That's why the scope for nondisclosure of income, high-value transactions and non-filing/defective filing of returns has become very limited. So, say experts, do not get shocked or surprised if you get a notice from the income tax department seeking details of a transaction or source/proof of some income.
Rs 30 lakh is the threshold of net assets over which wealth tax is levied
1% is the wealth tax on the net value of assets exceeding Rs 30 lakh
"The process of filing tax returns has been changed tremendously over the past few years. Even a minor error may invite a notice from the income tax department for correction or explanation," says Amit Maheshwari, Partner, Ashok Maheshwary & Associates.
"One should reply within the stipulated time. Generally, 30 days are given for reply by post or in person. Attach a copy of documents regarding income and investments claimed in the return. Consult a tax expert if complexities are involved," says Sudhir Kaushik, co-founder, Taxspanner.com, a tax planning and filing website.
WHY YOU GET I-T NOTICE
Return not filed or delayed: Your employer deducted tax from you salary. However, you did not file the return.
In such a case, the tax department will send a notice asking you to file the return. The notice has to be responded to within the given time. Otherwise, you may be penalised.
Tax consultants say if there is no default in paying tax, the taxpayer is usually not penalised for late filing.
However, if any tax is due, the department charges 1% interest per month from the due date.
Mismatch in tax credit: Tax deducted at source, or TDS, figure in your Form 16 may be different from the actual tax credit mentioned in Form 26 AS, a document issued by the income tax department that has all your tax-related information such as tax deducted, refund, etc, against your permanent account number (PAN). In case there is mismatch between the two, the department goes by the figure in Form 26 AS.
The mismatch could be because either the employer has not deposited the tax deducted from your salary with the department or has credited it in someone else's account. In such a case, you have to file a rectified return.
If the employer has not paid the TDS to the tax department, point this out to him. In case the tax has being credited to someone else's account, furnish the TDS certificate to the assessing officer for making the necessary changes.
What if you made capital gains by selling stocks/bonds, earned interest on fixed deposits or had rental income, but did not report these in your return? Improved tracking by the income tax department means hiding these is difficult and may lead to serious repercussions in the form of penalty and prosecution.
For instance, in case of concealment of income or non-payment of tax, the penalty can be 100-300% of the amount due. So if the tax due is Rs 20,000, you may have to pay a fine of up to Rs 60,000, besides the due amount.
"To invest in equities, you need a demat account, and for that you need a PAN. So, the tax department gets all the information. You also pay STT (securities transaction tax) and so again the government has all the information regarding share purchases. Even when you book capital gains, it is a banking transaction, and you face the risk of coming under the tax department's scrutiny. You run the risk even otherwise. For instance, if there is an inquiry against your (stock) broker, you can also get a notice," says Rakesh Nangia, a chartered accountant and managing partner, Nangia Co.
However, one must know that there is no tax on long-term capital gains and dividend income from equities. Only short-term capital gains (made by selling shares held for less than a year) are taxed.
Non-disclosure of assets for wealth tax:
Not many people know that if they own unproductive assets such as urban land, vacant house, personal car, gold, expensive watches, paintings, etc, they are liable to pay wealth tax if the net aggregate value of these things exceeds Rs 30 lakh. The tax rate is 1% on the amount over and above this Rs 30 lakh threshold.
If you have assets whose value exceeds Rs 30 lakh, you have to file a return for wealth tax as well. However, first home is exempt from wealth tax.
"Many individuals are not aware that they have to file a wealth tax return. The method for determination of net taxable wealth is also not known to many," says Tapati Ghose, senior director, Deloitte Haskins and Sells.
Valuation of property, jewellery, etc, can be a tedious process. You can approach government-approved valuers for this. The second home is valued on the basis of rental income while jewellery is valued at the market price.
"Wealth tax provisions have not been rigorously implemented in India. These mostly involve immovable property and jewellery. You can take help from experts to value your assets," says Amit Maheshwari of Ashok Maheshwary & Associates.
Notices for high-value transactions:
Any high-value transaction (with or without quoting PAN) that you thought you can get away with can invite a notice from the income tax department.
The tax department closely scrutinises individuals with bank cash deposits worth Rs 10 lakh or more in a year, credit card purchases of Rs 2 lakh or more, mutual fund investments of Rs 2 lakh or more, or purchase of bonds and debentures worth Rs 5 lakh or more in a year. Besides, sale or purchase of property worth Rs 30 lakh or more also attracts attention of the tax department.
Under the law, details of such transactions have be furnished by the entity with which you are doing the transaction. For example, if you have Rs 10 lakh or more in the savings account of a bank, the respective bank has to file an annual information return with the department.
Such tight monitoring means the taxman may send you a notice asking you to file a return. Also, if there is a sharp discrepancy between your earnings and spendings, the tax department may ask you to explain your sources of income.
"Many of the above notices may lead to the department raising a tax demand, which if not dealt with expeditiously could lead to your bank accounts being attached," says Tapati Ghose of Deloitte.
From June this year, the government has made it mandatory for buyer of a property worth Rs 50 lakh or more to deduct 1% tax from the payment to the seller and deposit it with the income tax department. The buyer needs to issue a TDS (tax deducted at source) certificate to the seller.
Investing in the name of spouse, children or even parents is common practice. But one thing that must be kept in mind is that even if the investments are in someone else's name, they have to be mentioned in your tax return because of the income clubbing provision in the Income Tax Act.
Failure to do so may invite a tax notice to the person in whose name you have invested.
"It is a normal check, so do not panic. Theoretically, you have not done anything wrong. All you need to do is explain that these are not your earnings and, therefore, not liable to be taxed," says Vineet Agarwal, partner, KPMG.
As per Section 64 of the Income Tax Act, any income from investment made or asset purchased in the name of close relatives (spouse, minor child or daughter-in-law) is clubbed with the income of the person making the investment and taxed accordingly.
This applies to all types of investments such as shares, fixed deposits, land, building, post office savings and mutual funds.
Further, income from assets transferred directly or indirectly other than for adequate consideration to a person or association of persons who may benefit the individual's spouse or son's wife are also clubbed with the transferer's earnings.
How to deal with tax notices
Do not panic, simply oblige the taxman. Respond to the notice, and furnish the documents and information the department has sought. File a rectified return and pay the tax due, if any, within the stipulated period.
In some cases, tax officials may ask you to be present in person for checking returns filed by you. You can either represent your case yourself or authorise a tax expert to do so. The latter option is better as a professional will fully understand each and every explanation sought and respond appropriately.
"In case there are no complexities in your return, attend the hearing yourself with all income/investment proofs. Else, hire a tax expert. Those who consult a tax expert online/offline are less likely to get a notice because the compliance requirement is being managed by a professional," says Sudhir Kaushik of Taxspanner.com.
Not responding to the notice could cost you a lot of time, money and peace of mind. In some cases, it could also lead to imprisonment.
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What leads to income tax raids, searches and seizures?
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The summons or notice calls for the
books of account or other documents to be produced before the authorised
officer. If, for some reason it is not possible to submit the documents
on the appointed date and time,
the authority concerned should be informed in advance and a suitable
alternate date sought. If a person thus cooperates with the tax
authorities there would be no occasion for them to conduct tax raid
against him on these grounds.
Similarly, one should not keep any
unaccounted or undisclosed money, property or income popularly known as
black money. All unaccounted income, should be declared.
If such a disclosure is made before its detection by the Income Tax
Department, the chances of being trapped in a tax raid are minimised. A
tax raid may also be conducted against a person in possession of
undisclosed income or property not belonging to him but to someone else.
It is therefore important for a person who is in possession or in
custody of someone else’s jewellery or other valuables, etc. to ensure
that they are duly accounted for.
1. Make correct disclosure of income and wealth in returns
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
2. Comply with summons or notices to prevent a tax raid
As stated earlier, non-compliance with the summons issued under Section 142(1) by the Assessing Officer for the production of books of account or other documents might result in an income tax raid. It is, therefore, absolutely necessary to fairly and properly comply with the summons. Wherever this is not possible, proper adjournment should be sought. Similarly, a written summons or notice has been wrongly issued or addressed, the recipient should promptly inform the Assessing Officer about the correct state of affairs. Such co-operation on the part of a person, whether he is an income tax assessee or not, will ensure prevention of a raid.
