PIL In Supreme Court Challenges Income Tax Law Allowing Search Of Digital Devices, Cloud Data

A public interest litigation has been filed before the Supreme Court challenging the constitutionality of provisions in the Income Tax Act, 2025 that empower tax authorities to conduct searches of “computer systems” and “virtual digital space”, including personal electronic devices, cloud servers, emails and private communications.

The plea, filed under Article 32 of the Constitution by entrepreneur Vishwaprasad Alva, assails Section 247 of the Income Tax Act, 2025, as well as the corresponding provisions under Section 132 of the Income Tax Act, 1961.

Section 132 of the 1961 Act, which is mirrored in Section 247 of the new Act, permits search and seizure on the belief 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, these provisions create an “anticipatory search framework”, enabling highly intrusive powers to be exercised without any existing violation of law.

A bench comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi and Justice NV Anjaria briefly heard arguments on Tuesday by Senior Advocate Sanjay Hegde, assisted by Advocate-on-Record Pranjal Kishore, before adjourning the matter for further consideration next week.

Appearing for the petitioner, Hegde contended that the impugned provisions permit searches based merely on an apprehension that a person may not produce documents or disclose assets if summoned, creating what he described as an “anticipatory search mechanism”. He argued that such a framework fails the test of proportionality, particularly in light of the right to privacy recognised in K.S. Puttaswamy v. Union of India.

The bench observed that the statutory scheme requires recording of reasons and that judicial review of search authorisation is available.

Justice Bagchi said that a limited judicial review on the reasons to exercise Section 132 powers was recognised by the Supreme Court in 2022 in Principal Director Of Income Tax (Investigation) vs Laljibhai KanjiBhai Mandalia 2022 LiveLaw (SC) 592.

Justice Bagchi noted that "If a roving search under 132 is initiated, you come before us and call upon the department to produce the records, and if you find that there is no rational nexus between the material before the department and the reasonable belief recorded by them in their records, the entire procedure will be set aside."

CJI Surya Kant said that if there are incriminating electronic documents, people might destroy the device itself.

Hegde submitted that, irrespective of the possibilities of evidence destruction, there must be some guidelines to circumscribe the power of the authorities to prevent abuse.

The petitioner also challenged the non-disclosure of "reasons to believe", arguing that it curtails meaningful judicial oversight, particularly when digital searches involve access to vast quantities of personal and sensitive information.

Justice Bagchi noted that the guidelines and safeguards prescribed in the Mandalia judgment had already dealt with most of the issues flagged regarding the misuse of search powers.

The bench asked Hegde to come back after examining the Mandalia judgment in detail.

The matter has been adjourned for further hearing.