‘I-T dept ensures strict confidentiality of data’

The income tax department adheres to strict confidentiality of taxpayer data, says CBDT chairman Ravi Agrawal and asserts that stringent internal controls are in place to uphold confidentiality and integrity. In an interview to TOI, Agrawal says the powers to access digital devices during search and survey operations are merely being updated in the new I-T Bill to reflect the digital age. Excerpts:How will the new I-T Act help the common taxpayer?The provisions of law will become far more simpler for any taxpayer to read and understand. The dependence on a professional to understand the law is expected to see some correction. The use of formulae, tables and consolidation of provisions will enable easier compliance for taxpayers and professionals.The tax department has access to enormous amounts of data and the bill provides power to the department to access social media accounts for investigation purposes. How will the department ensure privacy of data?The I-T Bill, 2025 only re-states and makes explicit the powers already implicit in the Income-Tax Act 1961 under section 132. It is important to understand that these provisions are strictly applicable only during search and survey operations. They are not meant to breach the online privacy of common taxpayers, even if their case is under scrutiny. The powers to access digital devices and information during search and survey operations have always existed and are merely being updated to reflect the digital age. Clause 247 of the bill, which allows overriding access codes, is a modernisation of these existing provisions.With financial activities increasingly moving online, including digital banking, cryptocurrency, and cloud storage, these powers are intended to combat sophisticated methods of tax evasion that utilise internet-based tools and technology. Regarding data security, CBDT is acutely aware of the sensitivity of the financial data it handles. Our data collection and analysis are strictly for the purpose of tax administration and are governed by the provisions of I-T Act, 1961. Stringent internal controls have been instituted to uphold confidentiality and integrity, with access to taxpayer data strictly controlled and monitored. The principle of “need-to-know” is followed. The faceless nature of core procedures such as assessments and appeals introduces a layer of anonymity by design. Cases are randomly allocated through an automated system, ensuring neither the taxpayer nor the assessing officer knows each other’s identity. This reinforces a neutral, fair, and objective approach, minimising the risk of selective targeting. Risk assessment uses identity-blind, rule-based algorithms.The focus of the department now is building taxpayer trust but how will the new powers impact this?I-T Bill, 2025 provides for no new or additional powers. The department will continue to work on a “Trust First and Scrutinise Later” philosophy, recognising that most taxpayers are honest. The department prefers the “nudge” approach for minor discrepancies, while intrusive steps are for cases with credible intelligence or significant evidence of large-scale tax evasion, concealment of income, or involvement in illicit activities.The goal is to create a deterrent effect for willful defaulters while fostering a climate of trust for the honest taxpayer. By clearly defining the scope of these powers to serious evasion cases, the department aims to assure honest taxpayers that they will not be arbitrarily targeted.How would you assure the taxpayers on this?There is no question of any general surveillance of common taxpayers or their social media accounts. The fundamental approach remains “Trust First,” with intrusive actions being a last resort only for proven, large-scale evasion cases, not for honest taxpayers. Even when an algorithm flags a case for scrutiny, subsequent proceedings involve human application of mind and a review mechanism to ensure fairness. Taxpayers also retain the right to appeal any order they believe is incorrect.What has been the role of technology in stepping up refunds?End-to-end automation of ITR processing, including real-time challan validation and automated refund processing, has been implemented. Bank account validation ensures seamless refund disbursal. The average refund processing time has reduced from 93 days in FY 2013-14 to 17 days in 2024-25. Faster refund processing has significantly improved the taxpayer experience and confidence in the system.How is the department using AI, ML and blockchain technology to maximise revenues and plug loopholes?The use of AI within the I-T department is limited now. Going forward, AI will play a critical role in detecting and curbing shell companies, black money, and benami transactions. The upcoming projects of the department such as Insight 2.0 aims at wider use of AI. For example, AI will be used in various areas such as fraud and anomaly detection, pattern recognition, trend identification, predictive modelling, processing of unstructured data.