A Practical Guide to Search and Seizure under Income Tax Act

GAGAN KUMAR, FCA, LL.B. Assisted by

Amit Kaushik, FCA, LL.B.

Highlights • Step by step guide to deal with search and surveys.

• Offers practical solutions to complex situations.

• Answers supported with relevant case laws.

India

SEARCH AND SEIZURE UNDER INCOME TAX ACT

Bloomsbu

A Practical Guide to

Contents at a glance Acknowledgement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v About the author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Preface  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Table of contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Table of cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii Chapter 1

Why searches are conducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1

Chapter 2

Is it legal to conduct search-what about right to privacy?. . . . . . . . . . 2.1

Chapter 3

How do I know that the search is valid? . . . . . . . . . . . . . . . . . . . . . . . 3.1

Chapter 4

Who can authorise search?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1

Chapter 5

Can search continue throughout the night?. . . . . . . . . . . . . . . . . . . . . 5.1

Chapter 6

What about the family members? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1

Chapter 7

Can a survey be converted into search?. . . . . . . . . . . . . . . . . . . . . . . . 7.1

Chapter 8

What can be seized?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1

Chapter 9

What material is regarded as incriminating material?. . . . . . . . . . . . . 9.1

Chapter 10

Can I call my legal counsel? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1

Chapter 11

What about my assets in foreign countries?. . . . . . . . . . . . . . . . . . . 11.1

Chapter 12

Can I be arrested during a search?. . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1

Chapter 13

When can my statement be recorded?. . . . . . . . . . . . . . . . . . . . . . . . 13.1

Chapter 14

Can the statements of my family members be also recorded?. . . . . . 14.1

Chapter 15

Can I retract my statement?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.1

Chapter 16

How can I file my returns if the books have been seized?. . . . . . . . . 16.1

Chapter 17

Assessment procedure in case of search and seizure or requisition. . 17.1

Chapter 18

Can the assessment of other persons be also opened?. . . . . . . . . . . . 18.1

Chapter 19

When can my assets be released? . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.1

Chapter 20

Can I go for settlement of tax and penalty?. . . . . . . . . . . . . . . . . . . . 20.1

Chapter 21

Is penalty mandatory? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.1

Chapter 22

Can prosecution be launched against me?. . . . . . . . . . . . . . . . . . . . . 22.1

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Chapter 23

Can income tax department share information with other authorities also?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.1

Chapter 24

Can income tax department invoke Benami Properties Act or PMLA?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.1

xii

Table of contents Acknowledgement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v About the author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Preface  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Contents at a glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Table of cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii Chapter 1 Why searches are conducted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 1.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 1.2 Wanchoo Committee Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 1.3 Reports of the Tax Administration Reform Commission (TARC) . . . . . . . . . 1.8 1.3.1 Identification and expansion of tax base. . . . . . . . . . . . . . . . . . . . . . 1.9 1.3.2 Challenges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.10 Chapter 2 Is it legal to conduct search-what about right to privacy?. . . . . . .

2.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.1.1 Writs of assistance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.2 Rights to privacy in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.3 Demarcation of right to privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.4 Is the right to privacy absolute? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.5 Indian Case Laws on search and seizure. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.6 Do tax authorities have the right to search and seize? . . . . . . . . . . . . . . . . . .

2.1 2.1 2.2 2.4 2.6 2.6 2.7 2.9

Chapter 3 How do I know that the search is valid? . . . . . . . . . . . . . . . . . . . . . 3.1 3.1 Can i Ask for the copy of warrant?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 3.1.1 Can a blank search warrant be issued? . . . . . . . . . . . . . . . . . . . . . . . 3.2 3.1.2 Should the Warrant have name of the authorised officer?. . . . . . . . . 3.4 3.1.3 Who can authorise the search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 3.1.4 Only the person/entity (legal person) named in the warrant can be searched . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 3.1.5 Can there be a common search warrant for various parties?. . . . . . . 3.8 3.1.6 Can search warrant be issued in the name of deceased person?. . . . 3.9 3.1.7 Search warrant must specify the place sought to be searched. . . . . . 3.9 3.1.8 Should Search warrant state reasons and specify documents? . . . . 3.11 3.1.9 Is there a defined parameter as to what can be seized by the search party? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13 3.1.10 Can one search warrant be used more than once?. . . . . . . . . . . . . . 3.14 3.2 Ask for the identification of the team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.18 3.3 Identify the team leader and find his designation. . . . . . . . . . . . . . . . . . . . . 3.19

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3.4 3.5 3.6 3.7

Is there a requirement of any lady officers? . . . . . . . . . . . . . . . . . . . . . . . . .

How ‘panch’ are called in?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Can you choose ‘panch’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Do I have to pay tax during search itself?. . . . . . . . . . . . . . . . . . . . . . . . . . .

3.20 3.20 3.23 3.23

Chapter 4 Who can authorise search?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.2 Authorities involved in searches. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.3 Jurisdiction of authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.4 Two classes of persons empowered to issue warrants of authorisation to other persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.5 Forms for authorisation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.1 4.1 4.1 4.4

Chapter 5 Can search continue throughout the night? . . . . . . . . . . . . . . . . . .

5.1 Humane approach during search. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.2 International rulings concerning search throughout the night. . . . . . . . . . . . .

5.3 Human rights and personal liberty of an individual are paramount and cannot be taken lightly. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.4 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.1 5.1 5.3

4.6 4.8

5.4 5.7

Chapter 6 What about the family members? . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 6.1 Can my family member be searched?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 6.2 Movement of family members may be restricted. . . . . . . . . . . . . . . . . . . . . . 6.4 Chapter 7 Can a survey be converted into search?. . . . . . . . . . . . . . . . . . . . . . 7.1 7.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 7.2 Differences between a survey and a search. . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 7.2.1 Place of survey and search. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 7.2.2 Time at which the survey or search may be conducted. . . . . . . . . . . 7.3 7.2.3 Power to seize . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 7.2.4 Extent of inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5 7.3 Recording of statements and its evidentiary value. . . . . . . . . . . . . . . . . . . . . 7.6 7.4 Assistance of police or an officer of the central government . . . . . . . . . . . . . 7.7 7.5 Individual’s personal search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8 7.6 Presence of witnesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8 7.7 what are the trigger points to convert survey into search? . . . . . . . . . . . . . . . 7.9 7.8 No assessment under section 153A pursuant to survey operation. . . . . . . . 7.25 Chapter 8 What can be seized?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.1 Meaning of “seize”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.2 Assets that cannot be seized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.3 What may be seized?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.4 What is the period of retention in a seizure or constructive seizure?. . . . . . . xiv

8.1 8.2 8.3 8.3 8.4

Table of contents

8.5 Panchnama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4 8.6 Can there be seizure of immovable properties? . . . . . . . . . . . . . . . . . . . . . . . 8.4 8.7 Seizure of goods or moneys or papers already in custody of a government department. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5 8.8 can stock-in-trade be seized?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9 8.9 When can a restraint order under the second proviso to section 132(1) be passed (generally known as constructive seizure)? . . . . . 8.11 8.10 An order of restraint under section 132(3):. . . . . . . . . . . . . . . . . . . . . . . . . . 8.12 8.10.1 Where it is not practicable to seize . . . . . . . . . . . . . . . . . . . . . . . . . 8.12 8.10.2 Resort to section 132(3) due to physical or mental incapability of the officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.13 8.10.3 Issue of prohibitory order on bank deposits only after assessing officer forms a prima facie opinion. . . . . . . . . . . . . . . . . 8.15 8.10.4 Instances of prohibitory order under section 132(3) of the Act and their validity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.16 8.10.4.1 Prohibitory order issued without forming reasonable belief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.16 8.10.4.2 Prohibitory order cannot be served when authorised officer is not unsure . . . . . . . . . . . . . . . . . . . . . 8.20 8.10.4.3 Prohibitory order cannot be issued for ascertaining if bank transactions represent undisclosed income . . . . . . 8.22 8.10.4.4 Prohibitory order where search could not be concluded. . 8.24 8.10.4.5 Who should serve prohibitory order . . . . . . . . . . . . . . . . . 8.25 8.10.4.6 Restraint order cannot be passed under section 132(3) for articles mentioned in section 132(1). . . . . . . . . 8.26 8.10.5 A prohibitory order does not amount to seizure - not required to be recorded in panchnama. . . . . . . . . . . . . . . . . . . . . . . 8.28 8.10.6 Period of limitation for assessment under prohibitory orders. . . . . 8.28 8.10.7 Period of operation of the order under section 132(3):. . . . . . . . . . 8.31 8.11 Distinction between prohibitory orders under second proviso to section 132(1) and section 132(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.32 8.12 Summary of difference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.35 Chapter 9 What material is regarded as incriminating material? . . . . . . . . . 9.1 9.1 Why is incriminating material relevant?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 9.2 Relevancy of incriminating material. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 9.2.1 No evidentiary value would be attached to statements recorded unless there is incriminating material found. . . . . . . . . . . . 9.5 9.2.2 Addition may be made when the material found is incriminating and not otherwise . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5 9.3 What is incriminating material? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5 9.3.1 What may be regarded as incriminating material . . . . . . . . . . . . . . . 9.6 9.3.2 Instances where material seized has been considered incriminating.9.6 xv

A Practical Guide to Search and Seizure under Income Tax Act

9.4

9.5 9.6 9.7 9.8

What would not be considered as incriminating?. . . . . . . . . . . . . . . . . . . . . . 9.7 9.4.1 Mere statement without any corroborating evidence is not an incriminating material. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.8 9.4.2 The statement recorded under section 133A i.e. during a survey cannot be said to be incriminating material. . . . . . . . . . . . . . 9.9 9.4.3 All documents seized or found during the search proceedings may or may not be relevant or useful and be taken to be as incriminating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.9 9.4.4 Loose papers, hard disks, pen drives which show no incriminating element are inadmissible. . . . . . . . . . . . . . . . . . . . . . 9.11 9.4.5 Incriminating information received from a foreign source triggering a search cannot be treated as incriminating for the purpose of applying section 153A. . . . . . . . . . . . . . . . . . . . . . . 9.12 What is the new scheme of assessment of search cases? . . . . . . . . . . . . . . . 9.13 Can a case be re-opened even if the assessment was done under section 143(3)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.19 Would the income unearthed during search be assessed separately? . . . . . . 9.20 Separate assessments for the past six years (10 years in certain cases) . . . . 9.20

Chapter 10 Can I call my legal counsel?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.1 Whether the assessee during search operations can call his legal counsel. .

