Supreme Court Examines Constitutional Challenge To Income Tax Act, 2025 Provisions
Supreme Court Examines Constitutional Challenge To Income Tax Act, 2025 Provisions
Introduction
A Public Interest Litigation has been filed before the Supreme Court challenging the constitutional validity of provisions under the Income Tax Act, 2025 that authorise Income Tax authorities to conduct searches of “computer systems” and “virtual digital space”, including personal digital devices, cloud servers and electronic communications. The petitioner contends that the impugned provisions create an intrusive and anticipatory search regime violating the fundamental right to privacy under Article 21 of the Constitution.
Factual Background
The petition assails Section 247 of the Income Tax Act, 2025, scheduled to come into force from 1 April 2026, along with corresponding provisions under Section 132 of the Income Tax Act, 1961. Section 247 authorises tax officials to conduct searches not only of physical premises but also of “computer systems”, broadly defined to include communication devices, electronic storage systems, cloud infrastructure and “virtual digital space”.
The challenge also extends to clauses permitting search and seizure where authorities have reason to believe that a person “will not” or “would not” produce documents if summoned, or that assets would not be disclosed for tax purposes. According to the petitioner, this anticipatory standard allows highly intrusive searches even in the absence of proven non-compliance.
The petitioner argues that the law permits access to laptops, mobile phones, emails, private chats and cloud-stored data, and enables officials to override passwords or access controls, without prior judicial authorisation. It is contended that such sweeping digital search powers represent a significant expansion of traditional search authority into the realm of informational privacy.
Procedural Background
The matter was heard briefly by a Bench comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi and Justice N.V. Anjaria. Senior Advocate Sanjay Hegde, appearing for the petitioner, assisted by Advocate-on-Record Pranjal Kishore, advanced submissions challenging the provisions.
Hegde acknowledged that Section 132 of the Income Tax Act, 1961 had been upheld in Pooran Mal v. Director of Inspection (1974). However, he submitted that the recognition of the right to privacy as a fundamental right in K.S. Puttaswamy v. Union of India (2017) necessitated a fresh constitutional evaluation of such powers, especially in the digital context.
The Bench adjourned the matter for further consideration, directing the petitioner to examine the 2022 decision in Principal Director of Income Tax (Investigation) v. Laljibhai KanjiBhai Mandalia, wherein limited judicial review of “reasons to believe” under Section 132 was recognised.
Issues
1. Whether Section 247 of the Income Tax Act, 2025, permitting searches of computer systems and virtual digital space, violates the fundamental right to privacy under Article 21.
2. Whether provisions enabling anticipatory searches based on belief of future non-compliance are constitutionally valid.
3. Whether the absence of prior judicial authorisation and non-disclosure of “reasons to believe” renders the framework arbitrary and violative of natural justice.
Contentions of the Parties
The petitioner contended that the impugned provisions establish an “anticipatory search framework”, allowing invasive digital searches on the mere belief that a person may not comply with summons in future. It was argued that such speculative triggers fail the proportionality test and permit excessive intrusion into personal digital data.
The plea further asserted that search authorisations are granted internally by senior tax officials without judicial oversight, and that statutory provisions barring disclosure of “reasons to believe” impede meaningful judicial review. The petitioner relied heavily on privacy jurisprudence, particularly K.S. Puttaswamy, to argue that digital data given its volume and sensitivity demands heightened constitutional safeguards.
In response to the submissions, Justice Bagchi observed that judicial review of search authorisations is available and that courts can examine whether there exists a rational nexus between the material before authorities and the belief recorded. The Court noted that the statutory framework requires recording of reasons based on information and satisfaction at multiple levels of authority.
The Bench highlighted that anticipatory provisions are intended to prevent destruction of evidence, especially in the digital context where devices or data may be easily erased. Chief Justice Surya Kant remarked that the power was not “uncontrolled” as statutory preconditions exist. The Court indicated that concerns may be addressed through fact-specific judicial scrutiny rather than a facial invalidation of the provision.
Reasoning and Analysis
At the preliminary stage, the Court was not persuaded that the impugned provisions conferred unguided or uncanalised powers upon tax authorities. The Bench emphasised that the statute requires recording of “reasons to believe” and that limited judicial review is available to test the existence of material and rational nexus.
The Court observed that, particularly in the digital era, there exists a genuine possibility of destruction of incriminating electronic evidence if advance notice is issued. The statutory framework, therefore, attempts to balance investigative necessity with procedural safeguards.
The Bench further indicated that prior precedent, including the Mandalia decision, addresses many of the concerns raised regarding scrutiny of search authorisations. It suggested that implementation over time may reveal whether further safeguards are required.
Decision
The Court did not grant interim relief and adjourned the matter for further consideration, directing the petitioner to examine existing precedent in greater detail. The constitutional challenge remains pending.