3. How to declare exempted or non-taxable income and wealth
There is, frequently, confusion about the declaration of exempted income or wealth. It is advisable for an assessee to declare the nature and source of such non-taxable income or other receipts in the income tax and wealth tax returns, or in a statement enclosed with the returns. When the entire picture is placed before the Assessing Officer, there is little scope or raid on the grounds of possessing undisclosed income. In view of the relaxed wealth tax exemption limit, many will now be outside the wealth tax net, hence they may enclose their statement of wealth with the income tax return.
Under the instructions dated 11 May,
1994, issued by the Central Board of Direct Taxes, 500 gms. of gold
jewellery and ornaments per married lady, 250 gms. per unmarried lady,
& 100 gms. per male member of the family were directed not to be
seized. These instructions could only be retrospective in the sense that
even if a seizure is made
subsequently, irrespective of the date of acquisition of gold jewellery,
the benefit has to be given to that extent, as held by the Karnataka
High Court in Smt. Pati Devi v. ITO [1999] 240 ITR 727.
4. Preserve important vouchers and other documentary evidence for the acquisition of assets
It is vital to preserve important vouchers and/or other documentary evidence as proof for their acquisition. All vouchers of movable and immovable assets in excess of Rs. 1,000 per item must be preserved. Similarly, all bills or memos for items of precious stones, new or old jewellery or gold ornaments, etc. purchased from the market or from another person, should be obtained and preserved after paying the proper sales-tax or any other tax to avoid risk of their being seized. Where gold ornaments or jewellery have not been purchased by the owner but have been acquired by way of a gift on some ceremonial occasion or otherwise it is advisable that certificates carefully preserved. This is necessary to prove the acquisition of such assets in case an inadvertent income tax raid takes place and the assessee is called upon to prove the nature and source of acquisition.
5. How to prevent an income tax raid on lockers, and safe deposit vaults
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Sometimes a person is not the owner of
any bullion, jewellery, precious stones or any other article or books of
account in his possession but merely a custodian of a friend or
relative’s property. In such cases it is always better for the custodian
to get a declaration from the owner regarding the nature and source of
the articles to satisfy himself that they do not represent any
undisclosed income or property. In that case the custodian would not
land himself in trouble in case an enquiry or tax raid is conducted
against him. If, however, an income tax warrant is issued against him,
he should make a true disclosure about the ownership of the alleged
undisclosed property or goods by producing the necessary receipt or
proof showing that he was merely the custodian, not the real owner.
Identify the income tax personnel authorised to conduct the raid
Sometimes instances are reported in the media of harassment caused by unauthorised persons entering the premises in the name of an income tax raid and taking away valuables. It is, therefore, very important to verify the identity of the persons executing the alleged warrant. The income tax consultant or legal adviser should be immediately notified. The assistance of neighbours can also be sought for the purpose. Once a search or seizure should be allowed only when their proper identity is established.
It is useful to know the income tax
authorities involved, both in the matter of authorisation and the actual
conduct of the search or seizure. These authorities and their powers
are briefly described:
(A) The Central Board of Direct Taxes (CBDT)
This is the highest executive constituted by the Central Board of Revenue Act, 1963, with effect from 1.January 1964. It has the power to make rules for the implementation of this Act. This is also known as the “Board.”
(B) Directors-General, Directors of Inspection (DG & DI) & Joint Directors
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
(C) Chief Commissioners of Income Tax (CCIT) or Commissioners of Income Tax (CIT) or Joint CITs.
The Central Government may appoint as many Chief Commissioners of Income Tax or Commissioners of Income Tax, or Additional CITs as it thinks fit. Their functions pertain to person(s), incomes or cases as directed by the Board. Generally, a Commissioner of Income Tax (CIT) is in charge of a particular specified geographical area e.g., the Commissioner of Income Tax, Delhi, VII. They perform certain judicial functions under Sections 263 and 264. They can also exercise the functions of DGs in certain circumstances. A CCIT or CIT, like a DG or DIT, is also competent under Section 132(1) to issue a warrant of authorisation for search or seizure. Joint CITs may also be authorised by the Board to issue a warrant of authorisation under Section 132(1). Joint CITs may also be authorised to conduct a search and seizure.
(D) Deputy Commissioners of Income Tax (DC)
Deputy Commissioners of Income Tax (DCs) are also appointed by the Central Government. They are directly under the control of the Chief Commissioner or the CIT and perform such functions of Income Tax Officers or Assistant Commissioners of Income Tax (AC), as may be assigned to them. They can also be empowered by the Chief Commissioner or CIT to exercise the powers of an Asstt. CIT. A DC can be authorised by a DI or CIT to conduct an income tax search or seizure under Section 132 (1).
(E) Deputy Directors of Inspection and Assistant Directors of Inspection (DDI or ADI)
Deputy Directors of Inspection (DDI) and Assistant Directors of Inspection (ADI) are also appointed by the Central Government. A DDI is equal in rank to the DC and an ADI to that of an AC or an Income Tax Officer. They can be authorised to conduct search and seizure under Section 132(1) by the DG, DIT, CCIT, or CIT. Besides, in special cases, the Board can empower any DDI to authorise any ADI or AC or ITO to conduct a raid under Section 132(1).
(F) Assistant Commissioner (A.C.) or Income Tax Officer (ITO)
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
(G) Inspectors of Income Tax (IIT)
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Who is entitled to represent a person before the IT authorities in search and seizure matters?
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
(i) A relative; or
(ii) A person regularly employed by him; or
(iii) Any officer of a Scheduled Bank with which the assessee maintains a current account or has other regular dealings; or
(vi) Any legal practitioner who is entitled to practise in any civil court in India; or
(v) Any Chartered Accountant, or any auditor within the ambit of Section 226 of the Companies Act 1956; or
(vi) Any person who has a National
Diploma in Commerce (with Advanced Accountancy and Auditing) awarded by
the All India Council of Technical Education, or a Government Diploma in
Company Secretaryship awarded by the Department of Company Law Affairs
or the final examination of the Institute of Costs and Works Accountants
of India; or
(vii) Any person who, before the coming
into force of this Act in the Union Territory of Dadra and Nagar Haveli,
Goa, Daman and Diu, or Pondicherry, attended before an income tax
authority on behalf of any assessee other than in the capacity of an
employee or relative in that territory; or
(vii) Any person who has acquired a
degree in Commerce or Law from any Indian, Pakistan, Rangoon and certain
English, Irish, and Scottish University; or (ix) Any Income Tax
Practitioner practising before 1 April 1962.
- See more at: http://taxguru.in/income-tax/5-steps-to-prevent-income-tax-raids-searches-and-seizures.html#sthash.5dn1IPAz.dpuf
What leads to income tax raids, searches and seizures?
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The summons or notice calls for the
books of account or other documents to be produced before the authorised
officer. If, for some reason it is not possible to submit the documents
on the appointed date and time,
the authority concerned should be informed in advance and a suitable
alternate date sought. If a person thus cooperates with the tax
authorities there would be no occasion for them to conduct tax raid
against him on these grounds.
Similarly, one should not keep any
unaccounted or undisclosed money, property or income popularly known as
black money. All unaccounted income, should be declared.
If such a disclosure is made before its detection by the Income Tax
Department, the chances of being trapped in a tax raid are minimised. A
tax raid may also be conducted against a person in possession of
undisclosed income or property not belonging to him but to someone else.
It is therefore important for a person who is in possession or in
custody of someone else’s jewellery or other valuables, etc. to ensure
that they are duly accounted for.
1. Make correct disclosure of income and wealth in returns
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
2. Comply with summons or notices to prevent a tax raid
As stated earlier, non-compliance with the summons issued under Section 142(1) by the Assessing Officer for the production of books of account or other documents might result in an income tax raid. It is, therefore, absolutely necessary to fairly and properly comply with the summons. Wherever this is not possible, proper adjournment should be sought. Similarly, a written summons or notice has been wrongly issued or addressed, the recipient should promptly inform the Assessing Officer about the correct state of affairs. Such co-operation on the part of a person, whether he is an income tax assessee or not, will ensure prevention of a raid.