10.2 It is not the statutory right of the taxpayer to demand the presence of the legal counsel.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.3 Denial of permission for presence of lawyer does not amount to violation of constitutional rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.4 Lawyer may be allowed to sit at a distance while not actively participating in the search process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.1 10.1 10.1 10.3 10.6

Chapter 11 What about my assets in foreign countries?. . . . . . . . . . . . . . . . . 11.1 11.1 Retrospective application of section 149 to income from foreign assets or otherwise coming into notice during a search . . . . . . . . . . . . . . . . 11.2 11.2 Time limits under section 153A of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . 11.3 11.2.1 Search conducted prior to 1st April, 2017. . . . . . . . . . . . . . . . . . . . 11.3 11.2.2 Search conducted on or after 1st April, 2017 . . . . . . . . . . . . . . . . . 11.6 11.3 Black Money Act and undisclosed foreign assets: . . . . . . . . . . . . . . . . . . . . 11.7 11.4 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.13 11.5 Author’s Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.16 11.5.1 Judgments After insertion of Explanation 3 . . . . . . . . . . . . . . . . . 11.17 Chapter 12 Can I be arrested during a search? . . . . . . . . . . . . . . . . . . . . . . . .

12.1 Arrests under income tax act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.2 Section 132 does not empower the authorised officer to make arrests. . . . .

12.3 Situation where arrest can be made. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvi

12.1 12.1 12.2 12.2

Table of contents

Chapter 13 When can my statement be recorded?. . . . . . . . . . . . . . . . . . . . . .

13.1 Statement must be recorded during search. . . . . . . . . . . . . . . . . . . . . . . . . .

13.1.1 Statement recorded after search could not be brought under purview of section 132(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13.1.2 Statement recorded before search could not be brought under purview of section 132(4). . . . . . . . . . . . . . . . . . . . . . . . . . .

13.2 No relevancy of statement if no incriminating material found. . . . . . . . . . .

13.3 Questions of tax officer should relate to the material found during search. .

13.1 13.2

Chapter 14 Can the statements of my family members be also recorded?. . .

14.1 Anyone in possession or control of material may be examined on oath. . . .

14.2 All evidence collected at time of search can be used in evidence against any person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.3 Addition to the assessee’s income on the basis of statement made by him on behalf of family members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.1 14.1

13.2 13.3 13.4 13.4

14.2 14.2

Chapter 15 Can I retract my statement?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.1 15.1 Points which are relevant when a statement is retracted:. . . . . . . . . . . . . . . 15.3 15.1.1 Retraction must be made without delay. . . . . . . . . . . . . . . . . . . . . . 15.4 15.1.2 Evidences to corroborate reasons for retraction . . . . . . . . . . . . . . . 15.5 15.1.3 Retraction of statements recorded at odd hours. . . . . . . . . . . . . . . . 15.6 15.1.4 Intimation of retraction to higher authorities. . . . . . . . . . . . . . . . . . 15.7 15.2 Reasons for retraction of a statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.8 15.2.1 Involuntary: Statements made involuntarily i.e. obtained under coercion, threat, duress, undue influence etc. . . . . . . . . . . . . 15.8 15.2.2 Voluntary: statement has been given under some mistaken belief either of fact or law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9 15.3 Mode and manner of retraction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.11 15.4 Case laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.11 15.5 Burden of proof lies on the assessee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.16 15.5.1 Confession before custom officers is binding, even if retracted. . 15.17 Chapter 16 How can I file my returns if the books have been seized? . . . . . . 16.1 16.1 Sub section (9) of section 132. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.1 16.2 No interest for late filing of returns can be charged if the copies of seized books provided to the assessee belatedly. . . . . . . . . . . . . . . . . . . . . . 16.3 Chapter 17 17.1 17.2 17.3

Assessment procedure in case of search and seizure or requisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Introduction to sections 153A to 153C. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Procedure under section 153A of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . .

Is evidence found relevant to any particular previous year sufficient for reassessment or assessment for previous six years.. . . . . . . . . . . . . . . . .

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17.4 17.5 17.6

17.7

17.8

Re-opening/re-assessment of cases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.8 Reassessment when there is pending assessment/reassessment proceedings for any assessment years within the period of six years. . . . . . 17.9 Amendment by the Finance Act, 2017 whereby the period for which a notice under section 153A can be issued has been extended to 10 years in certain cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.10 Pending assessment proceedings shall abate:. . . . . . . . . . . . . . . . . . . . . . . 17.11 17.7.1 What is the meaning of the term “abate”?. . . . . . . . . . . . . . . . . . . 17.11 17.7.2 Will the assessment pending in appeal abate?. . . . . . . . . . . . . . . . 17.13 17.7.3 Does the assessing officer assume original jurisdiction with respect to abated proceedings? . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.14 Assessment under section 153A in case of completed proceedings only when there is incriminating material. . . . . . . . . . . . . . . . . . . . . . . . . . 17.18 17.8.1 Return in response to notice under section 153A . . . . . . . . . . . . . 17.18 17.8.2 Whether notice under section 143(2) within stipulated time is mandatory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.19 17.8.3 Can Fresh Claim be made in return filed under section 153A?. . . 17.23 17.8.4 Whether return filed in response to notice under section 153A may be revised?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.23 17.8.5 Time limit for completion of assessment. . . . . . . . . . . . . . . . . . . . 17.24 17.8.6 Period of limitation where an order under section 153A is revised under section 263 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.28

Chapter 18 Can the assessment of other persons be also opened? . . . . . . . . . 18.1 18.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.2 18.2 What does section 153C of the Act provide? . . . . . . . . . . . . . . . . . . . . . . . . 18.2 18.3 What is the nature of the proceedings?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.4 18.4 Is it necessary that material seized should belong to the other/third person? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5 18.4.1 Position prior to 1st June, 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5 18.4.2 Assessment to be void in certain cases . . . . . . . . . . . . . . . . . . . . . . 18.8 18.4.3 Significance of substitution of words “belongs to” by “pertains to” in section 53C(1)(b) by Finance Act, 2015 . . . . . . . . 18.9 18.4.4 Amendment to section 153C by Finance Act, 2015 is not retrospective and applicable only from 1st June 2015.. . . . . . . . . 18.15 18.4.5 Who should record “satisfaction” before invoking section 153C of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.17 18.5 Satisfaction of the assessing officer under section 153C . . . . . . . . . . . . . . 18.19 18.5.1 What if the assessing officer fails to record satisfaction. . . . . . . . 18.25 18.5.2 Should the satisfaction be recorded by the assessing officer of the other person as well?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.26 18.5.3 Is it necessary to have separate satisfaction note even though the assessing officer is the same for the person referred to in 153A and 153C . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.27 xviii

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18.5.4 What is the time limit to record satisfaction. . . . . . . . . . . . . . . . .

18.5.5 The question whether ingredients of section 153C of the Act are satisfied doesn’t require interference by high court . . . . .

18.6 Assessment years which may be assessed or reassessed under section 153C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18.7 Can pending proceedings be abated under section 153C . . . . . . . . . . . . . .

18.7.1 What happens to the concluded assessments?. . . . . . . . . . . . . . . .

18.7.2 Material seized has to be incriminating material. . . . . . . . . . . . . .

18.8 What is the time limit to hand over seized material? . . . . . . . . . . . . . . . . .

18.9 What is the time limit for issuing notice under section 153C to the other person?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18.10 What is the time limit for assessment or reassessment under section 153C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18.10.1 Can orders under section 153C be revised under section 263?. . .

18.11 What happens to the assessment of income of other persons when the search itself is declared invalid/illegal . . . . . . . . . . . . . . . . . . . . . . . . .

18.29 18.31 18.31 18.35 18.39 18.41 18.44 18.45 18.45 18.47 18.48

Chapter 19 When can my assets be released?. . . . . . . . . . . . . . . . . . . . . . . . . . 19.1 19.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.1 19.2 How are seized assets dealt with?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.3 19.3 Is the time limit provided in section 132B merely directory?. . . . . . . . . . . . 19.4 19.4 Utilisation of cash/assets seized in search proceedings. . . . . . . . . . . . . . . . 19.9 19.4.1 Release of seized assets other than cash . . . . . . . . . . . . . . . . . . . . . 19.9 19.4.2 Seized asset could be adjusted towards payment of liability arising on application made before settlement commission . . . . . 19.10 19.4.3 Assessing officer cannot apply seized assets for discharge of liability of person other than person from whose custody assets are seized. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.10 19.5 Is any interest receivable on the refund of cash seized during search?. . . . 19.11 19.6 Whether the cash seized can be adjusted against the advance tax liability?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.13 19.6.1 Amendment by Finance Act, 2013 . . . . . . . . . . . . . . . . . . . . . . . . 19.17 19.6.2 Impact of amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.17 19.6.3 Whether applicability of Explanation 2 is prospective or retrospective?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.18 Chapter 20 Can I go for settlement of tax and penalty?. . . . . . . . . . . . . . . . . .

20.1 Introduction to Settlement Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . .

20.2 Application for settlement of cases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20.2.1 Conditions for filing of application for settlement . . . . . . . . . . . . .

20.2.1.1 Application only in respect of a “case”. . . . . . . . . . . . . . .

20.2.1.2 Form and manner of making application. . . . . . . . . . . . . .

20.1 20.2 20.3 20.3 20.3 20.5

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20.3 20.4 20.5

20.6

20.7 20.8 20.9 20.10 20.11 20.12 20.13 20.14

20.15

xx

20.2.1.3 Application can be filed only if the additional amount of income tax payable on the income disclosed in application exceeds the specified amount . . . 20.6 20.2.2 Calculation of the additional taxes to be paid in respect of the disclosure of income made before the Settlement Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.8 20.2.3 Full and true disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.8 No revision or withdrawal of the application allowed once made . . . . . . . . 20.9 Time limit to make an application to the Settlement Commission. . . . . . . 20.10 Procedure on receipt of an application under Section 245C: . . . . . . . . . . . 20.11 20.5.1 Issue of notice to the applicant under section 245D(1). . . . . . . . . 20.11 20.5.2 Admission of the application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.13 20.5.3 Validation of the application on the basis of report from the Commissioner of Income Tax [Sec 245D(2B)/(2C)]. . . . . . . . . . . 20.13 20.5.4 Second Report from the Commissioner of Income Tax [245D(3)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.13 Order of Settlement Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.15 20.6.1 Rectification of order. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.15 20.6.2 Time limit for passing order under section 245 D(4) . . . . . . . . . . 20.15 20.6.3 Where any tax payable in pursuance of an order under subsection (4) is not paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.15 20.6.4 Order obtained by fraud or misrepresentation. . . . . . . . . . . . . . . . 20.15 Power of Settlement Commission to reopen completed proceedings. . . . . 20.18 Order of settlement to be conclusive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.18 Immunity from prosecution (Section 245H). . . . . . . . . . . . . . . . . . . . . . . . 20.19 Abatement of proceeding and its consequences. . . . . . . . . . . . . . . . . . . . . 20.19 Exclusive jurisdiction over the case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.20 Bar on subsequent settlement application -Section 245K. . . . . . . . . . . . . . 20.21 Application to the Settlement Commission in cases of search and seizure.20.21 Filing an application before the Settlement Commission after a search. . . 20.21 20.14.1 Application cannot be made after the assessment or reassessment has concluded. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.22 20.14.2 Full disclosure of the income not disclosed before the Assessing officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.22 20.14.3 Copy of the application to be served to the Assessing Officer . . . 20.23 20.14.4 Adjustment of assets seized under section 132 or requisitioned under section 132A . . . . . . . . . . . . . . . . . . . . . . . . . 20.23 Benefits and demerits of approaching the Settlement Commission in cases of Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.24 20.15.1 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.24 20.15.2 Demerits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.24

