SUPREME COURT DECLINES TO HEAR CHALLENGE AGAINST SEARCH AND SEIZURE POWERS UNDER SECTION 132 OF THE INCOME TAX ACT (CORRESPONDING TO SECTION 247 OF THE NEW ACT):

The Supreme Court on Monday declined to entertain a petition challenging the constitutional validity of search and seizure powers under Section 132 of the Income Tax Act, 1961, and its counterpart, Section 247, in the new Income Tax Act, 2025, which is scheduled to come into effect from April 1, 2026. A bench comprising Chief Justice of India Surya Kant and Justice Joymalya Bagchi dismissed the writ petition as withdrawn after hearing arguments from Senior Advocate Sanjay Hegde, who appeared for the petitioner assisted by Advocate on Record Pranjal Kishore. The bench permitted the petitioner to submit a representation to the Government of India seeking modifications or clarifications to the provision, while rejecting the claim that it was unconstitutional.

The petition, filed as a public interest litigation, primarily targeted the exemption granted to tax officers from disclosing the "reasons to believe" that justify a search, either to the assessee or to the Income Tax Appellate Tribunal. It highlighted concerns over the "anticipatory" nature of the powers, which allow searches based on a belief that a person might not produce documents if summoned or that undisclosed assets would not be revealed for tax purposes, even without any proven violation or non-compliance. The plea argued that such clauses enable highly intrusive actions on speculative grounds, bypassing less invasive mechanisms like summons, surveys, or assessments. A key focus was the expansion under Section 247 to cover "computer systems" and "virtual digital space," encompassing personal laptops, mobile phones, emails, private chats, cloud servers, electronic communications, and remote data storage. The petitioner contended that this broad scope permits access to sensitive personal information, potentially overriding passwords and access controls without prior judicial authorization, thereby infringing on informational privacy protected under Article 21 of the Constitution, as affirmed in the K.S. Puttaswamy judgment. It further asserted that internal authorization by senior tax officials, combined with non-disclosure of reasons—even post-2017 amendments barring revelation to tribunals—renders meaningful judicial scrutiny difficult and violates natural justice principles. Reliance was placed on pre-privacy era rulings like Pooran Mal v. Director of Inspection, urging a fresh evaluation in light of evolving fundamental rights jurisprudence.

The bench appreciated the petitioner's concerns about potential misuse and the desirability of greater safeguards, such as disclosing at least a gist of reasons to tribunals or providing independent oversight, while noting that the provisions target major tax evaders and evolve over time to prevent abuse. It emphasized that the law requires recording of "reasons to believe" in writing and that judicial review by High Courts remains available, as affirmed in the 2022 decision in Principal Director of Income Tax (Investigation) v. Laljibhai Kanjibhai Mandalia, which recognized only a limited scope for such review. The court clarified that the existence of judicial review by constitutional courts suffices to uphold validity, even if not extended to tribunals, and that apprehensions of misuse or supplementation of reasons were abstract rather than concrete. It declined to second-guess parliamentary wisdom or strike down the provision, underscoring that while concerns about harassment exist, the framework includes checks and balances. The dismissal reflects judicial restraint in policy-laden fiscal matters, allowing executive refinement through representations while preserving High Court oversight.