Author: Sujen Rafik Shaikh, Siddharth College of Law, Mumbai
New Income Tax Bill Grants Sweeping Powers to Access Personal Data: Privacy Concern and Allegation of Misuse Amplified by Modi-Adani Allegations
Abstract
The Income Tax Bill, 2025, introduced in India on February 13, 2025, grants tax authorities unprecedented powers to access personal data, including emails, social media accounts, and digital transactions, under Clause 247. While aimed at combating tax evasion in the digital age, these powers have raised significant privacy concerns, particularly in light of allegations of political misuse of government agencies. Critics, including opposition parties and legal experts, warn that the lack of judicial oversight and procedural safeguards could lead to arbitrary surveillance, harassment, and violations of fundamental rights. These concerns are amplified by allegations of crony capitalism involving Prime Minister Narendra Modi and businessman Gautam Adani, with fears that tax powers could be weaponized to target critics, opposition leaders, and ordinary citizens. This article examines the new powers through a legal lens, analyzing potential violations of constitutional rights, regulatory frameworks, and democratic norms. It explores legal concepts such as privacy, abuse of power, and public interest, while assessing the implications for governance, economic equity, and public trust. The article concludes with recommendations for balancing tax enforcement with privacy protections and democratic integrity.
Introduction
The Income Tax Bill, 2025, marks a significant shift in India’s tax enforcement framework, granting tax authorities the power to access “virtual digital spaces” (e.g., emails, social media accounts, bank records) during investigations. Introduced by Finance Minister Nirmala Sitharaman, the bill aims to modernize tax administration and combat tax evasion in an increasingly digital economy. However, Clause 247, which allows tax officers to override access codes without judicial oversight, has sparked controversy, with critics warning of privacy erosion and potential misuse.
These concerns are heightened by broader anxieties about the misuse of government agencies, particularly in the context of allegations surrounding Prime Minister Narendra Modi and businessman Gautam Adani. Opposition parties, activists, and posts found on X allege that Adani’s rapid business expansion—spanning ports, airports, and renewable energy—has been facilitated by favoritism and policy support from Modi’s administration. Recent controversies, such as the Hindenburg Research report (2023) and US indictments (2024) against Adani for bribery and securities fraud, have intensified scrutiny, raising fears that tax powers could be weaponized to silence dissent and target critics. This article analyzes the new tax powers through a legal framework, addressing the following questions:
Do these powers violate constitutional rights to privacy and freedom of expression?
Are there risks of abuse of power, particularly in light of Modi-Adani allegations?
What are the implications for governance, economic equity, and public trust?
How can legal reforms balance tax enforcement with democratic integrity?
Legal Analysis
New Powers of the Income Tax Department and Privacy Concerns
The right to privacy, upheld as a fundamental right under Article 21 of the Constitution in Justice K.S. Puttaswamy v. Union of India (2017), requires state intrusions to meet tests of legality, necessity, and proportionality. Abuse of power refers to the misuse of public office for private gain or to favor specific interests.
Analysis
Clause 247 of the Income Tax Bill, 2025: The bill grants tax authorities the power to “break open the lock of any door, box, locker, safe, almirah, or other receptacle… or gain access by overriding the access code to any said computer system, or virtual digital space.” This extends traditional search and seizure powers under Section 132 of the Income Tax Act, 1961, to digital realms, including emails, social media accounts, and online transactions.
Privacy Violations: Legal experts warn that these powers violate the right to privacy under Article 21, as they lack judicial oversight and procedural safeguards. Unlike democratic jurisdictions (e.g., the US under the Fourth Amendment, the EU under GDPR), where tax authorities require court warrants to access digital data, India’s bill allows unilateral access based on suspicion, violating proportionality and necessity.
Risks of Misuse: Posts found on X, opposition leaders, and legal experts (e.g., former Infosys CFO Mohandas Pai) warn that these powers could lead to arbitrary surveillance, harassment, and intimidation. For example, tax officers could scrutinize social media posts showcasing luxury spending (e.g., cars, travel) without corresponding income declarations, triggering investigations. Without clear criteria, this risks “fishing expeditions” and breaches of Article 19(1)(a) (freedom of expression).
Proof
Clause 247’s language, as reported by Reuters and India Today, extends search powers to “virtual digital spaces” without judicial oversight.
Supreme Court’s Puttaswamy judgment (2017) requiring state intrusions to meet legality, necessity, and proportionality tests.
Statements by legal experts (e.g., Sonam Chandwani, KS Legal) warning of unrestricted surveillance and potential misuse.
Legal Implication
Clause 247 violates the right to privacy under Article 21, as it lacks judicial oversight and procedural safeguards, inviting constitutional challenges.
Unrestricted access to digital data breaches Article 19(1)(a), as it could deter free expression and digital engagement, undermining democratic freedoms.
Modi-Adani Allegations and Risks of Abuse of Power
Conflict of interest refers to a situation where a public official’s personal or financial interests’ conflict with their duty to act in the public interest. Crony capitalism denotes an economic system where business success is influenced by close ties to political power, often leading to favoritism and corruption.
Analysis
Modi-Adani Relationship: Adani’s business empire expanded significantly during Modi’s tenure as Chief Minister of Gujarat and Prime Minister, with contracts for airports, ports, and renewable energy aligning with Modi’s policy priorities. Critics allege that these contracts were awarded through tailored tenders, violating fair competition under the Competition Act, 2002.
