Taxmann's Law Relating to Search & Seizure with Block Assessment

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Compliance of statutory conditions as contemplated under section 247 of the Income-tax Act, 2025 (corresponding to section 132 of the Income-tax Act, 1961) are mandatory

Provisions of section 247(1) of the Income-tax Act, 2025 (corresponding to section 132(1) of the Income-tax Act, 1961) should be strictly construed

2.6 SECTION 247(1)(a)(i) OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO CLAUSE (a) OF SUB-SECTION (1) OF SECTION 132 OF THE

ACT, 1961)

2.7 SECTION 247(1)(a)(ii) OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO CLAUSE (b) OF SECTION 132(1) OF THE INCOME-TAX ACT, 1961)

of

AUTHORIZATION OF SEARCH

Controversy regarding search authorized by Additional/ Joint Director, Additional/Joint Commissioner

Misinterpretation of section 247(1)(a)(II) of the Incometax Act, 2025 (corresponding to clause (b) to section 132(1) of the Income-tax Act, 1961) used for issue of subsequent

Grounds for challenging validity

Observance of safeguards in-built in the provisions of section 247 of the Income-tax Act, 2025 (corresponding to section 132 of the Income-tax Act, 1961) and rules is essential for exercise of powers

Mere allegation of existence of no material - Not a valid

Challenging assumption of jurisdiction u/s 153A of the 1961 Act

Different circumstantial indicators which may point that search was not in accordance with law thus prompting a challenge

search action in

restraint under section 247(4)(b)(i) & (iii) of the Income-tax Act, 2025 (corresponding to section 132(3) of the

Act, 1961)

Jurisdiction of High Court - Cause of action arose wholly or partly

Interest Litigation for not conducting search against influential persons not entertained

ACTUAL CONDUCT OF SEARCH OPERATIONS

5.1 TEXT OF SECTION 247(1)(i) TO (vii) OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO CLAUSES (i) TO (v) OF SECTION 132(1) OF THE INCOME-TAX ACT, 1961)

Seized articles to be kept in sealed packages bearing identification

convey the seized books of account or assets to the cus-

be followed by the custodian

Assessing Officer is empowered to exercise the power of sub-rules (19) & (21) of rule 148 of the Income-tax Rules, 2026 (corresponding to sub-rules (11) and (13) of rule 112 of the Income-tax Rules, 1962)

u/s 247(4) of the Income-tax Act, 2025 (corresponding to section 132(3) of the

the

Issue of summons to assessee u/s 246 of the Income-tax Act, 2025 (corresponding to section 131 of the Income-tax Act, 1961)

Filing objection for transfer of cases u/s 243 of the Incometax Act, 2025 (corresponding to section 127 of the Incometax Act, 1961)

of undisclosed income after introduction of provision of section 195 of the Income-tax Act, 2025 (corresponding to section 115BBE of the Income-tax Act, 1961) and penalty provision under section 271AAB of the

regular books of account and records

of the

In case of search or survey at the premises of the Counsel/ Chartered Accountant, whether files/documents of other clients can be seized?

Seizure of asset acquired prior to 7 assessment years preceding to the year of search - Whether valid?

Deemed seizure not applicable to Bank Lockers, FDRs, Deposits etc.

Deemed seizure v. Restraint u/s 247(4)(b)(i) & (iii) of the Income-tax Act, 2025 (corresponding to section 132(3) of the Income-tax Act, 1961)

6.7

Placing of mark of identification on books of account and other documents

Whether taking over keys amounts to seizure

RESTRAINT ORDER - SECTION 247(4)(b)(i) & (iii), 247(4)(b)(ii) OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO SECTION 132(3) & (8A) OF THE INCOME-TAX ACT, 1961)

7.4 WHEN CAN RESTRAINT ORDER UNDER SECTION 247(4) OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO SECTION 132(3) OF THE INCOME-TAX ACT, 1961) BE PASSED?

Restraint order only for books of account, other documents or assets

order not to be used as a tool for temporary sus-

Power under section 247(4) of the Income-tax Act, 2025 (corresponding to section 132(3) of the Income-tax Act, 1961) not to be used to keep the search operation pending

7.5 MANNER OF PASSING ORDER UNDER SECTION 247(4) OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO SECTION 132(3) OF THE INCOME-TAX ACT, 1961)

Powers to the authorized officer to record statement under section 246(2) of the Income-tax Act, 2025 (corresponding to section 131(1A) of the Income-tax Act, 1961) in the course

Recording of statement u/s 247(6) of the Income-tax Act, 2025 (corresponding to section 132(4) of the Income-tax Act, 1961) - Before the

Issuing of summon under section 246(2) of the Income-tax Act, 2025 (corresponding to section 131(1A) of the Incometax Act, 1961) before conclusion of

in the nature of amendment/modification of earlier statement given u/s 247(6) of the Income-tax Act, 2025 (corresponding to section 132(4) of the Income-tax Act,

Text of section 246 of the Income-tax Act, 2025 (corresponding to section 131 of the Income-tax Act, 1961)

Applicability of section 246 of the Income-tax Act, 2025 (corresponding to sub-section (1) of section 131 of the Income-tax, 1961

No power to the authorized officer in the course of search to issue summons under sub-section (1)

Salient features of section 246(2)(b)&(c) of the Income-tax Act, 2025 (corresponding to sub-section (1A) of section 131 of the Income-tax Act, 1961)

Validity of Summons issued by ADI/Authorized Officer under sub-section (1) of section 131 of the 1961 Act

Whether summon under section 246(2)(b) & (c) of the Income-tax Act, 2025 (corresponding to section 131(1A) of the Income-tax Act, 1961) can be issued to the person searched

Invoking power under section 246(2)(b)&(c) of the Income-tax Act, 2025 (corresponding to section 131(1A) of the Income-tax Act, 1961) before taking action under section 247(1)(i) to (vi) of the Income-tax Act, 2025 (corresponding to clauses (i) to (v) of section 132(1) of the Income-tax Act, 1961) by the Authorized Officer - Meaning thereof

348

348

349

Whether summon under section 246(2)(b)&(c) of the Income-tax Act, 2025 (corresponding to section 131(1A) of the Income-tax Act, 1961) can be issued to the persons other than the person searched 350

Consequences of non-compliance of summon issued under section 246 of the Income-tax Act, 2025 (corresponding to section 131 of the Income-tax Act, 1961) to the person searched

In case of non-compliance of summon, power of the income tax authorities to enforce attendance through arrest warrant

351

351 8.15 INTRODUCTION OF NEW SECTION 133C BY FINANCE (NO. 2) ACT, 2014 AND AS MODIFIED BY THE FINANCE ACT, 2016 AND THE FINANCE ACT, 2017 GRANTING POWER TO CALL FOR INFORMATION BY PRESCRIBED INCOME

PRESUMPTION UNDER SECTIONS 247(7) & 524 OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO SECTIONS 132(4A) & 292C OF THE INCOME-TAX ACT, 1961)

9.1 TEXT OF SECTION 247(7) OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO SECTION 132(4A) OF THE INCOME-TAX ACT, 1961)

Rationale for introduction of new section 292C of the

Presumption u/s 524 of the Income-tax Act, 2025 (corresponding to section 292C of the Income-tax Act, 1961) available not only in regular assessment proceeding but also in any other proceeding under the Act

Whether presumption under section 524 of the Income-tax Act, 2025 (corresponding to section 292C of the Income-tax Act, 1961) is available while framing assessment under section 280 of the Income-tax Act, 2025 (corresponding to section 148 of the Income-tax Act, 1961) 368

Presumption under section 247(7) of the Income-tax Act, 2025 (corresponding to section 132(4A) of the Income-tax Act, 1961) v. section 102 of the Income-tax Act, 2025 (corresponding to section 68 of the Income-tax Act, 1961)

Presumption under section 132(4A) of the 1961 Act v. section 103 of the Income-tax Act, 2025 (corresponding to section 69 of the Income-tax Act, 1961)

368

369

9.8 ONUS TO ESTABLISH INCOME OF THE ASSESSEE REMAINS

What in case of dumb document

Applicable to “Any” books of account ........... and not to “Such” books of account ............

