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Friday 4 August 2017

What if Income Tax Department Raids you?

The search and survey operations conducted by the Income tax department, is commonly known as Income tax raids (‘raids’). Raids has always been one of the worst nightmares of businessmen, high earners and corporates. Some reasons for fear being heavy tax and penalty payments, possible devastating impact on the business, mental harassment faced during such raids etc.
If you are likely to experience such action it is better to familiarise with the subject, so that, the situation can be faced with confidence and serenity.

Criteria’s for Raid:
With a view to focus on high revenue yielding cases and to make the optimum use of manpower, the Central Board of Direct Taxes has decided that officers deployed in the Investigation Wing should adhere to the following guidelines:
a.    Searches should be carried out only in cases where there is credible evidence to indicate substantial unaccounted income/assets in relation to the tax normally paid by the assessee or where the expected concealment is more than Rs. 1 crore;
b.    Search operation will also be mounted when there is evidence of hidden unaccounted assets arising out of a conspiracy to cause public harm, terrorism, smuggling, narcotics, fraud, gangsterism, fake currency, fake stamp papers and such other manifestations;
c.     Tax payers who are professionals of excellence should not be searched without there being compelling evidence and confirmation of substantial tax evasion.

Do’s and Don’ts during the raids
The following do’s and don’ts in nutshell can assist in reducing the impact of the dreaded procedure of raids-
1.    Maintain proper and updated books of accounts
2.    Copies of important documents like returns of income/wealth filed, assessment orders, tax payment challans should be readily available.
3.    Investments made in assets should be properly accounted and supporting evidence should be available to substantiate the investment made.
4.    Statements recorded at the time of search are very crucial. One should be very cautious and careful while answering the question and the person questioned should not panic.
5.    It is important to be co-operative and cordial with the search and survey teams.

Tax Payer:
a.    He should not restrict the Income Tax Officials from checking his premises.
b.    He should handover the keys of lockers and almirahs for peaceful operation.
c.     He should introduce the persons present in his house and their relation with him.
d.    He should sign the recorded statements and Panchanama after careful reading.
e.    He should not remove anything from the premises without intimating the officials.
f.     He should give the statement as per his knowledge to the officials.
·         He can check the notice and identity cards of officers engaged in search operation.
·         He can check the officers before and after the search operation.
·         To see the warrant of authorization duly signed and sealed by the issuing authority.
·         He can keep two local persons as witnesses.
·         If necessary, he can call Doctor.
·         Assessee himself can remain present during search operations.
·         He can appoint tax consultant, CA/Lawyer to present his case during the search operation.
·         He can ask for lady officials to check his female relatives.
·         He can go for his regular work such as pooja, taking food or others.
·         He can send his children to school; if needed after checking their schoolbags.
·         He can move outside the premises with due permission of the Competent Officer.
·         He can check the statements written by the Income Tax Officers.
·         He can take true copies of Panchanama, Statement & other related documents.
·         He can sign on the paper seal put on the seized goods and recheck his signature at the time of breaking the seal in court or other places.
·         He can oppose for seizure of such goods, which are declared in Income Tax Return.
·         Under section 132 (5) after the search operation he can ask the competent officers to seize goods worth due income tax and take back other seized goods.

Income Tax Officer
1.    He cannot arrest anybody.
2.    The officers can enter into any building, place or vehicle owned by the person. They can even search the persons coming to these areas. They can break the locks of almirahs and locker for search.
3.    They can check the account and other related documents and can seize them.
4.    They can seize cash, gold or silver, jewellery held above the specified limit.
Assets that cannot be seized
a.    Immovable assets
b.    Stock held in business
c.     Assets disclosed in Income Tax and Wealth Tax returns
d.    Assets appearing in regular books of account
e.    Cash for which explanation can be given
f.     Jewellery mentioned in wealth tax return
g.    Gold up to 500 gm per married lady, 250 gm per unmarried woman and 100 gm per male member of the family.
h.    Jewellery as per the status of the family if so appear to the investigating Officer
Assets that can be seized
a.    Unaccounted cash, jewellery, gold, bullion, lockers, promissory notes, cheques, drafts.
b.    Books of accounts, chits, diaries, etc.
c.     Computer hard disks and other data storage devices.
d.    Documents of property, title deeds, etc.
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