As the privacy experts increase the alarm on the alleged capacity of the new income tax bill, which allows target snowpping of digital assets of taxpayers, including his social media accounts, former IRS officer Ajay Mainkotia argues that the bill simplifies the current law – and the tax department is unfavorable by taxing the tax department.
A person’s house is his palace. But the law allows the palace to be dissolved sometimes. The violation is not a whispering, but after following the appropriate protocol, is determined by the law.
Raid – The colloquial words used for the formal vocabulary used in the Income Tax Act ‘search and seizure’ – are some more distant.
They are not resorted to in the general course to determine the taxpayer’s taxable income, but are called under extraordinary circumstances. The raid is the ultimate violation of secrecy, and thus, is performed only under special circumstances.
What are these circumstances?
tax department The general course receives information about taxpayers from several sources in the general course about the sale or purchase of property, share transactions, dividends, bank interest, transmission, received rent, and others. These have been listed in Form 26AS related to taxpayer, which can be checked for their information and its accuracy can be confirmed. The tax department also gets information about foreign assets and bank accounts of Indian taxpayers from foreign shrines.
The tax department can only conduct a raid if it has the reason for believing – based on information in its possession – that there is no taxpayer or will not be responsible for tax notice or some income or property that is not or will not be declared, and taxes have been developed resulting.
Information about tax evasion should be reliable and needs to be verified. After proper hard work, the tax officer recorded his satisfaction that he had the reason to believe that tax evasion is present, which needs to be approved by his superiors. Then a green signal is given.
Thus, there is a rigorous process to ensure that the valid process is followed and only followed cases that warrant a raid, according to the law, is taken for execution. Raids, unfortunate, as they may, when other methods do not work, are done as the last measures to get black money out.
Raids can be ‘painful’
On one hand, privacy, a raid can be very painful. There can be nothing for the householders, which knocks on the front door compared to the morning, in an hour when the milkman and the newspaper delivery boy are in their round, when the house is stirring to wake up and the children wake up for school.
Even a rigid tax itere, who knows that one day a trip will be paid, is not unaffected.
During a raid, the tax team goes from room to room, makes a wide discovery for books, documents, vouchers, diary, papers, gold, jewelery, precious accessories, computers, pen-drives, external hard drives and other items. Almira, boxbades, suitcases, cannists, mattresses, furniture, bags, clothes – all undergo a detailed inspection. Efforts are made to investigate for false roofs, false coaches, false drawers. If a room, or cupboard, or suitcase is closed and the keys are not available or not assigned, the lock can be broken.
Computers are also investigated. With the advent of technology, transactions are now recorded digital and electronically and the tax law allows computers to inspect books, documents, vouchers, diaries, papers and transactions. These can also be stored on computers, or on cloud storage space, and platforms/apps on computer such as mail, WhatsApp and social media sites. Since a phone is a computer (small and more portable) these days, the phone is also examined for mail, WhatsApp messages and social media posts.
Nothing is off-lymph. Once confidentiality is violated, the taxpayer cannot demand or expect a redline that cannot be crossed.
An essential ‘evil’
These days, with the advent of technology and smart internet-based equipment, tax evasion is refined. The tax evasion business is conducted on WhatsApp and similar messaging services that ensure privacy and security.
Cash sales, property transactions partially in cash, money laundering, Hawala International trade, betting, transactions under the invoice of bribery, the list is endless. No one has strict copies of such tax. Similarly, email can also be used for such purposes. Social media sites can highlight lifestyle, travel, weddings and parties, which in turn can help investigators determine whether a person has declared everything properly.
At the conclusion of the raid, money and valuables which have not been declared to the department have not been seized. After the determination and payment of taxes, precious goods are later returned.
Books are also seized because other such documents, diary, paper, pen drive, external hard drives are Germans to determine tax liability. Those who are not relevant are not seized. Computer hard disks and phones are also seized. Copies of all such physical seizures, copy of computer hard drive, and the phone (after this are made of its content) are later given to the taxpayer. Electronic records obtained from computer/phone, subject to safety measures, are used as evidence in tax proceedings.
What happens if the taxpayer does not share passwords of electronic records, digital storage drives, emails, social media handles, cloud storage space and communication platforms? In that event, the tax officer can override the access code of the computer system. If this is not done, the raid will be fruitless and the tax evader will go away, Scott-Free. But non-cooperation is a rare event-and most taxpayers fully support.
In a survey, which can only be in an office or factory, not at residence, no seizures are allowed and only copies of books and documents, and electronic/digital records on computer/computer peripheral/phone.
Confidential concern with new IT Act
The tax department sets great stores in ensuring taxpayer’s confidentiality. The same lies in the taxpayer’s charter which is part of the tax law. The relevant provision states-Maintain privacy: The department will not disclose any information provided by the taxpayer to the department until the law is authorized by the law.Therefore, any third party will not have any knowledge of taxpayer’s taxes. For example, on the basis of WhatsApp messaging, any tax theft will remain only under the scope of the department.
However, if the taxpayer had to combat the tax order, the details would come to light as the legal decisions outside the tax department (Tax Tribunal, High Court, or Supreme Court) are in the public domain.
These days, the media is awakening with the news that the new Income Tax Bill 2025, Claus 247 especially, overrods the tax authorities on the online activities of taxpayers by overroding the computer system or virtual digital space on social media accounts and online activities of taxpayers.
Virtual digital space is defined as “any digital field” allows users to interact, communicate and activate through computer technology.
This is not true. The new Income Tax Bill 2025 only to ensure continuity with efficiency, what is meaningless in the current tax law, makes it simple, integrates, updates and sheds. It does not introduce new policy or taxes. The current tax law already allows that it is claimed to be empowered with the new bill (when it is applied).
No new powers have been given to the tax department in the new tax bill. The provision of bringing into transparency and certainty continues the status quo with more clarity.
In addition, a fear appears that in the general course of assessment, tax authorities may hack in online activities of taxpayers. This is not true again.
Getting admission in virtual digital spaces is only acceptable during raids and surveys, and also that the taxpayer refuses to participate with the password, leaving the tax department no choice, but to resort to override.
If the key is not available, it is similar to the lock of almira’s lock during the raid.
To shorten:
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The current tax law allows the phone, including the phone, mail, messaging services, social media sites, But only during a raid or surveyNot during evaluation or any other action
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The new Income Tax Bill has not been given any new powers to the tax officer in this regard in 2025.
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Repeatedly in the raid
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Forced power to get admission in computer systems including mail, messaging services, social media sites is implemented only when the taxpayer refuses to participate with the password, but usually taxpayers cooperate
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German is used only for tax evaluation
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Information is not misused
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Celebrity tax is maintained by the department
There are many examples where the tax department is more sinful than committing sin. This is such an example. English rock band Police Gaye, “Every step you make … every step you take … I am watching you”.
We are not there yet.
(Ajay Mainkotia is a former IRS officer and currently runs a tax and legal advisor.The QuintNeither endors nor responsible for them.)
