Income Tax Raids: What, Who, and How

Context

The Income Tax Department raided several offices of the Dainik Bhaskar Group recently, in connection with an alleged case of tax evasion. The raids reportedly took place at the group’s offices in Bhopal, Noida, Jaipur, and Ahmedabad, as well as at the promoters’ residences and offices.

Credit: ipleader blog

According to the publication, mobile phones belonging to employees who were present in offices during the raids were seized, and employees who had completed their shifts were not permitted to leave.

According to reports, the IT raids were conducted in response to information about tax evasion and alleged instances of related party transactions and round-tripping of funds. The Income Tax Department suspects the Group of engaging in tax evasion through its associate companies.

While the storey surrounding this latest IT raid develops, here is a brief explanation of how tax officials in India plan and execute the operation.

What are Income Tax (IT) raids?

IT raids are’search and seizure operations’ conducted by the department against a person, business, or entity suspected of hoarding illegal funds. It is one of the government’s numerous initiatives aimed at combating corruption and black money.

Black money is a term that refers to funds that have been obtained illegally or funds on which an individual or entity has failed to pay required taxes. This is also referred to as unaccounted money or wealth that is hidden from authorities. This can include undeclared funds, jewellery, and other property.

When does the IT department conduct a raid?

An IT raid is a constitutionally permissible mechanism by which the IT department attempts to rein in the country’s black money. A raid is conducted in response to credible evidence of tax evasion. This information may originate with the IT department’s Intelligence Wing, with any of the government departments, or with taxpayer records. The IT Department may conduct a raid if it becomes aware of an individual spending an excessive amount of money in comparison to his or her declared income. Other reasons for IT raids include bookkeeping, accounting, and invoice manipulation; unexplained cash credits, stock transactions, and illegal real estate investments, among others.

Who conducts an IT raid?

Raids are authorised by the Principal Director General or Director-General, or the Principal Director or Director, or the Principal Chief Commissioner or Chief Commissioner, or the Principal Commissioner or Commissioner, pursuant to Section 132(1) of the Income Tax Act.

Additional Directors, Additional Commissioners, Joint Directors, Joint Commissioners, Assistant Directors, Deputy Directors, Assistant Commissioners, Deputy Commissioners, or Income-tax Officers can lead IT raids.

What authority do the officers conducting the raid possess?

Authorized officials have the authority to enter and search any premises, including a person’s home, office, or any other location connected to the individual or entity, where they believe documents representing undisclosed income or valuables are kept.

They are authorised to break open any locks in the absence of keys. They have the authority to conduct personal searches of anyone suspected of concealing articles or information relating to tax evasion. Officials conducting raids can affix identification marks to material and copy books of accounts and other documents.

Authorized officials have the authority to seize undeclared money, jewellery, or valuables. Additionally, they can seize accounting records, invoices, diaries, property documents, and data storage devices such as computers, laptops, hard drives, and pen drives, among others.

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