The extension of income tax search powers to 'virtual digital space' under the Income Tax Act, 2025 raises questions of proportionality and informational privacy. Critically examine in light of the Puttaswamy judgment.

Q. The extension of income tax search powers to 'virtual digital space' under the Income Tax Act, 2025 raises questions of proportionality and informational privacy. Critically examine in light of the Puttaswamy judgment. (15 marks, 250-350 words)

Section 247 of the Income-tax Act, 2025, operative from 1 April 2026 [3], extends search and seizure beyond premises and ledgers to "virtual digital space" — email servers, social media and online trading accounts [1]. After Puttaswamy (2017), such intrusion is valid only if it is proportionate.

The case for extending the power - Changed locus of evasion: undisclosed income now resides in cloud storage and remote servers rather than steel almirahs; a premises-only power would be self-defeating [1]. - Legality prong satisfied: the power flows from a statute enacted by Parliament and is exercisable only in authorised search proceedings on recorded "reason to believe", not routine scrutiny [1]. - Operational reality: digital evidence can be erased in seconds, making advance notice impractical.

Where proportionality is strained - Overbreadth: a smartphone aggregates health, location, intimate and professional data, almost none of it tax-relevant; accessing it wholesale is categorically unlike seizing a ledger, weakening the "least restrictive means" requirement. - Override of access codes: officers may bypass passwords and encryption — a power with no physical-world analogue [1]. - Executive, not judicial, authorisation: recorded reasons remain undisclosed to the taxpayer, so pre-search scrutiny is absent and post-facto review is thin — an Article 14 fairness concern. - Third-party spillover: cloud accounts hold data of clients and employees not under investigation, besides raising cross-border data-sovereignty questions.

Assessment on the Puttaswamy four-fold test - Legality and legitimate aim (revenue mobilisation) are met; necessity and proportionality stricto sensu remain doubtful absent procedural safeguards [2]. - The Digital Personal Data Protection Act, 2023 offers limited comfort, as it permits exemptions for notified State instrumentalities [4].

Digital search powers are thus not unconstitutional in principle, but unbalanced in design. A rights-compatible model would require pre-authorisation by a judicial or independent authority, a search protocol confining seizure to tax-relevant data, sealed-cover disclosure of reasons to courts, and time-bound deletion of extraneous material. Calibrating enforcement to the least intrusive means secures both the revenue and the dignity Article 21 guarantees.

(~300 words)

Sources: 1. PRS Legislative Research — The Income-Tax (No.2) Bill, 2025 — definition and scope of "virtual digital space"; power to override access codes; search on "reason to believe" 2. Justice K.S. Puttaswamy (Retd.) v. Union of India, Supreme Court of India, 24 August 2017 — informational privacy under Article 21 and the proportionality test 3. PIB, Ministry of Finance — "Income-tax Act, 2025 comes into force from today (1st April, 2026)" — commencement date of the new Act 4. The Digital Personal Data Protection Act, 2023 (Act 22 of 2023), India Code — data-protection framework and exemptions for State instrumentalities