2023 (3) TMI 1317 - HC - Income Tax

Proceedings initiated both under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - Look Out Circular ( LOC ) issued against petitioner - HELD THAT - The assessment order is already under challenge before the CIT (Appeals) where 20% of the demand amount has already been stated to have been deposited. Insofar as the Black Money Act proceedings are concerned, the Petitioner has already deposited the amount demanded. The language used in paragraph (J) is that the originating agency must keep reviewing the LOCs opened at its behest on a quarterly and annual basis and submit the proposals to delete the LOC, if any, immediately after such a review. Clearly, the counter affidavit does not state that such a review has been undertaken either on a quarterly basis or annual basis and the reasons why the LOC is being continued against the Petitioner. The Office Memorandum also clearly records categorically that if the person is no longer wanted by the originating agency, the LOC cannot be continued. Thus, the spirit of the OM is to ensure that LOCs are not continued without periodic application of mind by the Originating Agency. In the present case, the following facts are borne in mind by this Court- (i) The Petitioner has participated in the investigation of the Income Tax department and his statements stand recorded. (ii) The assessment is already completed and the demand has been raised. (iii) 20% of the demand has already been deposited before the CIT (Appeals) and the proceedings are now pending before the CIT (Appeals). (iv) The proceedings under the Black Money Act have been concluded and the demanded amount has been paid. (v) No prosecution has been launched by the Respondent under the Income Tax Act. (vi) No prosecution has been launched even under the Black Money Act. (vii) The LOC has been continued since 2019 without being reviewed. In view of the above factual and legal position under the OM, the LOC does not deserve to be continued and the same is quashed. The petition is allowed in the above terms.

Summary

Issues Involved:
1. Quashing of Look Out Circular (LOC) issued against the Petitioner.
2. Compliance with Office Memorandum regarding LOC.
3. Status of prosecution under the Income Tax Act and Black Money Act.

Summary:

Issue 1: Quashing of Look Out Circular (LOC)
The Petitioner sought the quashing of the LOC issued against him following a search and seizure operation conducted by the Income Tax department on 1st November 2019. The LOC was issued post this operation, and despite the Petitioner complying with the summons and recording his statement, the LOC continued to be operational. Assessment orders were passed for AYs 2014-15 to 2020-21, raising a total demand of Rs. 9,21,82,365/-. The Petitioner challenged these orders before the CIT (Appeals) and paid 20% of the demand as per CBDT guidelines, which should have stayed the demand.

Issue 2: Compliance with Office Memorandum regarding LOC
The Petitioner argued that the LOC should be quashed due to non-compliance with the Office Memorandum, which mandates periodic review of the LOC. The Petitioner highlighted that no FIR or prosecution had been initiated under the Income Tax Act or Black Money Act, and the conditions for continuing the LOC were not met. The Office Memorandum requires that LOCs be reviewed quarterly and annually, and if the person is no longer wanted, the LOC should be deleted. The Respondent failed to demonstrate that such reviews were conducted.

Issue 3: Status of prosecution under the Income Tax Act and Black Money Act
The Respondent argued that prosecution could be launched under both the Income Tax Act and Black Money Act, citing the potential for the Petitioner to evade tax and penalties. However, it was conceded that no sanction for prosecution had been granted under Section 279 of the IT Act. The court noted that certain offences under the IT Act are non-cognizable, and no notice for prosecution had been issued to the Petitioner.

Conclusion:
The court considered the following facts: the Petitioner's participation in the investigation, completion of assessment, payment of 20% of the demand, conclusion of proceedings under the Black Money Act, and the absence of any prosecution. The LOC had been continued since 2019 without review, violating the Office Memorandum. Consequently, the court quashed the LOC, allowing the petition and directing the Respondent to inform immigration authorities of the order. The petition and all pending applications were disposed of accordingly.