CHENNAI: The Madras High Court has ruled that adhering to the digital evidence investigation manual issued by the Central Board of Direct Taxes is mandatory for the Income Tax department while conducting searches and seizing electronic evidence.
The ruling was given by Justice Krishnan Ramasamy on a batch of petitions filed by Saravana Selvarathinam Retails Private Limited challenging the seizure of electronic evidence (text files) from unknown location without following relevant rules during a search held in 2022 and subsequent issuance of show cause notice for tax assessment based on such evidence.
The petitioner blamed the I-T department for seizing the electronic evidence without adhering to the digital evidence investigation manual and not sharing the details with it for submitting reply to the showcause notices and the assessment orders.
The judge reasoned the Digital Evidence Investigation Manual has been issued by the CBDT by virtue of powers available under Section 119 of the IT Act and hence, the I-T authorities and all other persons employed in the execution of the Act are ‘bound to observe and follow’ such orders, instructions and directions issued by CBDT.
The Supreme Court has culled out the principles which have to be followed while conducting search and seizure of evidence. “Hence, it is mandatory for the respondents (I-T department) to follow the manual issued by CBDT while conducting search and seizure,” the judge said in the order.
He held that the data collected by the respondents can be “relied upon only if they are supported by the corroborative evidence.” Further, he said the court is of the considered view that since the respondents had not followed the manual while collecting and preserving the electronic evidence as per the law laid down by the apex court and if there is no corroborative evidence to prove it, the “search and seizure is against the law and ab initio bad.”
Finding the department of committing ‘complete violation’ of the principles of natural justice by not following the procedure, the judge concluded it would be appropriate to set aside all the assessment orders, and thereafter, remit the matter back for re-consideration to the authority concerned and to pass appropriate orders in accordance with the law.
Subsequently, he set aside the show cause notices and the assessment order; and by moulding the relief sought for, directed the authorities concerned to reconsider the matter by giving the adequate opportunity for the petitioner and providing all the documents, based on which, the notices were issued.