New IT Bill empowers Taxman to access electronic systems in searches & surveys

The new income-tax Bill empowers tax authorities to demand codes for access to electronic systems during surveys and searches. Section 247 of the Bill broadens search and seizure powers of income-tax authorities, covering access not only to physical and local assets but also digital records and virtual spaces.

Section 253 allows tax officers to request “technical and other assistance, including access codes” during surveys, making it mandatory for taxpayers to provide access to Cloud spaces, computers and electronic records. According to this Section, the income-tax authority could ask businesses “to provide the necessary technical and other assistance (including access code) to enable the inspection of such books of account or other documents, or computer system, or any other material connected with such systems, including virtual digital space, as may be required and which may be available at such a place”.

Earlier, under the Income Tax Act, 1961, Section 132 allowed searches and provision of physical and digital document, cash and assets, while Section 133(6) on power to call for information, as well as 133A on surveys, permitted officers to seek information but did not mandate allowing digital access. The new Bill, according to experts, makes it compulsory to grant access to digital data.

Modern-day businesses and taxpayers use electronic means for recording and storing accounting records. Given this reality, it was imperative for the tax enforcement to have legal basis to get access to such electronic records. While under the current 1961 (income-tax) regime, the access was otherwise made available, the 2025 proposal gives the ask a legal basis.

It enhances powers of enforcement authorities to scrutinize crypto currency and other digital virtual assets which were used for tax evasions.

Further, in 253(5) (b), an I tax officer can record the statement of any person on oath, which will gain evidentiary value.

Till now, such statement, under see 133A (3) (iii), have not evidentiary value to it.

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