Speaking in the Lok Sabha, she said digital evidence, including WhatsApp messages and Google Maps location data, is already being used in tax investigations and must be formally recognised in the law.
The FM clarified that the existing tax framework, governed by the Income Tax Act of 1961, primarily refers to physical books of accounts, ledgers, and manually recorded financial data.
This has led to legal challenges when tax officials seek access to digital records during search and seizure operations. “Right now, people argue, ‘I have shown my ledger, why do you want my passcode?’ This gap is being addressed in the new bill before the select committee,” she explained.
To highlight the importance of digital access in tax investigations, the FM cited multiple cases where encrypted messages, mobile data, and online tracking tools helped expose financial misconduct:
Unaccounted Wealth of ₹250 Crore: Authorities uncovered large sums of unaccounted money when encrypted messages were decoded. The investigation revealed networks of individuals involved in tax evasion.
Crypto Assets Worth ₹90 Crore: Seized WhatsApp messages helped track down individuals engaged in illicit cryptocurrency transactions.
Bogus Billing Scam of ₹200 Crore: Tax officials used WhatsApp conversations to trace syndicates issuing fake invoices and identify the final beneficiaries.
Manipulated Capital Gains to Evade Taxes: In one case, capital gains from the sale of land worth ₹150 crore were fraudulently reduced to ₹2 crore by creating false acquisition cost documents and misusing bank statements. Several professionals were found involved in this malpractice through their WhatsApp communications.
Google Maps Location Data for Tax Investigations: Authorities used location history to track individuals suspected of hiding unaccounted cash, leading them to secret hideouts where illegal transactions were conducted.
The FM stressed that without explicit legal backing, even clear evidence of financial misconduct can be challenged in court. “If the law doesn’t provide for it, despite having the evidence in front of us, it becomes tedious. We need to close this loophole,” she stated.
The new bill proposes to formally include digital data access in tax investigations, ensuring that tax authorities have the legal mandate to examine electronic records where necessary. “The digital element must be brought in, or we risk letting tax evaders exploit legal gaps,” the minister added.