Table of contents

Chapter 21 Is penalty mandatory?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.1 21.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.2 21.2 Relevant Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.2 21.2.1 Explanation 5 to section 271(1)(c) . . . . . . . . . . . . . . . . . . . . . . . . . 21.2 21.2.2 Scope and application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.3 21.2.3 Immunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.7 21.3 Explanation 5A to section 271(1)(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.8 21.3.1 Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.9 21.3.2 Immunity from penalty under explanation 5A of section 271(1)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.10 21.3.3 Strict application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.10 21.3.4 Due date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.12 21.3.5 Penalty is mandatory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.14 21.3.6 Difference between Explanation 5 and 5A of section 271(1)(c) :.21.15 21.4 Penalty where search has been initiated - Section 271AAA. . . . . . . . . . . . 21.17 21.4.1 Scope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.18 21.4.2 Case laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.20 21.5 Penalty where search has been initiated -Section 271AAB : . . . . . . . . . . . 21.28 21.5.1 Scope and applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.30 21.5.2 Conditions provided under this section. . . . . . . . . . . . . . . . . . . . . 21.30 21.5.3 Provision under section 270A and section 271(1)(c) will not apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.30 21.5.4 Applicability of section 271AAB for cases of search under section 132. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.31 21.5.5 Immunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.32 21.5.6 Comparison between 271AAA and 271AAB. . . . . . . . . . . . . . . . 21.33 21.5.7 Penalty provision under section 271AAB is not mandatory. . . . . 21.34 Chapter 22 Can prosecution be launched against me?. . . . . . . . . . . . . . . . . . . 22.1 22.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.1 22.2 Offences Relating to Non-compliance of orders Issued/Non-Cooperation during Search. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.1 22.2.1 Section 275A: Contravention of order made under section 132(3).22.1 22.2.2 Section 275B: Failure to comply with the provisions of clause (iib) of sub-section (1) of section 132.. . . . . . . . . . . . . . . . . 22.5 22.3 Offences Relating to Assessment Conducted after Search and other related offences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.7 22.3.1 Section 276C: Wilful attempt to evade tax, etc. . . . . . . . . . . . . . . . 22.7 22.3.1.1 Difference in section 276C(1) and section 276C(2) . . . . . 22.8 22.3.1.2 Interpretation of term “wilful attempt to evade the payment of tax”:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.9

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22.4

22.3.2 Section 276CC: Failure to furnish returns of income. . . . . . . . . .

22.3.2.1 Does return filed under section 139(4) fulfil requirements of section 139(1). . . . . . . . . . . . . . . . . . . .

22.3.2.2 Relief through section 276CC. . . . . . . . . . . . . . . . . . . . .

22.3.2.3 Impact of Amendment by the Finance Act, 2018. . . . . . .

22.3.3 Section 277: False statement in verification, etc. . . . . . . . . . . . . .

22.3.3.1 Who can be prosecuted under section 277of the Act. . . .

22.3.4 Section 278: Abetment of false return, etc. . . . . . . . . . . . . . . . . . .

Offences committed by Non-Individuals . . . . . . . . . . . . . . . . . . . . . . . . . .

22.4.1.1 Case laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22.10 22.12 22.12 22.15 22.16 22.16 22.16 22.21 22.25

Chapter 23 23.1

23.2 23.3

Can income tax department share information with other authorities also?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.1 Disclosure of information concerning assessees. . . . . . . . . . . . . . . . . . . . . . 23.1 23.1.1 Disclosure of records from assessment proceedings now in the custody of other agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.2 23.1.2 Notified income-tax authorities for purposes of section 138(1)(a). 23.4 23.1.3 Notified authorities under section 138(1) (a) (ii). . . . . . . . . . . . . . . 23.4 Information not to be disclosed, in certain cases, exceptions . . . . . . . . . . . 23.7 Income-tax Return is exempt from disclosure under RTI Act. . . . . . . . . . 23.10

Chapter 24 24.1 24.2 24.3

xxii

Can income tax department invoke Benami Properties Act or PMLA? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Prevention of Money Laundering Act, 2002 (PMLA). . . . . . . . . . . . . .

Benami Properties Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Authorities empowered to act under the Prohibition of Benami Property Transactions Act, 1988. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24.3.1 Identification of benami properties. . . . . . . . . . . . . . . . . . . . . . . . .

24.1 24.1 24.1 24.2 24.4

Table of cases A.K. Singhania v Gujarat State Fertilizer Co. Ltd AIR 2014 SC 71 . . . . . . . . . . . . 22.28 ACIT v Golf View Homes Pvt Ltd MANU/IL/0126/2016. . . . . . . . . . . . . . . . . . . . 18.44 ACIT v RPD Earth Movers (P.) Ltd. [2019] 174 ITD 717 (Chennai –Trib). . . . . . . . . 9.7 ACIT, New Delhi v Splendor Landbase Limited (ITA no. 2461/Del/2016). . . . . . . 17.23 Ajmera Housing Corporation and Ors. v Commissioner of Income Tax [2010]326ITR642(SC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.9 Ananta N. Naik v Dy. CIT [2000] 112 taxman 281 (Mag.) . . . . . . . . . . . . . . . . . . . . 3.14 Anurag Dalmia v DCIT, Central Circle-26 (15.02.2018 - ITAT Delhi) ITA No. 5395 and 5396 of 2017 MANU/ID/0075/2018. . . . . . . . . . . . . . . . . . . 9.12 ARN Infrastructure India Ltd. v Asstt. CIT [2017] 81 taxmann.com 260/394 ITR 569 (Delhi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.41 Ashok Chaddha v ITO [2011] 337 ITR 399 (Delhi),. . . . . . . . . . . . . . . . . . . . . . . . 17.20 Ashok Kumar Goel v Public Information Officer VAT Ward No. 64 [2012] 20 taxmann.com 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.12 Assistant Commissioner of Income Tax, Central Circle - 2(2) v RPD Earth Movers Pvt. Ltd. and Ors [2019]174ITD717(Chennai). . . . . . . . . . . . . . 18.43 Asst. CIT v Prakash Steelage Ltd (2015)169TTJ(Mum)137. . . . . . . . . . . . . . . . . . 21.31 Asstt. CIT v Expresso Investments [2006]8SOT287(Mum) . . . . . . . . . . . . . . . . . . 15.13 Asstt. CIT v Hotel Blue Moon [2010] 321 ITR 362 (SC) . . . . . . . . . . . . . . . . . . . . 17.19 Asstt. Commissioner of Income Tax, CC-13 v Ritu Singal 2016(49) ITR(Trib)664(Delhi) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.23 Asstt. Commissioner of Income Tax, Central Circle-2 v Shreenarayan Sitaram Mundra [2017]166ITD47(Ahd). . . . . . . . . . . . . . . . . . . 21.22 B.K. Nowlakha v Union of India [1991] 192 ITR 436. . . . . . . . . . . . . . . . . . . . . . . . 8.33 Bharat Kumar v ITO [1989] 34 TTJ (Ahd.) 350. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.2 Brahm Datt v Assistant Commissioner Income Tax [2019] 260 TAXMAN 380 (Delhi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 C. Ramaiah Reddy v Asstt. CIT [2011] 339 ITR 210(Kar) . . . . . . . . . . . . . . . 3.14, 8.29 Canyon Financial Services Ltd. v ITO [2017] 399 ITR 202 (Delhi) (SLP Dismissed/Rejected in [2018] 91 taxmann.com 252 (SC)). . . . . . 18.13, 18.23

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Canyon Financial Services Ltd. v ITO [2017] 399 ITR 202 (Delhi) [SLP against this judgment was dismissed in [2018] 253 Taxman 341 (SC)]. . 18.27 CCIT v Pampapathi (2009) 310 ITR 64 (Kar). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7 Chander Prakash Jain v CIT [2017] 393 ITR 302 (Allahabad) . . . . . . . . . . . . . . . . 19.12 Chief Commissioner of Income Tax (CCA) v The State of Bihar through The Chief Secretary [2012 ]205TAXMAN 232 (Patna ). . . . . . . . . . . . . 5.2 Chironjilal Sharma (HUF) v Union of India [2014] 360 ITR 237 (SC). . . . . . . . . . 19.12 CIT (Central) v Kabul Chawla [2016] 380 ITR 573 (Delhi) . . . . . . . . . . . . . . . . . . . . 9.3 CIT (Central) v B.N. Bhattacharjee and Ors. [1979]118ITR461(SC) . . . . . . . . . . . . 20.2 CIT (Exemption) v Monarch Educational Society [2016] 387 ITR 416 (Delhi). . . 11.17 CIT ITO v Mr. Gope M. Rochlani. Rajesh Kumar Jalan [2006] 286 ITR 276 (Gau.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.13 CIT v Anil Kumar Bhatia, [2013] 352 ITR 493 (Delhi). . . . . . . . . . . . . . . . . . 9.21, 9.23 CIT v Arpit Land (P.) Ltd, [2017] 393 ITR 276 (Bom.).,. . . . . . . . . . . . . . . . . . . . . . 18.8 CIT v B.G. Shirke Construction Technology (P.) Ltd [2017] 395 ITR 371 (Bom.)..17.24 CIT v Balaji Steel Profiles [2015] 371 ITR 265 (AP &Telangana) . . . . . . . . . . . . . . 13.2 CIT v Dilbagh Rai Arora [2019] 263 Taxman 30 (Allahabad). . . . . . . . . . . . . . . . . . . 9.5 CIT v Harjeev Aggarwal (2016) 290 CTR (Del) 263. . . . . . . . . . . . . . . . . . . . . . . . . . 9.8 CIT v Jet Airways (I) Ltd. [2011] 331 ITR 236. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.17 CIT v Kabul Chawla (2016) 380 ITR 573 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.42 CIT v Khyber Foods (2012) 346 ITR 36 (Ker.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8 CIT v Late J. Chandrasekar (HUF) [2011] 338 ITR 61 (Mad.). . . . . . . . . . . . . . . . . 18.4 CIT v M/s. Jagriti Aggarwal [2011] 339 ITR 610 (P&H). . . . . . . . . . . . . . . . . . . . . 21.13 CIT v Mrs. Sandhya P. Naik [2002] 253 ITR 534 (Bom.). . . . . . . . . . . . . . . . . . . . . 8.28 CIT v Naresh Kumar Agarwal [2014] 369 ITR 0171. . . . . . . . . . . . . . . . . . . . . 9.5, 13.4 CIT v O. Abdul Razak [2013] 350 ITR 71, SLP granted [2013] 350 ITR(ST) 4 (SC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1 CIT v Pawan Kumar Garg [2009] 178 Taxman 491/[2011] 334 ITR 240 (Delhi). . . . 4.3 CIT v Ramesh Chander [1974] 93 ITR 450 (P&H),. . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7 CIT v S.K. Katyal [2009] 308 ITR 168 (Del). . . . . . . . . . . . . . . . . . . . . . . . . . 3.17, 3.20 CIT v Sarb Consulate Marine Products (P.) Ltd [2007] 294 ITR 444 (Delhi). . . . . . 8.32 CIT v Shankarlal Bhagwatiprasad Jalan [2018] 407 ITR 152 (Bombay).. . . . . . . . . 13.2 CIT v Shettys Pharmaceuticals & Biologicals Ltd., [2015] 232 Taxman 268 (Andhra Pradesh).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.26 CIT v Singhad Technical Education Society, (2015) 378 ITR 84 (Bom.) . . . . . . . . 18.24 xxiv

