Income Tax Raid - What Is It And Why?

To overcome corruption and hoarding of black or illegal money, the government of India has the right to initiate a legal move in the form of income tax raid. The Income Tax Department of India (ITD) is the apex body that conducts the raid. Income tax raid has been a tool of the government for a long time against the hoarding of black money. To discourage black money hoarding and curb illegal wealth, income tax raids have been the most successful method. Income tax raids cause panic among the holders of illegal wealth because the income tax department carries out a thorough operation of search and seizure under the Income Tax Act. In this article, you will learn about what is income tax raid and related things.

Let us begin by understanding what is income tax raid?

What Is Income Tax Raid?

When the income tax department suspects that an individual or business has illegal money, they carry out income tax search and survey operation which is also called income tax raid. The main function of the income tax department while carrying out an income tax raid is to collect income tax and enforce direct tax laws like Black Money Act, 2015, Benami Transactions (Prohibition Act) Act, 1988, etc.

When there an activity to avoid or evade tax, the Income Tax Department of India (ITD) carries out the process of search and seizure under the Income Tax Act. The Department of Revenue of the Ministry of Finance which is headed by the Central Board of Direct Taxes (CBDT) supervises the Income Tax Department of India (ITD).

Let us now learn about the purpose of Income tax raid.

Purpose Of Income Tax Raid

Search and seizure under the Income Tax Act are one of the most powerful weapons that the ITD possesses to curb illegal wealth/black money. Black money, also known as unaccounted money is the illegal income of an individual or a business on which taxes have not been paid. Such income is concealed or hidden from the income tax authorities. Therefore, to find such income an income tax raid is conducted. In order to avoid any chances of income tax raid, one must not accumulate any black money and disclose all the earnings in the income tax returns.

Now let us learn about the situations when a raid can happen.

When Can A Raid Happen?

• When there is credible information on tax evasion or reports received from the intelligence wing of the income tax department.
• Illegal investment in real estate.
• Information provided by the government departments.
• Taxpayer's information received from his assessment records.
• Information in relation to disproportionate spending by the income tax payer i.e. the taxpayer.
• Living a luxurious lifestyle without corresponding income to support the same.
• Unexplained share transactions, cash credits, etc.

Let us now learn who can carry out an income tax raid.

Who Can Carry Out Income Tax Raid

According to Section 132(1) of the Income Tax Act, the:

• Principal Director General or Director-General or
• Principal Director or Director or
• Principal Chief Commissioner or Chief Commissioner or
• Principal Commissioner or Commissioner

The above mentioned persons have the authority to authorize other officers who can carry out an income tax raid on their behalf.

Let us now learn about the powers of tax authorities while executing a raid.

Powers Of Tax Authorities While Executing A Raid

• Enter any building or place and search wherever they suspect that the money, bullion, jewellery, books of accounts, other documents or valuable things with undisclosed income are kept.
• When keys are not available, break open the locks.
• When a person is suspected to have things mentioned in the first point, the tax authorities can carry out personal searches.
• Seize any of the above mentioned items.
• Place identification marks and take copies or extracts of the books of accounts or any other relevant documents.
• Make note of the valuables or inventories found during the search operation.

The above mentioned are some of the powers of the tax authorities. You must always remember that by indulging in tax evasion or avoidance by illegal means can lead to severe consequences. The penalties are not only in monetary terms but you can face imprisonment too. You can easily avoid tax raids from income tax authorities by following the law of the land. An individual or business must timely respond to the notices and summons sent by the department. Also, you must never keep any property or income that is undisclosed. By following the simple laws and disclosing all your income, you can lawfully avoid income tax raids.