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How to spot a fake income-tax raid
June, 09th 2015

Last week, four men robbed a Charkop businessman of Rs 12 lakh and ornaments at 7 am in an incident straight out of Bollywood movie Special 26, which reminiscences the 1987 robbery of Tribhovandas Bhimji Zaveri store at Opera house.

Another youth in Thane was swindled off Rs 7.5 lakh by two men who approached him in a car claiming to be income tax officers. They took him in the car, stripped him off the money. Mohan Pandey of Saharanpur was a victim of fake income tax raid too in 2012. The gang of four not just took away valuables and cash, but also demanded more money as bribe.

Posing as income tax officers is a strategy rampantly being adopted by burglars. How can you avoid being a victim? Though it is tough to distinguish a fraud as one is panic-stricken amidst chaos at the thought of income tax raid, there are certain acts of genuine income tax raid or survey that can help you tell a thief apart.

The aim of an income tax raid or survey and search as they are called in income tax parlance are to trace unaccounted money and tax evasion. So, the officers typically try and look for books, computers, unaccounted cash and jewellery not disclosed under wealth tax returns.

While conducting a survey, income tax officers are entitled to inspect books of account and other documents, place marks of identification on books of account or documents examined or make extracts or copies of books of account or documents.

Chartered accountant Paras Savla, says, "One should always check the authorization letter. No officer can conduct a survey without this essential document, which can be issued by the chief commissioner. Also, assess the identity card which would have the income tax department's seal."

Check whether the search authorization document has been issued by principal director general, director general, principal director of income tax, director of income tax, principal chief commissioner of income tax, chief commissioner of income tax and commissioner of income tax only.

"The officers executing a raid wouldn't belong to the ward or the city that you belong to. For instance, if your assessment is done at ward 13 of Mumbai. Not a single officer would belong to that ward," Savla adds.

A common thread to all the robberies under the garb of income tax seizures is that the cash, ornaments and valuables are taken away. However, Savla points out that as per the rules, income tax officers are not allowed to take anything from the premises in the loose form.

"They have the right to file a Panchanama, seal the books and items found or place marks on them. Before sealing they call five people from neighbouring areas. Gold held at the premises below a certain limit cannot be seized."

Gold jewellery and ornaments to the extent of 500 gram per married lady 250 gm per unmarried lady and 100 gm per male member of the family are not supposed to be seized. However, these limits are not written in stone. The officer can exclude more gold after assessing the status and community of the taxpayer.

In another case, robbers claimed to be sales tax officials and fled with a vehicle full of copper wires. However, the authorised officer cannot seize stock-in-trade of a business. "He can only make a note of inventory of such stock-in-trade," points out Ameet Patel, partner at Manohar Chowdhry & Associates.

However, this rule does not apply to cash. "Unaccounted cash, even if forming part of stock-in-trade of business for an assessee, can be seized, if other conditions are satisfied," as per Section 132 of the Income Tax Act.

Just like your lawyer can be called for during police summons, one can call a chartered accountant during the survey and raids.

Also, the Charkop instance took place at 7 am. Can they enter the premises before business hours? Savla explains, "Never can the survey be conducted during off business hours. Once they enter the premises, the survey can extend the business hours, but the survey itself can be conducted during the business hours alone. These business hours depend on the profession of the taxpayer. So, it can be 9 am to 6 pm for a regular office. But if it is a hotel, then the survey can be conducted during the hours the hotel is open."

Savla recommends, a way to escape surveys and raids at your home is to avoid using your residence address as business address. So, if you have been using business address in your income tax returns then the raids cannot happen at your residence and you can nab the thieves if they land up at your home instead of office.

You should also be alarmed if the persons claiming to be income tax officers ask you to accompany them for further investigations as has happened in the above mentioned instances. "Unless the officers are going to another place or office of the assesse, the taxpayer isn't required to accompany the officers after the survey and seizure. All the rules of CRPC (Code of Criminal Procedure) need to be complied," says Savla.

You can also request for a copy of the panchanama and place your signature and seal on the package that the income tax officers have seized.

Currently, there is not any helpline where a taxpayer can check the credentials or the identity of the income tax officers who have been authorized to conduct a survey. "We would recommend the Central Board of Direct Taxes to set up a helpline to assist aggrieved tax payers," says Savla, who is also the president of the Chamber of Tax Consultants.

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