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CIT v Singhad Technical Education Society [2017] 397 ITR 344 (SC). . . . . . . . . . 18.24 CIT v T. Rangroopchand Chordia [2016] 241 taxman 221 (Mad). . . . . . . . . . . . . . . . 9.6 CIT v Tarsem Kumar [1986] 161 ITR 505. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8, 8.28 CIT v Anil Kumar Bhatia [2013] 352 ITR 493 (Delhi).. . . . . . . . . . . . 17.7, 17.10, 17.14 CIT v Arun Kapoor [2012] 20 taxmann.com 431 (Punj. & Har.). . . . . . . . . . . . . . . 19.16 CIT v Ashok Kumar [2011] 334 ITR 355 (P&H). . . . . . . . . . . . . . . . . . . . . . . . . . . 19.16 CIT v Continental Warehousing Corpn. (NhavaSheva) Ltd. [2015] 374 ITR 645 (Bom.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5 CIT v K. K. Marketing [2005] 278 ITR 596 (Delhi) . . . . . . . . . . . . . . . . . . . . . . . . 19.16 CIT v Kabul Chawla [2016] 380 ITR 573 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.16 CIT v Lavanya L and (P.) Ltd [2017] 397 ITR 246 (Bombay)[SLP dismissed in [2019] 261 Taxman 454 (SC)]. . . . . . . . . . . . . . . . . . . . . . . . . . . 18.31 CIT v Pawan Kumar Garg [2011] 334 ITR 240 (Delhi). . . . . . . . . . . . . . . . . . . . . . . . 4.5 CIT v Shaila Agarwal [2011] 346 ITR 130 (All.). . . . . . . . . . . . . . . . . . . . . 17.12, 17.13 CIT v Ulike Promoters (P.) Ltd. [2013] 356 ITR 507 (Delhi) . . . . . . . . . . . . . . . . . 17.33 CIT, Bikaner v Ravi Mathur 2017 (1) WLC (Raj.) 387. . . . . . . . . . . . . . . . . . . . . . 15.17 Commissioner Of Income Tax (Central) v M/S Gopi Apartment [2014] 365 ITR 411 (All). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.17 Commissioner of Income Tax (Central) v B.N. Bhattacharjee and Ors [1979]118ITR461(SC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.18 Commissioner of Income Tax v Rakesh Kumar, Mukesh Kumar L/H of Late Mohar Singh [2009] 313 ITR 305 (P&H). . . . . . . . . . . . . . . . . . . . . . . . . 3.9 Commissioner of Income Tax v O. Abdul Razak [2013]350ITR71(Ker). . . . . . . . . 15.16 Commissioner of Income Tax Central-III v Lavanya Land Pvt. Ltd. and Ors [2017] 397 ITR 246 (Bom). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.2 Commissioner of Income Tax, Jalpaiguri v Om Prakash Mittal (2005) 2 SCC 751.20.22 Commissioner of Income Tax-7 v RRJ Securities Ltd, [2016] 380 ITR 612 (Delhi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.36, 18.39 Commissioner of Income-tax v Capital Power Systems Ltd. [2009] 222 CTR 47 (Delhi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Common Cause (A Registered Society) & Ors. v Union of India [2006] 282 ITR 406 (Punj).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.10 Common Cause (A Registered Society) & Ors. v Union of India & Ors [2017]394ITR220(SC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.11 Council of Institute of Chartered Accountants of India v Mukesh R. Shah [2004] 134 TAXMAN 265 (Guj) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.5 xxv

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Cowasjee Nusserwanji Dinshaw v ITO [1987] 165 ITR 702. . . . . . . . . . . . . . . . . . . 19.8 D K Basu v State of West Bengal 1997 (1) SCC 416 (SC) . . . . . . . . . . . . . . . . . . . . . 5.4 D.C.I.T. v Salasar Stock Broking Ltd (2016)181TTJ(Kol)526 . . . . . . . . . . . . . . . . 21.21 D.S. (India) Jewelmart (P.) Ltd v Union of India [2016] 387 ITR 593 (Allahabad). 7.16 DCIT v National Standard India Ltd [2017] 166 ITD 426 (Mumbai Trib.) [2017] 166 ITD 426 (Mumbai - Trib.). . . . . . . . . . . . . . . . . . . . . . . . . . . 18.16 Deepchand & Co v ACIT (1995) 51 TTJ 421 (Bom.) . . . . . . . . . . . . . . . . . . . . . . . . 15.8 Devarajan and Ors. v Tamil Nadu Farmers Service Co-operative Federation and Ors [1981 ] 131 ITR 506 (Mad ). . . . . . . . . . . . . . . . . . . . . . . . . 8.13 DGIT (Inv.) v Spacewood Furnishing (P) Ltd. [2015] 374 ITR 595 (SC). . . . . . . . . 3.12 Dhunjibhoy Stud & Agricultural Farm v DCIT (2002) 82 ITD 18 (Pune). . . . . . . . 15.11 Distt. Registrar and Collector, Hyderabad and Ors. v Canara Bank and Ors. AIR 2005 SC 186. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5, 2.7 Dr. Nalini Mahajan v Director of Income-tax (Investigation) [2002] 257 ITR 123. . . 4.4 Dr. Nalini Mahajan v DIT [2001] 252 ITR 123 (Delhi). . . . . . . . . . . . . . . . . . . . . . . . 4.7 Dr. Pratap Singh v Director of Invesigation (1985) 155 ITR 166 SC.. . . . . . . . . . . . 3.11 Dr. William Britto v CIT [2015] 68 SOT 195 (Panaji - Trib.) . . . . . . . . . . . . . . . . . 18.48 DSL Properties (P.) Ltd. v Dy. CIT [2013] 60 SOT 88 (Delhi - Trib.) (URo) . . . . . 18.27 G. Viswanathan v ITO [1987] 167 ITR 103 (Ker.). . . . . . . . . . . . . . . . . . . . . . . . . . . 22.8 Ganapati Fincap Services Pvt. Ltd., v CIT [2017] 395 ITR 692 (Delhi). . . . . . . . . 18.27 Gautam Khaitan v Union of India [2019] 105 taxmann.com 276 (Delhi). . . . . . . . 11.10 Gebilal Kanhaialal (HUF) v Assistant Commissioner of Income Tax (2004) 270 ITR 523 (Raj.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.7 Gian Chand v State of Punjab AIR [1962] SC 496. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 Girish Ramchandra Deshpande v Central Information Commissioner [2013] 1 SCC 212.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.10 H.L. Sibal v CIT [1975] 101 ITR 112 (Punj. & Har.). . . . . . . . . . . . . . . . . . . . . . . . . 3.10 Hanuman Pershadganeriwala v Director of Inspection, IT [1974] 93 ITR 419 (Delhi).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.2 Happy Home Developers v Assistant Commissioner of Income-tax, Central Circle-1, Nashik [2017] 87 taxmann.com 10 (Pune - Trib.). . . . . . . . . 19.18 Harbhajan Singh Chadha v DIT [2016] 380 ITR 100 (Allahabad). . . . . . . . . . . . . . 3.10 Hemant Kumar Sindhi and another V C.I.T. and others [2014] 364 ITR 555 (Allahabad).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.10 Hiralal Maganlal & Co. v DCIT (2005) 96 ITD 113 (Mumbai). . . . . . . . . . . . . . . . 15.14 xxvi

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Hotel Kiran v Assistant Commissioner of Income Tax [2002] 82 ITD 453 (Pune). . 15.8 Income- tax Officer v Dinesh K. Shah [1997] 223 ITR 68 (Madras). . . . . . . . . . . . 22.25 Income-tax Officer Ward 23(1), New Delhi v R.K. Gupta [2008] 115 ITD 384 (Delhi).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.18 Ireland v United Kingdom [1978] ECHR 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 IT and WT and Ors. , (2016)289CTR(Ori)569. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.17 ITO v Mr. Gope M. Rochlani (2013)158TTJ(Mum)120 . . . . . . . . . . . . . . . . . . . . . 21.13 ITO v Raj and Raj Investments (2007) 293 ITR 66 (Kar.). . . . . . . . . . . . . . . . . . . . . . 7.4 ITO v Seth Bros, (1969) 74 ITR 836, 847 (SC). . . . . . . . . . . . . . . . . . . . . . . . . 3.13, 7.8 ITO v Firm Madan Mohan Damma Mal, (1968) 70 ITR 293, 301 (All). Also see, ITO v Seth Bros. (1969) 74 ITR 836, 845 (SC). . . . . . . . . . . . . . 4.9 Jagmohan Mahajan v CIT [1976] 103 ITR 579 (Punj. & Har.) . . . . . . . . . . . 2.4, 3.2, 3.6 Jai Steel (India) v Asst. Commissioner of Income (2013) 259 CTR (Raj) 281 . . . . 17.23 Jai Steel (India) v Asstt. CIT [2013] 219 Taxman 223 (Raj.). . . . . . . . . . . . . . 9.3, 17.17 Jakhotia Plastics (P.) Ltd. v Principal Commissioner of Income-tax, [2018] 256 Taxman 60 (SC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.17 Jalil Abdulbhai Shaikh v Dy. CIT [2018] 407 ITR 418 (Gujarat) . . . . . . . . . . . . . . . . 9.6 Jamshedpur Engg. & Machine Mfg. Co. Ltd. v Union of India [1995] 214 ITR 556. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.29 Jamshedpur Engg. & Machine Mfg. Co. Ltd. v Union of India [1995] 214 ITR 556 (PAT.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.22 Jasbir Singh and Ors.v ITO [1987] 168 ITR 770 (PH). . . . . . . . . . . . . . . . . . . . . . . 22.16 Jawahar Lal Jain (HUF) v CIT (2015) 370 ITR 712 (Punj. & Har.). . . . . . . . . . . . . 21.38 Justice K.S. Puttaswamy and Ors. v Union of India (UOI) and Ors. AIR 2005 SC 186. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 Jyotichand Bhaichand Saraf & Sons (P.) Ltd. v Deputy Commissioner of Income-tax, Circle 11(1) (ITAT Pune) [2012] 139 ITD 10 (Pune). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9 K. Choyi, ITO v Syed Abdulla Bafakki Thangal (1973) 91 ITR 144 (Ker.) . . . . . . . 12.2 K. Subramanyam v ITO [1993] 199 ITR 723. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.29 K.R. Modi & Co. v Dy. DIT (Inv.) [2005] 272 ITR 587 (Cal.) . . . . . . . . . . . . . . . . . . 3.7 K.V. Abdul Azeez v CIT [2018] 404 ITR 288 (Ker).. . . . . . . . . . . . . . . . . . . . . . . . 17.28 Kailashben Manharlal Choksi v CIT [2008] 174 Taxman 466 ; [2010] 328 ITR 411 (Gujarat) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7, 15.6 Kantilal C. Shah v ACIT [2011] 133 ITD 57 (Ahd). . . . . . . . . . . . . . . . . . . . . . . . . . 15.4 xxvii

