2016 (5) TMI 293 - HC - Income Tax

Summons - Evasion of tax on the earnings of the Petitioner in India as a result of the agreements signed by Mr. Ricky Martin with Sony Corporation of America ( SCA ) - Held that - There is nothing brought on record by the ITD to show that there was a contract between the Petitioner and Mr. Ricky Martin in regard to his concert in Delhi on 6th December 1998. The ITD has also not denied that DNPL, the organiser of the concert, had no contract with the Petitioner. This writ petition has been pending since 1999 and there was a sufficient time for the ITD to have placed on record the outcome of the investigation which it was supposed to undertake pursuant to the impugned notices issued to the Petitioner. The counter affidavit was filed way back on 17th February 1999 at a stage when the investigation was still incomplete. Nothing has been placed on record in these seventeen years by the ITD to inform the Court of the consequent result of said investigation. In the circumstances, the Court is constrained to conclude that the case of the Petitioner as has been made out in the petition remains un-rebutted by the ITD. In particular the case of the Petitioner that it has no contract as such with Ricky Martin as it was not the organiser of his concert held on 6th December 1998 and therefore no part of the proceeds of the said concert came to the share of the Petitioner, has not been disputed by the Department. In the circumstances the Court quashes the impugned summons, notices, and letters and orders. The guarantee furnished by the Petitioner to the Department on 7th December 1998 shall stand discharged.

Summary

Issues:
Challenge to summons and letters by Income Tax Department, Coercion in furnishing guarantee, Lack of contract between petitioner and Ricky Martin, Incomplete investigation by ITD, Quashing of impugned summons and letters, Discharge of guarantee, Prohibition on further coercive steps by ITD.

Analysis:
The petition challenges various communications by the Income Tax Department (ITD) related to a live concert by Ricky Martin in New Delhi. The ITD suspected tax evasion by the petitioner based on agreements with Sony Corporation of America. The petitioner alleged coercion by the ITD in furnishing a guarantee agreeing to meet any tax demand arising from the concert. The guarantee also mentioned the petitioner's appointment as an agent of Ricky Martin under the Income Tax Act.

The petitioner submitted evidence showing no direct contract between them and Ricky Martin for the concert. Further, the concert organizer confirmed the absence of any contractual relationship with the petitioner and detailed the profit distribution from the event. Ricky Martin's letter disclaimed any contract with the petitioner for the concert or for the sale of CDs and cassettes in India. The ITD failed to prove the existence of a contract between the petitioner and Ricky Martin or to rebut the petitioner's claims.

The case had been pending since 1999, with the ITD not completing the investigation or providing any outcome to the court. The court noted the lack of evidence from the ITD to counter the petitioner's claims. Consequently, the court quashed the impugned summons, notices, and letters, and discharged the guarantee provided by the petitioner. The ITD was prohibited from taking further coercive steps based on the challenged communications.

In conclusion, the court ruled in favor of the petitioner due to the lack of evidence supporting the ITD's claims and the absence of a contract between the petitioner and Ricky Martin. The judgment emphasized the importance of completing investigations and providing evidence to support allegations in legal proceedings.