Income Tax Act 2025 (ITA’25) Vs Income Tax Act 1961 (ITA’61) Series

Can “Cloud Data” in case of Income Tax Act 2025 (ITA’25) be considered ‘books’ … If Loose papers incase of Survey/ Search or Seizure are incriminating evidence when tallied to Books, under Income Tax Act 1961 (ITA’61)

Section 158B(b) of ITA’61 defines Undisclosed Income refers to not only assets found but also income based on entry in books of account or other documents or transactions representing income. Similarly, Section 158BB (1) for computation of Undisclosed Income, refers to not only evidence in the form of Books of Account or documents but also” such other materials” or “information” as are available with the AO. Loose Papers may come in the category of “Such other materials” or “information” and it is a fact that such loose slips, papers, diaries or documents have been a source of information for large additions and often become contentions issues in post-search assessment /block assessment as to extent of reliance to be placed and the evidently value of such loose papers or documents normally found during the course of the search. The Hon’ble MP High Court in the case of Lunkad Media And Entertainment Ltd. And Others Versus Union Of India, Parkson Securities Limited Versus The Assistant Commissioner Of Income Tax 3 (1) And Others, Lunkad Securities Ltd., Rajvir Marketing And Investment Limited, Lunkad Media And Entertainment Ltd., Lunkad Securities Ltd. And Others, Lunkad Securities Ltd., West End Management Technologies Pvt. Limited, Parkson Securities Limited, Rajvir Marketing And Investment Limited Versus The Assistant Commissioner Of Income Tax-3 (1) And Others - 2025 (8) TMI 58 - MADHYA PRADESH HIGH COURT, held that the loose papers and scrap containing entries were duly examined and verified by the Assessing Officer against the bank statements, therefore, the loose papers were rightly treated as books of account. The assessees were given ample opportunity to produce concrete material to rebut the same, but failed to file any income tax returns or provide any documentary evidence to explain the money receipts.

This being the case with loose documents it needs to be seen, the jurisprudence which will develop, in the case of information derived from “Cloud Data” under Income Tax Act 2025

Under Section 253 (1) (i) of Income Tax Act 2025 which correspond to Section 133A of Income Tax Act 1961, it is mandatory for assesses to enable the officers on survey “the inspection of …. information in electronic form or on a computer system…” and also provide “Access Code”. Incase the information on Cloud are examined and verified by the Assessing Officer against the bank statements, can these be also treated as books of account is the question which may be asked going forward.

Extract of Section “253. Powers of survey” under ITA’25 is as follows -

(1) Irrespective of anything contained in any other provision of this Act, an income-tax authority may enter any place at which a business or profession, or activity for charitable purpose is carried on, whether such place be the principal place or not of such business or profession or of such activity for charitable purpose, where such place…. and, upon entry into such a place, may require any proprietor, trustee, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession or such activity for charitable purpose—

(i) to provide the necessary technical and other assistance (including access code) to enable the inspection of such books of account or other documents, or information in electronic form or on a computer system, as may be required and which may be available at such place;
Extract of Section “133A. Powers of survey” under ITA’61 is as follows -

133A. (1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter…
at which a business or profession or an activity for charitable purpose is carried on, whether such place be the principal place or not of such business or profession or of such activity for charitable purpose, and require any proprietor, trustee, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession or such activity for charitable purpose-

(i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place,…

(iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act….”