Income Tax Raid is a scary word for most of the people. To know What is Income Tax Raiding? How to prevent it? and What is the procedure for IT raid? read the complete post.
What is Income Tax Raid?
It is a search operation done by the Income Tax officers if we try to hide our income on which tax is applicable or if we don’t pay tax honestly. In this search operation, they can search residential & business premises, bank lockers, and vehicles for unaccounted money.
The taxpayer needs to follow Indian IT rules regarding paying tax on his/her income. Breaking those rules may lead to Income Tax Raid. In such raid, if IT officer finds any unauthorized transactions, he can seize the stocks, account books, and valuables.
Income Tax Surveys are of three types, they are
- Normal Survey: Under Section 133 B.
- Expenses occurred on Marriage and/or Parties: Under Section 133 A (5).
- Special Survey: Under Section 133 A (1).
Income Tax Raid Procedure
Indian income tax procedure is mainly based on Self Assessment System. Search operations are carried out by a team from investigation wing. It takes place between sunrise and sunset. The search team usually cover all the business premises of the taxpayer (in India) and the residential premises of the key persons of the assessee like the directors of the company, partners of the assessee firm, etc. This raid can extend upto 2 to 3 days. It may also cover residential premises of friends, close relatives, business associates, etc. of the assessee.
The team usually checks stock, cash, Jewellery, books of accounts, other assets, loose papers. Apart from the checking of records the Income Tax search team records statements of management, personnel, and at times, they may question any person present at the searched premises, which may include even customers, visitors, and guests. Investigation team does not allow the use of telephones & mobiles during raids.
In brief, during the search operation, IT Officer possesses the following powers but he cannot arrest anybody:
- The IT officers can enter any place, building, or check vehicle owned by the person.
- They can even search the people coming to these areas.
- They can break the locks of a locker and almirahs for the search operation.
- They can check and seize the account and other related documents.
- They can seize gold or silver, cash, jewellery above the limit.
Taxpayers/Assessee rights during Income Tax Raids
- He can check the ID cards and notice of officers engaged in the search operation.
- He can keep 2 local persons as witnesses.
- He can check the IT officers before & after the search operation.
- Taxpayer himself can remain present during the search operations.
- He can call Doctor if necessary.
- During the search operation, he can appoint CA/Lawyer, tax consultant to present his case.
- He can do his regular work such as taking food, Pooja, or others.
- To check his female relatives, he can ask for lady officials.
- He can send his children to school (if needed after checking their schoolbags).
- He can check the statements written by the Income Tax (IT) Officers.
- He can move outside the premises with the due permission of the Competent Officer.
- He can sign on the paper seal put on the seized goods and recheck his signature at the time of breaking the seal in court or other places.
- He can oppose for the seizure of goods, which are declared in IT Return.
- He can take true copies of Statement, Panchanama, & other related documents.
- Under section 132(5) after the search operation, he can ask the competent officers to seize goods worth due income tax and take back other seized goods.
Duties of the Taxpayer
- He should not restrict the Income Tax Officers who came for checking his premises.
- He should introduce the persons present in his residence and also their relation with him.
- He should hand over the keys of almirahs and lockers to IT officials for peaceful operation.
- After careful reading, he should sign the recorded statements & Panchanama.
- As per his knowledge, he should give the statement to the officials.
- Without intimating the officials, he should not remove anything from the premises.
- He should not ‘give any unwanted evidence’ and/or ‘give any false statement’.
How to Prevent Income Tax raid?
To prevent IT raid,
- One should file the Income Tax return honestly.
- Avoid high-value transaction because IT department receives information about a high-value transaction from bank & financial institution. The transactions that are considered as high-value transactions are as follows.
- Property purchases of above 30 lakhs.
- Above Rs. 10 Lakh Car or Consumer durables purchase.
- Deposits above Rs. 10 lakhs in a saving account.
- Purchase of stock above Rs. 1 lakh.
- Above Rs. 2 lakh Credit card expense.
- Mutual fund investments above Rs. 2 lakhs.
- Share purchase of a single company above Rs 1 lakh.
- Rs. 2 lakh or above Jewelry purchase.
- Don’t sell the property for a lesser amount than Government Valuation.
- Don’t introduce fresh capital over Rs. 10 lakhs.
- If the department has given notice or summons, one should comply with notices or summons to prevent an Income tax raid.
- Preserve documentary evidence and other important receipts for any high-value transaction with detail about the source of income.
- Get updated about IT rules & statutory provisions of the IT Law.