Search and Seizure Proceedings, Powers, and Procedural Safeguards in New Income Tax Act [Old vs New Income Tax Series - Article 3]

Income-tax search actions, commonly called search and seizure or raids, are among the strongest powers available to tax authorities. From 2025, these powers are reorganised under the Income-tax Act, 2025. The core philosophy remains similar to the Income-tax Act, 1961, but the new law modernises the framework to address electronic records, cloud systems, digital assets, and introduces a clearly structured block assessment regime for search cases.

Section-wise mapping: Old Act vs New Act

Subject	Income-tax Act, 1961	Income-tax Act, 2025
Search and seizure	Section 132	Section 247
Requisition	Section 132A	Section 248
Non-disclosure of reasons	Judicial position	Section 249
Application of seized assets	Section 132B	Section 250
Retention & copies	Section 132(8)	Section 251
Search assessments	Scattered	Sections 292-301

When can a search be authorised?

Under Section 247(1), a search can be authorised only when a senior tax authority has information and forms a reason to believe that one of the specified conditions exists. These include:

• Required books, documents, or information, including electronic data, have not been produced or are unlikely to be produced.
• A person is in possession of assets or information relating to assets that represent wholly or partly undisclosed income or property, including links to undisclosed foreign income or assets.

The law is designed to prevent routine or casual searches. The requirement of information and reason to believe limits searches to serious and evidence-based cases.

In the case of Raj Krishan Gupta and Ors v.Principal Director of Income Tax (2025 TAXSCAN (HC) 1806), the Delhi High Court upheld the search of family lockers under Section 132 where the Department showed bona fide “reasons to believe,” properly approved, and supported by material.

This shows that courts generally do not sit in appeal over the sufficiency of reasons once the statutory conditions are met.

Who conducts the search and what powers do they have?

Once authorisation is validly issued, the authorised officer can exercise the powers listed in Section 247(1). These include:

• Entering and searching buildings, places, vessels, vehicles, or aircraft where undisclosed records or assets are suspected.
• Requiring technical assistance from persons controlling electronic records, including login credentials or access support.
• Breaking open locks and overriding access codes of computer systems if access is denied.
• Searching individuals present at, entering, or leaving the premises if concealment is suspected.
• Marking, copying, and taking extracts from books, documents, and computer systems.
• Preparing an inventory of assets and stock-in-trade found.
• Seizing books, documents, computer systems, and assets, but not stock-in-trade.

A key practical change is the explicit treatment of digital access. The law clearly empowers officers to access and copy electronic records and to override digital security where legally justified.

Cloud data and virtual digital space

The term “virtual digital space” is defined under Section 261(j). It reads

virtual digital space” means an environment, area or realm, that is constructed and experienced through computer technology and not the physical, tangible world which encompasses any digital realm that allows users to interact, communicate and perform activities using computer systems, computer networks, computer resources, communication devices, cyberspace, internet, worldwide web and emerging technologies, using data and information in the electronic form for creation or storage or exchange and includes––

(i) email servers;

(ii) social media account;

(iii) online investment account, trading account, banking account, etc.;

(iv) any website used for storing details of ownership of any asset;

(v) remote server or cloud servers;

(vi) digital application platforms; and

(vii) any other space of similar nature.

This definition makes it clear that the Act treats modern digital and cloud-based environments as legally cognisable locations for holding information and assets, bringing them squarely within the scope of search, seizure, and assessment provisions where the statutory conditions are satisfied.

Restraint orders and deemed seizure

Section 247(4) draws an important distinction between two types of restraint.

Deemed seizure under Section 247(4)(a)

If it is not possible or practical to physically seize a valuable article or thing, other than stock-in-trade, due to its size, weight, nature, or risk, the officer may pass a restraint order. This restraint is treated as a deemed seizure.

This is the only situation where a restraint order is legally treated as seizure.

Non-deemed restraint under Section 247(4)(b)

In other situations where seizure is not practical, the officer may restrain dealings with books, documents, assets, bank lockers, bank accounts, or computer systems.

Two safeguards apply:

• The restraint cannot continue beyond 60 days.
• The restraint is expressly not treated as a seizure.

This distinction narrows the scope of deemed seizure and provides time limits for other restraint orders.

Statements, presumptions, attachment, and valuation

Examination on oath

Under Section 247(6), the authorised officer may examine on oath any person who has possession, control, or access to records, assets, or computer systems. Such statements can be used as evidence under both the 1961 Act and the 2025 Act.

In CHETNABEN J SHAH v. THE INCOMETAX OFFICER, WARD 10(3) case, the Gujarat High Court ruled that mere voluntary disclosure of income without material evidence cannot form basis of addition. The principle is that admission/confession during search should be backed by evidence; additions should not rest only on a statement.

Presumptions during search

Section 247(7) allows certain legal presumptions when a person is found in possession or control of books, documents, assets, or electronic information. These include presumptions about ownership, truthfulness of contents, authenticity of signatures, and validity of electronic communications.

Provisional attachment

Section 247(8) permits provisional attachment of property during or shortly after a search, subject to recorded reasons and prior approval of senior officers. The attachment is valid for a limited period, generally six months from the end of the month in which the order is passed.