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Kesri K Deboo v ACIT(2009) 313 ITR 186 (Bom). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7 Krishna Medical Stores and Anr. v ITO [1994] 206 ITR 76 (AP). . . . . . . . . . . . . . 22.17 L. R. Gupta v Union of India (1992)194 ITR 32.. . . . . . . . . . . . . . . . . . . . . . . . 6.5, 12.1 Laxmipat Choraria v K.K. Ganguly [1971] 82 ITR 306 (Cal.) . . . . . . . . . . . . . . . . . . 8.5 M.V. Javali v Mahajan Borewell & Co. and Ors [1998] 230 ITR 1 (SC). . . . . . . . . 22.22 MaaVaishnavi Sponge Ltd. v DGIT (Inv.) [2012] 339 ITR 413 (Orissa). . . . . 8.15, 8.22 Madhu Gupta v Director of Income Tax (Investigation) and Ors [2013] 350 ITR 598 (Delhi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Madhupuri Corporation v Prabhat Jha DDIT (Inv.) (2002) 256 ITR 498 (Guj.). . . . . 3.8 Mahaan Foods Ltd. v Dy. CIT [2010] 123 ITD 590 (Delhi) . . . . . . . . . . . . . . . . . . . 8.24 Maheshbhai Shantilal Patel v Secretary, Income Tax Settlement Commission [2018] 94 taxmann.com 460 (Guj.). . . . . . . . . . . . . . . . . . . . . . . 20.11 Majinder Singh Kang v CIT; CIT v Mehak Finvest (P.) Ltd [2014] 367 ITR 769 (Pun.&Har.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.17 Manish Maheshwari v Asst. CIT [2007] 289 ITR 341 (SC). . . . . . . . . . . . . . . . . . . 18.18 Manmohan Krishan Mahajan v CIT [1977] 107 ITR 420 (Punj. & Har.) . . . . . . . . . . 3.2 Manmohansingh Vig v Deputy Commissioner of Income Tax, Circle 1(1) [2006]6SOT18(Mum).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.11 Mansukhlal Dhanra v Eknath Vithal Ogale AIR 1995 SC 1102. . . . . . . . . . . . . . . . 18.10 Mascot Buildwell Pvt. Ltd. v ACIT ITA No.4548/Del/2015 . . . . . . . . . . . . . . . . . . 18.31 Midas Capital Pvt. Ltd. v ACIT order dated 23.03.2018 - ITAT Cuttack : MANU/IF/0014/2018. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10 Mitaben R. Shah v Dy. CIT [2011] 331 ITR 424. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.6 Mohanlal. S. Doppa v CIT [2002] 253 ITR 33 (Guj). . . . . . . . . . . . . . . . . . . . . . . . 20.17 Mohnot (NK) v DCIT [1995] 215 ITR 275 (Madras) . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 Monaben Ketanbhai Shah v State of Gujarat [2004] 7 SCC 15. . . . . . . . . . . . . . . . 22.29 Motilal v Preventive Intelligence Officer, [1971] 80 ITR 418 (All.). . . . . . . . . . . . . 8.27 Mrs. Dr. Tapati Sengupta and Ms. Amgana Sengupta v Enforcement Officer, Enforcement Directorate (FERA) and Ors 1998 (60) ECC 48 (Cal.). . . . 5.4 Nadim Dilip Bhai Panjvani v Income-tax Officer, Ward No. 3, 383 ITR [2016] 375. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.5, 19.6 Naresh Chand Agarwal v UOI [2013] 359 ITR 353 (All.). . . . . . . . . . . . . . . . . . . . 17.33 Naresh Trehan v Rakesh Kumar Gupta [2015] 228 Taxman 119. . . . . . . . . . . . . . . 23.11 Narsi Creations v Dy. CIT [2016] 70 taxmann.com 156 (Delhi - Trib.). . . . . . . . . . 18.20 Navarathna & Co. v State 1987 168 ITR 788 (Mad). . . . . . . . . . . . . . . . . . . . . . . . 22.18 xxviii

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Nenmal Shankarlal Parmer v ACIT (1992) 195 ITR 582. . . . . . . . . . . . . . . . . . . 3.9, 8.2 Nikka Mal Babu Ram v Asst. CIT [2010] 41 SOT 407 (Chd). . . . . . . . . . . 19.13, 19.16 Oanali Ismailji Sadikot v State of Gujarat [2016] 135 SCL 215 (Gujarat). . . . . . . . 22.27 Olmstead v United States 277 U.S. 438 (1928) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 Om Prakash Agrawal v Union of India[2013] 255 CTR 445 (Madhya Pradesh). . . 19.12 Om Prakash Jindal v Union of India [1976] 104 ITR 389. . . . . . . . . . . . . . . . . . . . . 8.20 P.R. Metrani v CIT [2006] 287 ITR 209 (SC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.7 P.Srinivas Naik v ACIT [2009] 117 ITD 201(Bang.). . . . . . . . . . . . . . . . . . . . . . . . . 18.5 Param Transport (P.) Ltd. v Principal Commissioner of Income-Tax, [2019] 102 taxmann.com 327 (Chhattisgarh), SLP dismissed in [2019] 261 Taxman 346 (SC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.29 Pawan Kumar Goel v Union of India [2019] 265 Taxman 25 (Punjab & Haryana). . 7.24 PCIT v M/s N.S. Software (Firm) [2018] 403 ITR 259 (Delhi). . . . . . . . . . . . . . . . 18.11 PCIT v N.S. Software (Firm)[2018] 403 ITR 259 (Delhi). . . . . . . . . . . . . . . . . . . . 18.25 PCIT v Nikki Drugs & Chemicals (P.) Ltd [2015] 386 ITR 680 (Delhi). . . . . . . . . 18.28 PCIT v Pradip Jayantilal Karia [2018] 94 taxmann.com 323 (Gujarat). . . . . . . . . . . 14.2 PCIT v Ritu Singal [2018]403ITR97(Delhi) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.26 PCIT v Super Malls Pvt. Ltd [2017]393ITR557(Delhi). . . . . . . . . . . . . . . . . . . . . . 18.28 Pepsi Foods Pvt. Ltd. v ACIT [2014] 367 ITR 112 (Delhi). . . . . . . . . . . . . . . . . . . 18.23 Pepsico India Holdings (P.) Ltd. v Asstt. CIT [2014] 270 CTR 467 (Delhi). . . . . . 18.10 Pepsico India Holdings Private Limited v Assistant Commissioner of Income Tax [2015] 370 ITR 295 (Delhi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.6 Pooja Ravinder Devidasani v State of Maharashtra [2015] 124 CLA 162 (SC) . . . 22.25 Poolapandi v Superintendent , Central Excise , (1992) 62 Taxmann 447 (SC). . . . . 10.3 Pooran Mal v The Director of Inspection (Investigation), New Delhi and Ors. AIR 1974 SC 348. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9 Pr. CIT v Jakhotia Plastics (P.) Ltd [2018] 94 taxmann.com 89. . . . . . . . . . . . . . . . 11.17 Pr. CIT v Jigesh Venilal Koralwala [2016] 387 ITR 177 (Guj.). . . . . . . . . . . . . . . . 21.38 Pr. CIT v Krutika Land (P.) Ltd. [2019] 261 Taxman 454 (SC). . . . . . . . . . . . . . . . . 18.8 Pr. CIT v Meeta Gutgutia [2017] 395 ITR 526 (Delhi),. . . . . . . . . . . . . . . . . . . . . . . . 9.9 Pr. CIT v PPC Business and Products P. Ltd., [2017] 398 ITR 71 (Delhi). . . 8.31, 17.33 Pr. CIT v Sandeep Chandak (2018) 405 ITR 648 (All) . . . . . . . . . . . . . . . . . . . . . . 21.37 PR. Commissioner of Income Tax v Shri Neeraj Jindal [2017]393ITR1(Delhi). . . . 21.4 Prakash Nath Khanna v CIT [2004] 266 ITR 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.12

