On the BBC Income Tax ‘Survey’: State Actions Blatantly Unlawful

THE raids last week at the offices of British Broadcasting Corporation (BBC) in Mumbai and Delhi — officially a ‘survey’ under the Income-tax Act, 1961 — provided further proof that the ruling dispensation at the Centre has an abysmally low tolerance for anything that portrays it in less than flattering light. But tolerance usually runs low in places where the sustenance of a regime is dependent upon the suppression of dissident voices and creating an environment where citizens feel righteous in ignoring that suppression.

Why the ‘survey’?

Would the ‘survey’ have happened if the BBC had not released its two-part documentary on the role of the Prime Minister and his party in the systematic otherisation of Indian Muslims? The answer is obvious, and it was equally so when the same or similar exercise was conducted against NewsClick, Newslaundry, and Dainik Bhaskar in 2021. They all performed their jobs in a way that irked those in power.

Also read: Survey exercise carried out by IT Dept at Newsclick and Newslaundry offices violated safeguards for right to privacy laid out in Puttaswamy verdict

In a press release issued after the conclusion of the three-day ‘survey’ on Friday, the Union Ministry of Finance justified the exercise and revealed its preliminary findings. The BBC, which was not expressly named, and only described as “a prominent international Media Company” was accused of having incomes/profits disproportionate to its scale of operations in India, non-payment of tax on certain remittances and non-disclosure of income in India, and discrepancies and inconsistencies in its transfer price documentation.

Would the ‘survey’ have happened if the BBC had not released its two-part documentary on the role of the Prime Minister and his party in the systematic otherisation of Indian Muslims? The answer is obvious.

The employees of the BBC, on the other hand, have been accused of employing “dilatory tactics… in the context of producing documents/agreements sought”, a claim whose veracity is not of significance since the tax authority does not possess the power to examine any person on oath and present it as evidence in court, under Section 133A of the Income-tax Act. However, it could be deciphered as revealing the inclination with which the ‘survey’ was conducted.

Violation of due process

In a previous piece, The Leaflet has explained how even for a ‘survey’ — as opposed to a ‘search and seizure’ operation — the tax authority’s powers are packed with caveats. To reiterate, no books of account or other documents can be impounded by an income tax authority without first recording reasons for doing so. In addition, the tax authority cannot retain in their custody any confiscated documents beyond a period of 15 days without obtaining the approval of higher tax authorities, such as the Principal Chief Commissioner or the Chief Commissioner or the Principal Director General of Income Tax.

Also, an income tax authority is allowed to enter a premises and conduct a ‘survey’ only during the hours at which such a place is open for the conduct of business.

In the survey exercise at the BBC offices, neither was any order for interception furnished by the income tax officials, nor did they share any recorded reasons for impounding digital devices.

As a further caveat, an income tax authority can “on no account” remove or cause to remove any cash, stock “or other valuable article or thing”.

All this holds significance in light of multiple reports suggesting that the phones and laptops of employees of the BBC were confiscated during the ‘survey’ on February 14, and that at least ten employees had to stay overnight at the office premises.

Also read: Safeguards in investigation of digital devices: Supreme Court seeks detailed affidavit from Union Government

Violation of privacy of BBC employees

The seizure of phones and laptops of employees, and the cloning of their data during a survey is not only contrary to the provisions of the Income-tax Act, but also violative of the right to privacy of the employees.

The right to privacy was recognized as a fundamental right protected by the Constitution of India by the Supreme Court in its landmark Puttaswamy judgment in 2017. Like all other fundamental rights, however, the court clarified that the right to privacy is not absolute, and can be overridden by competing state and individual interests.

The main test for determining the infringement of privacy advanced by a majority of the nine-judge Constitution bench is the proportionality test, espoused by the plurality opinion of then Justice Dr. D.Y. Chandrachud (written on behalf of then Chief Justice J.S. Kehar, Justices R.K. Agrawal and S.A. Nazeer, and himself) and the concurring opinion of Justice S.K. Kaul.