3. How to declare exempted or non-taxable income and wealth
There is, frequently, confusion about the declaration of exempted income or wealth. It is advisable for an assessee to declare the nature and source of such non-taxable income or other receipts in the income tax and wealth tax returns, or in a statement enclosed with the returns. When the entire picture is placed before the Assessing Officer, there is little scope or raid on the grounds of possessing undisclosed income. In view of the relaxed wealth tax exemption limit, many will now be outside the wealth tax net, hence they may enclose their statement of wealth with the income tax return.
Under the instructions dated 11 May,
1994, issued by the Central Board of Direct Taxes, 500 gms. of gold
jewellery and ornaments per married lady, 250 gms. per unmarried lady,
& 100 gms. per male member of the family were directed not to be
seized. These instructions could only be retrospective in the sense that
even if a seizure is made
subsequently, irrespective of the date of acquisition of gold jewellery,
the benefit has to be given to that extent, as held by the Karnataka
High Court in Smt. Pati Devi v. ITO [1999] 240 ITR 727.
4. Preserve important vouchers and other documentary evidence for the acquisition of assets
It is vital to preserve important vouchers and/or other documentary evidence as proof for their acquisition. All vouchers of movable and immovable assets in excess of Rs. 1,000 per item must be preserved. Similarly, all bills or memos for items of precious stones, new or old jewellery or gold ornaments, etc. purchased from the market or from another person, should be obtained and preserved after paying the proper sales-tax or any other tax to avoid risk of their being seized. Where gold ornaments or jewellery have not been purchased by the owner but have been acquired by way of a gift on some ceremonial occasion or otherwise it is advisable that certificates carefully preserved. This is necessary to prove the acquisition of such assets in case an inadvertent income tax raid takes place and the assessee is called upon to prove the nature and source of acquisition.
5. How to prevent an income tax raid on lockers, and safe deposit vaults
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Sometimes a person is not the owner of
any bullion, jewellery, precious stones or any other article or books of
account in his possession but merely a custodian of a friend or
relative’s property. In such cases it is always better for the custodian
to get a declaration from the owner regarding the nature and source of
the articles to satisfy himself that they do not represent any
undisclosed income or property. In that case the custodian would not
land himself in trouble in case an enquiry or tax raid is conducted
against him. If, however, an income tax warrant is issued against him,
he should make a true disclosure about the ownership of the alleged
undisclosed property or goods by producing the necessary receipt or
proof showing that he was merely the custodian, not the real owner.
Identify the income tax personnel authorised to conduct the raid
Sometimes instances are reported in the media of harassment caused by unauthorised persons entering the premises in the name of an income tax raid and taking away valuables. It is, therefore, very important to verify the identity of the persons executing the alleged warrant. The income tax consultant or legal adviser should be immediately notified. The assistance of neighbours can also be sought for the purpose. Once a search or seizure should be allowed only when their proper identity is established.
It is useful to know the income tax
authorities involved, both in the matter of authorisation and the actual
conduct of the search or seizure. These authorities and their powers
are briefly described:
(A) The Central Board of Direct Taxes (CBDT)
This is the highest executive constituted by the Central Board of Revenue Act, 1963, with effect from 1.January 1964. It has the power to make rules for the implementation of this Act. This is also known as the “Board.”
(B) Directors-General, Directors of Inspection (DG & DI) & Joint Directors
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
(C) Chief Commissioners of Income Tax (CCIT) or Commissioners of Income Tax (CIT) or Joint CITs.
The Central Government may appoint as many Chief Commissioners of Income Tax or Commissioners of Income Tax, or Additional CITs as it thinks fit. Their functions pertain to person(s), incomes or cases as directed by the Board. Generally, a Commissioner of Income Tax (CIT) is in charge of a particular specified geographical area e.g., the Commissioner of Income Tax, Delhi, VII. They perform certain judicial functions under Sections 263 and 264. They can also exercise the functions of DGs in certain circumstances. A CCIT or CIT, like a DG or DIT, is also competent under Section 132(1) to issue a warrant of authorisation for search or seizure. Joint CITs may also be authorised by the Board to issue a warrant of authorisation under Section 132(1). Joint CITs may also be authorised to conduct a search and seizure.
(D) Deputy Commissioners of Income Tax (DC)
Deputy Commissioners of Income Tax (DCs) are also appointed by the Central Government. They are directly under the control of the Chief Commissioner or the CIT and perform such functions of Income Tax Officers or Assistant Commissioners of Income Tax (AC), as may be assigned to them. They can also be empowered by the Chief Commissioner or CIT to exercise the powers of an Asstt. CIT. A DC can be authorised by a DI or CIT to conduct an income tax search or seizure under Section 132 (1).
(E) Deputy Directors of Inspection and Assistant Directors of Inspection (DDI or ADI)
Deputy Directors of Inspection (DDI) and Assistant Directors of Inspection (ADI) are also appointed by the Central Government. A DDI is equal in rank to the DC and an ADI to that of an AC or an Income Tax Officer. They can be authorised to conduct search and seizure under Section 132(1) by the DG, DIT, CCIT, or CIT. Besides, in special cases, the Board can empower any DDI to authorise any ADI or AC or ITO to conduct a raid under Section 132(1).
(F) Assistant Commissioner (A.C.) or Income Tax Officer (ITO)
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
(G) Inspectors of Income Tax (IIT)
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Who is entitled to represent a person before the IT authorities in search and seizure matters?
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
(i) A relative; or
(ii) A person regularly employed by him; or
(iii) Any officer of a Scheduled Bank with which the assessee maintains a current account or has other regular dealings; or
(vi) Any legal practitioner who is entitled to practise in any civil court in India; or
(v) Any Chartered Accountant, or any auditor within the ambit of Section 226 of the Companies Act 1956; or
(vi) Any person who has a National
Diploma in Commerce (with Advanced Accountancy and Auditing) awarded by
the All India Council of Technical Education, or a Government Diploma in
Company Secretaryship awarded by the Department of Company Law Affairs
or the final examination of the Institute of Costs and Works Accountants
of India; or
(vii) Any person who, before the coming
into force of this Act in the Union Territory of Dadra and Nagar Haveli,
Goa, Daman and Diu, or Pondicherry, attended before an income tax
authority on behalf of any assessee other than in the capacity of an
employee or relative in that territory; or
(vii) Any person who has acquired a
degree in Commerce or Law from any Indian, Pakistan, Rangoon and certain
English, Irish, and Scottish University; or (ix) Any Income Tax
Practitioner practising before 1 April 1962.
- See more at: http://taxguru.in/income-tax/5-steps-to-prevent-income-tax-raids-searches-and-seizures.html#sthash.5dn1IPAz.dpuf
What leads to income tax raids, searches and seizures?
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The summons or notice calls for the
books of account or other documents to be produced before the authorised
officer. If, for some reason it is not possible to submit the documents
on the appointed date and time,
the authority concerned should be informed in advance and a suitable
alternate date sought. If a person thus cooperates with the tax
authorities there would be no occasion for them to conduct tax raid
against him on these grounds.
Similarly, one should not keep any
unaccounted or undisclosed money, property or income popularly known as
black money. All unaccounted income, should be declared.
If such a disclosure is made before its detection by the Income Tax
Department, the chances of being trapped in a tax raid are minimised. A
tax raid may also be conducted against a person in possession of
undisclosed income or property not belonging to him but to someone else.
It is therefore important for a person who is in possession or in
custody of someone else’s jewellery or other valuables, etc. to ensure
that they are duly accounted for.
1. Make correct disclosure of income and wealth in returns
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
2. Comply with summons or notices to prevent a tax raid
As stated earlier, non-compliance with the summons issued under Section 142(1) by the Assessing Officer for the production of books of account or other documents might result in an income tax raid. It is, therefore, absolutely necessary to fairly and properly comply with the summons. Wherever this is not possible, proper adjournment should be sought. Similarly, a written summons or notice has been wrongly issued or addressed, the recipient should promptly inform the Assessing Officer about the correct state of affairs. Such co-operation on the part of a person, whether he is an income tax assessee or not, will ensure prevention of a raid.
3. How to declare exempted or non-taxable income and wealth
There is, frequently, confusion about the declaration of exempted income or wealth. It is advisable for an assessee to declare the nature and source of such non-taxable income or other receipts in the income tax and wealth tax returns, or in a statement enclosed with the returns. When the entire picture is placed before the Assessing Officer, there is little scope or raid on the grounds of possessing undisclosed income. In view of the relaxed wealth tax exemption limit, many will now be outside the wealth tax net, hence they may enclose their statement of wealth with the income tax return.