Presumption as to the signature and handwriting not against the assessee

251, 247(8), 247(9), 250 & 261(a), 261(f) OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO SECTIONS 132(8)/132(10)/132(9)/132(9A) TO (9D) & 132B OF THE INCOME-TAX ACT, 1961)

PART 1

MISCELLANEOUS PROVISIONS RELATING TO SEARCH

10.1 TEXT OF SECTION 251(3) AND 251(5) OF THE 2025 ACT (CORRESPONDING TO SECTION 132(8) & 132(10) OF THE

Retention and release of books of account or other documents covered under section 132(8) while retention and release of assets covered under section 132B of the 1961 Act

Rationale behind amendment of sub-section (8) of section 132 of the 1961 Act

No approval of Commissioner required for retention of books of account or other documents till completion of assessment

Retention of books of account or other documents after completion of assessment - Extension of period

for extension to be granted before the expiry of

No opportunity of hearing required to be granted to the assessee before granting approval for extension

Release of books of account or other documents illegally

Release of books of account or documents illegally seizedCan the Department compel the attestation of the documents by the assessee?

Mandatory for Assessing Officer to adjust seized amount against demand under section 266 of the Income-tax Act, 2025 (corresponding to section 140A of the Income-tax Act, 1961)

No Civil Suit for non-payment of interest under section 250(8) & (9) of the Income-tax Act, 2025 (corresponding to section 132B(4) of the Income-tax Act,

Interest under section 250(7) to (9) of the Income-tax Act, 2025 (corresponding to section 132B(3) & 132(4) of the Income-tax Act, 1961) read with section 244 of

Whether seized cash can be treated as advance tax paid by the

Cash seized in case of income-tax search not to be treated as advance tax paid but can be claimed as self-assessment

or waiver of penal interest for late filing of return of income, etc.

UNDER SECTIONS 248, 249 & 261(a) OF

ACT, 2025 (CORRESPONDING TO SECTION 132A OF THE INCOME-TAX ACT, 1961)

TEXT OF SECTIONS 248, 249 & 261(a) OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO SECTION 132A OF THE

Supreme Court decision in the case of

Rationale of provision of section 248 of the Income-tax Act, 2025 (corresponding to section 132A of the Income-tax Act, 1961)

NATURE OF PROVISION OF SECTION 248 OF THE INCOMETAX ACT, 2025 (CORRESPONDING TO SECTION 132A OF THE INCOME-TAX ACT, 1961)

Applicability of section 247(7) to 247(11) of the 2025 Act (corresponding to section 132(4A) to (14) of the Income-tax Act,

Comparison and substitution of various situations under section 132A of the 1961 Act with section 132 of the 1961 Act

Who can issue authorization for requisition under section 132A of the 1961 Act?

Who can be requisitioning officer?

To form “reason to believe” in consequence of information in possession

Opportunity to the person before taking delivery of material from the possession of other Government Authority/Officer

There may be huge time gap between requisition made and actual delivery of

Recording of statement under section 246(2)(b) & (c) of the Income-tax Act, 2025 (corresponding to section 131(1A) of the Income-tax Act,

Benefit of making declaration of undisclosed income under section 132(4) of the 1961 Act and also Deeming fiction of “undisclosed income” under section 271AAA of the 1961 Act not applicable in case of requisition u/s 132A 478

Penalty in case of revision of return consequent upon requisition under section 248 of the Income-tax Act, 2025 (corresponding to section 132A of the Income-tax Act, 1961)

Assessment in accordance with provisions of section 153A of the 1961 Act

In case of requisition, which six years to be covered

Delay in receiving requisitioned material - Assessment for the year of requisition

Time limit for completion of assessment under section 153A of the 1961 Act in case of requisition under section 132A of the 1961 Act

Nature of assessment proceeding in case of requisition under section 132A of the 1961 Act

Applicability of provision of section 292C of the 1961 Act regarding presumption

of requisitioned

Provision of section 153C of the 1961 Act may also be applicable for requisitioned assets

Whether provision of section 153A of the 1961 Act would be applicable when requisition is made but actual delivery of seized material is not handed over to the requisitioning officer

Validity of action under section 248 of the Income-tax Act, 2025 (corresponding to section 132A of the Income-tax Act, 1961) - Whether can be examined by ITAT

New Block Assessment Scheme applicable in case of search initiated on or after the applicability of Income-tax Act, 2025 i.e. 1.4.2026

507

New Block Assessment Scheme is different from Old block assessment scheme applicable to search initiated between 1.7.1995 to 31.5.2003 507

Assessing Officer to assess or reassess Undisclosed income of the block period 508

Non Obstante clause u/s 292 of 2025 Act for assessment of Total Undisclosed income as a result of search 508

The period covered within the year of search may include in certain situation two tax years consisting of one complete tax year and part of the subsequent tax year 509

Determination of date of execution of the last of the Authorizations 510

There may be different date of conclusion of search for different entities within the group, thus resulting in different block periods 510

Rationale for extending ‘block period’ till conclusion of search

Any type of addition to income made by AO liable to be covered within the ambit of ‘Undisclosed Income’ 511

In case of search, all additions and disallowances made in the assessment of the Block Period are liable to be taxed @ 60% irrespective of the year or entity to which it belongs 512

Not restricted to be arising from the evidence found as a result of search 513

Even income relating to abated assessment or reassessment proceedings may be covered within the ambit of ‘undisclosed income’ 513

Any expense, exemption, deduction or allowance claimed under this Act which is found to be ‘incorrect’ instead of “false”an expression used in the earlier definition of ‘Undisclosed income’- the scope has been widened by the legislature by using the term “incorrect” under the new scheme 514

‘Undisclosed income’ may be for the part of the year of search or for earlier tax years as well 514

Whether ‘incorrect’ claim of any expense, exemption, deduction or allowance may be part of normal income? 515

Whether there can be any addition to income in the assessment order for the Block period which is not covered within the ambit of ‘Undisclosed income’? 515

Whether mere change of head of income in the assessment order may be in the nature of ‘Undisclosed Income’? 516

Whether income on which taxes stood paid but return of income not filed can be said to be in the nature of ‘Undisclosed Income’? 516

Whether income declared in the belated return but after the initiation of search may be treated as ‘Undisclosed Income’? 517

12.8 TOTAL UNDISCLOSED INCOME FOR ASSESSMENT OF BLOCK PERIOD

A.O. to assess or re-assess ‘total undisclosed income’ of the block period 517

‘Total Undisclosed income’ as mentioned u/s 293(1)(2)(3) of 2025 Act (corresponding to section 158BB(1) of 1961 Act) 518

Issue of notice to the searched person to furnish return of income of block period 521

Declaration of undisclosed income in the return relating to any of the tax years falling in the Block period 521

Time limit for filing the return of undisclosed income of block period 522

Assessee to declare his undisclosed income for the block period 522

Delayed return filed u/s 294(1)(a) of 2025 Act shall not be deemed to be a return u/s 263 of 2025 Act and, further block period return cannot be revised 523

What may be the consequences if return for the Block Period is filed late? 523

Whether revised return can be filed for earlier tax year if time permits? 523

Whether updated return can be filed for earlier tax year(s) if time permits as per provisions of section 263(6) of 2025 Act? 524

In case seized documents & Statements recorded are not supplied, how return for the Block Period can be filed in the given time? 524

No notice u/s 280 of 2025 Act (corresponding to section 148 of 1961 Act) is required to be issued for the purpose of proceeding under this Chapter

Separate Return for the year of search to be filed as per normal provisions of the Act

Undisclosed income for part of the search year having transactions as referred in section 166 of 2025 Act (corresponding to section 92CA of 1961 Act) is not to be covered in the block period return of income

Return of income u/s 263 for complete tax year included in the period of search relating to normal income to be filed separately

524

525

525

525

Prior approval of higher authority to be taken before issuance of notice for filing block period return 526

A.O. to determine total undisclosed income of the block period 526

Computation of tax as per assessment order passed relating to undisclosed income 526

Undisclosed income of the part of the search year to be assessed in the assessment of the Block period 527

In case search is initiated in one tax year but concluded in subsequent tax year, whether normal income relating to complete tax year is to be assessed in Block Period? 527

Undisclosed income for the part of search year relating to cases falling under section 166 not to be assessed in assessment for the Block Period 528

Block period assessment not to be as per faceless scheme of assessment

529

Approaching Dispute Resolution Panel as provided under section 275 of 2025 Act (corresponding to section 144C of 1961 Act) is not available in the case of Assessment or Reassessment for the Block Period 529

Provisions of section 270(1) of 2025 Act (corresponding to section 143(1) of 1961 Act) not to apply to the Return furnished for Block period

Authority empowered to pass assessment order for the Block period?

