Tax law needed teeth to deal with bigwig evaders: Supreme Court

The Supreme Court of India on Monday (March 9, 2026) gave a petitioner liberty to approach the competent authority in the Union government with a representation questioning the new Income Tax law, which permits authorities not only to disclose reasons for initiating search and seizure operations but also extends the definition of undisclosed assets to the virtual digital space.

A Bench headed by Chief Justice of India Surya Kant dismissed as withdrawn a petition filed by Vishwaprasad Alva challenging the legality of provisions, especially Section 132 of the Income Tax Act of 1961 and its corresponding provision of Section 247 along with Section 249 (non-disclosure of reasons for initiating search and seizure) in the new Income Tax Act of 2025. The new law is scheduled to take effect from April 1, 2026.

The CJI indicated that tax laws need teeth as they dealt mostly with tax evaders, bigwigs. “It is not easy,” Chief Justice Kant said orally.

“But the law strikes both the big and the small together. You make laws for Dawood Ibrahim and it hits a poor man elsewhere,” senior advocate Sanjay Hegde responded.

The petitioner, also represented by advocate Pranjal Kishore, opposed the absolute non-disclosure of reasons, and noted that seizure of personal digital devices cannot infringe the right to informational privacy as an intrinsic part of dignity as upheld by a nine-judge Bench of the Supreme Court in the Puttaswamy case.

The petition referred to Section 261 (e) of the 2025 Act, which defined ‘computer system’ to include “remote server or cloud server or virtual digital space”.

“It is clear that the Income Tax Act allows searches even of personal laptops or mobile phones. It goes without saying that the power of search under the Act constitutes a serious invasion into the spatial and informational privacy of an individual,” the petition contended.

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“The question is while I concede the position that reasons may not be disclosed in advance, there should be a mechanism by which the existence of reasons should be available to be known within the system. Otherwise, what happens is there is supplementation [of reasons] by the authorities,” Mr. Hegde submitted.

He referred to a Comptroller and Auditor General (CAG) audit report highlighting “poor diligence before initiating the search in terms of information and requisite research, etc”.

Mr. Hegde submitted that a system could be made better in a way that assessees were not unnecessarily harassed.

“It cannot be that reasons appear to be like what Faiz said ‘jo hazir bhi hai gayab bhi’, that it is there and not there. Reasons must not only exist but there must be safeguards within the system,” the senior advocate said. He said there was no punishment for wrongful prosecution.

“We fully appreciate what you are saying. But when there is a scope of judicial review, we cannot say that the provision is unconstitutional,” Justice Joymalya Bagchi addressed Mr. Hegde.

The senior advocate submitted that the provisions compelled an assessee to necessarily approach a High Court to learn the reasons behind a search or seizure.

“Why should every person come before the High Court to know the reasons? They should at least be shown to the Tribunal,” he argued.

Justice Bagchi said the extent of enquiry by the apex court into the constitutionality of a statutory provision was limited to checking if there was a process of judicial review in existence or not. “In this case, the statute has reposed judicial review in a constitutional court, the High Courts,” the judge said.

“This looks like an initial apprehension about the provision. There are provisions which seem innocuous but may lead to great and continuous misuse. In such cases, courts may have to intervene. There are other provisions which look capable of misuse, but the system is streamlined in such a way that there would be no misuse,” Chief Justice Kant submitted.