Unveiling the Power of Income Tax Search and Seizure: Combating Tax Evasion

The Income Tax Department has the power to search and seize( also called raids) property or money from people suspected of not paying their taxes. This is an important tool to catch tax evaders. The Department can conduct raids on individuals or groups who are suspected of hiding their income or property. Even though it might seem like a serious measure, it is legal and needed when the Department feels it is necessary.

Objectives of Income Tax Search and Seizure

The Income Tax Department carries out search and seizure operations with the primary objective of addressing tax evasion and avoidance, which can pose a threat to social security. The department aims to tackle the menace of black money and uphold the law laid down by the Indian Constitution through these operations. By doing so, the department aims to ensure a fair and just tax system that benefits all citizens of the country.

The Income Tax Department can conduct raids on individuals or groups for a wide range of reasons. The following are the top 20 reasons for income tax raids:

1. Non-disclosure of income or assets that exceed Rs 1 crore and non-payment of tax on such income or assets
2. Suspected possession of assets that have been unaccounted for and deemed to be used for the purpose of smuggling, public disorder, fraud, terrorism, etc.
3. Verification of lavish expenditure at weddings or marriages
4. Evidence of tax evasion based on actual fact rather than rumors or assumptions
5. Reports or tax evasions gathered by intelligence departments
6. Reports in relation to the confiscation of money by any state or central government law enforcement agency
7. Information from informers hired by the law to provide critical data on any individual or organization suspected of tax evasion
8. Data or information put together from the perusal of tax assessment files and records that have passed through the process of verification
9. Evidence received from any party with an intimate relation with the assessee in question, such as a member of the assessee's family, a business partner, an employee, etc.
10. Manipulation or cooking of books or ledgers showing accounting details and transactions, documentation or records, invoices, vouchers, bills, etc.
11. Possession of duplicates or copies of books of accounts
12. Possession of substantial amounts of income held with the assessee, at banks or financial institutions, at the residence of the assessee, at any business property, at lockers held in banks or financial institutions, at the residence of any member of the assessee's family, at the residence of any business partner of the assessee, at the residence of any employee of the assessee.
13. Evidence linking the arrival of a person at any of the airports in India with the possession of substantial sums of money, gold, incriminating documents, etc.
14. Assessees earning low salary or income but in possession of vast sums of money
15. Information or data that contradicts any facts that have been recorded
16. Suspicious business transactions, transfers, or activity, including travel from one location to another, whether within India or abroad
17. Information gathered from magazines, social media and other internet web pages, newspapers, news on the television, news on the radio, etc.
18. Information, data, and evidence gathered from other governmental departments
19. Assets not accounted for in the books of account or balance sheets of the assessee, including cash, jewelry, bank balances, investments, shares, etc.
20. Evidence linking the assessee to the illegal purchase or investment in and of any property or real estate.

These are just the top 20 reasons for income tax raids conducted by the Income Tax Department in India. It is important to note that any individual or organization suspected of tax evasion or other illegal activities can be subject to an income tax raid by the authorities. The reasons for an income tax raid can vary widely, and it is always advisable to maintain accurate records and disclose all income and assets to avoid any such action by the authorities.

Top 10 rights of an assessee during Income Tax Raid

1. The right to be informed about the reason for the raid and the identity of the authorised income tax officer.
2. The right to inspect the search warrant and confirm the identity of the authorised income tax officer present.
3. The right to insist that only authorised female tax officers shall be allowed to search the female family members of the assessee.
4. The right to inspect and search the authorised income tax officers to ensure that no planting or tampering of evidence takes place.
5. The right to seal and stamp any packages that have been confiscated by the raid, and receive a witness copy of the same.
6. The right to have two individuals from the local area stand as independent witnesses during the raid.
7. The right to avail of medical assistance if needed.
8. The right to eat meals at standard meal times.
9. The right to provide a statement at the time the raid is being carried out or after the raid has been concluded.
10. The right to exercise the right to silence and not provide a statement, although it may have an adverse effect on proceedings 

Top 10 duties  of an assessee during Income Tax Raid

1. To allow free and unhindered ingress into the premises.
2. 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.
3. To identify and explain the ownership of the assets, books of account and documents found in the premises.
4. To identify every individual in the premises and to explain their relationship to the person being searched.
5. Not to allow or encourage the entry of any unauthorised person into the premises.
6. Not to remove any article from its place without notice or knowledge of the authorised officer.
7. To answer all queries truthfully and to the best of his knowledge.
8. Being legally bound by an oath or affirmation to state the truth.
9. To ensure that peace is maintained throughout the search process.
10. To cooperate with the search party in all respects so that the search action is concluded at the earliest and in a peaceful manner.  

Top of Form

Top 5 key tips to avoid raid 

1. Be truthful and disclose all taxable and nontaxable income and wealth while filing income tax returns.
2. Follow all compliance procedures when issued with a summons by an assessing officer.
3. Keep proper records and documents of any income or wealth that is exempt from tax.
4. Maintain bills, vouchers, and other necessary documents as proof of purchase.
5. Keep a record of the contents of bank lockers and be prepared to provide it to income tax authorities if needed.                                                           

The author is a Chartered Accountant with 2 decades of experience into Accounting, Taxation, Auditing, Risk & Compliance, Credit Controls, Due diligence. Currently author is founder and managing partner at RRL Global services.