Union Budget proposes changes to Income Tax search and seizure provisions

A salesman watches TV screens during the live telecast of Union Budget 2023 by Finance Minister Nirmala Sitharaman in Ahmedabad on Wednesday.
| Photo Credit: VIJAY SONEJI

The Union Budget 2023-24 has proposed certain changes to the Income Tax search and seizure provisions in view of the increased use of technology and digitisation in the management and maintenance of accounts, digitisation of data, cloud storage and other associated aspects.

Section 132 of the Income-Tax Act pertains to the procedure for the search and seizure to be followed by the agency.

The document said: “In the recent past, due to the increased use of technology and digitisation in every aspect including management and maintenance of accounts, digitisation of data, cloud storage etc., the procedure for search and seizure has become complex, requiring the use of data forensics, advanced technologies for decoding data etc., for complete and proper analysis of accounts.”

Similarly, “there is an increasing trend of undisclosed income being held in a vast variety of forms of assets or investments in addition to immovable property. Valuation of such assets and decryption of information often require specific domain experts like digital forensic professionals, valuers, archive experts etc. In addition to this, services of other professionals like locksmiths, carpenters etc., are also required in most of the cases, due to typical nature of the operations”.

Accordingly, the government has proposed to amend the relevant provisions of the section to ensure that during the course of I-T searches, the authorised officer may be able to requisition the services of any other person or entity, as approved by the Principal Chief Commissioner or the Chief Commissioner, the Principal Director General or the Director-General, in accordance with the procedure prescribed by the Board in this regard, for assistance during the search.

It has also been proposed that during or post search, the officer may make a reference to any person, entity or authorised valuer to estimate the fair market value of the property in the manner prescribed and submit a report within 60 days from the receipt of reference.

If approved, the amendment will take effect from April 1.

“Consequent to the changes in 2021, the assessment or reassessment in consequence to search is now performed under Section 147 of the Act and provisions of Sections 153A and 153B are no longer applicable. The timelines for completing assessment or reassessment in search cases are linked to the execution of the last of the authorisations during such procedure, in order to establish the day of conclusion of search proceedings, and what constitutes as last authorisation is provided in Section 153B,” it said.

As the provisions of Section 153B are no longer applicable, the government has proposed to provide the meaning of execution of last authorisation under Section 132 itself. “This amendment will take effect retrospectively from the April 1, 2022,” it said.