Under the instructions dated 11 May,
1994, issued by the Central Board of Direct Taxes, 500 gms. of gold
jewellery and ornaments per married lady, 250 gms. per unmarried lady,
& 100 gms. per male member of the family were directed not to be
seized. These instructions could only be retrospective in the sense that
even if a seizure is made
subsequently, irrespective of the date of acquisition of gold jewellery,
the benefit has to be given to that extent, as held by the Karnataka
High Court in Smt. Pati Devi v. ITO [1999] 240 ITR 727.
4. Preserve important vouchers and other documentary evidence for the acquisition of assets
It is vital to preserve important vouchers and/or other documentary evidence as proof for their acquisition. All vouchers of movable and immovable assets in excess of Rs. 1,000 per item must be preserved. Similarly, all bills or memos for items of precious stones, new or old jewellery or gold ornaments, etc. purchased from the market or from another person, should be obtained and preserved after paying the proper sales-tax or any other tax to avoid risk of their being seized. Where gold ornaments or jewellery have not been purchased by the owner but have been acquired by way of a gift on some ceremonial occasion or otherwise it is advisable that certificates carefully preserved. This is necessary to prove the acquisition of such assets in case an inadvertent income tax raid takes place and the assessee is called upon to prove the nature and source of acquisition.
5. How to prevent an income tax raid on lockers, and safe deposit vaults
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Sometimes a person is not the owner of
any bullion, jewellery, precious stones or any other article or books of
account in his possession but merely a custodian of a friend or
relative’s property. In such cases it is always better for the custodian
to get a declaration from the owner regarding the nature and source of
the articles to satisfy himself that they do not represent any
undisclosed income or property. In that case the custodian would not
land himself in trouble in case an enquiry or tax raid is conducted
against him. If, however, an income tax warrant is issued against him,
he should make a true disclosure about the ownership of the alleged
undisclosed property or goods by producing the necessary receipt or
proof showing that he was merely the custodian, not the real owner.
Identify the income tax personnel authorised to conduct the raid
Sometimes instances are reported in the media of harassment caused by unauthorised persons entering the premises in the name of an income tax raid and taking away valuables. It is, therefore, very important to verify the identity of the persons executing the alleged warrant. The income tax consultant or legal adviser should be immediately notified. The assistance of neighbours can also be sought for the purpose. Once a search or seizure should be allowed only when their proper identity is established.
It is useful to know the income tax
authorities involved, both in the matter of authorisation and the actual
conduct of the search or seizure. These authorities and their powers
are briefly described:
(A) The Central Board of Direct Taxes (CBDT)
This is the highest executive constituted by the Central Board of Revenue Act, 1963, with effect from 1.January 1964. It has the power to make rules for the implementation of this Act. This is also known as the “Board.”
(B) Directors-General, Directors of Inspection (DG & DI) & Joint Directors
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
(C) Chief Commissioners of Income Tax (CCIT) or Commissioners of Income Tax (CIT) or Joint CITs.
The Central Government may appoint as many Chief Commissioners of Income Tax or Commissioners of Income Tax, or Additional CITs as it thinks fit. Their functions pertain to person(s), incomes or cases as directed by the Board. Generally, a Commissioner of Income Tax (CIT) is in charge of a particular specified geographical area e.g., the Commissioner of Income Tax, Delhi, VII. They perform certain judicial functions under Sections 263 and 264. They can also exercise the functions of DGs in certain circumstances. A CCIT or CIT, like a DG or DIT, is also competent under Section 132(1) to issue a warrant of authorisation for search or seizure. Joint CITs may also be authorised by the Board to issue a warrant of authorisation under Section 132(1). Joint CITs may also be authorised to conduct a search and seizure.
(D) Deputy Commissioners of Income Tax (DC)
Deputy Commissioners of Income Tax (DCs) are also appointed by the Central Government. They are directly under the control of the Chief Commissioner or the CIT and perform such functions of Income Tax Officers or Assistant Commissioners of Income Tax (AC), as may be assigned to them. They can also be empowered by the Chief Commissioner or CIT to exercise the powers of an Asstt. CIT. A DC can be authorised by a DI or CIT to conduct an income tax search or seizure under Section 132 (1).
(E) Deputy Directors of Inspection and Assistant Directors of Inspection (DDI or ADI)
Deputy Directors of Inspection (DDI) and Assistant Directors of Inspection (ADI) are also appointed by the Central Government. A DDI is equal in rank to the DC and an ADI to that of an AC or an Income Tax Officer. They can be authorised to conduct search and seizure under Section 132(1) by the DG, DIT, CCIT, or CIT. Besides, in special cases, the Board can empower any DDI to authorise any ADI or AC or ITO to conduct a raid under Section 132(1).
(F) Assistant Commissioner (A.C.) or Income Tax Officer (ITO)
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
(G) Inspectors of Income Tax (IIT)
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Who is entitled to represent a person before the IT authorities in search and seizure matters?
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
(i) A relative; or
(ii) A person regularly employed by him; or
(iii) Any officer of a Scheduled Bank with which the assessee maintains a current account or has other regular dealings; or
(vi) Any legal practitioner who is entitled to practise in any civil court in India; or
(v) Any Chartered Accountant, or any auditor within the ambit of Section 226 of the Companies Act 1956; or
(vi) Any person who has a National
Diploma in Commerce (with Advanced Accountancy and Auditing) awarded by
the All India Council of Technical Education, or a Government Diploma in
Company Secretaryship awarded by the Department of Company Law Affairs
or the final examination of the Institute of Costs and Works Accountants
of India; or
(vii) Any person who, before the coming
into force of this Act in the Union Territory of Dadra and Nagar Haveli,
Goa, Daman and Diu, or Pondicherry, attended before an income tax
authority on behalf of any assessee other than in the capacity of an
employee or relative in that territory; or
(vii) Any person who has acquired a
degree in Commerce or Law from any Indian, Pakistan, Rangoon and certain
English, Irish, and Scottish University; or (ix) Any Income Tax
Practitioner practising before 1 April 1962.
- See more at: http://taxguru.in/income-tax/5-steps-to-prevent-income-tax-raids-searches-and-seizures.html#sthash.5dn1IPAz.dpuf- Mar
- 11
- 2014
How to prevent Income Tax Raids, Searches & Seizures
What leads to income tax raids, searches and seizures?
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The summons or notice calls for the
books of account or other documents to be produced before the authorised
officer. If, for some reason it is not possible to submit the documents
on the appointed date and time,
the authority concerned should be informed in advance and a suitable
alternate date sought. If a person thus cooperates with the tax
authorities there would be no occasion for them to conduct tax raid
against him on these grounds.
Similarly, one should not keep any
unaccounted or undisclosed money, property or income popularly known as
black money. All unaccounted income, should be declared.
If such a disclosure is made before its detection by the Income Tax
Department, the chances of being trapped in a tax raid are minimised. A
tax raid may also be conducted against a person in possession of
undisclosed income or property not belonging to him but to someone else.
It is therefore important for a person who is in possession or in
custody of someone else’s jewellery or other valuables, etc. to ensure
that they are duly accounted for.
1. Make correct disclosure of income and wealth in returns
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
2. Comply with summons or notices to prevent a tax raid
As stated earlier, non-compliance with the summons issued under Section 142(1) by the Assessing Officer for the production of books of account or other documents might result in an income tax raid. It is, therefore, absolutely necessary to fairly and properly comply with the summons. Wherever this is not possible, proper adjournment should be sought. Similarly, a written summons or notice has been wrongly issued or addressed, the recipient should promptly inform the Assessing Officer about the correct state of affairs. Such co-operation on the part of a person, whether he is an income tax assessee or not, will ensure prevention of a raid.
3. How to declare exempted or non-taxable income and wealth
There is, frequently, confusion about the declaration of exempted income or wealth. It is advisable for an assessee to declare the nature and source of such non-taxable income or other receipts in the income tax and wealth tax returns, or in a statement enclosed with the returns. When the entire picture is placed before the Assessing Officer, there is little scope or raid on the grounds of possessing undisclosed income. In view of the relaxed wealth tax exemption limit, many will now be outside the wealth tax net, hence they may enclose their statement of wealth with the income tax return.
