Breaking Myths - Warrant of Authorization

[Dinesh Inbavadivu]

Warrant of Authorization

[as stipulated under the Income Tax Act]

The genesis of Search lies in the growing menace of Black money in our economy which is popularly known as Parallel economy. One cannot deny the fact that there are rampant tax evasion practices prevalent in our society and the government has constitutional duties to prevent such practices for the larger good of the nation. Therefore, the object of Search is to unearth the hidden or undisclosed income of the property and bring it to assessment and to retain them for the purposes of proper realization of taxes or penalty.

Search & Seizure is an extensive topic which cannot be explained at an instance. The very initiation of Search has lots of confusions amongst layman & also some learned people who don’t know about the Income Tax Act. Also, there are common myths that strike one’s mind when they hear “Search” which needs to be broken. Taking all this into consideration, the author here attempts to give a brief, yet precise, tool to “Warrant of Authorization” which is the inception of any search operation.

Introduction:

Search and Seizure (Proceedings) under the Income Tax Act itself is a Self-contained code. Chapter XIII, Part C deals with Search & Seizure. Here, the author focuses on or rather tries to give ‘a birds eye view’ of the Search warrant analyzing the provisions of the Income Tax Act, also relying on some landmark Judgements.

We all grew up watching movies that lack logic (mostly) where a man turns out to be an Income Tax officer conducting search operation, showing the person being searched just an ID card to stop him from asking questions and further proceed with the search operation. Is that even possible? Do Dramatic Bollywood/kollywood / tollywood scenarios exist in real life? To give a better clarity about the Search Warrant, we ought to answer the following;

1. Who can issue a Warrant?
2. Who can be an authorized officer?
3. Against whom can a Warrant be issued?
4. On what basis, does they issue warrant?

Alright, here is an attempt to know what the Income Tax Act stipulates about Warrant of authorization/ Search Warrant.

Basically, the provisions relating to Search and Seizure were introduced for the first time in the year 1956 in the Income Tax Act, 1922. Prior to this, powers of Search and Seizure vested in income tax authorities in 1948 as per Taxation of Income Investigation Commission (Amendment) Act, 1948, which were struck down as Ultra Vires and violative of Article 14 of the Constitution of India by the Hon’ble Apex Court.

Suraj Mall Mohta & Co., Vs A.V. Visvanatha Sastri [1954 (5) TMI 1 - SUPREME COURT]

THANGALKUNJU MUSALIAR VERSUS AUTHORISED OFFICIAL AND INCOME-TAX OFFICER ON SPECIAL DUTY, TRIVANDRUM [1953 (9) TMI 30 - TRAVANCORE-COCHIN HIGH COURT]

SHREE MEENAKSHI MILLS LIMITED, MADURAI AND OTHERS VERSUS SRI AV VISVANATHA SASTRI AND OTHERS [1954 (10) TMI 5 - SUPREME COURT]

The provisions regarding the authorization of search are composite which needs to be looked into carefully; A portion of section 132 of the Income Tax Act is extracted here;  (Since the core discussion in this article is related only to “Warrant of authorization”)

132. (1) Where the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that-

(a)  any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or

(b)  any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or

(c)  any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property),

then,-

(A) the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or

(B) such Additional Director or Additional Commissioner or Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer,

A careful reading of the above, would lead us to answer the questions (supra);

1. Certain officers as empowered by the Board, may issue, search warrants against the person whom they exercise jurisdiction under Section 120 only if they have ‘REASON TO BELIEVE’. {also answers (d)}

Authority	Circumstances	Against whom	For which premises	Who can be authorized officer
PDG/DG/PD/D/ PCC/CC/PC/C	Has reason to believe	Who has jurisdiction over the person as per Sec 120	Irrespective of the jurisdiction of the premises	Addl D/ Addl C/ JD/ JC/ AD/ DD/ AC/ DC/ ITO
AD/AC/JD/JC	Has reason to believe that any delay may be prejudicial to the interest of revenue	Not having jurisdiction over the person as per Sec. 120	Premises within the jurisdiction	AD/DD/AC/DC/ ITO
-do-	Has reason to suspect in respect of any other place not mentioned in the warrant of authorization, may authorize, such officers	Not having jurisdiction over the person as per Sec. 120	-do-	-do-

2. The term authorized officers are not defined in the statute, they are officers who are authorized by the Board. Additional Director / Additional Commissioner / Joint Director/ Joint Commissioner / Assistant Director/ Assistant Commissioner/ Deputy Director/ Deputy Commissioner/ Income Tax officer are authorized by the Board to conduct search operations. The Search warrants are issued by the authorities as mentioned in the table (supra).