Prior approval of higher authority to be taken before passing assessment order under this Chapter

529

529

530

Whether block period assessment or reassessment would result in de novo assessment for the tax years covered within the Block Period? 530

OR

Determination of Undisclosed

Rate of tax as per section 192 of 2025 Act 532

No surcharge prescribed 532

Undisclosed income relating to abated tax years though discovered by AO in the pending assessment, but declared by the assessee in the Block Period return liable to be taxed @ 60% without any interest and penalty

533

Flat rate of tax @ 60% applicable to all kinds of income of all persons/entities for any tax year included in the Block Period 533

No interest u/ss 423, 424, 425 of 2025 Act (corresponding to section 234A, 234B or 234C of 1961 Act) to be charged 533

Interest u/s 298 of 2025 Act (corresponding to section 158BFA of 1961 Act) to be charged in case delayed filing of block period return 534

Interest for late filing of return for the Block period to be charged up to which period in case taxes are paid & undisclosed income is declared in such delayed return 534

Cash seized to be adjusted against the tax on undisclosed income of the Block Period 534

In the case of search, pending assessment or reassessment proceedings as on the date of initiation of search relating to the block period to abate 535

Proceedings u/s 166 of 2025 Act (corresponding to section 92CA of 1961 Act), if pending shall also abate 536

Whether Pending proceedings under section 153A/153C of 1961 Act also to abate? 536

Pending assessment or reassessment proceedings not covered in block period not to abate 536

Pending search assessments proceedings under this Chapter, if any, not to abate 536

Revival of abated assessment proceedings

No set-off of Loss against undisclosed income of the Block Period

537

Whether set-off of unabsorbed depreciation to be allowed against the undisclosed income of the Block Period? 538

Whether set-off of unabsorbed losses and unabsorbed depreciation against the normal income assessed for the tax year in which Block Period ends 538

Whether assessee can claim set-off of unabsorbed losses or unabsorbed depreciation in the return of normal income to be filed after the initiation of the search relating to tax year falling in the Block Period including the year in which Block Period ends 539

No penalty on ‘undisclosed income’ if declared in the block period return

Penalty @ 50% of tax on undisclosed income assessed for the block period

No penalty u/s 439 of 2025 Act and u/s 270A or u/s 271AAB of 1961 Act 541

No penalty u/ss 298(2), 444(1), 450, 451, 453 of 2025 Act (corresponding to sections 158BFA(2), 271AAD(1) or section 271D or section 271DA or section 271E of 1961 Act) with respect to income declared in the block period return & due taxes etc. paid 541

Any other penalty under any other provision of law may be applicable 543

Whether there is any immunity from Prosecution in the case of search qua undisclosed income declared in the Return of Block Period 543 12.15 ASSESSMENT OR REASSESSMENT OF ‘OTHER PERSON’ AS A

543

Handing over of the evidence etc. relating to the other person, to his jurisdictional A.O. 543

Jurisdiction to be assumed on the basis of evidence etc. seized during search relating to other person 544

Recording of satisfaction by both the Assessing Officers 544

No time limit for handing over the evidence etc. 545

Block period to remain same for ‘other person’ also 545

Due to late handing over, whether some of the earlier tax years may be excluded from the block period? 545

Whether all the tax years falling in the block period are required to be assessed or reassessed relating to the other person? 546

Whether evidence found during the course of search belonging, pertaining or relating to the other person have to be of incriminating nature?

Time limit for passing assessment order of Block Period

Exclusion of the period from the date of initiation of search till the handing over the seized material to the Assessing Officer but not exceeding 180 days

Different time limits for passing assessment orders for different entities within the group

Exclusion of period under certain specific circumstances, subject to availability of minimum period of 60 days which is further to be extended till the end of the month

Time Barring Limit for passing the assessment order in the case of ‘other person’

Assessment scheme under this Chapter appears to be in the nature of In-built ‘Settlement Scheme’

Comparison of Levy of tax, interest & penalty under different schemes

Assessment scheme

to the searched person under

NEW ASSESSMENT OR REASSESSMENT SCHEME

13.5

13.6 SIGNIFICANT ISSUES EMERGING OUT OF NEW ASSESSMENT OR REASSESSMENT PROVISIONS OF SEARCH CASES 577

In the case of search initiated on or before 31st March, 2021, provisions of sections 153A & 153C shall remain applicable 577

As per new assessment or reassessment provisions, reopening of the case under section 147 of the 1961 Act for three or ten preceding years, as the case may be, can be made year wise, & all such years involved are not required to be reopened & reassessed simultaneously, as happened to be the case under section 153A of the 1961 Act 578

Impact of TOLA & Supreme Court’s decision in Ashish Agarwal for the purpose of extension of time limitation for reopening of AYs 2013-14 & 2014-15 578

In the case of search held on or after 1.4.2021, which assessment years can be reopened as per amended law of section 149 of the 1961 Act 581

There shall not be any abatement of the pending assessments for which notice under section 143(2) has already been issued or assessment is already in progress 582

Provisions of newly inserted section 148A of the 1961 Act would not be applicable for reopening of the prior three or ten years’ cases as a consequence of search. However approval of the ‘specified authority’ is required under section 151 of the 1961 Act 583

Reopening of the cases beyond three years may be possible when income chargeable to tax is represented in the form of asset 584

Mandatory reopening of prior three years cases in the case of search even if no incriminating material is found during search. Whether it would be in the nature of de novo assessment or additions can be made only relating to the incriminating material found during search? 587

Burden of proof lies on whom in respect of any other escaped income which comes to the notice of AO during the course of reassessment proceeding under section 148 of the 1961 Act 588 In case of search, assessment beyond preceding three years may be reopened when there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment - Meaning thereof 589

In what manner, jurisdiction over ‘other person’ may be assumed under section 148, as a consequence of search? 590

Whether penalty provision of section 271AAB of the 1961 Act shall remain applicable for the ‘specified previous year’ even after the new assessment scheme of the search cases?

13.7 RELEVANCE OF JURISPRUDENCE DEVELOPED WITH RESPECT TO REOPENING OF ASSESSMENT UNDER THE OLD LAW CONTAINED IN SECTIONS 147-151 & 153A-153D OF THE 1961 ACT TO THE NEW SCHEME OF ASSESSMENT OR REASSESSMENT IN SEARCH CASES

What are the consequences if income tax return pursuant to notice under section 148 of the 1961 Act is not filed?

591

591

592

Whether fresh notice under section 280 of the Income-tax Act, 2025 (corresponding to section 148 of the Income-tax Act, 1961) can be issued in case earlier notice is held invalid? 593 What is the effect of additional income declared by the assessee in the return filed pursuant to notice under section 280 of the Income-tax Act, 2025 (corresponding to section 148 of the Income-tax Act, 1961)?

594

Time limit for reopening of assessment in the case of income in relation to foreign asset - Applicability after introduction of new scheme of assessment or reassessment 597

Whether notice under section 270(8) of the Income-tax Act, 2025 (corresponding to section 143(2) of the Income-tax Act, 1961) is required to be issued and served before finalizing the reassessment under the new scheme of assessment or reassessment?

Whether under the new scheme, ‘reason to believe’ is required to be recorded as to the escapement of income as was so required under the old section 148 of the 1961 Act?

Whether additions can be made on issues not covered by the information suggesting escapement of income under the new scheme of assessment or reassessment?

On whom the burden of proof of escaped income lies?

Whether assessing officer may seek omnibus and sweeping details which are unconnected with the information suggesting escapement of income under the new scheme of assessment or reassessment?

Whether reopening is possible based on change of opinion on the same set of facts?

Whether another notice under section 148 of the 1961 Act can be issued if fresh evidences come to the possession of the assessing officer?

Whether reopening is possible on the basis of surmise & suspicion?

599

600

601

603

605

606

607

607

Whether reopening of assessment can be made on the basis of heavy cash deposit in Bank account or investment in properties disproportionate to the income?

Whether direction or finding by any appellate authority or court order can be the basis for reopening the assessment under new scheme of assessment or reassessment?

Whether reopening of an assessment is possible even in a case when an issue is pending in appeal, revision or reference before any appellate authority or court, under new scheme of assessment or reassessment?

Whether an assessment can be reopened under the new scheme of reassessment if income has been assessed earlier at too low a rate of tax?

