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2023 (9) TMI 1323 - HC - Income TaxIssuance and continuation of the Look-Out Circular issued against him at the behest of the Income Tax Department - Black Money - Petitioner remained untraceable and non-cooperative during the said search and seizure proceedings - notice was issued to the Petitioner u/s 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 requiring him to furnish information in relation to the undisclosed foreign assets that were found during the course of the investigations - whether Clause L of the OM of 2021 would be legally valid, especially in respect of the phrase detrimental to the economic interests of India and in respect of other clauses which permit indefinite continuation of LOCs, non-communication of reasons either prior or post issuance of the LOC and extension of LOC to such individuals who in the opinion of the authorities ought not to be permitted to travel on the ground of it being detrimental to the economic interests of India? - HELD THAT - Both the parents of the Petitioner have filed their affidavits. The said affidavits of assets, show that the parents of the Petitioner live in Delhi. It is clear from the same that the father of the Petitioner has various properties in India and is engaged in the clothing business by the name of M/s Chitkara Cloth House. The parents of the Petitioner along with the Petitioner s sister, collectively, own immovable properties worth close to Rs. 40 crores as can be made out from the affidavits. Petitioner s wife is stated to be a practicing lawyer in Delhi. The Petitioner s brother is also an entrepreneur based in Delhi. Petitioner s parents have agreed to offer the properties as a security for the quashing of the LOC against the Petitioner, by filing affidavits before the Court. The situation that emerges from the above discussion is that the Petitioner has deliberately concealed the existence of a company in Hong Kong, which was under his control. He did not divulge the details of the same despite being provided with repeated opportunities to do so. As substantial transactions have been carried out in the bank account of the said Hong Kong based entity, which was also not revealed to the authorities. Additionally, the Petitioner attempted to wriggle out of giving any explanation in respect of these transactions. Court also takes into consideration the fact that the Petitioner is only about 34 years of age and that the non-issuing of permission to travel, could be having an adverse impact on his career and his personal life. Petitioner has substantial familial ties in India. His parents are senior citizens and have come to his rescue by agreeing to stand as sureties and are offering their properties as security. This court is of the opinion that this is not a case that would be detrimental to the economic interest of the country as there is no allegation that the Petitioner has siphoned off any public funds. In addition, the overwhelming fact that no criminal proceedings have been initiated against the Petitioner, despite the demand having already been raised against him is an important consideration. While the demand against the Petitioner has already been raised and the assessment order has already been passed under the Black Money Act, 2015, the appeal before the Commissioner of Income Tax (Appeals) is still pending. Fresh penalty proceedings are still under-way, and the Court is informed that prosecution is also sought to be initiated, after the final oral submissions in this matter stand concluded. This Court is of the opinion that stringent conditions deserve to be imposed upon the Petitioner. The LOC debarring him from traveling can be converted into an intimation about the arrival/departure of the Petitioner in terms of Clause 6(I) of the Office Memorandum of 2021. LOC shall stand modified to an intimation in terms of Clause 6(I) of the OM of 2021, which reads as under (I) In cases where there is no cognizable offence under IPC and other penal laws; the LOC subject cannot be detained/arrested or prevented from leaving the country. The Originating Agency can only request that they be informed about the arrival/departure of the subject in such cases. Petitioner shall appear before the Assistant Director of Income Tax (INV), UNIT-4(4), ROOM NO.121; C, BLOCK CIVIC CENTRE, NEW DELHI for compliance of the above conditions on 5th October, 2023. The original files along with copies of documents, etc. which were handed over by the Income Tax Department have been returned.
Issues Involved:
1. Issuance and Continuation of Look-Out Circular (LOC) against the Petitioner. 2. Compliance with the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. 3. Legal Validity of Office Memorandums (OMs) governing LOCs. 4. Petitioner's Right to Travel Abroad. Summary: 1. Issuance and Continuation of Look-Out Circular (LOC) against the Petitioner: The Petitioner, a successful entrepreneur, was issued an LOC by the Income Tax Department due to proceedings under the Black Money Act, 2015. The LOC was issued after a search and seizure operation at his residence, where he was found to be uncooperative. The Petitioner's attempts to travel abroad were repeatedly thwarted due to the LOC, and his requests for a copy of the LOC were denied. The Petitioner argued that the LOC should be quashed since he had cooperated with the authorities, the investigation had concluded, and no criminal proceedings were instituted against him. 2. Compliance with the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015: The Income Tax Authorities discovered that the Petitioner was involved in transactions worth Rs. 300 crores through a Hong Kong-based company, which he did not declare in his income tax returns. Proceedings under the Black Money Act, 2015, were initiated, resulting in a demand of Rs. 56.35 crores and penalty proceedings. The Petitioner's appeal against the assessment order is pending, and fresh penalty and prosecution proceedings have been initiated. 3. Legal Validity of Office Memorandums (OMs) governing LOCs: The Court analyzed the legal framework and guidelines for issuing LOCs, tracing back to the OM of 2010 and its amendments in 2017 and 2018. The OMs allow LOCs to be issued in cases detrimental to the economic interests of India. The Court reviewed various judgments and concluded that the legality and validity of the OMs are pending before higher courts, and each case must be judged on its facts. 4. Petitioner's Right to Travel Abroad: The Court recognized the Petitioner's right to travel abroad as a fundamental right under Article 21 of the Constitution of India. However, it balanced this right against the public interest and economic interests of the country. The Court noted that the Petitioner had substantial familial ties in India and that his parents were willing to offer properties as security. The Court concluded that the case did not warrant the LOC as detrimental to the economic interests of the country and modified the LOC to an intimation, subject to stringent conditions to ensure the Petitioner's compliance and cooperation with ongoing investigations. Conclusion: The Court modified the LOC to an intimation, allowing the Petitioner to travel abroad under stringent conditions, including providing security in the form of properties, submitting travel itineraries, and ensuring cooperation with the authorities. The decision balanced the Petitioner's fundamental right to travel with the need to safeguard economic interests and ongoing investigations.
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