History of Search & Seizure in Indian Income Tax

History of Search & Seizure in Indian Income Tax

§  In 1956 the provisions of search and seizure made its first entry into the Income Tax Act.

§  Section 132 was totally substituted by the Finance Act, 1964.

§   Section 132 underwent a thorough overhaul in the year 1976.

§   Since then two committees had made certain recommendations on search and seizure provisions:  

i)        The Raja Chellaiah Committee

ii)       The Kelkar Committee.

• The recommendations affecting the substantive law have mostly been given effect to.
• The assessee friendly measures recommended have not been given serious considerations.

 

History of assessment of Undisclosed Income(Post Search)

 Phase 1 - Upto 30th June, 1995 (Normal Reassessment)
ü  No special provisions for reassessment.
ü  Undisclosed income taxed under general provisions.
ü  Provisions of sections 143 & 147 were mainly used.
ü  Reopening of completed assessments possible.
ü  Regular rates of taxation & interest on undisclosed income.
ü  Penalty & prosecution for concealment possible.
ü  Conditional immunity under expln. 5 to section 271(1)(c ) was available.

Phase II - From 1st July, 1995 to 31st May, 2003 (Block Assessment)
ü  FA 1995 inserted Chapter XIV-B for asst. of undisclosed income(UDI)
ü  Popularly known as Block Assessment.
ü  Only UDI detected in the course of search, assessable in Block asst.
ü  Block period comprised of 6 asst. years preceding the PY of search & included the period upto the date of search.
ü  UDI charged to tax at 60%.
ü  Surcharge leviable at the rates prescribed in the Finance Act  for the relevant year.  [CIT Vs. Suresh N. Gupta 297 ITR 322 (SC)]
ü  Block asst. was in addition to  & independent of regular asst. Disclosed income taxed in regular asst. & UDI in Block asst.
ü  Special provisions for asst. of third party's UDI.
ü  No interest u/s 234A, 234B & 234C.
ü  No penalty for concealment of income (upto 31-12-96).
ü  Order appealable – directly to ITAT initially, subsequently like any other asst. order, to CIT (Appeals)

Phase III - From 1st June, 2003 onwards  (Special Reassessment)
ü  Finance Act, 2003 has introduced sections 153A, 153B and 153C w.e.f.   1-6-2003, which has replaced  Chapter XIV-B.
ü  No more block period, undisclosed income and block assessment.
ü  Under the present  scheme total income of an assessee will be determined year wise and not  restricted to undisclosed income alone.
ü  Tax payable at the regular rates as applicable to respective years on total income – Expln.(ii) to s. 153A.
ü  The returns are required to be filed after search in respect of six asst. years immediately preceding the year of search – 153A(a)