The Finance Act 2017 proposes a vital Amendment in the Income Tax Act 1961 relating to procedure for searches under the Act.
Sub-section (1) and (1A) of section 132 provide that where an authority mentioned therein, based on the information in his possession, has 'reason to believe' or 'reason to suspect' of circumstances referred to in the said sub-sections, he may authorize an authority specified therein to carry out search & seizure.
Similarly, sub-section (1) of section 132A provides that the specified income-tax authority based on 'reason to believe' can authorise other income-tax authority mentioned therein to requisition from some other officer or authority to deliver books of account, documents or assets of the assessee to the income-tax authority so authorised.
Finance Act 2017 says confidentiality and sensitivity are the hallmarks of proceedings under section 132 and section 132A.
“However, certain judicial pronouncements have created ambiguity in respect of the disclosure of 'reason to believe' or 'reason to suspect' recorded by the income-tax authority to conduct a search under section 132 or to make requisition under section 132A. It is therefore proposed to insert an Explanation to sub-section (1) and to sub-section (1A) of section 132 and to sub-section (1) of section 132A to declare that the 'reason to believe' or 'reason to suspect', as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal”
According to the proposed Amendment the 'reason to believe' or 'reason to suspect', as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal.
These amendments will take effect retrospectively from the date of enactment of the said provisions viz. to sub-section (1) of section 132 from 1st day of April, 1962 and to sub-section (1A) of section 132 and to sub-section (1) of section 132A from 1 st day of October, 1975
Recording “reasons to believe” has been considered as one of the safeguards to prevent vexatious search and seizures in many statutes.
In Pooran Mal Etc Vs Director Of Inspection (Investigation) of Income Tax the Constitution Bench of the Supreme Court held Sections 132, 132A of IT Act is not violative of Article 14 and 19(1)(f) and (g) of the Constitution of India. It is also held that illegality in search does not vitiate the entire proceedings.