IT Search & Seizure FAQs — Section 132, 153A Rights & Procedure

These questions are drawn from real GST compliance scenarios, litigation, and common queries from practitioners. Answers reflect the law as amended up to Finance Act 2024.

• 1 What are the conditions for authorising a search under Section 132?

  A warrant of authorisation under Section 132(1) can be issued when the Director or Commissioner has 'reason to believe' based on specific information that: (a) a person to whom a summons has been issued under Section 131(1) has not produced, or will not produce, the required books/documents; (b) a person is in possession of money, bullion, jewellery, or other valuables representing income not disclosed; or (c) a person is in possession of books of account that he would not produce if summoned. The belief must be based on credible, specific information — not mere suspicion or fishing expedition.

• 2 What are the rights of a taxpayer during a search under Section 132?

  Taxpayers have the following rights during an IT search: (1) Right to verify the search warrant and the identity of the officers; (2) Right to have a witness present (though officers need not wait indefinitely); (3) Right to have copies of panchnama and documents seized; (4) Right to examine the seized documents; (5) Right to make statements voluntarily — but statements made under coercion are inadmissible; (6) Right to not be searched personally by an officer of the opposite gender; (7) Right to file a writ petition challenging the search if there is clear illegality or lack of jurisdiction.

• 3 For how many years can the tax department assess income after a search?

  Under Section 153A, the AO can issue notices and assess the searched person for up to 6 assessment years immediately preceding the year of search. If undisclosed income (evidenced by books/documents found in search) exceeds ₹50 lakh, the block period extends to 10 AYs. For the year of search (relevant AY), assessment is made normally under Section 143. For third parties (Section 153C), the 6-year block runs from the year in which the assets/documents were handed over to the AO of that person.

• 4 What happens to jewellery found during an income tax search?

  CBDT Instruction No. 1916 provides relief: jewellery up to 500g for a married woman, 250g for an unmarried woman, and 100g for a male member of the family need not be seized if the assessee claims it is from declared sources (agricultural income, gifts, stridhan, etc.). Beyond these limits, the officer may seize jewellery if it cannot be satisfactorily explained. Seized jewellery is released under Section 132B after payment of assessed tax. Unexplained jewellery is taxed under Section 69A.

• 5 Can a Section 153A assessment be quashed if no incriminating material is found?

  Yes. The Supreme Court in Principal CIT v. Abhisar Buildwell Pvt. Ltd. (2023) held that for an AY where the original assessment was completed (not pending on the date of search), Section 153A assessment can only be made if incriminating material pertaining to that AY was found during the search. Absence of incriminating material for a specific AY means no addition can be made for that AY under 153A — the completed assessment cannot be disturbed.

• 6 What is the distinction between Section 153A and Section 153C assessments?

  Section 153A applies to the person who was actually searched under Section 132. Section 153C applies to a third party (other than the searched person) whose books of account, documents, or assets are found during the search of another person. For 153C to apply, the AO of the searched person must be 'satisfied' that the found material belongs to or relates to the third party, and must hand the material to the AO of that third party. The third party then receives notice under 153C and is assessed for up to 6 (or 10) AYs.

• 7 What is the time limit for completing an assessment under Section 153A?

  Under Section 153A read with Section 153B, the time limit to complete a search assessment is 24 months from the end of the financial year in which the last of the authorisations for search was executed. For pending assessments (in case search is conducted before an assessment is completed), the time limit under Section 153A assessment is calculated from the relevant AY.

• 8 Can a writ petition be filed against an income tax search?

  Yes, but courts are generally reluctant to interfere with searches at the initial stage. A writ is maintainable where: (1) the search warrant is issued by a non-competent authority; (2) the warrant does not specify the person or premises searched; (3) the search is clearly a fishing expedition with no specific information; or (4) there is a fundamental procedural irregularity. The Supreme Court in ITO v. Seth Brothers (1969) and in Pooran Mal v. Director of Inspection (1974) upheld the constitutional validity of search powers while confirming judicial review for procedural infirmities.

• 9 What disclosures can a taxpayer make during the search to minimise penalties?

  Voluntary disclosure of undisclosed income during the search can reduce the penalty from 60% to 30% under Section 271AAB, provided: (1) the taxpayer admits the undisclosed income in the statement recorded during search; (2) specifies the manner of earning such income; (3) pays the tax and interest on the disclosed income on or before the due date of ITR filing; and (4) files the return declaring the undisclosed income. Post-search voluntary disclosure does not qualify for the 30% rate if admission is not made during the search.