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Pramatha Nath v State AIR 1951 Cal 581 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.17 Prasanna Dugar v CIT [2015] 373 ITR 681. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.38 Principal CIT v Emirates Technologies (P.) Ltd [2018] 99 taxmann. com 355 (Delhi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.23 Principal CIT v Index Securities (P.) Ltd. [2017] 86 taxmann.com 84 (Delhi) . . . . 18.11 Principal CIT v Mukeshbhai Ramanlal Prajapati [2018] 99 taxmann. com 447 (Guj.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.27 Principal Commissioner of Income Tax v Roshan Lal Sancheti (2019) 306 CTR (Raj) 140. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.7 Pullangode Rubber Produce Co. Ltd. v State of Kerala and Ors. [1973]91ITR18(SC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.2 Puspa Ranjan Sahoo v Asstt. DIT [2012] 210 Taxman 217 (Mag.) (Ori.). . . . . . . . . 8.11 Quality v ITO [1999] 239 ITR 290 (Pat).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.9 R. S. Seth Gopikrishan Agarwal v R. N. Sen, Assistant Collector of Customs and Ors. AIR 1967 SC 1298.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11 R.R. Gavit v Smt. Sherbanoo Hasan Daya [1986] 161 ITR (793). . . . . . . . . . 13.3, 13.4 Raghu Raj Pratap Singh v ACIT [2008] 307 ITR 450 (All.) . . . . . . . . . . . . . . . . . . . 3.19 Raj and Raj Investments v ITO (2007) 293 ITR 57 (Kar.). . . . . . . . . . . . . . . . . . . . . . 7.4 Raja Ram Maheshwari v The DCIT ITA 992/JPR/2017. . . . . . . . . . . . . . . . . . . . . . 21.34 Rajabather, Re: AIR 1959 Mad 450. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.22 Rajendra Singh Nayak v Deputy Director of Income-tax (Investigation), [2014] 227 Taxman 13 (Madhya Pradesh)(MAG.) . . . . . . . . . . . 8.4 Rajnish Vohra v DCIT, I.T.A. No. 516/CHD/2012 order dated 30.10.2012. . . . . . . 21.14 Ram Swarup Sahu v CIT (1992) 196 ITR 841 (Patna). . . . . . . . . . . . . . . . . . . . . . . . 3.12 Ramesh Chander and Ors. v Commissioner of Income Tax and Ors [1974]93ITR244(P&H). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.1 Ramesh Chander v CIT [1974] 93 ITR 244 (Punj.&Har.). . . . . . . . . . . . . . . . . . . . . 8.27 Ranbaxy Laboratories Ltd. v CIT [2011] 336 ITR 136 (Delhi). . . . . . . . . . . . . . . . 11.17 Rich Udyog Network Limited v Chief CIT [2016] 386 ITR 136 (Allahabad). . . . . . . 7.9 S.C. Gupta v CIT [2001]248ITR782(All). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.18 S.R. Batliboi & Co. v Department of Income-tax (Investigation) [2009] 315 ITR 137 (Delhi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.6 S.S. Gadgil v Lal& Co [1964] 53 ITR 231. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Salmouni v France [2000] 29 EHRR 403. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3

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Sandeep Chandak and Ors. v Assistant Commissioner of Income Tax 2017(55)ITR(Trib)209(Lucknow). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.37 Sandvik Asia Ltd. v CIT [2006] 280 ITR 643 (SC). . . . . . . . . . . . . . . . . . . . . . . . . 19.12 Sanjay Aggarwal v Dy. CIT [2014] 150 ITD 692 (Delhi) . . . . . . . . . . . . . . . . . . . . . 9.12 Sanjay Sinha v Union of India & Anr,.[2004] 271 ITR 465 (Pat) . . . . . . . . . . . . . . . 22.2 Sarat Chandra Sahoo v Deputy Commissioner of Income Tax (2015) 152 ITD 326. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.20 Sardar Paraduman Singh v UOI [1987] 31 Taxman 515 (Delhi). . . . . . . . . . . . . . . . 8.26 Sarita Kaur Manjeet Singh Chopra v The Income Tax Officer MANU/IP/0455/2015 ITAT Pune Bench order dated 30.10.2015. . . . . . . . . . . 21.11 Sasi Enterprises v Asstt. CIT [2014] 361 ITR 163 (SC). . . . . . . . . . . . . . . . . . . . . . 22.13 Satpaul D. Agarwal (HUF) v Asst. CIT [1998] 62 TTJ (Mum.) 98. . . . . . . . . . . . . 19.16 Satya Prakash Sharma v Asst. CIT 20 DTR 561 (Delhi) . . . . . . . . . . . . . . . . . . . . . 19.16 Semayne’s case 5 Coke’s Repts. 91a, 77 Eng. Rep. 194 (K.B. 1604) . . . . . . . . . . . . . 2.1 Sh. Venkateswara Lodge v CIT [1969] 71 ITR 629 (AP).. . . . . . . . . . . . . . . . . . . . . . 9.9 Sharad B. Sahai and Ors. v Commissioner of Income Tax and Ors (2010) 235 CTR (All) 596. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.48 Sheraton Apparels, Max v ACIT (2002) 256 ITR 20. . . . . . . . . . . . . . . . . . . . . . . . . 21.7 Shri Biren V Shah v Asstt. Commissioner of Income Tax, ITAT bench at Ahmedabad, MANU/IB/0103/2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.3 Shri Mahavir Nagari Sahakaripat Sanstha Ltd v DCIT [2002] 74 TTJ 793 (Pune). . . 9.8 Shrivardhan Mohta v Union of India (2019) 307 CTR (Cal) 396 dated 14.02.2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.11 Siksha ‘O’ Anusandhan v CIT [2011] 336 ITR 112 (Orissa). . . . . . . . . . . . . . . . . . . . 3.6 Smt. Neena Wadhwa v Dy. CIT [2003] 128 Taxman 149 (Mag.) (Delhi) . . . . . . . . . 8.31 Smt. Rajkumari Chandak v Assistant Commissioner of Income tax, Co. Cir.-I (Inv.), Chennai [2016] 382 ITR 312 (Madras). . . . . . . . . . . . . . . . . . . 7.26 Smt. Sita Devi v Commissioner of Income Tax and Ors, 1980 122 ITR 105 P H.. . . . 6.3 Southern Herbals Ltd. v DIT (Investigation) [1994] 207 ITR 55 (Kar.) . . . . . . . . . . . 3.6 SSP Aviation Ltd. v Deputy Commissioner of Income Tax (2012) 346 ITR 177. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.36, 18.37 State of Karnataka vPratap Chand [1981] 2 SCC 335. . . . . . . . . . . . . . . . . . . . . . . 22.29 State of Maharashtra v Narayan Champalal Bajaj [1993] 201 ITR 315 (Bom).8.14, 22.3 Strategic Credit Capital (Pvt.) Ltd. v Ratnakar Bank Limited (2017) 81 Taxman 408 (Delhi) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.19 xxxi

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Subir Roy v S.K Chattopadhyay (1986) 158 ITR 472 (Cal). . . . . . . . . . . . . . . . . . . . . 7.8 Sudhakar M. Shetty v Asst. CIT 10 DTR 173 (Mum) . . . . . . . . . . . . . . . . . . . . . . . 19.16 Sudharshan P. Amin v Asstt. CIT [2013] 217 Taxman 37 (Guj.). . . . . . . . . . . . . . . . 15.6 Summer Builders v Dy. CIT [2012] 49 SOT 210 (Mumbai) . . . . . . . . . . . . . . . . . . 19.11 Sunder Singh v State Of Uttar Pradesh AIR 1956 SC 411. . . . . . . . . . . . . . . . . . . . . 3.22 Sunny Jacob Jewellers and Wedding Centre v Dy. CIT [2014] 362 ITR 664 (Kerala) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.8 Super Malls (P.) Ltd. v Dy. CIT [2017] 88 taxmann.com 373 (Delhi - Trib.) . . . . . 18.26 Surjeet Singh Chhabra v UOI and Ors.,(1997) 1 SCC 508 . . . . . . . . . . . . . . . . . . . 15.17 T. Lakhamshi Ladha & Co. v CIT [2016] 386 ITR 245 (Bombay) . . . . . . . . . . . . . . 15.9 Tiwari Kanhaiya Lal v CIT [1985] 154 ITR 109.. . . . . . . . . . . . . . . . . . . . . . . . . . . 17.18 Travancore Cements Ltd. v Asstt. CIT [2008] 305 ITR 170 (Ker). . . . . . . . . . . . . . 11.16 Umang Agrawal v Commissioner of Income-tax (Central Circle), Kanpur[2015] 59 taxmann.com 329 (Allahabad) . . . . . . . . . . . . . . . . . . . . . . . 19.12 Union of India v Gautam Khaitan Order dated 21.05.2019. . . . . . . . . . . . . . . . . . . 11.11 V. S. Kuttan Pillai v Ramakrishnan, 1980 SC 185, 192. . . . . . . . . . . . . . . . . . . . . . . . 4.9 V.B. Desai & R.B. Desai v Administrative Officer, Settlement Commission [2002] 125 Taxman 1097 (Kar.). . . . . . . . . . . . . . . . . . . . . . . . . . 20.19 Video Master v Joint Commissioner of Income Tax [2002] 83 ITD 102 (Mum). . . . 15.3 Vinay Chandra Chandulal Shah v State of Gujarat [1995] 213 ITR 307 (Guj.). . . . . 22.8 Vinod Goel v Union of India (2001) 252 ITR 29 (Punjab & Haryana). . . . . . . . . . . 7.13 Vipan Khanna v Asstt. CIT [2002] 122 Taxman 1.. . . . . . . . . . . . . . . . . . . . . . . . . . 11.16 Visa Comtrade Ltd. v UOI [2011] 338 ITR 343 (Ori.). . . . . . . . . . . . . . . . . . . . . . . . 8.17 Vishwanath Khanna v Union of India [2012] 20 taxmann.com 828 (Delhi). . . . . . 19.16 VLS Finance Ltd. v CIT [2016] 384 ITR 1 (SC). . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.17 Windson Electronics (P.) Ltd. v UOI [2004] 269 ITR 481 (Calcutta) . . . . . . . . . . . . 8.32 Y.V. Anjaneyulu v DCIT [2017] 58 ITR(T) 551 (Visakhapatnam - Trib.). . . . . . . . . . 9.5

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Why searches are conducted Synopsis 1.1 1.2 1.3

Introduction ...................................................................................................... 1.1 Wanchoo Committee Report ............................................................................ 1.1 Reports of the Tax Administration Reform Commission (TARC) .................. 1.8 1.3.1 Identification and expansion of tax base ............................................... 1.9 1.3.2 Challenges........................................................................................... 1.10

The activities of the tax evaders and their acquisition of black money are naturally shrouded in secrecy. The aim of investigation is to lift this veil of secrecy in order to unearth black money and discover the true state of affairs. Searches form a necessary and powerful adjunct to investigation as they bring assets and information to light, which would otherwise be beyond the reach of the revenue department through its normal channels of enquiry and examination of accounts.

We consider the power of search under the Income-tax Act as a potent instrument in the hands of the department to provide direct and clinching evidence about tax evasion and existence of black money. Searches not only lead to unearthing of black money in kind, but also to getting hold of hidden books of accounts that clearly show that what has been disclosed is only part of what has been earned, invested or accumulated1. It is very important to curb the menace of tax evasion in order to maintain confidence of the taxpayers in the country’s taxation system.

Treading towards equitable distribution of wealth, India follows a progressive system of taxation. Therefore, only an iota of population forms the eligible taxpayers.

