“Retaliatory raids” under the new Income Tax Act must be put under sharp judicial scrutiny

THE INCOME TAX ACT, 2025, hastily slammed through both houses of Parliament in August without any parliamentary debate or discussion, contains an outrageous and repressive provision that grants sweeping powers to the Assessing Officer to invade a taxpayer’s digital informational privacy. 

While the power to conduct search and seizure is not new - being delineated earlier in Section 132 of the Income Tax Act, 1961 (‘1961 Act’) — one would have expected that the exercise of revisiting a sixty-year-old statute would have been used as an opportunity to align the power with the Supreme Court’s jurisprudence on privacy in the digital age. Instead, the new law doubles down on authoritarian practices, rendering the law even more draconian.

Section 247 empowers the tax authority to enter and search any place where “electronic media” or a “computer system” is suspected to contain relevant information. Section 261(e) defines the term “computer system” expansively to include “virtual digital space,” thus covering personal and professional communication platforms, social media accounts, cloud storage, and other online repositories. In effect, the law extends traditional physical search powers into the digital sphere, radically enlarging the scope of state intrusion into the informational domains of individuals. It is an expansion that raises serious constitutional concerns.

Why the new law must be tested against Puttaswamy’s proportionality standard

In 1973, the constitutionality of Section 132 of the 1961 Act was unsuccessfully challenged before a five-judge Constitution Bench of the Supreme Court in Pooran Mal v. Director of Inspection. Pooran Mal, in turn, relied on M.P. Sharma v. Satish Chandra (1954), which had held that, unlike the Fourth Amendment in the United States, the Indian Constitution imposed no express limitation on search and seizure powers, including on grounds of privacy. However, that jurisprudential foundation no longer holds. 

In K.S. Puttaswamy v. Union of India (2017), a nine-judge Constitution Bench of the Supreme Court emphatically recognised privacy as a fundamental right integral to Articles 14, 15, 19, and 21 of the Constitution. By doing so, Puttaswamy overruled M.P. Sharma, and by necessary implication, cast doubt on Pooran Mal.

Consequently, the new law must be tested against the proportionality standard articulated in Puttaswamy: 

(i) the measure must pursue a legitimate aim; 

(ii) there must be a rational nexus between the measure and its objective; 

(iii) no less intrusive alternative should be available; and 

(iv) the measure must strike a balance between the importance of the objective and the rights infringed. 

While preventing tax evasion may be a legitimate State aim, the inclusion of social media accounts and personal digital communications within the sweep of Section 247 bears no rational nexus to the determination of taxable income. Invading the private digital lives of taxpayers is disproportionately intrusive and fails the Puttaswamy test.