As per this, three factors must be reviewed: legality (that is, the existence of a law), legitimate goal (that is, the law should seek to achieve a legitimate state aim), and proportionality (there should be a rational nexus between the objects and the means adopted to achieve them).

The legal parameters for any government officers to “intercept, monitor or decrypt” information in any computer resource are set out in the Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009. As per these rules, the order for interception, monitoring or decryption of information under Rule 3 must be communicated to the “person in-charge of the computer resource” as per Rule 12. As per Rule 13, such a direction must be made in writing to the latter by the officer carrying out the order.

The impounding of devices and copying of personal information from personal devices by the income tax officials fits within the definition of interception in the Rules, as the said definition, provided in Rule 2(l), includes the “viewing, examination or inspection of the contents of any direct or indirect information”.

Moreover, the proviso to Section 133A(3) of the Income-tax Act specifically states that impounding of “books of account or other documents” can be done by an income tax authority only after recording reasons for doing so. Additionally, the proviso to Section 133A(6) states that an Assistant Director or a Deputy Director or an Assessing Officer or a Tax Recovery Officer or an Inspector of income tax can carry out a survey only after obtaining the approval of the Joint Director or the Joint Commissioner, as the case may be.

Transfer pricing compliance ordinarily wouldn’t require a ‘survey’ under the Income-tax Act, since a transfer pricing report and all the supporting agreements, invoices, ledgers, method of computation of arms’ length, books of accounts, and other relevant documents are already with the Assessing Officer/Transfer Pricing Officer, based on which notices for further enquiry can be issued and the question of transfer pricing compliance be adjudicated upon. 

In the survey exercise at the BBC offices, neither was any order for interception furnished by the income tax officials, nor did they share any recorded reasons for impounding digital devices. Without the requisite transparency, it is not possible to ascertain whether the requirement of the proviso to section 133A(6) was met.

Thus, their actions prima facie fail the legality criterion of the proportionality test.

Also read: One year of Right to Privacy: Looking at expansion of rights and impact on pending constitutional bench cases

Do the allegations even warrant a ‘survey’?

As advocate Deepak Joshi explained in The Wire last week, even if the government’s allegations against BBC are accurate, that still doesn’t justify resorting to a ‘survey’.

The most appropriate course of action, as per Joshi, would have been to launch a fresh income assessment for BBC or complete the pending assessments against it with these findings. This would “necessitate issuance of show cause notices, conducting personal hearings with the assessing officer/transfer pricing officer and then passing a reasoned order making a demand of outstanding taxes.”

There is a penalty prescribed in the Income-tax Act for the non-submission of the relevant documents. But as Joshi further explains that transfer pricing compliance ordinarily wouldn’t require a ‘survey’ under the Income-tax Act, since a transfer pricing report and all the supporting agreements, invoices, ledgers, method of computation of arms’ length, books of accounts, and other relevant documents are to be submitted to the income tax department during a routine assessment; these are thus already with the assessing officer/transfer pricing officer, based on which notices for further enquiry can be issued and the question of transfer pricing compliance be adjudicated upon.

Other related allegations made by the government’s press release — discrepancies related to the level of relevant function, asset and risk ((FAR) analysis, the incorrect use of comparables which are applicable to determine the correct arms length price (ALP), and inadequate revenue apportionment — are all matters of assessment. The kind of documents required to assess such allegations are already on record before the transfer pricing officer.

The conduct of a survey to seize such documents from the BBC offices is undoubtedly a disproportionate action by the income tax department, as is the recording of statements of BBC staff from content development and other production-related departments, and the examination of digital devices of BBC’s editorial staff.

What raises suspicions

The ‘survey’ follows the Union government’s attempt at thwarting the dissemination of the said documentary by using the emergency powers it wields under the Information Technology Act, 2000. YouTube and Twitter were ordered to remove links related to the documentary, to which they accordingly complied, saving their officials from a possible imprisonment extendable up to seven years and a potentially heavy fine, for violating an order of the government made under Section 69A of the Information Technology Act.

