Introduction
Clause 247 of the proposed Income Tax Bill, 2025, grants tax authorities extensive investigative powers, allowing them to override access codes and enter virtual digital spaces for suspected tax evasion cases. While it aims to strengthen enforcement, the provision raises critical concerns about privacy, constitutional rights, and the risk of misuse.
Clause 247
Where the competent authority, in consequence of information in his possession, has reason to believe that—
(a) A person issued a summons under Section 246(1) or a notice under Section 268(1) has failed to produce required documents, books of account, or information stored electronically; or
(b) A person is likely to withhold such documents or electronic records relevant to tax proceedings; or
(c) A person possesses undisclosed income or property, including money, bullion, jewelry, or other valuable assets,
the competent authority may authorize an officer, not below the rank of an Income-tax Officer, to—
(i) "Enter and search" any premises, vehicle, vessel, or aircraft where relevant documents or undisclosed assets may be stored.
(ii) "Override access codes" and gain entry into any computer system, cloud server, email account, social media platform, or any virtual digital space.
(iii) "Break open locks" of safes, lockers, or receptacles to retrieve suspected tax-related records or valuables.
(iv) "Search any individual" suspected of concealing such documents or valuables on their person.
(v) "Seize and copy" books of account, documents, and electronic data found during the search.
(vi) "Mark and inventory" seized assets, including digital and physical property.
Interpretation of Clause 247
🔴 Unprecedented Digital Access: Authorizes tax officers to bypass security mechanisms and enter private digital spaces, including bank accounts, investment platforms, and communication channels.
🔴 Sweeping Powers Without Judicial Oversight: Officers can access personal and business information without prior approval from a court.
🔴 Broad Definition of ‘Virtual Digital Space’: Includes cloud storage, email servers, and social media platforms, raising concerns over potential misuse.
🔴 Compulsory Compliance: Individuals and businesses must grant tax authorities full access to their electronic records upon demand.
Impact on Taxpayers
(a) Privacy and Digital Rights Concerns
Clause 247 significantly infringes on taxpayers’ right to privacy, particularly in light of the Supreme Court’s Puttaswamy judgment, which upholds data protection and digital autonomy.
(b) Risk of Arbitrary Enforcement
The absence of judicial scrutiny could lead to 🔴 overreach, exposing individuals and businesses to intrusive investigations without clear evidence of wrongdoing.
(c) Chilling Effect on Free Expression
Surveillance of social media, emails, and other digital platforms may deter individuals from 🔴 expressing opinions freely, fearing tax scrutiny based on their online presence.
(d) Economic and Business Disruptions
Unrestricted seizure of business records and digital assets could 🔴 impact operations, disrupt financial transactions, and create compliance burdens for enterprises.
(e) Potential for Misinterpretation and Profiling
Extravagant purchases, international travel, and luxury spending—if taken out of context—may be 🔴 misconstrued as disproportionate income, leading to unwarranted tax investigations.
Constitutional and Legal Concerns
🔴 Violation of Article 21 (Right to Privacy): The clause undermines personal autonomy by allowing unrestricted access to personal digital assets without legal safeguards.
🔴 Threat to Free Speech (Article 19(1)(a)): Monitoring social media activities may deter open discussions and create a climate of self-censorship.
🔴 Contravention of PUCL v. Union of India: The Supreme Court mandates a structured legal procedure for electronic surveillance, which this clause lacks.
🔴 No Judicial Oversight or Review: The unchecked authority to conduct searches and seizures increases the risk of arbitrary actions against individuals and businesses.
Recommendations & Safeguards
🔴 Mandatory Judicial Authorization: Digital searches should require prior court approval to prevent misuse.
🔴 Clear Procedural Guidelines: Establishing a structured framework for executing searches and seizures will ensure due process.
🔴 Independent Oversight Mechanism: Setting up a review board to oversee digital investigations will safeguard against abuse.
🔴 Transparent Justification for Access: Tax authorities must provide documented reasons before gaining access to virtual spaces.
Conclusion
While Clause 247 enhances tax enforcement capabilities, its far-reaching provisions raise fundamental concerns about individual privacy, free speech, and the potential for excessive state surveillance. Without judicial safeguards and well-defined boundaries, the provision risks becoming a tool for overreach rather than structured and fair tax enforcement. Lawmakers must address these critical issues to balance taxation enforcement with constitutional rights and democratic principles.