Valuation reference

Under Section 247(9), valuation of property may be referred to a Valuation Officer or approved valuer. The valuation report must be submitted within the prescribed time.

Criminal procedure framework

Section 247(10) applies the Bharatiya Nagarik Suraksha Sanhita, 2023 to search and seizure procedures, replacing references to the earlier Code of Criminal Procedure.

Requisition instead of search: Section 248

Sometimes, books, documents, or assets are already held by another authority under a different law. Section 248 allows requisition in such cases.

A requisition can be made if the authority believes that relevant material or undisclosed assets are in the custody of another officer or authority and are required or useful for tax proceedings.

Once delivered, key provisions relating to restraint, presumptions, attachment, and retention apply to the requisitioned material, with suitable modifications.

In Kasinath Rangonda Kanade v. State of Kerala (2024 TAXSCAN (HC) 2038), where cash/assets are already produced before a Magistrate, the Kerala High Court recognised that income-tax authorities can still seek interim custody to make requisition/search machinery effective

Reasons not to be disclosed

Section 249 provides that the recorded reasons for authorising a search or requisition cannot be disclosed to any person, authority, or the Appellate Tribunal. While reasons must exist and be recorded internally, this provision strengthens confidentiality around authorisation decisions.

Application and release of seized assets

Section250 governs how seized or requisitioned assets are used. Assets may be applied to recover existing tax liabilities or liabilities determined after assessment, including block assessments.

Key safeguards include:

• The right of the taxpayer to apply for release of seized assets within specified timelines.
• A defined outer time limit, generally linked to execution of the last authorisation.
• Payment of interest at 0.5 percent per month or part thereof on excess amounts retained, in specified situations.

In Harish Forex Services Pvt. Ltd. v. Assistant Director of Enforcement (2024 TAXSCAN (HC) 154), the Rajasthan High Court criticised prolonged non-decision on release of seized currency (treated as stock-in-trade) and emphasised timelines and duty to consider release, relying on Section 132B mechanics.

Retention and copying of seized records

Section 251 regulates post-search handling of books and documents.

• If the authorised officer lacks jurisdiction, seized material must be handed over to the jurisdictional Assessing Officer within 180 days.
• The person from whom items are seized has the right to make copies or extracts, under supervision.
• Retention is time-bound and linked to assessment progress. Longer retention requires recorded reasons and approvals.
• A formal objection mechanism is available by applying to the Board, with an opportunity of being heard.

Search vs survey powers

The Act clearly distinguishes search from survey or inspection powers. Under Section 253(3), during a survey or inspection, tax authorities cannot remove cash, stock, valuables, or books from the premises. Seizure is permitted only in a search under Section 247. This distinction is critical for compliance and risk assessment.

Block assessment framework (Sections 292 to 301)

Trigger and abatement

When a search or requisition is initiated, Section 292 requires assessment or reassessment of undisclosed income for the block period. Certain pending proceedings for years within the block period abate, as specified.

In Saurabh Agrotech Pvt. Ltd. v. DCIT (2025 TAXSCAN (ITAT) 904), the ITAT Jaipur held that for completed and unabated assessment years, additions under search assessment provisions cannot be sustained in the absence of incriminating material found during the course of search.

In Pr. CIT (Central-1) v. Milan Kavin Parikh (2025 TAXSCAN (HC) 2664), the Bombay High Court held that information received from a foreign government after completion of search could not be treated as incriminating material found during search for sustaining additions under Section 153A, relying on settled Supreme Court jurisprudence.

Block period and undisclosed income

Under Section 301, the block period includes:

• Six tax years preceding the year of search or requisition.
• The period from 1 April of the year of search to the date of execution of the last authorisation.

Undisclosed income includes assets, including virtual digital assets, unrecorded expenditure, and incorrect claims of exemption or deduction.

Computation

Section 293 provides the computation mechanism. Undisclosed income is aggregated from the return filed and income determined by the Assessing Officer. Income already properly disclosed or assessed before the search is excluded, subject to conditions. Set-off of earlier losses or depreciation against undisclosed income is restricted.

Procedure and notice

Section 294 requires issuance of a notice calling for a return of undisclosed income within up to 60 days. Revised returns are not permitted. In limited audit-related cases, a 30-day extension may be granted. Prior approval of senior officers is mandatory before issuing the notice.

Other person cases

If seized material relates to another person, Section 295 requires transfer of material and initiation of block assessment proceedings against that person, with rules for aligning dates and periods.

Time limits

Under Section 296, the block assessment order must generally be passed within 12 months from the end of the quarter in which the last authorisation is executed or requisition made. Extensions apply in limited cases, such as transfer pricing references. Specific exclusions from limitation are also provided.

Authority and approvals

Section 299 requires that block assessment orders be passed by Assessing Officers of specified rank. Prior approval of senior officers is mandatory for searches or requisitions initiated after commencement of the 2025 Act.

Conclusion

The Income-tax Act, 2025 retains the core principles of search and seizure but modernises them for a digital economy. It provides clearer powers, stronger procedural safeguards, and a comprehensive block assessment system.