3. Sec.132 of the Income Tax Act prescribes the issuance of warrant against certain persons. Against the following persons, a Search Warrant shall be issued;

Clause (a) of Sec. 132	Any person who has been issued with a summons u/s.131(1) of the Act or a notice u/s.142(1) requiring him to furnish Books of Account or other documents, who has failed to produce or cause to be produced the documents as sought for;
Clause (b) of Sec. 132	Any person to whom the summons or notice will/might be issued, who wouldn’t produce or cause to produce the documents sought for which will be useful to or relevant to any proceedings under the Act;
Clause (c) of Sec.132	Any person who is in possession of money, bullion, jewellery or other valuable articles that represents wholly or partly the undisclosed income or property;

      Let us draw some scenarios to get a clear picture of the issuance of Search Warrant;

Against whom can a Search warrant be issued ?

A person in possession of the Asset or owner of the asset

1. If a Company’s cash is kept at the residence of one of its employees, then the Warrant can be issued in the name of the owner of the asset (i.e, Company) if the owner of the Asset is known to the Department and the “REASON TO BELIEVE’ has to be formed with respect to such person (i.e., the employee). But in case, actual owner is not known to the Department, Search Warrant can be issued to the person who is in possession of such asset. In case of Bank Locker, the name of the assessee is reflected in the warrant giving the address of the premises in which Bank locker is situated.

Against a Non-Resident Indian (NRI)?

2.  The Word “any person” includes even a Non-resident Indian and he/she would be amenable to search and Seizure. NRI can also have an income in India which wouldn’t have been disclosed.

RAM KUMAR DHANUKA. VERSUS UNION OF INDIA AND OTHERS [2001 (2) TMI 43 - RAJASTHAN HIGH COURT]

Legality of Search Warrant against a Deceased person

3. The search and the authorization is invalid and void ab initio, when search Warrant is issued in the name of a dead person.

COMMISSIONER OF INCOME-TAX, KARNAL VERSUS RAKESH KUMAR, AND MUKESH KUMAR, PANIPAT [2008 (7) TMI 110 - PUNJAB AND HARYANA HIGH COURT]

Legality of Search Warrant against Minor

4. A minor is usually not required to file his Return of Income. In case there is any information with the Department, they can issue warrant in the name of the legal guardian. Also, it is only such person (Legal guardian) who can be assessed u/s.153A of the Act.

Search Warrant in joint Name

5. There is no legal bar in issuance of a common authorization.

When the premises in jointly occupied?

6. There are instances when a premises be shared by many people or many companies might share a portion of the said premises, in this scenario, if the Warrant is against one company, practically the same warrant is used to search the entire premises. But, when it comes to seizure of documents or articles, a separate warrant is required (only in case of companies which share the same premises). In case of residential premises, reason to believe that the parties are connected will take it away, but the department would want a separate Warrant of authorization to seize materials, if assets of the tenants are to be seized.

Therefore, separate search warrants for each premises, place, vehicle or bank locker situated independently is mandatory.

5. How does a Warrant of Authorization look like?

(Please refer Income Tax rules – Rule 112)

Rule 112 of the Income Tax Rules, gives a picture of the Search Warrant.

Authorization by	Form
DG/D or CC/C or DD/DC	45
CC or C	45A
CC or C [as per 132(1A)]	45B

• Authorization shall be in writing with the signature of the officer issuing the authorization and shall bear his seal.
• A Warrant of authorization must specify the person in respect of whom it is issued.
• In case of Firm, the residential premises of a partner cannot be searched u/s.132(1) unless the warrant specifically has the name of the partner.
• There is a separate column in the Search warrant to enter the address of the search place, which needs to be filled.

What if the Search Warrant is BLANK?

• Rule 112 implies that the Commissioner should append his signature to the warrant only after it is completely filled up.

• The authority issuing warrant ought to write a satisfaction note and place it before the commissioner to get green light for the search. And the commissioner cannot append signature without the columns being filled, even in the case satisfaction was recorded and communicated but the warrant was not filled up. Reliance is placed in the case of HL. SIBAL VERSUS COMMISSIONER OF INCOME-TAX, PUNJAB AND OTHERS [1975 (7) TMI 67 - PUNJAB AND HARYANA HIGH COURT]

Whether source of information needs to be disclosed to the person being searched?

• Source of information need not be disclosed at the initial stage of issue of Search warrant.

