Court raps taxmen who snoop

The tax authorities have been rapped by the Delhi high court for attempting to snoop on some companies, including Maytas, although they were not the suspected evaders.

Terming a search and seizure operation conducted by the Income Tax department as a 'serious invasion of the privacy and freedom of the citizen,' the Delhi high court has said that such exercises cannot be a 'roving or fishing exercise' by the department.

The case pertains to a search and seizure operation conducted by the department on the EMMAR MGF group in September 2007, when I-T officials seized two laptops of the auditing and accounting firm of the company.

But it so happened that the laptops of the accounting firms also had information pertaining to other clients, including Maytas promoted by the kin of Satyam Computer Services [ Get Quote ] founder Ramalinga Raju [ Images ].

The tax department insisted that accounting firm S R Batliboi and Company should give it 'total and unrestricted access to the laptops' so that it can peruse the information.

S R Batliboi and Company, however, refused the same.

The court also said that since by the exercise of the power 'a serious invasion' is made upon the rights, privacy and freedom of the tax-payer, the power must be exercised 'strictly in accordance with the law' and only for the purposes for which the law authorises it to be exercised.

Coming down heavily on the I-T department for gaining access to two laptops of a 'third party' seized during a search operation, a bench of justices Vikramajit Sen and Rajiv Shakdher ruled that an 'indiscriminate seizure deracinates the personal liberty and privacy of the citizen and is anathematic to law'.

The I-T department also sent the laptops to the CFSL to crack the passwords but it failed, following which the accounting firm filed a writ petition in the Delhi high court requesting it to prevent the department from 'forcibly gaining or securing access to the data' contained in the laptops.

The court, in its order on May 27, directed the tax department to return both the laptops without any information being accessed by I-T officers.

The accounting firm contented that an unbridled access by the tax department into the laptops would 'tantamount to grave professional misconduct and would be contrary to the code of ethics applicable (upon them) as well the obligations contained in Chartered Accountants Act, 1949'.

The court rejected the department's argument that by virtue of section 153C (of the I-T Act) the departments 'dominion is extended over any money, bullion, jewellery. . .or book of accounts or documents seized by them even if it belongs to a third party.'

The court said that 'if this is applicable to all and sundry it would infract and nullify the fundamental rights of the citizen (third or unconnected party) concerned'.