Whether reopening notice under section 148 of the 1961 Act issued under the new scheme of assessment or reassessment can be challenged in Writ before High Court?

Whether failure of the assessee to disclose material facts fully & truly in original assessment has become irrelevant under the new scheme of assessment or reassessment while judging the validity of reopening?

Whether new scheme of assessment or reassessment applies equally to assessment or reassessment made as a consequence to search as well as survey?

Whether the law evolved and developed under section 153A of the 1961 Act is still relevant for assessment or reassessment made under the new scheme for assessment or reassessment as a consequence of search?

Whether initiation of reopening of assessment or reassessment on a non-existing ground can be sustained?

ASSESSMENT OF SEARCH CASES UNDER

608

609

610

611

612

612

613

614

616

14.4 NATURE AND SCOPE OF PROVISION OF SECTION 153A OF THE

Mandatory reopening of preceding six years’ cases

Rationale for reopening of preceding six years’ cases

of non-obstante

Applicable in case of search initiated after 31st May, 2003

Discrepancy regarding “search is initiated” and “search is conducted”

Meaning of “search is initiated” and “search is conducted”

Whether drawing of Panchnama is mandatory to decide conduct of search?

Assessment under section 153A of the 1961 Act not the assessment only for undisclosed income found as a result of search as was the case in block assessment under Chapter XIVB

Concept of undisclosed income under section 271AAA/ 271AAB of the 1961 Act entirely from a different perspective

Preceding six years covered under section 153A of the 1961

Re-opening of assessment for further three assessment years beyond prior six assessment years in certain cases

Rate of tax applicable in the case of assessment under section 153A of the 1961 Act

Search warrant/panchnama drawn in joint name

Notice of assessment in case of amalgamation

Notice of assessment to deceased

Pending assessment or reassessment to abate

Fresh assessments to be framed for all the preceding six years whether assessment proceedings are abated or not

Abatement of pending assessment proceeding - What remains the status of return filed?

Abatement to revive

No other assessment or reassessment proceedings during pendency of proceeding u/s 153A

Application for rectification under section 287 of the Income-tax Act, 2025 (corresponding to section 154 of the Income-tax Act, 1961) not to abate

Whether exemption/deduction can be claimed first time in the returns filed under section 153A of the 1961 Act, which could not be made in the original return

Applicability of provisions regarding imposition of penalty and prosecution

Filing of return after search under normal provisions of the Act - Whether required?

Late filing of return under section 153A of the 1961 Act - Consequences thereof

Whether return filed in pursuance to notice under section 153A of the 1961 Act can be revised?

Whether assessee should file income tax returns under section 153A of the 1961 Act when opting to apply to Settlement Commission?

CERTAIN ISSUES RELATING TO ASSESSMENT UNDER SECTION 153A OF THE 1961 ACT

665

No repetition of addition under section 153A of the 1961 Act for the same issues relating to which addition already made in earlier assessment or reassessment proceedings 665

Fresh material found relating to issue with respect to which addition already made in earlier assessment finalized 666

Whether to assess or reassess as required under section 153A of the 1961 Act tantamount to de novo assessment proceeding?

Arguments against the concept of de novo assessment

667

670

Change of opinion by the assessing officer during assessment/ reassessment proceedings under section 153A of the 1961 Act relating to issue already considered and examined during earlier assessment proceedings 675

Judicial controversy regarding de novo assessment 676

No addition in case No Incriminating Material Found during search & Assessment Proceedings not abated 684

Statement under section 247(6) of the Income-tax Act, 2025 (corresponding to section 132(4) of the Income-tax Act, 1961) - Whether to be construed as incriminating material? 687

What constitutes Incriminating Material?

688

In case of search, whether invoking provision of section 153A of the 1961 Act is mandatory? 689

Name not appearing in Panchnama - prima facie proof of no search - provision of section 153A of the 1961 Act can not be invoked 690

Invoking provision of section 153C of the 1961 Act instead of provision of section 153A of the 1961 Act even in case of searched person 690

How incriminating material not found from the premises of the searched person but found from some other person/entity may be considered in the assessment of searched person? 691

Whether provision of section 280 of the Income-tax Act, 2025 (corresponding to section 148 of the Income-tax Act, 1961) or section 377 of the Income-tax Act, 2025 (corresponding to section 263 of the Income-tax Act, 1961) can be invoked with respect to assessment framed as per provisions of section 153A 692

Seized material from the authorized officer received lateBeyond time limit as prescribed u/s 251(1) of the Income-tax Act, 2025 (corresponding to section 132(9A) of the Income-tax Act, 1961) - Validity of assessment proceeding 693

Issue of notice under section 153A of the 1961 Act prior to receipt of the seized material from the authorized officer 694

Assumption of jurisdiction - Notice under section 270(8) of the Income-tax Act, 2025 (corresponding to section 143(2) of the Income-tax Act, 1961) within time limit - Whether mandatory in case of proceedings u/s 153A of the 1961 Act? 694

Status of assessment order passed under section 153A of the 1961 Act when search is held illegal 696

“Reason to believe” recorded by the competent authority for authorization of the search not available with the assessing officer

Application of presumption under section 524 of the Income-tax Act, 2025 (corresponding to section 292C of the Income-tax Act, 1961) during assessment of search cases

Introduction of section 115BBE & flat rate of tax rate on undisclosed income/investment/expenditure etc.

Whether satisfaction to be recorded in writing? 717

Quoting of Document Identification Number (DIN) on satisfaction note - whether mandatory?

Time limit for recording satisfaction & handing over the seized material

Recording of satisfaction when assessing officer is common 725

Material seized - What in case of illegal seizure? - Whether seized material to be of incriminating nature? 727

“Belongs or belong to other person” 733

Belonging to more than one person 739

To hand over to the Assessing Officer of other person 740

Satisfaction by the Assessing Officer of the other person 741

Time limit for issuing notice as per section 153C of the 1961 Act

Law existing on the date of search to apply for cases under section 153C of the 1961 Act

OF JURISDICTION U/S 153C OF THE 1961 ACT

Assumption of jurisdiction u/s 153C of the 1961 Act at what stage? 742

That assessing officer shall proceed against each such other person - Recording of satisfaction by the assessing officer having jurisdiction over the other person before assuming jurisdiction under section 153C of the 1961 Act? 744

The word ‘shall’ to be interpreted as mandatory or directory? - Whether all search years to be reassessed? 748

Relaxation regarding requirement of framing assessment or reassessment of earlier six years 750

All provisions of section 153A of the 1961 Act to apply

UNDER SECTION 153C OF THE 1961 ACT

Assessment or reassessment of seven years - Which seven years? 751

Abatement of pending proceedings 755

Assessment of undisclosed income of other person on the basis of entries in books of account or documents of the person searched 755

Seized material belonging or relating to some other person, whether section 153C of the 1961 Act is the only recourse? 756

Once jurisdiction under section 153C of the 1961 Act is invoked - What kind of additions can be made? 759

Presumption under section 292C of the 1961 Act - Whether available in the case of assessment under section 153C of the 1961 Act? 759

Mention of wrong section/designation of assessee in order does not invalidate the order 760

C. SECTION 153D OF THE 1961 ACT - PRIOR APPROVAL OF JOINT COMMISSIONER

Advancement of time limit for completion of assessment for the year of search by twelve months

Date on which search is conducted and the date on which search is concluded may fall in different financial years 780

Different time limits for different persons within the group

Time limit for completion of assessment in case of the person covered under section 153C of the 1961 Act 781

“Service of assessment order also should be within the limitation period”

Time limit when reference is made to transfer pricing officer under section 166 of the Income-tax Act, 2025 (corresponding to section 92CA of the Income-tax Act, 1961) 787

Time limitation not to be extended when information cannot be shared by foreign tax jurisdiction as per DTAA 787

HANDLING OF ASSESSMENT IN SEARCH CASES

Applicability of higher tax rate under section 195 of the Income-tax Act, 2025 (corresponding to section 115BBE of the Income-tax Act, 1961)

In case of general declaration of undisclosed income, benefit of telescoping

Direction by Joint Commissioner under section 272 of the Income-tax Act, 2025 (corresponding to section 144A of the Income-tax Act, 1961)

Summons under sections 246 and 261(a) of the Income-tax Act, 2025 (corresponding to section 131 of the Income-tax Act, 1961)

Calling for information under section 252(1)(a) of the Income-tax Act, 2025 (corresponding to section 133(6) of the Income-tax Act, 1961) 815

