income Tax.

Proceeding” means any proceeding under the Act in respect of any year which may be pending on the date on which the powers under the above said section are exercised or which may have been completed on or before such date and includes also all proceedings under the Act which may be commenced after such date in respect of any year.


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Search and Seizure (section 132) and Power to requisition books of account etc. (section 132A)

The ‘reason to believe’ and/or ‘reason to suspect’ as recorded by the Income-Tax Authority for the purpose of lawfully initiating a ‘search and seizure’ action and/or ‘requisition books of accounts etc’ against a person is not required to be disclosed to any person or any authority or the Income Tax Appellate Tribunal (ITAT).


Assessment in case of Search or Requisition
– Section 153A and 153C (any other person)

Notice for Assessment/Reassessment can be issued for a further 4 Assessment year(s) beyond 6 assessment years (‘Block’ period) i.e. total of 10 Assessment years if the following conditions are met

  • Assessing Officer (AO) has in his/her possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to Rs.50 lacs or more in the relevant Assessment year or in aggregate in the relevant Assessment years;
  • Income referred to above or part thereof has escaped Assessment for such year(s); and
  • Search under section 132 is initiated or requisition under section 132A is made on or after the 1 April 2017.


Power of Survey
(section 133A)

Survey’ action under the above said provision can now be carried out in a place at which an activity for charitable purpose is carried in addition to a place of business or profession, whether or not such place be the principal place of such business or profession, or of such activity for charitable purpose.


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Subject to the satisfaction of prescribed conditions under section 153A read with section 132/132A, the Assessing Officer (AO) is potentially empowered to assess or reassess (as the case may be) the ‘total income’ of the concerned Assessee in respect of 6 Assessment years (‘Block Period’) immediately preceding the Assessment year relevant to the Previous year in which —

  • ‘Search’ action under section 132 is conducted; or
  • ‘Requisition’ is made under section 132A for books of account, other documents or any assets with respect to the said Assessee.


Assessment of Income of any Other Person
– Section 153C

Under the above said provision, where the relevant Assessing Officer (AO) is satisfied that any money, bullion, jewellery etc. seized or requisitioned, belongs to/or any books of account etc. requisitioned pertains/or any information contained therein relates to a person other than the person referred to in section 153A, then the same can be handed over to the AO having jurisdiction over such other person to be proceeded against in accordance with the provisions of section 153A (if the latter mentioned AO is satisfied that the books of account etc. have a bearing on the determination of the total income of such other person for the relevant Assessment year(s) under the Act).


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