Under the instructions dated 11 May,
1994, issued by the Central Board of Direct Taxes, 500 gms. of gold
jewellery and ornaments per married lady, 250 gms. per unmarried lady,
& 100 gms. per male member of the family were directed not to be
seized. These instructions could only be retrospective in the sense that
even if a seizure is made
subsequently, irrespective of the date of acquisition of gold jewellery,
the benefit has to be given to that extent, as held by the Karnataka
High Court in Smt. Pati Devi v. ITO [1999] 240 ITR 727.
4. Preserve important vouchers and other documentary evidence for the acquisition of assets
It is vital to preserve important vouchers and/or other documentary evidence as proof for their acquisition. All vouchers of movable and immovable assets in excess of Rs. 1,000 per item must be preserved. Similarly, all bills or memos for items of precious stones, new or old jewellery or gold ornaments, etc. purchased from the market or from another person, should be obtained and preserved after paying the proper sales-tax or any other tax to avoid risk of their being seized. Where gold ornaments or jewellery have not been purchased by the owner but have been acquired by way of a gift on some ceremonial occasion or otherwise it is advisable that certificates carefully preserved. This is necessary to prove the acquisition of such assets in case an inadvertent income tax raid takes place and the assessee is called upon to prove the nature and source of acquisition.
5. How to prevent an income tax raid on lockers, and safe deposit vaults
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Sometimes a person is not the owner of
any bullion, jewellery, precious stones or any other article or books of
account in his possession but merely a custodian of a friend or
relative’s property. In such cases it is always better for the custodian
to get a declaration from the owner regarding the nature and source of
the articles to satisfy himself that they do not represent any
undisclosed income or property. In that case the custodian would not
land himself in trouble in case an enquiry or tax raid is conducted
against him. If, however, an income tax warrant is issued against him,
he should make a true disclosure about the ownership of the alleged
undisclosed property or goods by producing the necessary receipt or
proof showing that he was merely the custodian, not the real owner.
Identify the income tax personnel authorised to conduct the raid
Sometimes instances are reported in the media of harassment caused by unauthorised persons entering the premises in the name of an income tax raid and taking away valuables. It is, therefore, very important to verify the identity of the persons executing the alleged warrant. The income tax consultant or legal adviser should be immediately notified. The assistance of neighbours can also be sought for the purpose. Once a search or seizure should be allowed only when their proper identity is established.
It is useful to know the income tax
authorities involved, both in the matter of authorisation and the actual
conduct of the search or seizure. These authorities and their powers
are briefly described:
(A) The Central Board of Direct Taxes (CBDT)
This is the highest executive constituted by the Central Board of Revenue Act, 1963, with effect from 1.January 1964. It has the power to make rules for the implementation of this Act. This is also known as the “Board.”
(B) Directors-General, Directors of Inspection (DG & DI) & Joint Directors
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
(C) Chief Commissioners of Income Tax (CCIT) or Commissioners of Income Tax (CIT) or Joint CITs.
The Central Government may appoint as many Chief Commissioners of Income Tax or Commissioners of Income Tax, or Additional CITs as it thinks fit. Their functions pertain to person(s), incomes or cases as directed by the Board. Generally, a Commissioner of Income Tax (CIT) is in charge of a particular specified geographical area e.g., the Commissioner of Income Tax, Delhi, VII. They perform certain judicial functions under Sections 263 and 264. They can also exercise the functions of DGs in certain circumstances. A CCIT or CIT, like a DG or DIT, is also competent under Section 132(1) to issue a warrant of authorisation for search or seizure. Joint CITs may also be authorised by the Board to issue a warrant of authorisation under Section 132(1). Joint CITs may also be authorised to conduct a search and seizure.
(D) Deputy Commissioners of Income Tax (DC)
Deputy Commissioners of Income Tax (DCs) are also appointed by the Central Government. They are directly under the control of the Chief Commissioner or the CIT and perform such functions of Income Tax Officers or Assistant Commissioners of Income Tax (AC), as may be assigned to them. They can also be empowered by the Chief Commissioner or CIT to exercise the powers of an Asstt. CIT. A DC can be authorised by a DI or CIT to conduct an income tax search or seizure under Section 132 (1).
(E) Deputy Directors of Inspection and Assistant Directors of Inspection (DDI or ADI)
Deputy Directors of Inspection (DDI) and Assistant Directors of Inspection (ADI) are also appointed by the Central Government. A DDI is equal in rank to the DC and an ADI to that of an AC or an Income Tax Officer. They can be authorised to conduct search and seizure under Section 132(1) by the DG, DIT, CCIT, or CIT. Besides, in special cases, the Board can empower any DDI to authorise any ADI or AC or ITO to conduct a raid under Section 132(1).
(F) Assistant Commissioner (A.C.) or Income Tax Officer (ITO)
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
(G) Inspectors of Income Tax (IIT)
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Who is entitled to represent a person before the IT authorities in search and seizure matters?
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
(i) A relative; or
(ii) A person regularly employed by him; or
(iii) Any officer of a Scheduled Bank with which the assessee maintains a current account or has other regular dealings; or
(vi) Any legal practitioner who is entitled to practise in any civil court in India; or
(v) Any Chartered Accountant, or any auditor within the ambit of Section 226 of the Companies Act 1956; or
(vi) Any person who has a National
Diploma in Commerce (with Advanced Accountancy and Auditing) awarded by
the All India Council of Technical Education, or a Government Diploma in
Company Secretaryship awarded by the Department of Company Law Affairs
or the final examination of the Institute of Costs and Works Accountants
of India; or
(vii) Any person who, before the coming
into force of this Act in the Union Territory of Dadra and Nagar Haveli,
Goa, Daman and Diu, or Pondicherry, attended before an income tax
authority on behalf of any assessee other than in the capacity of an
employee or relative in that territory; or
(vii) Any person who has acquired a
degree in Commerce or Law from any Indian, Pakistan, Rangoon and certain
English, Irish, and Scottish University; or (ix) Any Income Tax
Practitioner practising before 1 April 1962.
The Article was First Published on 20.03.2009
- Mar
- 11
- 2014
How to prevent Income Tax Raids, Searches & Seizures
What leads to income tax raids, searches and seizures?
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The summons or notice calls for the
books of account or other documents to be produced before the authorised
officer. If, for some reason it is not possible to submit the documents
on the appointed date and time,
the authority concerned should be informed in advance and a suitable
alternate date sought. If a person thus cooperates with the tax
authorities there would be no occasion for them to conduct tax raid
against him on these grounds.
Similarly, one should not keep any
unaccounted or undisclosed money, property or income popularly known as
black money. All unaccounted income, should be declared.
If such a disclosure is made before its detection by the Income Tax
Department, the chances of being trapped in a tax raid are minimised. A
tax raid may also be conducted against a person in possession of
undisclosed income or property not belonging to him but to someone else.
It is therefore important for a person who is in possession or in
custody of someone else’s jewellery or other valuables, etc. to ensure
that they are duly accounted for.
1. Make correct disclosure of income and wealth in returns
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
2. Comply with summons or notices to prevent a tax raid
As stated earlier, non-compliance with the summons issued under Section 142(1) by the Assessing Officer for the production of books of account or other documents might result in an income tax raid. It is, therefore, absolutely necessary to fairly and properly comply with the summons. Wherever this is not possible, proper adjournment should be sought. Similarly, a written summons or notice has been wrongly issued or addressed, the recipient should promptly inform the Assessing Officer about the correct state of affairs. Such co-operation on the part of a person, whether he is an income tax assessee or not, will ensure prevention of a raid.
3. How to declare exempted or non-taxable income and wealth
There is, frequently, confusion about the declaration of exempted income or wealth. It is advisable for an assessee to declare the nature and source of such non-taxable income or other receipts in the income tax and wealth tax returns, or in a statement enclosed with the returns. When the entire picture is placed before the Assessing Officer, there is little scope or raid on the grounds of possessing undisclosed income. In view of the relaxed wealth tax exemption limit, many will now be outside the wealth tax net, hence they may enclose their statement of wealth with the income tax return.
Under the instructions dated 11 May,
1994, issued by the Central Board of Direct Taxes, 500 gms. of gold
jewellery and ornaments per married lady, 250 gms. per unmarried lady,
& 100 gms. per male member of the family were directed not to be
seized. These instructions could only be retrospective in the sense that
even if a seizure is made
subsequently, irrespective of the date of acquisition of gold jewellery,
the benefit has to be given to that extent, as held by the Karnataka
High Court in Smt. Pati Devi v. ITO [1999] 240 ITR 727.