Availability of presumption under section 524 of the Income-tax Act, 2025 (corresponding to section 292C of the Income-tax Act, 1961)

Special audit under section 268(5) & (6) of the Income-tax Act, 2025 (corresponding to section 142(2A) of the Incometax Act, 1961)

Provisional attachment under Sections 500 and 2(98) of the Income-tax Act, 2025 (corresponding to section 281B of the Income-tax Act, 1961) 819

To undertake proceedings under section 280 of the Incometax Act, 2025 (corresponding to section 148 of the Incometax Act, 1961)/153C of the 1961 Act

Applicability of deeming provisions of income under sections 102 & 106 of the Income-tax Act, 2025 (corresponding to sections 68 to 69D of the Income-tax Act, 1961)

of seven

No additions possible in block assessment under Chapter XIVB when no incriminating material is found during

Levy of penalty in case of agreed addition during assessment

difference in stock 865

Addition u/s 102 of the Income-tax Act, 2025 (corresponding to section 68 of the Income-tax Act, 1961) 867

Addition u/s 103 of the Income-tax Act, 2025 (corresponding to section 69 of the Income-tax Act, 1961)

PENALTIES AND PROSECUTION IN SEARCH CASES

“Specified previous year” 882

“Undisclosed Income” 882

Non obstante clause under section 271AAA of the 1961 Act 886

Whether penalty u/s 271AAA of the 1961 Act mandatory 886

Penalty at the rate of ten per cent of the “undisclosed income” 887

Penalty for specified previous year in the case of search initiated on or after 1-6-2007 can be levied u/s 271AAA/271AAB of the 1961 Act and not u/s 271(1)(c) of the 1961 Act 887

16.8 PROVISION OF SECTION 271AAA OF THE 1961 ACT IN NUTSHELL

16.9 IMMUNITY FROM PENALTY UNDER SECTION 271AAA OF THE 1961 ACT - MANNER OF DECLARATION 889

Declaration to be made in the course of search 889

Specifies and substantiates the manner 890

Requirement of substantiating the manner of deriving the undisclosed income to be complied with at which stage 895

Pays the tax and interest in respect of the undisclosed income 897

16.9A NATURE AND SCOPE OF PROVISION UNDER SECTION 271AAB OF THE 1961 ACT 900

Applicable in the case of search initiated on or after 1st day of July 2012 900

Rationale of introducing section 271AAB of the 1961 Act 900

Staggering of quantum of penalty under section 271AAB of the 1961 Act 901

Levy of penalty at the rate of 10% of undisclosed income when declaration of undisclosed income is made during search initiated on or after 1-7-2012 but before 15-12-2016 901

Levy of penalty at the rate of 20% of undisclosed income when declaration of undisclosed income is made not during the course of search but in the return of income filed for the specified previous year in case of search initiated on or after 1-7-2012 but before 15-12-2016 903

Levy of penalty at the rate of 30% to 90% (60% for A.Y. 201718) of undisclosed income when declaration of undisclosed income is not made by the searched person but additions are made by the Assessing Officer during assessment proceedings, in respect of search initiated on or after 1-7-2012 but before 15-12-2016 903

Provisions of sections 471 and 532 of the Income-tax Act, 2025 (corresponding to section 274 of the Income-tax Act, 1961) and section 472 of the Income-tax Act, 2025 (corresponding to section 275 of the Income-tax Act, 1961) to apply 904

Analysis of Significant issues 904

Interpretation of the definition of “Undisclosed Income” 904

‘Penalty’ u/s 271AAB of the 1961 Act imposable if income declared falls within the definition of ‘Undisclosed Income’ 906

Declaration of Undisclosed Income in the statement recorded u/s 132(4) would not ipso facto be regarded as Undisclosed Income 908

Ambiguity in the definition of “Specified Date” 909

Cash seized - Whether to be treated as payment of tax before the “specified date”? 910

Decision regarding declaration of “undisclosed income” during search to be made more cautiously 910

Application with Settlement Commission may be opted by searched person 911

Whether penalty u/s 271AAB of the 1961 Act is mandatory in nature? 912

Penalty provision under section 271AAB of the 1961 Act amended in case of search initiated on or after 15th of December, 2016 913

Enhancement of penalty by the first Appellate Authority 915 16.10 PENALTY UNDER SECTION 271AAA/271AAB OF THE 1961 ACT v. PENALTY UNDER SECTION 271(1)(c) OF THE 1961 ACT 915

Penalty provision u/s 271AAA of the 1961 Act applicable even when no declaration of “undisclosed income” relating to “specified previous year” is made during search and such “undisclosed income” is declared in the return of income filed or such “undisclosed income” is added by AO in the assessment order in respect of search initiated after 1-6-2007 but before 1-7-2012 915

Penalty under section 271AAB of the 1961 Act v. Penalty under section 271(1)(c) of the 1961 Act 917

Situation when penalty for “specified previous year” may be applicable/leviable under section 271(1)(c) of the 1961 Act 918

Judicial decisions to the effect that penalty under section 271(1)(c) of the 1961 Act not applicable at all for specified previous year in the case of search. 918

No penalty u/s 271(1)(c) of the 1961 Act for concealment of income if income not covered within the definition of “undisclosed income” under section 271AAA/271AAB of the 1961 Act, is declared in the return of income relating to ‘specified previous year’ 919

16.11 PENALTY FOR UNDISCLOSED INCOME RELATING TO EARLIER YEARS 920

Provision of section 271AAA/271AAB of the 1961 Act applicable only for “specified previous year” and not for earlier years - Declaration of undisclosed income for earlier years may be treated as admitted concealment for those years 920

Judicial decisions to the effect that in case undisclosed income is shown in the return filed under section 153A of the 1961 Act for years prior to specified previous year, no penalty under section 271(1)(c) of the 1961 Act can be levied 921

Clinching evidences of undisclosed income for earlier years 921

Declaration made for earlier years subject to no penalty 922

Penalty for concealment of income for earlier years applicable under section 271(1)(c) of the 1961 Act read with Explanation 5A923

No Penalty merely on surrender of Income 924

16.12 TEXT OF EXPLANATION 5A TO SECTION 271(1)(c) OF THE 1961 ACT 924

16.13 RATIONALE FOR INSERTION OF EXPLANATION 5A TO SECTION 271(1)(c) OF THE 1961 ACT 925

To cover a situation where due date of filing of return is expired but concealed income is included in the return filed after search 925

After search having taken place, return of income already filed is revised showing undisclosed income found as a result of search pertaining to such year 926

Whether Explanation 5A to section 271(1)(c) of the 1961 Act shall be attracted regarding normal profits as per balance sheet finalized but income-tax return pending on the date of search 928

16.14 PROVISION OF SECTION 271AAA/271AAB OF THE 1961 ACT AND EXPLANATION 5A TO SECTION 271(1)( c ) OF THE 1961 ACT NOT APPLICABLE TO REQUISITION MADE UNDER SECTIONS 248, 249 & 261( a ) OF THE INCOME-TAX ACT, 2025 (CORRESPONDING TO SECTION 132A OF THE INCOME TAX ACT, 1961) 930

16.15 NEW PENALTY PROVISION UNDER SECTION 270A OF THE INCOME-TAX ACT, 1961 (CORRESPONDING TO SECTION 439 OF THE INCOME-TAX ACT, 2025) MADE APPLICABLE WITH EFFECT FROM A.Y. 2017-18 IN PLACE OF SECTION 271(1)(c) OF THE 1961 ACT 931

Applicability of provision of section 439 of the Income-tax Act, 2025 (corresponding to section 270A of the Income-tax Act, 1961) in case of search 935

No provision under section 270A of the 1961 Act corresponding to Explanation 5A to section 271(1)(c) of the 1961 Act 936

Instructions of the CBDT regarding not pressurizing for declaration of undisclosed income during search 936

Provisions of sections 471, 472 and 532 of the Income-tax Act, 2025 (corresponding to sections 274 & 275 of the Income-tax Act, 1961) to apply 938 16.17 ATTRACTION OF PENALTY FOR CONCEALMENT IN CASES COVERED U/S 153C OF THE 1961 ACT

16.17A PENALTY PROVISION RELATING TO SEARCH INITIATED BEFORE 1ST JUNE, 2007 - EXPLANATION 5 TO SECTION 271(1)(c) OF THE 1961 ACT