However, when the people who ought to pay taxes escape their liability illegally it discourages other honest taxpayers. Further, tax evasion leads to generation of 1

The December, 1971 report of the Direct Taxes Enquiry Committee (known as the Wanchoo Committee)

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“black money” which can be used for various illegal activities like funding terrorist organization etc. Black money can also be generated through illegal means and therefore goes unaccounted. The meaning and origin of the term black money was succinctly explained by the December, 1971 report of the Direct Taxes Enquiry Committee (known as the Wanchoo Committee). It was explained as under: 2.1 'Black money' is an elusive term. It is as its name suggests, 'tainted' money. Money which is not clean or which has a stigma attached to it. Different persons have understood this expression differently and the term has not yet acquired a precise definition or connotation. However, black is a colour which is generally associated with evil. While it symbolises something which violates moral, social or legal norms, it also suggests a veil of secrecy shrouding it. The term 'black money' consequently has both these implications. It not only stands for money earned by violating legal provisions even social conscience but also suggests that such money is kept secret and not accounted for.

2.2 It was during the Second World War that the terms 'Black market' and 'Black money' came into vogue. Due to imposition of various controls on distribution and prices, a clandestine market had sprung up in which things were still available, but at prices higher than the controlled ones. The term 'black money' became current to describe the money received or paid in such 'black market' deals. Since disclosure of these deals, which were entered in violation of rules and regulations, would have invited severe penalties, these were naturally not entered in the regular books of account and, consequently remained concealed from the gaze of the tax authorities as well. Afterwards, though black market in the commonly understood sense of the term became rare with the lifting of several controls, transactions still continued to be carried on by the unscrupulous elements in trade and industry outside their books of account, as this practice helped the parties concerned to evade, or substantially reduce, the payment of taxes thereon. With the passage of time, 'black money' acquired a wider connotation-wider than its association with black market transactions alone.

2.3 Today, the term ‘black money’ is generally used to denote unaccounted money or concealed income and/or undisclosed wealth, as well as money involved in transactions wholly or partly suppressed. Some consider only that as black money which had its origin in clandestine transaction and is currently in circulation. There are others who assert that this is taking too narrow a view of black money. According to them, black money 1.2

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Why searches are conducted

denotes not only unaccounted currency which is either hoarded or is in circulation outside the disclosed trading channels but also its investment in gold, jewellery and precious stones made secretly and even investments in lands and buildings and business assets over and above the amounts shown in the books of account.

2.4 As mentioned above, tax evasion and black money are closely and inextricably inter-linked. While tax evasion leads to the creation of black money, the black money utilised secretively in business for earning more income inevitably leads to tax evasion. While all tax-evaded income represents black money in a broad sense, all black money does not necessarily originate in tax evasion. Black money is also made through surreptitious use of 'white money'. In this sense, the proliferation of black money derives an additional impetus from the inter-mixing of ‘black income’ and ‘white income'. This phenomenon arises essentially from the dual nature of the national economy. Thus, there is the “official” economy functioning on the basis of the official monetary system, involving open transactions financed through identifiable sources of funds, generating ascertainable income and wealth, and operating generally in conformity with government rules and regulations and the levy system. But there is another economy, a ‘parallel' economy, operating simultaneously and competing with the “official” economy. This parallel economy has ramifications which go beyond one's imagination. It derives its nourishment, strength and support from a secretive. defiant, and an unscrupulous element in our society; it is based not on the official monetary system, but on a secret understanding, and involves a complex range of undisclosed deals and transactions pushed through secretly with unaccounted sources of funds, generating, in the process, income and wealth which escape enumeration or cannot be easily ascertained.

2.5 Over the years, the parallel economy has grown in size and dimensions. Almost every sign of distress and human misery would appear to have been manipulated by anti-social elements to boost the parallel economy. Black money operations and tax evasion multiplied several fold in the wake of India's partition which resulted in an influx of refugees, untold sufferings and scarcity conditions. Strange as it may seem, planning, which gave a spur to nation building activities, was also taken advantage of by tax evaders and black money makers. For example, the population of sundry contractors, unauthorised 1.3

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suppliers and agents, and a host of racketeers has multiplied; and their sole occupation is to discover ever-increasing vistas of secret operations, striking secret deals, and obtaining cuts and commissions, and pushing through black money operations.

Almost every attempt by the Government to regulate production and distribution appears to be manipulated in some way or the other, by these elements, in their effort to extract illegal gains.

In this parallel economy, there is apparently no shortage of anything, no lack of facilities, and certainly no lack of 'money', provided the price is suitably 'black'.

2.6 With the surge of planned expenditures came large government orders, massive industrial outlays, defence programmes, construction and other investments, all creating a boom psychology-one which give a further thrust to illegal cuts, commissions and transactions and the generation of more black incomes. To mention one example, the cost of land and buildings went up resulting in new rackets; property dealings thus became a significant avenue of illegal deals, with ratios of 'white' and 'black' payments being freely mentioned. In Bombay, for example, during the period of our enquiry, the commonly quoted ratio was 60:40, that is to -say, that 40 per cent of the total amount for land or buildings had to be paid in 'black', and receipt might be issued only for 60 per cent of the payment. In some cases, the ratio may have been 50:50 or 40:60.

Consequently, a significant portion of the payment remained concealed at both ends and even wealth-tax dodged. In the worst days of inflation the artificial element of shortages has always been large; but as black money multiplied, the area of artificial shortages seems to have grown. Even otherwise, the distortions in the industrial economy, the periodic foreign exchange crisis and the rigorous import curbs have all provided a fertile field to anti-social elements to ensure that their parallel economy is kept flourishing. In an environment such as this, the smuggling of foreign goods, gold and gems, speculation in commodities and land and properties, and surreptitious money lending have by now become the main props of the black money economy.

2.7 Worse still, these illegal operations have induced a considerable amount of leakage of foreign exchange though under invoicing and over invoicing of foreign trade deals, and also through secret cuts and commissions on Joint ventures and collaboration agreements involving Indian and foreign parties.

Small wonder then that there is, in this black money economy, a 1.4

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Why searches are conducted

regular list of quotations covering items even where transferability is denied or restricted. These include industrial licences, import licences, allocations of materials, foreign exchange permits, etc. For example, import licences, particularly for certain raw materials and intermediates, are known to fetch high premiums in the illegal market, ranging from 300 to 500 per cent. The popularity of certain banks in Switzerland, Algeria, Kenya, Indonesia, Beirut and Hong Kong is a living proof of this phenomenon.

2.8 The problem of tax evasion is, however, not peculiar to our country. It exists the world over, as is evident from a study of the tax laws of the various countries and the administrative set-up for effective enforcement of such laws. The number of penalties imposed and persons prosecuted for tax frauds in some of the developed countries bears ample testimony to the existence of tax evasion in those countries. In our country, however, tax evasion and black money have now reached a stage which can only be described as a menace to the economy and a challenge to the fulfilment of the avowed objectives of distributive justice and setting up of an egalitarian society.

2.9 The effects of 'Black money' on the economy of the country cannot but be described as disastrous. As black money is largely generated by, or associated with, unaccounted deals, its first casualty is the revenue because it loses the tax which would have come to the Exchequer if such transactions had been done in the open and duly accounted for. Though the problem of black money has been faced by many countries in recent times, its consequences in a country like ours have a special significance in the context of our planned programme for economic progress within a democratic framework, Today, the country is seriously handicapped in its endeavour to march forward, when the resources needed for development are not adequately forthcoming for the reason that business is carried on in the 'black'.

2.10 Black money and tax evasion, which go hand in hand, have also the effect of seriously undermining the equity concept of taxation and warping its progressiveness. Together, they throw a greater burden on the honest taxpayer and lead to economic inequality and concentration of wealth in the hands of the unscrupulous few in the country. In addition, since black money is in a way 'cheap' money too, because it has not suffered reduction by way of taxation, there is a natural tendency among those who possess it to use it for lavish expenditure and 1.5

A Practical Guide to Search and Seizure under Income Tax Act

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conspicuous consumption. The existence of black money has, to a large extent, been responsible for the inflationary pressures, shortages, rise in prices and economically unhealthy speculation in commodities. Part of black money, which is not utilised in lavish consumption, goes into the purchase of bullion, precious stones and other valuable articles. This in turn, encourages large-scale smuggling of gold, etc., into the country, causing considerable strain on its already tight balance of payments position. Further, by keeping their ill-gotten gains outside the country as deposits in foreign banks or with their own associate concerns, whether earned in deals abroad or transferred out of India through clandestine channels, the tax evaders deprive the country of a part of its wealth which could have been put to productive use here. Besides, the leakage of foreign exchange makes our balance of payments rather distorted and unreal. There is also the oddity that a country, where capital and more particularly foreign exchange resources are scarce, becomes a de facto lender of aid and capital to economically advanced and wealthier nations, with the concealed outflow of funds.

2.11 Not infrequently, part of the black money is also hoarded within the country either in specie or in other forms after conversion, so that it may escape detection. This results in immobilisation of investible funds, which could have helped in the economic growth of the country and in fostering the welfare of the common man in turn. Moreover, as black money cannot be utilised openly, many are tempted to put it into production of certain non-essential goods in the hope that the risk of detection would be less there.

2.12 Black incomes and tax evasion defeat Government's economic policies and at the very least make the implementation of the policies ineffective; for example, in the field of credit and investment. Monetary policy involving severe restrictions or a curb on disbursement of credit comes straight in the face of a parallel economy functioning outside the purview of the authorities. When a dear money policy is pursued or the Government desires to impose selective control on disbursement of finance to certain sectors, the black money economy can frustrate this by opening up alternative sources of credit at 'free market' rates. This source of credit is available even to what the Government may consider as the non-priority sectors on whom the credit squeeze is to be applied. One of the reasons why the Government's management of credit and money in recent years 1.6

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Why searches are conducted

has been ineffective is the proliferation of black money and rampant tax evasion which provide a free access to surreptitious funds to those who desire them. The impact of this may be somewhat less when the curbs are officially relaxed. It is our view that black money and tax evasion are even otherwise encouraging over financing of business which is as dangerous as underfinancing. These trends add further to the inflationary pressures in the country. They can undo also some of the major investment targets and objectives of Government's planning.

Apart from the fact that this situation results in an underestimation of resources available in the 'country, thereby inhibiting investment planning, there is reason to believe that the operation of the black money economy has already upset the momentum of our development and distorted the pattern of saving and investment in India.

2.13 Black money and tax evasion have an adverse economic effect in yet another sense, in that they divert the energy of taxpayers and their advisers from productive activities to the non-productive object of manipulation of accounts, creating camouflage around their deals and devising all sorts of facades to escape their legitimate tax liability. In the process, they also compel the administration to spend a lot of its time and resources on tackling their devious ways of tax evasion-time and money which could have been put to more purposeful use.