4. Preserve important vouchers and other documentary evidence for the acquisition of assets
It is vital to preserve important vouchers and/or other documentary evidence as proof for their acquisition. All vouchers of movable and immovable assets in excess of Rs. 1,000 per item must be preserved. Similarly, all bills or memos for items of precious stones, new or old jewellery or gold ornaments, etc. purchased from the market or from another person, should be obtained and preserved after paying the proper sales-tax or any other tax to avoid risk of their being seized. Where gold ornaments or jewellery have not been purchased by the owner but have been acquired by way of a gift on some ceremonial occasion or otherwise it is advisable that certificates carefully preserved. This is necessary to prove the acquisition of such assets in case an inadvertent income tax raid takes place and the assessee is called upon to prove the nature and source of acquisition.
5. How to prevent an income tax raid on lockers, and safe deposit vaults
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Sometimes a person is not the owner of
any bullion, jewellery, precious stones or any other article or books of
account in his possession but merely a custodian of a friend or
relative’s property. In such cases it is always better for the custodian
to get a declaration from the owner regarding the nature and source of
the articles to satisfy himself that they do not represent any
undisclosed income or property. In that case the custodian would not
land himself in trouble in case an enquiry or tax raid is conducted
against him. If, however, an income tax warrant is issued against him,
he should make a true disclosure about the ownership of the alleged
undisclosed property or goods by producing the necessary receipt or
proof showing that he was merely the custodian, not the real owner.
Identify the income tax personnel authorised to conduct the raid
Sometimes instances are reported in the media of harassment caused by unauthorised persons entering the premises in the name of an income tax raid and taking away valuables. It is, therefore, very important to verify the identity of the persons executing the alleged warrant. The income tax consultant or legal adviser should be immediately notified. The assistance of neighbours can also be sought for the purpose. Once a search or seizure should be allowed only when their proper identity is established.
It is useful to know the income tax
authorities involved, both in the matter of authorisation and the actual
conduct of the search or seizure. These authorities and their powers
are briefly described:
(A) The Central Board of Direct Taxes (CBDT)
This is the highest executive constituted by the Central Board of Revenue Act, 1963, with effect from 1.January 1964. It has the power to make rules for the implementation of this Act. This is also known as the “Board.”
(B) Directors-General, Directors of Inspection (DG & DI) & Joint Directors
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
(C) Chief Commissioners of Income Tax (CCIT) or Commissioners of Income Tax (CIT) or Joint CITs.
The Central Government may appoint as many Chief Commissioners of Income Tax or Commissioners of Income Tax, or Additional CITs as it thinks fit. Their functions pertain to person(s), incomes or cases as directed by the Board. Generally, a Commissioner of Income Tax (CIT) is in charge of a particular specified geographical area e.g., the Commissioner of Income Tax, Delhi, VII. They perform certain judicial functions under Sections 263 and 264. They can also exercise the functions of DGs in certain circumstances. A CCIT or CIT, like a DG or DIT, is also competent under Section 132(1) to issue a warrant of authorisation for search or seizure. Joint CITs may also be authorised by the Board to issue a warrant of authorisation under Section 132(1). Joint CITs may also be authorised to conduct a search and seizure.
(D) Deputy Commissioners of Income Tax (DC)
Deputy Commissioners of Income Tax (DCs) are also appointed by the Central Government. They are directly under the control of the Chief Commissioner or the CIT and perform such functions of Income Tax Officers or Assistant Commissioners of Income Tax (AC), as may be assigned to them. They can also be empowered by the Chief Commissioner or CIT to exercise the powers of an Asstt. CIT. A DC can be authorised by a DI or CIT to conduct an income tax search or seizure under Section 132 (1).
(E) Deputy Directors of Inspection and Assistant Directors of Inspection (DDI or ADI)
Deputy Directors of Inspection (DDI) and Assistant Directors of Inspection (ADI) are also appointed by the Central Government. A DDI is equal in rank to the DC and an ADI to that of an AC or an Income Tax Officer. They can be authorised to conduct search and seizure under Section 132(1) by the DG, DIT, CCIT, or CIT. Besides, in special cases, the Board can empower any DDI to authorise any ADI or AC or ITO to conduct a raid under Section 132(1).
(F) Assistant Commissioner (A.C.) or Income Tax Officer (ITO)
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
(G) Inspectors of Income Tax (IIT)
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Who is entitled to represent a person before the IT authorities in search and seizure matters?
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
(i) A relative; or
(ii) A person regularly employed by him; or
(iii) Any officer of a Scheduled Bank with which the assessee maintains a current account or has other regular dealings; or
(vi) Any legal practitioner who is entitled to practise in any civil court in India; or
(v) Any Chartered Accountant, or any auditor within the ambit of Section 226 of the Companies Act 1956; or
(vi) Any person who has a National
Diploma in Commerce (with Advanced Accountancy and Auditing) awarded by
the All India Council of Technical Education, or a Government Diploma in
Company Secretaryship awarded by the Department of Company Law Affairs
or the final examination of the Institute of Costs and Works Accountants
of India; or
(vii) Any person who, before the coming
into force of this Act in the Union Territory of Dadra and Nagar Haveli,
Goa, Daman and Diu, or Pondicherry, attended before an income tax
authority on behalf of any assessee other than in the capacity of an
employee or relative in that territory; or
(vii) Any person who has acquired a
degree in Commerce or Law from any Indian, Pakistan, Rangoon and certain
English, Irish, and Scottish University; or (ix) Any Income Tax
Practitioner practising before 1 April 1962.
The Article was First Published on 20.03.2009
- Mar
- 11
- 2014
How to prevent Income Tax Raids, Searches & Seizures
What leads to income tax raids, searches and seizures?
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The summons or notice calls for the
books of account or other documents to be produced before the authorised
officer. If, for some reason it is not possible to submit the documents
on the appointed date and time,
the authority concerned should be informed in advance and a suitable
alternate date sought. If a person thus cooperates with the tax
authorities there would be no occasion for them to conduct tax raid
against him on these grounds.
Similarly, one should not keep any
unaccounted or undisclosed money, property or income popularly known as
black money. All unaccounted income, should be declared.
If such a disclosure is made before its detection by the Income Tax
Department, the chances of being trapped in a tax raid are minimised. A
tax raid may also be conducted against a person in possession of
undisclosed income or property not belonging to him but to someone else.
It is therefore important for a person who is in possession or in
custody of someone else’s jewellery or other valuables, etc. to ensure
that they are duly accounted for.
1. Make correct disclosure of income and wealth in returns
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
2. Comply with summons or notices to prevent a tax raid
As stated earlier, non-compliance with the summons issued under Section 142(1) by the Assessing Officer for the production of books of account or other documents might result in an income tax raid. It is, therefore, absolutely necessary to fairly and properly comply with the summons. Wherever this is not possible, proper adjournment should be sought. Similarly, a written summons or notice has been wrongly issued or addressed, the recipient should promptly inform the Assessing Officer about the correct state of affairs. Such co-operation on the part of a person, whether he is an income tax assessee or not, will ensure prevention of a raid.
3. How to declare exempted or non-taxable income and wealth
There is, frequently, confusion about the declaration of exempted income or wealth. It is advisable for an assessee to declare the nature and source of such non-taxable income or other receipts in the income tax and wealth tax returns, or in a statement enclosed with the returns. When the entire picture is placed before the Assessing Officer, there is little scope or raid on the grounds of possessing undisclosed income. In view of the relaxed wealth tax exemption limit, many will now be outside the wealth tax net, hence they may enclose their statement of wealth with the income tax return.
Under the instructions dated 11 May,
1994, issued by the Central Board of Direct Taxes, 500 gms. of gold
jewellery and ornaments per married lady, 250 gms. per unmarried lady,
& 100 gms. per male member of the family were directed not to be
seized. These instructions could only be retrospective in the sense that
even if a seizure is made
subsequently, irrespective of the date of acquisition of gold jewellery,
the benefit has to be given to that extent, as held by the Karnataka
High Court in Smt. Pati Devi v. ITO [1999] 240 ITR 727.