Text of Explanation 5 to section 271(1)(c) of the 1961 Act 942

Salient features of Explanation 5 to section 271(1)(c) of the 1961 Act

Failure to answer questions, sign statements recorded u/s 247(6) of the Income-tax Act, 2025 (corresponding to section 132(4) of the Income-tax Act, 1961) or u/s 246(2)(b) & (c) of the Income-tax Act, 2025 (corresponding to section 131(1A) of the Income-tax Act, 1961) 947

Failure to comply with the summons issued under sections 246 and 261(a) of the Income-tax Act, 2025 (corresponding to section 131 of the Income-tax Act, 1961) 947

Penalty for unaccounted business transactions 948

Penalty for loans or deposits or ‘specified sum’ taken or repaid in cash 950

Whether penalty is attracted for non-filing or late filing of Income-tax Returns under section 153A of the 1961 Act 951

Power to reduce or waive penalty etc. in certain cases as provided under section 469 of the Income-tax Act, 2025 (corresponding to clause (c) of section 273A of the Incometax Act, 1961) 952

Power of Commissioner to grant immunity from penalty under section 273AA of the 1961 Act 953

Contravention of prohibitory order passed under section 132(3) of the 1961 Act - Section 473 of the Income-tax Act, 2025 (corresponding to section 275A of the Income-tax Act, 1961) 954

Non-compliance of provision of section 132(1)(ii)(b) of the 1961 Act - Section 474 of the Income-tax Act, 2025 (corresponding to section 275B of the Income-tax Act, 1961) 954

Wilful attempt to evade tax - Section 478 of the Income-tax Act, 2025 (corresponding to section 276C of the Income-tax Act, 1961) 954

Failure to furnish return of income in search cases - Section 276CC of the 1961 Act 955

False statement and verification - Section 482 of the Income-tax Act, 2025 (corresponding to section 277 of the Income-tax Act, 1961) 955

Falsification of books of account or documents, etc.Section 483 of the Income-tax Act, 2025 (corresponding to section 277A of the Income-tax Act, 1961) 955

Abatement of false return - Section 484 of the Income-tax Act, 2025 (corresponding to Section 278 of the Income-tax Act, 1961) 956

Presumption as to assets, books of account in case of search for the purpose of prosecution - Section 489 of the Income-tax Act, 2025 (corresponding to section 278D of the Income-tax Act, 1961) 956

Whether there can be prosecution for non-compliance of summons issued under section 246 of the Income-tax Act, 2025 (corresponding to section 131 of the Income-tax Act, 1961) 956

Refusal to answer questions or to give incorrect reply to questions put during recording of statement under Section 247(6)/246 of the Income-tax Act, 2025 (corresponding to section 132(4)/131 of the Income-tax Act, 1961) 956

PRECAUTIONS BEFORE FACING SEARCH ACTION

CHAPTER

ACTUAL CONDUCT OF SEARCH OPERATIONS

5.1 Text of section 247(1)(i) to (vii) of the Income-tax Act, 2025 (corresponding to clauses (i) to (v) of section 132(1) of the Income-tax Act, 1961)

Power of search and seizure is contained in section 247(1)(i) to (vii) of the Income-tax Act, 2025 which empowers the Authorized Officer to:—

(i) enter and search any building, place, vessel, vehicle, aircraft where he has reason to suspect that such assets, books of account or other documents, or such information in electronic form or on a computer system are kept;

(ii) require any person, who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record or any information in electronic form or on a computer system, to afford the authorised officer with such reasonable technical and other assistance (including access code, by whatever name called) as may be necessary to enable the authorised officer to inspect such books of account or other documents or such information;

(iii) break open the lock of any door, box, locker, safe, almirah, or other receptacle or override the access code to any computer system for exercising the powers conferred by clause (i) where the keys thereof are, or the access to such building, place, etc., or the access code to such computer system, as the case may be, is not available;

(iv) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, any information in electronic form, or a computer systems or asset;

(v) place marks of identification on any books of account or other documents, or make or cause to be made extracts or copies therefrom and also from computer system;

(vi) make a note or an inventory of any such asset, and stock-in-trade of the business, found as a result of such search;

(vii) seize any such books of account, other documents, computer systems or asset (other than stock-in-trade of the business), found as a result of such search.

5.2 Legislative History - Significant Amendments

u In clause (i) the words “vessel, vehicle or aircraft” were added along with building or place by the Taxation Laws (Amendment) Act, 1975 w.e.f. 01.10.1975 so as to cover moving vehicles, ship or aircraft for search operations. Prior to the amendment, the authorization could be issued only for the search of a building or a place. The scope of this power was found limited by the Legislature which was then extended to cover the search of a vehicle and aircraft as well.

u Clause (iia) was inserted by Taxation Laws (Amendment) Act, 1975 w.e.f. 01.10.1975 so as to cover any person coming in, present within or going out of the premises to be searched. The authorized officer has been empowered to search such person, if he has reason to suspect that such person has secreted certain undisclosed assets or documents on his person. CBDT Circular No. 179, dated 30.9.1975 explains this insertion as legislating the power which was already there under rule 112(5). In the absence of such power in the Act it self, the relevant rule 112(5) could have been found ultra vires to Act.

u Clause (iib) had been inserted by Finance Act, 2002 w.e.f. 01.06.2002 so as to empower the authorized officer to inspect books and other documents kept in electronic form. It became necessary in view of more and more use of computers and books being maintained by the assessee in electronic form. This amendment was brought to overcome the difficulty faced by the Authorized Officer during search operation, in not being able to operate and have access to the data stored in computers for want of password and reluctance of the person searched and his staff to part with the password.

u Proviso to clause (iii) was inserted by Finance Act, 2003 w.e.f. 01.06.2003 providing not to seize stock-in-trade of the business so that normal business operations are not disturbed. Prior to this amendment, deemed seizure was being applied by the department on inventory items of the business which was causing lot of hardships in carrying out the business and on the movement of inventory. On the other side, department was also not able to realize the taxes by such seizure since inventory items used to get obsolete over a period of time.

5.3 Objective

The competent authority may authorize the authorized officer to undertake the actions as provided in above clauses (i) to (vii) of section 247(1) of the Income-tax Act, 2025 (corresponding to clauses (i) to (v) of section 132(1) of the Income-tax Act, 1961). The objective is to equip the authorized officer with powers to undertake the actions as provided in these provisions without which the very efficacy of the search operation would have been affected adversely to the Revenue.

5.4 To enter and search

Sections 247(1)(i) of the Income-tax Act, 2025 (corresponding to clause (i) of section 132(1) of the Income-tax Act, 1961) authorizes the authorized officer to enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or things are kept. (i) “He has reason to suspect” and “such” - Significance thereof

u In this phrase, ‘he’ refers to the competent authority who is authorizing to undertake search action and not to the authorized officer. The requirement to form ‘reason to believe’ in consequence of information in possession is qua-assessee and once the ‘reason to believe’ is formed against a person and search action is undertaken sections 247(1)(a)(I), (a)(II), (b) & 261(b) of the Income-tax Act, 2025 (corresponding to clause (a), (b) or (c) of section 132(1) of the Income-tax Act, 1961) specific building or place relating to such person to be covered for search can be done only on the basis of suspicion. In this view of the matter, the authorization to enter and search any building or place may be on the basis of suspicion. For covering any building or place, it is not required to form ‘reason to believe’ with respect to each building or place separately.

u The use of the word ‘Such’ books of account, other documents, money, bullion, jewellery or other valuable article or thing refers to those books of account, other documents, money, bullion, jewellery or other valuable article or thing which are referred under sections 247(1)(a)(I), (a)(II), (b) & 261(b) of the Income-tax Act, 2025 (corresponding to clause (a), (b) or (c) of section 132(1) of the Income-tax Act, 1961). Therefore, those books of account, other documents, money, bullion, jewellery or other valuable article or thing which are not covered under sections 247(1)(a)(I), (a)(II), (b) & 261(b) of the Income-tax Act, 2025 (corresponding to clause (a), (b) or (c) of section 132(1) of the Income-tax Act, 1961), cannot be the basis to “enter and search”.

(ii) Which premises can be searched

There has to be separate search warrant for each premise or place. If a person has several godowns or residential premises, there has to be separate authorization for each premise. If there are different municipal numbers of different portions of the same building, search of only those portions can be carried out whose number is mentioned in the authorization and not of all the portions. Any search operation undertaken at the premises not authorized by the search warrant would be illegal.

