2020 (2) TMI 519 - HC - Income Tax

Large scale tax evasion - Petitioner seeking permission to travel abroad as well as stay of the lookout circular issued against the petitioner for conducting business affairs - HELD THAT - The perusal of the status report, however, reveals that there are allegations of large scale tax evasion. The report prima facie reveals that petitioner is promoter of the Group and Director in the same companies of the Group who have indulged in large scale tax evasion. The Group has also obtained large scale credit facilities in different names from the banks based upon fictitious transactions. The petitioner has not been co-operating with investigating agency and has been evasive during interrogation. Keeping in mind the fact that petitioner was the main person controlling/ directing affairs of the group within and outside India and there is large scale tax evasion and investigation is still in progress and there is a strong apprehension that petitioner may not return and, thus, will not be available for investigation, he cannot be granted permission to travel abroad at this stage. The application of the petitioner for seeking permission to travel abroad is, therefore, dismissed and stands disposed of accordingly.

Summary

Issues:
1. Permission to travel abroad and stay of lookout circular.
2. Impact of lookout circular on business affairs.
3. Allegations of tax evasion and irregularities within the group.
4. Issuance and continuation of lookout circular against the petitioner.
5. Prayers and submissions from both parties regarding the travel permission.

Issue 1: Permission to travel abroad and stay of lookout circular:
The petitioner filed an application seeking permission to travel abroad and stay the lookout circular issued against him for conducting business affairs. The petitioner's companies were facing financial difficulties due to heavy debtors not releasing payments amounting to 1200 Crore. The petitioner needed to travel to Dubai to discuss overdue matters with concerned parties, meet investors, and settle disputes. However, the respondents had issued a lookout circular, preventing the petitioner from traveling. The petitioner assured no intention to settle abroad or evade investigation and had cooperated during the investigation.

Issue 2: Impact of lookout circular on business affairs:
The lookout circular had prevented the petitioner from traveling abroad for work for over a year, causing a negative impact on the petitioner's business. This restriction led to a financial crisis, making it difficult to pay staff salaries. The petitioner requested the court to allow travel to Dubai and restrain the respondents from interfering until the petition's pendency to avoid further business threats and financial crises.

Issue 3: Allegations of tax evasion and irregularities within the group:
The respondents, based on evidence gathered during search and surveys, accused the Words Window Group of large-scale tax evasion and serious violations of tax laws. The group was found to engage in tax evasion through a network of companies and entities, both domestic and international, obtaining credit facilities based on false transactions. The key person controlling the group's affairs, Piyoosh Kumar Goyal, was identified as involved in these activities.

Issue 4: Issuance and continuation of lookout circular against the petitioner:
A lookout circular was issued against the petitioner due to his alleged involvement in tax evasion and irregularities within the Words Window Group. The respondents argued that the petitioner had been evasive during the investigation, necessitating the continuation of the lookout circular to prevent potential flight from the country. The sealed cover report presented to the court contained details of the investigation supporting the need for the lookout circular to remain in effect.

Issue 5: Prayers and submissions regarding travel permission:
The UOI opposed the petitioner's request for travel permission, citing the risk of the main person involved fleeing the country, hindering the investigation process. The court, after considering the submissions from both sides and the sealed cover report, dismissed the petitioner's application for travel permission. The court highlighted the allegations of tax evasion, lack of cooperation during the investigation, and the strong apprehension that the petitioner might not return if allowed to travel abroad, leading to the denial of the travel request.

Overall, the court denied the petitioner's application for permission to travel abroad and stay of the lookout circular, emphasizing the ongoing investigation, allegations of tax evasion, and the petitioner's role within the Words Window Group.