2.14 One of the worst consequences of black money and tax evasion is, in our opinion, their pernicious effect on the general moral fibre of society. They put integrity at a discount and place a premium on vulgar and ostentatious display of wealth. Many of the newly rich, who enjoy material prosperity and social prestige, owe their existence really to anti-social activities. This shatters the faith of the common man in the dignity of honest labour and virtuous living. It is, therefore, no exaggeration to say that black money is like a cancerous growth in the country's economy which, if not checked in time, is sure to lead to its ruination.

The Ministry of Finance noted as under: Black money arising from illegal activities such as crime and corruption has an underlying anti-social element. The 'criminal' component of black money may include proceeds from a range of activities including racketeering, trafficking in counterfeit and contraband goods, smuggling, production and trade of narcotics, forgery, illegal mining, illegal felling of forests, illicit liquor trade,

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robbery, kidnapping, human trafficking, sexual exploitation and prostitution, cheating and financial fraud, embezzlement, drug money, bank frauds, and illegal trade in arms. Some of these offences are included in the schedule of the Prevention of Money Laundering Act 2002. The 'corrupt' component of such money could stem from bribery and theft by those holding public office - such as by grant of business, leakages from government social spending Significant amount of black money, however, is generated through legally permissible economic activities, which are not accounted for and disclosed or reported to the public authorities as per the law or regulations, thereby converting such income into black money. ‌Studies indicate that countries with relatively poor implementation of regulations tend to have a higher share of unaccounted economy, whereas countries with properly implemented regulations and sound deterrence have smaller 'black' economies.

Thus, the fight against generation and accumulation of black money is likely to be far more complex, requiring stronger intervention of the state, in developing countries like India than in developed countries. It needs a stronger legal framework, commensurate administrative measures, and a very strong resolve to fight the menace. It also calls for political consensus as well as patience and perseverance.2 Therefore, it can be clearly seen that identifying tax evasion is not just important for sustaining confidence of honest taxpayers but also for maintaining law and order.

Search, seizure and survey are one of the most efficient methods in the hands of the authority to enforce compliance with tax laws and save it from redundancy.

The Tax Administration Reform Commission (“TARC�), in its first report3, while discussing the relevance of search and seizure noted as under: The tax administration undertakes intensive investigation of suspicious or anomalous transactions and high risk cases. The information gathered on these high risk cases through various sources are intended to identify, detect and punish cases of tax evasion and other tax crimes.

Investigation of tax evasion through search and seizure or tax crime investigations is meant to effectively deter such crimes rather than tax

2 3

1.8

Initiatives Taken By The Government For Unearthing And Curbing Black Money : A Fact Sheet 10.08.2012 - Ministry of Finance : MANU/CBDT/0135/2012 First Report TARC

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Why searches are conducted

collection, which is any way done by regular scrutiny assessments. The primary focus of search and seizure is to unearth evidence that is otherwise not feasible to get. The other is to marshal evidence with a view to launch prosecution in very high risk cases to create effective deterrence against tax evasion or tax crimes.

The third report4 of TARC further stated: Search and seizure operations are mechanisms used in cases where credible information about tax evasion is in the possession of the tax department. Evidence gathered through such operations, which is not possible to gather otherwise, generally leads to unearthing of undisclosed transactions/incomes, which ultimately translates into deepening the tax base. Such evidence/information also leads to the identification of new tax payers and stop filers, resulting in widening the tax base. Further, the operations also help detect failure to deduct tax at source (TDS) by persons responsible for doing so, failure by deductors to pay the TDS to the government’s account and failure to furnish returns and statements by those who are statutorily obliged to do so. This leaves an audit trail, which can be leveraged to widen the tax base.

Hence, well-integrated information sources help in discovering potential taxpayers. Risk of identification itself would encourage massive compliance.

It is also useful to objectively analyze the importance of search and seizure in expanding the tax base. The frequency of the use of this enforcement measure is depicted below: Financial Year

Number of groups searched

Total assets seized (In INR Crore)

Undisclosed income admitted u/s. 132(4) of the Income-tax Act, 1961 [INR in Crore]

2013-14⁎

569

807.84

10791.63

⁎

545

761.70

10288.05

2015-16⁎

445

712.68

11066.24

2016-17⁑

1152

1469.62

N.A.

⁑

582

992.52

N.A.

2014-15

2017-18 ⁎

⁑

4

Press Information Bureau, Government of India, Ministry of Finance, Year End Review – 2016, CBDT, Dept. of Revenue, Ministry of Finance 8th January 2017 http://www.pib.nic.in/newsite/PrintRelease.aspx?relid=156208 Answer to QN No. 2838 in Lok Sabha on 28th December, 2018

3rd report TARC

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The income tax offices throughout the country continued their drive against tax evaders. During the F.Y. 2016-17 (up to 30.11.2016), searches were conducted in 366 groups resulting in seizures of assets worth INR 689.61 crore and admission of undisclosed income of INR 9,923 crore. During the same period, 4,587 surveys conducted resulted in detection of undisclosed income of INR 8,017 crore.

Prosecutions were filed in criminal courts in 323 cases (up to October 2016) and 404 prosecutions were compounded. During F.Y. 2015-16, 98.77 Lakh new taxpayers were added to the tax base.5 On 4th April 2016, the International Consortium of Investigative Journalists (ICIJ) released the Panama Paper leaks which unveiled the data of one of the world’s biggest law firms. The data however, did not reveal financial details and beneficial ownership. Under the aegis of the Multi Agency Group, constituted by the Government and headed by the Chairman of CBDT, thorough investigations were conducted. Recent press release6 revealed as under: In the 74 cases found actionable, invasive actions were taken in 62 cases with searches conducted in 50 cases, and surveys in 12 cases leading to detection of undisclosed foreign investments of about INR 1140 crore (approx).

Therefore, it is manifested that search, seizures and survey are some of the most indispensable measures to detect black money and tax evasion. The challenge is to strike a balance between public interest of tackling tax evasion and a person’s right to privacy.

Large-scale compliance is the very essence of imposing tax in the first place. If only a small portion of the eligible taxpayers pay tax and the rest go scot-free then payment of tax simply takes the colour of being unjustified, price for honesty.

Normally, people tend to evade taxes because of two primary factors: ●

the rate is excessively high; or

the cost of compliance is high. ● However, in the absence of strict enforcement, addressing any of the two causes is futile.

The TARC noted as under: Encouragement and assistance to taxpayers in complying with tax laws cannot be expected to automatically lead to higher tax collections, unless taxpayers perceive the risk of being caught and the penalty for non-compliance as being high. The aim of strengthening enforcement is

5 6

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https://dea.gov.in/sites/default/files/Annual%20Report-2016-17-E.pdf http://pib.nic.in/newsite/PrintRelease.aspx?relid=180102 21st June 2018, Press Release

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to heighten risk perception and demonstrate the tax administration's capacity to detect and punish evasion. The enforcement mechanism should take its own course by imposing penalty and interest and initiating prosecution as and when required.

When it comes to enforcement, identifying the violation is the foundational step.

Conducting searches is one of the means for the same. However, there are certain challenges faced by the income tax department when it comes to the system of search and seizure in India which are listed below: ●

There is a need for co-ordination with lawyers/tax-consultants during and post the search operations to enable the administration to approach the adjudicatory authorities with proper issues and valid evidence.

●

There is lack of communication and symbiotic relationship between the direct tax department and the indirect tax department. The efficiency would increase manifold if the investigation wing of direct tax department is well connected with other agencies.

●

In India, the “tax gap” approach is followed. Revenue projections generated at the time of the budget and as adjusted throughout the year are compared to the actual revenue collection. The difference in these two results is known as “tax gap”. In order to diminish this tax gap, rather than focusing on improving the tax administration system the officers assume the role of tax collectors instead of tax assessors. Senior tax officers often put pressure on their subordinates which is ultimately passed on to the taxpayers. As a result, honest taxpayers are harassed to somehow pay more or the refunds due to the taxpayers are delayed. As noticed by the TARC in its first report. Such practices lead to two consequences as quoted under: first, a dearth of meaningful tax policy or tax administration policy and, second, an inequitable pressure on the good taxpayer7

●

Search and survey, being invasive in nature should be, therefore, seldomly used. Tax administration needs to capitalize the benefits of the rapid development of technology to meet its objectives. Detailed and logical databases can be maintained and information needs to be exchanged effectively between both the tax departments as well as other institutions like banks, insurance companies and so on. In order to minimize the intrusive physical searches, digital software could be used to collate information gathered and accordingly, conduct searches only where they are categorically required. In this context, the TARC noted as under: An effective mechanism of collecting information from various sources, data matching, integration and use needs to be put in place.

Besides strengthening enforcement, data exchange fortifies the

7

First Report TARC

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exercise and success of searches, and sends out a strong signal to evaders that multiple departments are aware of their illegal practices. ‌There should be a common platform and single data base, integration of technology to enable systems to talk to each other, integration of all data bases to form a common warehouse and an intelligence tool for developing analytics. ‌Implementing automatic matching algorithms that are able to cope with massive amounts of data should be considered to tap various heterogeneous databases across administrations (tax authorities) and financial entities (banks, insurance companies) using an efficient taxpayer identification scheme. Industry associations can also be good sources of data that could be useful in putting together a comprehensive data set.

The TRAC discussed various challenges and lacunas in our tax administration system and gave following recommendations, specifically for search, survey and seizure, in its third report. The recommendations are as under: xiv) Survey, search and seizure qq) Surveys and technology based information and intelligence systems should be used to identify potential taxpayers. Action needs to be taken jointly by the direct and indirect tax administrations in an integrated and co-ordinated manner to get better results. Databases of different agencies like the Medical Council of India and AADHAAR should be used to locate nonfilers and stop filers. (Section XI.5.k) rr) Surveys should be based on growth trend in sectors and industries especially clusters of business units known for use of undocumented and cash transactions; expenditure and opulent life style etc. Tax administration should develop/use software to zero in on such behavioural indicators. (Section XI.5.k) ss) A combined survey effort with the states should also be considered with reference to the National Population Registry database available at the state level. (Section XI.5.k) tt) Search and seizure mechanisms should be used in a co-ordinated manner in limited cases. To achieve better results information should be shared in a structured and integrated manner as discussed in detail in Chapter IX of the TARC report. (Section XI.5.k) uu) Enforcement should be strengthened to heighten the perception of the risk of being caught and of penalty for non-compliance being high. (Section XI.5.k)

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vv) Anti-avoidance provisions should be incorporated in tax laws to be implemented with great care and sensitivity. (Section XI.5.k)8 The Department of Revenue9 have accepted these recommendations and most of them are already under the process of implementation.

8 9

Third report TRAC https://dor.gov.in/tax/accepted-recommendations-tarc 04/06/2017 - 18:00

Status

of

TARC

Recommendations

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