(iii) Multi-storied buildings

The authorization of search warrant has to be qua-person as well as qua-premises. For example, a search warrant mentions Mr. A, resident of House No. 123, Sector-45, Delhi and this building is a multi-storied building having three floors and Mr. A resides at ground floor. Ist & IInd floor which have independent entry, are occupied by somebody else. In the search warrant, ground floor is omitted to be mentioned along with his address. In such a case, search operation can be undertaken only at the ground floor premises in occupation of Mr. A and the Ist & IInd floor which are occupied by somebody else, may be in occupation of his father or brother, cannot be covered under the search.

Under such circumstances, in case authorized officer attempts to search Ist & IInd floor, such person(s) occupying the Ist and IInd floors has remedy by way to approach to higher authorities or if he fails with them, he may approach to High Court by way of writ petition under article 226 of the Constitution.

However, in case authorized officer has reason to suspect that incriminating material relating to Mr. A, the person searched, is kept at Ist and IInd floor of the premises and he wants to search those floors also, he is required to obtain separate search warrant for those independent floors.

(iv) Premises jointly occupied by several persons

Problems do arise in those cases where the premises are occupied jointly like several brothers along with parents living in a family occupying single residential unit. In case they are occupying distinctively demarcated areas within the floor/premises and the search warrant is only in the name of one of the family members, the portion of the premises occupied by other brothers are not to be covered and those members are within their right to plead that no search operation with respect to them can be carried. However, in practice, it is very difficult to claim and establish distinctively demarcated areas within the floor/premise having common entrance. An authorized officer will be

(

(

entitled to carry out the personal search or the search operations in relation to co-occupier if he is satisfied that co-occupier has secreted some document or asset belonging to the searched person in whose case search is authorized.

In case several family members live together in joint family with no distinctively demarcated areas, it is difficult to claim immunity in relation to search operation with respect to their belongings or area occupied.

Similarly in the case of premises occupied by different companies or registered office of many companies situated in the same office, the search of the entire premises for which a search warrant is issued shall be valid even if the warrant is in the name of one company. The seizure of books of account or other documents can be made belonging to other companies on the ground that there may be some kind of business relation of those companies with the company in whose case search is authorized.

v) Timings of search

Search operation at times may be of utmost urgency and thus, no restriction on commencement or conduct of search operation has been provided in the law. A search may be commenced at any time during day or night and may be continued till next day or thereafter. However in practice, search operation is generally undertaken in the morning hours and planning is made in such a manner so as to strike the operation at different premises of the assessee all over the country at the same time.

(vi) Search of the premises

found locked

As per the powers given under clause (iii) of section 247(1) of the Income-tax Act, 2025 (corresponding to clause (ii) of section 132(1) of the Income-tax Act, 1961) read with rule 148(5) & (7) of the Income-tax Rules, 2026 (corresponding to sub-rule (4) of rule 112 of the Income-tax Rules, 1962), if any premises is found locked, the authorized officer is empowered to break open the lock to enter the premises and search it, irrespective of whether the owner or occupant of the premises is available or not.

vii) Free Ingress

According to rule 148(4) of the Income-tax Rules, 2026 (corresponding to sub-rule (3) of rule 112 of the Income-tax Rules, 1962) any person incharge of any building, place, vessel, vehicle or aircraft authorized to be searched shall allow the authorized officer carrying the valid search warrant, free ingress thereto and afford all reasonable facilities for the search. It is immaterial as to what is the relationship of that person with the person in whose case the search has been authorized.

(

Refusal to allow free ingress or, not affording the requisite facility for the search may make a person liable for the prosecution under sections 187 & 188 of the Indian Penal Code. Any obstruction in search procedure may make him further liable for prosecution u/s 186 of the Indian Penal Code.

Rule 148(15) of the Income-tax Rules, 2026 (corresponding to sub-rule (8) of rule 112 of the Income-tax Rules, 1962) requires occupant of the premises or some other person on his behalf to be permitted, to attend the proceeding during search operation. It does not however mean that no search can be conducted without their presence. The authorized officer is required to ask for admission in the premises and when he cannot otherwise obtain admission, he is empowered to use his authority to enter after breaking the lock.

It was held in the case of Hari Narayan Chandra v. Emperor AIR 1928 Cal. 27 that it is not necessary that the occupant must be present at the search. The rule only lays down that he should be permitted to do so if he desires to remain present.

viii) Search at the premises not belonging to assessee

A search can be conducted at the premises, which is not belonging to the target person. The target person may not even be the owner or occupant of such premises. For issuing search warrant and conducting search at any such premises, the competent authority has to satisfy himself that undisclosed books of account, documents or assets relating to the target person under search have been kept or secreted thereat. In case the authorities are having information or suspicion that the target person is keeping undisclosed books, documents or assets at any place or premises not belonging to him, the same may be covered for the purpose of search. When search warrant is issued in respect of such place in the name of target person, the authorized officer is required to search and seize the material only relating to such person. However, in practice, this restraint is not sometime exercised during search of such premises and assets/documents relating to other person(s) are also seized. This in our opinion can be done only when such documents/assets are having any connection or relation to the target person.

Generally under such circumstances, Department undertakes survey operation u/s 253 of the Income-tax Act, 2025 (corresponding to section 133A of the Income-tax Act, 1961) instead of action of search u/s 247 of the Income-tax Act, 2025 (corresponding to section 132 of the Income-tax Act, 1961). However, in case the place is not a business premises but is a residential premises, action has to be taken under section 247 of the Income-tax Act, 2025 (corresponding to section 132 of the Income-tax Act, 1961) as no survey action can be taken

(

u/s 253 of the Income-tax Act, 2025 (corresponding to section 133A of the Income-tax Act, 1961) at residential premises.

While searching the target person, premises of other person can be covered but search warrant is required to be made in the name of the target person and such search warrant cannot be issued in such a case in the name of other person.

In case search warrant is issued in the name of other person being occupant of any premises, who is having connection with the affairs of the target person, there has to be separate ‘reason to believe’ recorded with respect to such other person on the parameters of sections 247(1) (a)(I), (a)(II), (b) & 261(b) of the Income-tax Act, 2025 (corresponding to clause (a), (b) or (c) of section 132(1) of the Income-tax Act, 1961).

It may so happen, for example, when searched person is having close connection with his counsel, relating to the financial transactions and department is having the information that certain documents relating to such transactions are kept in the office of the counsel & therefore the premises of the counsel are also required to be searched. In another situation, when a search is conducted in the case of a company, senior executives of the company who are closely involved in managing the affairs of the company may also be required to be searched so as to collect evidences relating to the affairs of the company. In such cases, when search warrant is issued in the name of target person/company but search operations being conducted at the premises of other persons, undisclosed assets or documents relating to the personal affairs of other persons cannot be seized. However, if authorized officer wants to seize personal assets or documents of other persons which have no connection with the target person/company, there has to be separate search warrant in the name of consultant or senior executive whose premises are being searched after forming “reason to believe” on the parameters as prescribed under sections 247(1)(a)(I), (a)(II), (b) & 261(b) of the Income-tax Act, 2025 (corresponding to clause (a), (b) or (c) of section 132(1) of the Income-tax Act, 1961) with respect to such other person(s).

However, in practice it has been seen that the documents or undisclosed assets relating to personal affairs of such other person are seized by the authorized officer on the pretext that such documents or assets might have some connection with the target person/entity.

ix) Car parked outside the house

When search warrant is issued in the case of a person for his residential premises, the authorized officer is empowered to search any place, almirah, room or vehicle parked inside the house. In case car is parked outside adjoining the house and authorized officer is having suspicion that some undisclosed books of account or documents

are secreted therein, in our considered opinion, the same can also be searched and searched person cannot take the plea successfully that there has to be separate search warrant for vehicle parked outside the house. For this purpose, parking area of the car adjoining the house will be treated as part of the house and no separate search warrant for the vehicle is required.

5.5 To break, open locks, etc.

Sections 247(1)(iii) of the Income-tax Act, 2025 (corresponding to clause (ii) of section 132(1) of the Income-tax Act, 1961) provides that an authorized officer can break, open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i), where the keys thereof are not available.