4. Preserve important vouchers and other documentary evidence for the acquisition of assets
It is vital to preserve important vouchers and/or other documentary evidence as proof for their acquisition. All vouchers of movable and immovable assets in excess of Rs. 1,000 per item must be preserved. Similarly, all bills or memos for items of precious stones, new or old jewellery or gold ornaments, etc. purchased from the market or from another person, should be obtained and preserved after paying the proper sales-tax or any other tax to avoid risk of their being seized. Where gold ornaments or jewellery have not been purchased by the owner but have been acquired by way of a gift on some ceremonial occasion or otherwise it is advisable that certificates carefully preserved. This is necessary to prove the acquisition of such assets in case an inadvertent income tax raid takes place and the assessee is called upon to prove the nature and source of acquisition.
5. How to prevent an income tax raid on lockers, and safe deposit vaults
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Sometimes a person is not the owner of
any bullion, jewellery, precious stones or any other article or books of
account in his possession but merely a custodian of a friend or
relative’s property. In such cases it is always better for the custodian
to get a declaration from the owner regarding the nature and source of
the articles to satisfy himself that they do not represent any
undisclosed income or property. In that case the custodian would not
land himself in trouble in case an enquiry or tax raid is conducted
against him. If, however, an income tax warrant is issued against him,
he should make a true disclosure about the ownership of the alleged
undisclosed property or goods by producing the necessary receipt or
proof showing that he was merely the custodian, not the real owner.
Identify the income tax personnel authorised to conduct the raid
Sometimes instances are reported in the media of harassment caused by unauthorised persons entering the premises in the name of an income tax raid and taking away valuables. It is, therefore, very important to verify the identity of the persons executing the alleged warrant. The income tax consultant or legal adviser should be immediately notified. The assistance of neighbours can also be sought for the purpose. Once a search or seizure should be allowed only when their proper identity is established.
It is useful to know the income tax
authorities involved, both in the matter of authorisation and the actual
conduct of the search or seizure. These authorities and their powers
are briefly described:
(A) The Central Board of Direct Taxes (CBDT)
This is the highest executive constituted by the Central Board of Revenue Act, 1963, with effect from 1.January 1964. It has the power to make rules for the implementation of this Act. This is also known as the “Board.”
(B) Directors-General, Directors of Inspection (DG & DI) & Joint Directors
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
(C) Chief Commissioners of Income Tax (CCIT) or Commissioners of Income Tax (CIT) or Joint CITs.
The Central Government may appoint as many Chief Commissioners of Income Tax or Commissioners of Income Tax, or Additional CITs as it thinks fit. Their functions pertain to person(s), incomes or cases as directed by the Board. Generally, a Commissioner of Income Tax (CIT) is in charge of a particular specified geographical area e.g., the Commissioner of Income Tax, Delhi, VII. They perform certain judicial functions under Sections 263 and 264. They can also exercise the functions of DGs in certain circumstances. A CCIT or CIT, like a DG or DIT, is also competent under Section 132(1) to issue a warrant of authorisation for search or seizure. Joint CITs may also be authorised by the Board to issue a warrant of authorisation under Section 132(1). Joint CITs may also be authorised to conduct a search and seizure.
(D) Deputy Commissioners of Income Tax (DC)
Deputy Commissioners of Income Tax (DCs) are also appointed by the Central Government. They are directly under the control of the Chief Commissioner or the CIT and perform such functions of Income Tax Officers or Assistant Commissioners of Income Tax (AC), as may be assigned to them. They can also be empowered by the Chief Commissioner or CIT to exercise the powers of an Asstt. CIT. A DC can be authorised by a DI or CIT to conduct an income tax search or seizure under Section 132 (1).
(E) Deputy Directors of Inspection and Assistant Directors of Inspection (DDI or ADI)
Deputy Directors of Inspection (DDI) and Assistant Directors of Inspection (ADI) are also appointed by the Central Government. A DDI is equal in rank to the DC and an ADI to that of an AC or an Income Tax Officer. They can be authorised to conduct search and seizure under Section 132(1) by the DG, DIT, CCIT, or CIT. Besides, in special cases, the Board can empower any DDI to authorise any ADI or AC or ITO to conduct a raid under Section 132(1).
(F) Assistant Commissioner (A.C.) or Income Tax Officer (ITO)
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
(G) Inspectors of Income Tax (IIT)
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Who is entitled to represent a person before the IT authorities in search and seizure matters?
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
(i) A relative; or
(ii) A person regularly employed by him; or
(iii) Any officer of a Scheduled Bank with which the assessee maintains a current account or has other regular dealings; or
(vi) Any legal practitioner who is entitled to practise in any civil court in India; or
(v) Any Chartered Accountant, or any auditor within the ambit of Section 226 of the Companies Act 1956; or
(vi) Any person who has a National
Diploma in Commerce (with Advanced Accountancy and Auditing) awarded by
the All India Council of Technical Education, or a Government Diploma in
Company Secretaryship awarded by the Department of Company Law Affairs
or the final examination of the Institute of Costs and Works Accountants
of India; or
(vii) Any person who, before the coming
into force of this Act in the Union Territory of Dadra and Nagar Haveli,
Goa, Daman and Diu, or Pondicherry, attended before an income tax
authority on behalf of any assessee other than in the capacity of an
employee or relative in that territory; or
(vii) Any person who has acquired a
degree in Commerce or Law from any Indian, Pakistan, Rangoon and certain
English, Irish, and Scottish University; or (ix) Any Income Tax
Practitioner practising before 1 April 1962.
The Article was First Published on 20.03.2009
- Mar
- 11
- 2014
How to prevent Income Tax Raids, Searches & Seizures
What leads to income tax raids, searches and seizures?
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The main reasons are non-compliance with summons under Section 131(1) of the Income Tax Act, 1961, (hereinafter referred to as the Act) or a notice under Section 142(1) of the Act (described in Chapter VII, infra), likely non-compliance with such summons or notice, or the possession of undisclosed property or income. It is therefore absolutely necessary for a current income tax assessee or a likely income tax assessee to comply with the summons or notice issued by the Assessing Officer, or any other such authorised person.
The summons or notice calls for the
books of account or other documents to be produced before the authorised
officer. If, for some reason it is not possible to submit the documents
on the appointed date and time,
the authority concerned should be informed in advance and a suitable
alternate date sought. If a person thus cooperates with the tax
authorities there would be no occasion for them to conduct tax raid
against him on these grounds.
Similarly, one should not keep any
unaccounted or undisclosed money, property or income popularly known as
black money. All unaccounted income, should be declared.
If such a disclosure is made before its detection by the Income Tax
Department, the chances of being trapped in a tax raid are minimised. A
tax raid may also be conducted against a person in possession of
undisclosed income or property not belonging to him but to someone else.
It is therefore important for a person who is in possession or in
custody of someone else’s jewellery or other valuables, etc. to ensure
that they are duly accounted for.
1. Make correct disclosure of income and wealth in returns
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
It is always better to make a full and true disclosure of one’s income, whether taxable or fully or partially exempt, in the income tax return filed. This ensures compliance with the statutory provisions of the Income Tax Law. Similarly, a person’s wealth should be properly disclosed to the Wealth Tax Officer. It is advisable to disclose all items of wealth, taxable as well as non-taxable, so that the Assessing Officer is in possession of the information. These measures go a long way in preventing a tax raid.
2. Comply with summons or notices to prevent a tax raid
As stated earlier, non-compliance with the summons issued under Section 142(1) by the Assessing Officer for the production of books of account or other documents might result in an income tax raid. It is, therefore, absolutely necessary to fairly and properly comply with the summons. Wherever this is not possible, proper adjournment should be sought. Similarly, a written summons or notice has been wrongly issued or addressed, the recipient should promptly inform the Assessing Officer about the correct state of affairs. Such co-operation on the part of a person, whether he is an income tax assessee or not, will ensure prevention of a raid.
3. How to declare exempted or non-taxable income and wealth
There is, frequently, confusion about the declaration of exempted income or wealth. It is advisable for an assessee to declare the nature and source of such non-taxable income or other receipts in the income tax and wealth tax returns, or in a statement enclosed with the returns. When the entire picture is placed before the Assessing Officer, there is little scope or raid on the grounds of possessing undisclosed income. In view of the relaxed wealth tax exemption limit, many will now be outside the wealth tax net, hence they may enclose their statement of wealth with the income tax return.