But what raises suspicion is the non-availability of the blocking orders issued by the Union government. The only admission in this regard, ironically, arrived from a Twitter thread by a senior advisor to the Union government’s Ministry of Information and Broadcasting (MIB). The public availability of these documents hold significance in that they would reveal the reasoning applied and the material considered to thwart access to the documentary, in addition to revealing which other intermediaries received similar orders.

Data recently revealed in the Lok Sabha show that between 2018 and 2022, a total of 29,154 webpages have been blocked by the Union Ministry of Electronics and Information Technology.

Also read: Online censorship: Government’s favourite pastime activity

In actuality, the non-publication of blocking orders is in contempt of a 2020 Supreme Court decision which held that regardless of whether a legislation or rules made under it provide for publication or notification of orders, it is a settled principle of law and of natural justice that an order, “particularly one that affects lives, liberty and property of people”, must be made publicly available. “Any law which demands compliance of the people requires to be notified directly and reliably”, the court had stated, ruling on a petition by veteran journalist Anuradha Bhasin against the communication blockade imposed in Jammu and Kashmir in the aftermath of the abrogation of Article 370 of the Constitution and the erstwhile state’s bifurcation into two Union territories.

The non-publication of blocking orders is in contempt of a 2020 Supreme Court decision which held that regardless of whether a legislation or rules made under it provide for publication or notification of orders, it is a settled principle of law and of natural justice that an order, “particularly one that affects lives, liberty and property of people”, must be made publicly available.

It is possible that the Supreme Court might order the original files on the blocking orders to be placed before the court to check for irregularities of procedure, and may thereafter examine whether it should hold the Union government in contempt. The court is currently seized of a petition filed by former Editor-in-Chief of The Hindu N. Ram, Member of Parliament Mahua Moitra, and public interest lawyer Prashant Bhushan that, in essence, argues that the MIB did not possess the power to process the blocking order since the ruling of the Bombay High Court staying key provisions of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021 in response to a petition by The Leaflet in 2021 had the incidental effect of staying provisions that give the MIB its emergency powers.

Bias and/or embarrassment?

Were the contents of the documentary so biased and so against public interest and policy as to warrant the deployment of State machinery in retaliation? Perhaps not. In fact, both parts of the documentary begin by declaring, “The Indian Government declined to comment on the allegations contained in this film” and the BBC, known for its editorial balance, provided people affiliated to the Bharatiya Janata Party (BJP), the ruling party, enough leeway to not only contest the allegations, but also sow doubts and float unlikely theories in the documentary.

Or, was the Union government more irked by the fact that a major international publication had questioned the narrative that the Prime Minister wants to prevail?

One cannot say with certainty, but there are concerns that the documentary itself — which has been widely watched in India — and the events that have transpired since might have actually emboldened the supporters of the BJP, who have been led to believe that India is under threat from ‘a confluence of [foreign] interests’ who are out to destroy the country’s sovereignty, integrity, public order and relations with foreign countries: grounds which the MIB supposedly used to block the documentary’s access under Section 69A.

Also read: Government’s repeated reliance on foreign conspiracy theories endangers democracy

Expectations to not keep

In these tumultuous times, one is only fortunate that the documentary was not technically ‘banned’ for exhibition using the loosely worded provisions of the Cinematograph Act, 1952 which allows for the suspension of public exhibition of any film for a mere likelihood of causing “a breach of the peace”. But then, the BBC did not officially air the documentary publicly in India. This was done by students at some universities, who were then met with heavy police deployment and forceful resistance from university administrators.

With the BBC itself requesting take downs of unauthorised copies uploaded on the internet and exercising censorship by copyright, it appears from the sequence of events that all censors — the government, the BBC, universities, and perhaps even the income tax department — cruise in the same boat.

The actions of the Union government are blatant and self-explanatory, but also leave much to be answered. Coming clean would imply a withdrawal of the State machinery it has deployed to save its face, as only conspiracy theories abound when the State works in suspicious ways. Still, no reasonable citizen should expect it any time soon in light of the State’s blatantly unlawful actions.