It is the duty of authorized officer to provide reasonable opportunity to the assessee to produce keys of the lock. In case assessee fails to produce the same, the authorized officer may use his power to break or open the lock. In case the authorized officer suspects the undisclosed assets hidden inside, he may open or tear sofas, beds, break the wall or dig the floor. The assessee cannot object to such actions, if they are done bona fide and in good faith while carrying out the object of the search. A public officer discharging his official duties is presumed to be acting according to fairness and good conscience without any bias unless proved otherwise by the person alleging contrary to it.

However it is seen in practice that use of such power is exercised sparingly by the authorized officer under the circumstances when there is persistent non-cooperation in affording the facility of conducting search of any locked room, door, box, locker, safe, almirah or other receptacle.

Action may however lie against the authorized officer if these acts are done in mala fide manner and there was no reason to suspect that items broken or destroyed contained undisclosed assets or incriminating documents etc. hidden therein, either on the basis of information received from the informer or from any other source.

5.6 To conduct personal search

Clause (iia) of sub-section (1) of section 132 was inserted with effect from 01.10.1975. It empowers the authorized officer to search any person who has got out of, or is about to get into or is in the building or place etc., if the authorized officer has reason to suspect that such person has secreted about his person, any incriminating documents’, papers, money, bullion, etc.

Prior to insertion of the above clause, there were doubts about the power of the authorized officer as to whether such authorized officer had any

statutory power under the Act, to search any other person (other than the person in whose name the search warrant is issued) who was inside the building or who comes in or goes out of the building. After insertion of this clause, clarity has been brought and power has been specifically given to the authorized officer to search any person inside the building.

Personal search of any member of family residing in the premises or any guest, customer or other business constituent visiting the assessee during the course of search can be conducted and there is no need for separate search warrant for that purpose. Thus, person entering the premise where search operation is on, is required to be careful and vigilant on this aspect and ought to know that his personal search can be conducted by the authorized officer as it is permitted under the law.

The statutory procedure and requirements of the personal search are listed in rule 148(10) & (16) of the Income-tax Rules, 2026 (corresponding to sub-rule (5) & (9) of rule 112 of the Income-tax Rules, 1962) and have been discussed in detail while analyzing rule 112 of the 1962 Rules.

5.7 To afford facility to inspect electronic record

With the development of information technology, books of account are generally kept in computer or in any other electronic form. The details relating to undisclosed transactions may be kept in electronic form in the computers or in other electronic devices. The data in computers cannot be opened unless software being used or password for opening the file is made available to the authorized officer. Before this power was specifically conferred on the authorized officer, search team at times found itself in difficulty in having access to such books of account or documents due to non-cooperation of the searched person, his family members or his staff. To overcome these hardships, clause (iib) was inserted in sub-section (1) of section 132 with effect from 01.06.2002. It requires the searched person or any person in possession of electronic record to afford the authorized officer the necessary facility to inspect books of account, other documents or data kept in electronic form.

The necessary facility will include making available software being used to store data, password being used to open files or access to the server where data is stored.

(i) Restoration of deleted data

Sometimes data created by a person is deleted from the computers for various reasons such as wrong recording or incorrect recording of some fact etc. There are softwares available which may restore the deleted data and with the help of computer expert, department some-

times resort to such strategy so as to restore the deleted data which may be of incriminating nature. The searched person cannot disown such data as the presumption under section 247(7) of the Income-tax Act, 2025 (corresponding to section 132(4A) of the Income-tax Act, 1961)/section 524 of the Income-tax Act, 2025 (corresponding to section 292C of the Income-tax Act, 1961) will equally apply to the same. However, the searched person will be at liberty to displace the presumption by explaining the facts and circumstances in which the data was deleted so as to shift the burden of proof.

Therefore, every person should remain aware of the above factual and legal situation before creating any incriminating data in soft form.

(ii) Information in electronic form in possession of searched person received via email

In the computer or laptop of the searched person, there may be details or files containing financial and/or other information which have been received by him via email. In case such data is downloaded and is available in the computer of the searched person, it would tantamount that data is in his possession and control and such data may be inspected by the authorized officer.

There may be another situation where these files or details may not have been downloaded. Such data does not remain on the server of the searched person but may be accessed or opened though internet on the mail account of the searched person.

In such a situation, a pertinent question arises for consideration as to whether such data can be said to be in control or possession of the searched person and can the same be looked into and seized by the authorized officer?

In our considered opinion, such data cannot be said to be in possession or control of the searched person since data can be sent in the email id of any person by anybody. Unless the data is downloaded by the such person on his computer, it cannot be said that such data is in his possession and control. There can be one view that if possession and control of such data is not with the searched person, he may not be required to afford the authorized officer the necessary facility such as disclose the password of email id so as to enable him to inspect such data. However this view is not free from doubt & contrary view may be taken by the department in this regard.

Income-tax Act, 2025

Income-tax Act, 2025 has made certain amendments regarding the power of the authorized officer as under:

LAW RELATING TO SEARCH & SEIZURE WITH BLOCK ASSESSMENT

AUTHOR : Raj K. Agarwal, Rakesh Gupta

PUBLISHER : Taxmann

DATE OF PUBLICATION : July 2026

EDITION : 11th Edition | 2026

ISBN NO : 9789364552851

NO. OF PAGES : 1256

BINDING TYPE : Paperback

DESCRIPTION

Law Relating to Search & Seizure with Block Assessment is a comprehensive, practice-oriented treatise on the law and procedure governing income-tax search and seizure in India—the Department's most intrusive power for investigating undisclosed income. It covers the full life-cycle of a search: conditions and authorisation, conduct of operations, seizure of books and assets, statements, statutory presumptions, restraint orders and requisition, through to assessment of search cases (including the new Block Assessment Scheme), penalties, prosecution, and pre-search precautions.

The defining feature of this Edition is its dual-statute architecture—rewritten around the new Income-tax Act 2025 (operative 1st April 2026) while retaining, section by section, the Income-tax Act 1961 counterparts: search power as Section 247 (old Section 132), requisition as Sections 248–249 (old 132A), presumption as Sections 247(7) & 524 (old 132(4A) & 292C), and block assessment as Sections 292–301 (old Chapter XIV-B)—with even Rule 148 of the 2026 Rules mapped to Rule 112 of 1962. Practitioners can move fluently between the old and new law.

Beyond black-letter law, the book is unusually practical—opening with ready-reference tools (checklists, a chapter-wise digest of leading case laws, 101 FAQs, and a List of Cases exceeding a thousand citations) and closing with model forms, a Panchnama proforma, the warrant of authorisation, the Taxpayers' Charter and case studies. Landmark Supreme Court, High Court and Tribunal rulings are analysed throughout, with balanced treatment of divergent views and the authors' own considered opinion. This book is intended for the following audience:

• Practising Tax Consultants, Chartered Accountants and Advocates

• Taxpayers—Individuals & Corporates—and Senior Corporate Executives

• Tax Administrators & Departmental Officers

• Academicians & Students of Direct-Tax Law

• Anyone Needing a Working Bridge Between the Income-Tax Act 1961 & the New Income-Tax Act 2025 The Present Publication is the 11th Edition | 2026, amended by the Finance Act 2026. This book is authored by Dr Raj K. Agarwal & Dr Rakesh Gupta with the following noteworthy features:

• [Dual-statute Mapping (2025 ↔ 1961)] Every provision discussed under the 2025 Act with its 1961 counterpart flagged—sections, sub-sections and rules—for effortless comparison

• [Full Block Assessment Treatment] A dedicated chapter on the Block Assessment Scheme (Sections 292–301—the revived Chapter XIV-B regime reintroduced by the Finance (No. 2) Act 2024), across 18 sub-topics

• [Assessment-of-Search-Cases Trilogy] All three regimes in parallel—Block Assessment (2024/2025), Finance Act 2021 reassessment, and the legacy Section 153A/153C—covering every open case

• [Case-law Depth] Landmark rulings analysed, divergent views set out fairly, and 1,000+ citations in the List of Cases

• [Ready-Referencer] Checklists, a chapter-wise case-law digest, 101 FAQs and the List of Cases—for quick, practical answers

• [Practitioner's Toolkit] Model forms, Panchnama proforma, warrant of authorisation, Taxpayers' Charter, ground rules and worked case studies

• [Aligned with the New Criminal-law Code] Appendices reproduce the Bharatiya Nagarik Suraksha Sanhita 2023 and Bharatiya Nyaya Sanhita 2023 (replacing CrPC/IPC), plus the CPC 1908

• [Balanced Viewpoint] Arguments from both the taxpayer's and the department's side, with a candid, modest tilt toward taxpayers