Under the instructions dated 11 May,
1994, issued by the Central Board of Direct Taxes, 500 gms. of gold
jewellery and ornaments per married lady, 250 gms. per unmarried lady,
& 100 gms. per male member of the family were directed not to be
seized. These instructions could only be retrospective in the sense that
even if a seizure is made
subsequently, irrespective of the date of acquisition of gold jewellery,
the benefit has to be given to that extent, as held by the Karnataka
High Court in Smt. Pati Devi v. ITO [1999] 240 ITR 727.
4. Preserve important vouchers and other documentary evidence for the acquisition of assets
It is vital to preserve important vouchers and/or other documentary evidence as proof for their acquisition. All vouchers of movable and immovable assets in excess of Rs. 1,000 per item must be preserved. Similarly, all bills or memos for items of precious stones, new or old jewellery or gold ornaments, etc. purchased from the market or from another person, should be obtained and preserved after paying the proper sales-tax or any other tax to avoid risk of their being seized. Where gold ornaments or jewellery have not been purchased by the owner but have been acquired by way of a gift on some ceremonial occasion or otherwise it is advisable that certificates carefully preserved. This is necessary to prove the acquisition of such assets in case an inadvertent income tax raid takes place and the assessee is called upon to prove the nature and source of acquisition.
5. How to prevent an income tax raid on lockers, and safe deposit vaults
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Income tax raids are often conducted to seize bank lockers, safe deposit vaults and other lockers. It is generally believed that unaccounted property, income or wealth is kept in such lockers or safe deposit vaults. It is necessary to declare the lockers in the income tax statements and ensure that no unaccounted income, property or wealth is kept in them. In case of any doubts regarding the taxability of the contents kept in the lockers it is advisable to declare them in the income tax return. If all lockers are duly declared there is no risk of a raid. The owner of a locker, should maintain a register recording its contents for disclosure if called upon by the income tax authorities.
Sometimes a person is not the owner of
any bullion, jewellery, precious stones or any other article or books of
account in his possession but merely a custodian of a friend or
relative’s property. In such cases it is always better for the custodian
to get a declaration from the owner regarding the nature and source of
the articles to satisfy himself that they do not represent any
undisclosed income or property. In that case the custodian would not
land himself in trouble in case an enquiry or tax raid is conducted
against him. If, however, an income tax warrant is issued against him,
he should make a true disclosure about the ownership of the alleged
undisclosed property or goods by producing the necessary receipt or
proof showing that he was merely the custodian, not the real owner.
Identify the income tax personnel authorised to conduct the raid
Sometimes instances are reported in the media of harassment caused by unauthorised persons entering the premises in the name of an income tax raid and taking away valuables. It is, therefore, very important to verify the identity of the persons executing the alleged warrant. The income tax consultant or legal adviser should be immediately notified. The assistance of neighbours can also be sought for the purpose. Once a search or seizure should be allowed only when their proper identity is established.
It is useful to know the income tax
authorities involved, both in the matter of authorisation and the actual
conduct of the search or seizure. These authorities and their powers
are briefly described:
(A) The Central Board of Direct Taxes (CBDT)
This is the highest executive constituted by the Central Board of Revenue Act, 1963, with effect from 1.January 1964. It has the power to make rules for the implementation of this Act. This is also known as the “Board.”
(B) Directors-General, Directors of Inspection (DG & DI) & Joint Directors
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
The Government of India may appoint as many Directors- General of Income Tax (DG) or Directors of Income Tax (DIT), as it thinks fit. They shall perform such functions as may be assigned to them by the Board. They are generally in charge of search, vigilance, inspection, investigation, etc. A DG or DIT is a competent to authorise a lower authority to conduct an income tax raid or search and seizure under Section 132(1). A Joint Director may be authorised by the Board to issue a warrant of authorisation under Section 132(1). Likewise, a Joint Director can also be authorised to conduct a search and seizure.
(C) Chief Commissioners of Income Tax (CCIT) or Commissioners of Income Tax (CIT) or Joint CITs.
The Central Government may appoint as many Chief Commissioners of Income Tax or Commissioners of Income Tax, or Additional CITs as it thinks fit. Their functions pertain to person(s), incomes or cases as directed by the Board. Generally, a Commissioner of Income Tax (CIT) is in charge of a particular specified geographical area e.g., the Commissioner of Income Tax, Delhi, VII. They perform certain judicial functions under Sections 263 and 264. They can also exercise the functions of DGs in certain circumstances. A CCIT or CIT, like a DG or DIT, is also competent under Section 132(1) to issue a warrant of authorisation for search or seizure. Joint CITs may also be authorised by the Board to issue a warrant of authorisation under Section 132(1). Joint CITs may also be authorised to conduct a search and seizure.
(D) Deputy Commissioners of Income Tax (DC)
Deputy Commissioners of Income Tax (DCs) are also appointed by the Central Government. They are directly under the control of the Chief Commissioner or the CIT and perform such functions of Income Tax Officers or Assistant Commissioners of Income Tax (AC), as may be assigned to them. They can also be empowered by the Chief Commissioner or CIT to exercise the powers of an Asstt. CIT. A DC can be authorised by a DI or CIT to conduct an income tax search or seizure under Section 132 (1).
(E) Deputy Directors of Inspection and Assistant Directors of Inspection (DDI or ADI)
Deputy Directors of Inspection (DDI) and Assistant Directors of Inspection (ADI) are also appointed by the Central Government. A DDI is equal in rank to the DC and an ADI to that of an AC or an Income Tax Officer. They can be authorised to conduct search and seizure under Section 132(1) by the DG, DIT, CCIT, or CIT. Besides, in special cases, the Board can empower any DDI to authorise any ADI or AC or ITO to conduct a raid under Section 132(1).
(F) Assistant Commissioner (A.C.) or Income Tax Officer (ITO)
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
An Assistant Commissioner of Income Tax is equivalent to senior Class I, Income Tax Officer (ITO). Income Tax Officers are of two types: Class I and Class II. Class I ITOs are appointed by the Central Government while the Class II ITOs are appointed by the Chief Commissioner of Income Tax or CIT subject to the Central Government rules. An ITO is the most important official of the Department. He is the actual assessor who initiates assessment, calls for a return from the assessees within his jurisdiction, makes the assessment, collects revenue and makes the refunds. Vast powers of search and seizure of documents, books of account, bullion, money and jewellery, etc. have now been conferred upon the ACs and ITOs under Sections 132, 132A and 132B as is described later.
(G) Inspectors of Income Tax (IIT)
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Inspectors of Income Tax (IITs) are appointed by the Chief Commissioner of Income Tax or Commissioner of Income Tax. They perform such functions in the execution of the Income Tax Act as are assigned to them by the ITO or by any other proper authority under whom they are appointed to work. Their help can be taken by an ITO, AC, DC, ADI or DDI in conducting an income tax search or seizure under Section 132.
Who is entitled to represent a person before the IT authorities in search and seizure matters?
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
Except when a person is required to be personally present before any income tax authority, he has the right, under Section 288, to be represented by an “authorised representative”. This could be any person authorised by him in writing to appear on his behalf:
(i) A relative; or
(ii) A person regularly employed by him; or
(iii) Any officer of a Scheduled Bank with which the assessee maintains a current account or has other regular dealings; or
(vi) Any legal practitioner who is entitled to practise in any civil court in India; or
(v) Any Chartered Accountant, or any auditor within the ambit of Section 226 of the Companies Act 1956; or
(vi) Any person who has a National
Diploma in Commerce (with Advanced Accountancy and Auditing) awarded by
the All India Council of Technical Education, or a Government Diploma in
Company Secretaryship awarded by the Department of Company Law Affairs
or the final examination of the Institute of Costs and Works Accountants
of India; or
(vii) Any person who, before the coming
into force of this Act in the Union Territory of Dadra and Nagar Haveli,
Goa, Daman and Diu, or Pondicherry, attended before an income tax
authority on behalf of any assessee other than in the capacity of an
employee or relative in that territory; or
(vii) Any person who has acquired a
degree in Commerce or Law from any Indian, Pakistan, Rangoon and certain
English, Irish, and Scottish University; or (ix) Any Income Tax
Practitioner practising before 1 April 1962.
The Article was First Published on 20.03.2009
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