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36.  Taxpayers Can Pre-empt an Income Tax Raid – How ?

The very expression “Income Tax raid” is sufficient to send tremors of fear among income tax assessees. But in most cases taxpayers can preempt an income tax raid through proper tax planning. Thus, if you know the main reasons responsible for an income tax raid, it would be possible for you to prevent the income tax raid, i.e. search and seizure at your premises, whether office or residence.

There are three main reasons responsible for the authorisation of an income tax search warrant, which results in an income tax raid.


One of the reasons is the non-compliance by the assessee with summons under Section 131 of the Income Tax Act, or notice under Section 142(1) of the Act.

The second reason is the belief of the Income Tax Officer that there is likely to be a non-compliance with such summons or notice. It is, therefore, necessary for you to always comply with the summons issued by the Assessing Officer under the provisions of Section 131(1) of the Income Tax Act for personal hearing, or for production of books of account or other documents, etc. Similarly, should you receive a notice under Section 142(1) of the IT. Act, to enable the assessing officer to examine the books of account or other documents, etc. for income tax assessment, you must make due compliance. There may be occasions when it may not be possible to comply with the summons or notice on the appointed date and time, due to one reason or the other. Instead of getting nervous, you should inform the Income Tax Authority concerned about the reasons for your inability to comply with the same. Wherever possible, necessary proof of inability to comply with the summons or notice should also be furnished before the Assessing Officer or other Income Tax Authority. Further, you should also take necessary steps to obtain a suitable alternate date. This would reduce the chances of an income tax raid on account of this reason.

The most important reason, however, for an income tax raid is some information with the Director of Inspection or Commissioner of Income Tax etc., whereby he has reason to believe that the person whose premises are to be searched, is in receipt or possession of unaccounted or undisclosed money, property or income. Hence, you must ensure that you are never in possession of any such unaccounted money, property or income, irrespective of whether you are an assessee, or otherwise. In case you have some unaccounted income, you should declare it before the A.O. or the C.I.T. Thus, where a voluntary disclosure is made by a person about the hitherto undisclosed income or property, before its detection by the Income Tax Department, there are fair chances that you would not be caught in the trap of an income tax raid. Please remember, that an income tax raid may be conducted not merely against a person who is the owner of undisclosed income, but equally against a person who is in possession of the same, even though it does not necessarily belong to him. Therefore, it is important for a person, while having the custody of someone else’s jewellery or any other valuable article, to make sure that the same is duly accounted for. He should obtain a letter from the owner of the jewellery, etc. to the effect that the same belongs to him and that it represents disclosed income or property of the owner. Thus, where a person takes necessary precaution about a proper disclosure of the property or income in his possession, there would not be any risk of inviting an income tax raid.

Every tax payer must, therefore, make all out efforts to comply with all the above mentioned provisions so that the chances of income tax raid are avoided. In case unaccounted assets, etc. are found during the course of income tax raid, then only do you have to pay both tax and penalty, but you may also face prosecution.

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