The ITA have been granted wide powers under the IT Act to search any person or premises in order to unearth any undisclosed income or asset.^[1] However, a search action being a serious invasion upon the rights, privacy and freedom of the tax payer, this power of the tax authorities must be exercised strictly in accordance with law and only for the purposes for which the law authorizes for it to be exercised.^[2]

Section 132 of the IT Act provides for statutory safeguards which must be mandatorily fulfilled prior to carrying out any search action. The provision requires that before carrying out a search operation the authorized officer must have ‘information’ in his possession to form a reason to believe that any of the statutory conditions prescribed in clauses (a) to (c)  of Section 132 are fulfilled. What is of paramount importance is that such information has to be qua the person against whom an action under Section 132 of the IT Act is contemplated and must be in possession of the concerned authority prior to taking any such action.

The validity of a search action may be challenged before the competent High Court under Article 226 of the Constitution of India. However, there is no requirement under the law that such ‘reasons’ and formation of ‘reason to believe’ have to be disclosed to the assessee.

It must be understood that, the Court exercising jurisdiction under Article 226 of the Constitution of India would be entitled to examine the relevance of the reasons for the formation of reason to believe though not the sufficiency or the adequacy of the said ‘reasons’.^[3]  The limited scope of examination by the Court shall be restricted to analyzing whether the “reason to believe” has a rational connection or a relevant bearing on the formation of belief and is not extraneous or irrelevant, for the purpose of Section 132 of the IT Act.

Further it may also be noted that, the initiation of proceedings under Section 153A of the IT Act, for search operations carried out prior to April 01, 2021, cannot be done mechanically. In the absence of any incriminating material belonging to the assessee found during a search action, the provisions of Section 153A cannot be invoked in a routine manner.^[4]

[1] With effect from April 01, 2021, the manner of completing assessment in a search case has undergone a change. Post the amendment these assessments will be carried out under the reassessment regime.

[2] ITO v. Seth Brothers 1969 (74) ITR 836 (SC).

[3] DGIT v. Spacewood Furnishers P. Ltd. (374 ITR 545) (SC).

[4] Smt. Smrutisudha Nayak v. Union of India, order dated October 27, 2021 in CWP No. 10587/ 2009 (Orissa High Court).