• In the case of HARBHAJAN SINGH CHADHA AND OTHERS VERSUS DIRECTOR OF INCOME TAX AND OTHERS [2015 (4) TMI 14 - ALLAHABAD HIGH COURT] held that the disclosure of material or information to persons against whom action under section 132 is taken is not mandatory. Relevant portion of the judgement is extracted below;

Only where the petitioner furnishes adequate and cogent material in support of his denial of a valid information that the Court can justifiably call upon the department to disclose the information. The disclosure of the material or information to the persons against whom action under section 132 is taken is not mandatory because the very disclosure would affect or hamper the investigation. The person against whom the action is to be taken would be supplied all the relevant facts and materials on which further action is proposed after investigation is completed. The stage of disclosure consequently is given only when the authority resolves to make an appropriate order to impose tax liability or penalty, etc., and, at that stage, relevant material would be disclosed. [Para 14]

Whether Search warrant is required to be served?

• Rule 112(3) of the Income Tax Rules clearly stipulates that the Warrant of authorization is not required to be served to the person being searched. It is enough that the person being searched is produced with the Warrant and obtain his/her signature.

• The Law requires production of Warrant before the commencement of search proceedings.

• Clarification is also brought by the Board’s circular Letter F.No.15/156/65-IT(Inv) dated 13.08.1965, that it is not necessary to serve on the person whose premises are searched, a copy of Warrant of authorization.

• Various High Courts have also held the same;

SUBIR ROY AND ANOTHER VERSUS SK. CHATTOPADHYAY AND OTHERS [1984 (11) TMI 31 - CALCUTTA HIGH COURT]

SOUTHERN HERBALS LIMITED VERSUS DIRECTOR OF INCOME-TAX (INVESTIGATION) AND OTHERS [1993 (12) TMI 51 - KARNATAKA HIGH COURT]

GENOM BIOTECH PRIVATE LIMITED VERSUS DIRECTOR OF INCOME TAX [2009 (5) TMI 8 - BOMBAY HIGH COURT]

Whether Satisfaction Note is required to be served?

• Satisfaction Note is confidential and is an inter departmental process to obtain a search warrant. Upon which the reason to believe is drawn upon against an assessee.  This cannot be subject to production.

In my opinion, there may be a rationale in not showing or supplying copy of the satisfaction note prepared by the competent authority to the person searched since the information is collected from the confidential sources and disclosure of the identity of the informers may create a lot of trouble. But, a copy of authorization needs to be served on the person being searched, since the authorization wouldn’t contain any confidential details as to the information or subject matter of search or the informer, as such.

Therefore, the assessee has the right to obtain copy of the authorization.

Can I obtain Satisfaction note vide RTI application?

The answer is a BIG NO. After the enactment of Right to information Act, 2005, we all thought we could get anything vide this application. It is right that the RTI Act, 2005 has been enacted by the Parliament so as to give right to the citizens of the country to obtain functioning from any of the government authorities regarding their functioning and the actions taken by them in any field.

One needs to understand, that there is no specific mention in the RTI Act regarding the supply or otherwise of the search warrant and the satisfaction note to the person searched under the Income Tax Act.

More specifically, Section 8(g) & (h) of the RTI Act, 2005 provides that there shall be no obligation to give any citizen any information, the disclosure of which would endanger the life or physical safety of any person or identify the source of information or assistance given in confidence which would impede the process of investigation or apprehension or prosecution of the offenders.

In the case of MD OVERSEAS LTD. VERSUS DIRECTOR GENERAL OF INCOME-TAX [2011 (2) TMI 360 - ALLAHABAD HIGH COURT] it was held that as to the information regarding search, Right to Information Act, is not applicable.

To sum up –

1. Yes, the authorized officers shall enter into your residential / business premises any time, provided they have a proper / valid warrant of authorization from the higher authorities. Signature of the Commissioner is mandatory and also the Warrant needs to be filled completely.

No officer can enter into one’s premises just by showing the Asseseee an ID card (without any warrant of authorization). Therefore, DRAMATIC BollyWOOD/ KollyWOOD/ Tollywood SCENARIOS doesn’t exist in REAL LIFE.

2. Yes, during a search operation, the authorized officer can seek help of a police officer or any other government officer to help them conduct search.

3. Issue of Blank Warrant is ILLEGAL.

4. Assessees should be careful to verify this aspect before the search proceeding begins.

This is just an attempt to give some inputs/information about “Warrant of authorization” which all of us ought to know.