Regulatory Benefits: Allegations of regulatory inaction by SEBI, slow investigations into Hindenburg’s stock manipulation claims, and public sector investments (e.g., LIC, SBI) in Adani companies raise concerns about fiduciary duty under the SEBI Act, 1992, and Banking Regulation Act, 1949.
Risks of Weaponization: In the context of Modi-Adani allegations, the new tax powers could be misused to:
Target opposition leaders, activists, and journalists critical of the government, as alleged by Congress leaders like Supriya Shrinate.
Harass ordinary citizens perceived as non-compliant, using social media posts or private communications as pretexts for investigations.
Intimidate businesses competing with Adani, leveraging tax scrutiny to favor Adani’s interests.
Surveillance State Concerns: Opposition claims warn that these powers could turn India into a “surveillance state,” with tax authorities acting as “cyber watchdogs” to monitor dissent and settle political scores.
Proof
Hindenburg Research report (2023) alleging stock manipulation and accounting fraud, leading to a $150 billion loss in Adani Group stocks’ market value.
US DOJ indictment (2024) for a $250 million bribery scheme, alleging violations of the Foreign Corrupt Practices Act (FCPA).
Congress’s allegations of surveillance and misuse of agencies, as reported by The Hindu and Business Today.
Legal Implication
The Modi-Adani relationship may constitute a conflict of interest under Section 7 of the Prevention of Corruption Act, 1988, if proven that Modi influenced policy decisions for Adani’s benefit.
Misuse of tax powers to target critics violates Articles 14 (equality before law), 19(1)(a) (freedom of expression), and 21 (right to privacy), inviting judicial review.
Implications for Governance and Public Trust
The rule of law requires that all actions of the state be subject to legal scrutiny, ensuring transparency and accountability. Public interest demands that government policies prioritize the welfare of citizens over private interests.
Analysis
Economic Risks: Adani Group stocks’ volatility (e.g., $34 billion loss after US charges) affects investor confidence and India’s financial markets. Public sector exposure to Adani companies risks financial stability, violating public interest under Article 14.
Democratic Freedoms: Perceived cronyism and misuse of tax powers could deter dissent, impacting freedom of expression under Article 19(1)(a) and political participation under Article 21. Posts found on X warn of a chilling effect on digital engagement, undermining democratic norms.
Surveillance State: The lack of judicial oversight in Clause 247 risks creating a surveillance state, where tax authorities monitor private communications without accountability. This violates the Puttaswamy judgment’s principles of legality, necessity, and proportionality.
Public Trust: Allegations of favoritism and misuse of agencies erode public trust in governance, undermining voluntary tax compliance and democratic participation. Opposition claims of “Pegasus-style” surveillance amplify these concerns.
Proof
Market losses in Adani stocks post-Hindenburg and US charges, as reported by financial news outlets.
Congress’s allegations of surveillance and misuse of agencies, as reported by The Hindu and Business Today.
Legal experts’ warnings of a surveillance state and erosion of democratic freedoms.
Legal Implication
Economic risks from Adani’s controversies violate public interest under Article 14, inviting judicial scrutiny.
Erosion of democratic freedoms due to perceived misuse of tax powers may lead to constitutional challenges under Articles 19 and 21.
Recommendation
Clarify Scope and Definitions:
Explicitly define “virtual digital spaces” in Clause 247 to exclude personal emails and social media accounts unless directly linked to financial transactions.
Issue guidelines specifying the types of data that can be accessed and the conditions under which they can be collected.
Strengthen Oversight:
Require prior judicial approval for accessing sensitive personal data, aligning with Puttaswamy judgment’s principles.
Establish an independent oversight body (e.g., Privacy Commissioner) to review tax department actions and ensure compliance with privacy laws.
Enhance Transparency:
Notify taxpayers about the scope and purpose of data access during searches, ensuring they are informed of their rights.
Publish annual reports on search and seizure operations, including the number of cases involving digital data access, to promote accountability.
Align with Privacy Laws:
Ensure Clause 247 aligns with the Digital Personal Data Protection Act, 2023, and international privacy standards like GDPR.
Limit exemptions for tax authorities under the DPDP Act to prevent misuse and ensure data minimization.
Protect Vulnerable Groups:
Introduce safeguards to prevent the targeting of political opponents, activists, journalists, and ordinary citizens critical of the government.
Establish a grievance redressal mechanism for taxpayers to report harassment or misuse of tax powers.
Strengthen Democratic Institutions:
Ensure the independence of agencies like the Income Tax Department, ED, and CBI to prevent political interference.
Conduct a JPC probe into Adani’s allegations to ensure transparency and address public concerns.
Conclusion
The Income Tax Bill, 2025, grants tax authorities sweeping powers to access personal data, raising valid legal and ethical concerns about privacy, abuse of power, and democratic integrity. Clause 247’s lack of judicial oversight and procedural safeguards violates constitutional rights under Articles 14, 19, and 21, inviting judicial review. These concerns are amplified by allegations of crony capitalism involving Modi and Adani, with fears that tax powers could be weaponized to target critics, opposition leaders, and ordinary citizens. The implications for governance, economic stability, and public trust are significant, affecting investor confidence, democratic freedoms, and India’s global reputation. Legal reforms, including judicial oversight, transparency, and alignment with privacy laws, are essential to balance tax enforcement with democratic integrity. Until these issues are resolved, public skepticism, as reflected in posts found on X and opposition claims, is likely to persist, challenging the rule of law and public interest in India’s democratic framework.
