2022 (8) TMI 749 - HC - Income Tax

Black money - Undisclosed Foreign Assets - Beneficial Owner of the specified Undisclosed Assets - proceedings under the provisions of Section 10 1 of the Black Money Undisclosed Foreign Income and Assets and Imposition of Tax Act, 2015 - whether the petitioner is a beneficial owner of the Undisclosed Assets ? - HELD THAT - AO can proceed to assess the undisclosed foreign income and asset to determine the liability only on considering the accounts/documents, and evidence, and every further relevant material gathered. Further, the Assessing Officer, for the purposes of such enquiry u/s 10 2 of the BM Act, is vested with the necessary powers to direct discovery and production of evidence. The provisions of Section 8 2 of the BM Act specify that the authority, for the purposes of making an enquiry or investigation, shall be vested with specific powers as regards discovery and inspection, enforcing attendance and compelling production of documents and issuing commissions. These purposes are mentioned in Section 8 1 of the BM Act. The scheme of notice, further notices, enquiry and assessment under Section 10 of the BM Act is comprehensive and the AO must examine the entire gamut of circumstances and decide on the jurisdictional fact as a condition precedent for assessment. In this Court s considered opinion this scheme does not admit of any ambiguity to employ an interpretative tool, especially the reading of a definition clause which would not be a positive enactment, to construe a segregated enquiry. It is also argued that the provisions of Section 8 of the BM Act would indicate a distinct and separate enquiry on the jurisdictional fact from an enquiry that is contemplated under Section 10 of the BM Act. But in the light of the scheme under Section 10 and the express provisions of Section 8 2 , such reading would be a contrived reading. As observed by the Hon'ble Supreme Court in Commissioner of Central Excise, Haldia v. M/s Krishna Wax P Ltd., 2019 (11) TMI 673 - SUPREME COURT the significance of the date of issuance of notices will also have to be borne in mind when admittedly, the date of issuance of show-cause notice becomes vital for the purpose of limitation under the BM Act. If as contended on behalf of the petitioner, enquiry on the jurisdictional fact and assessment are segregated, despite the scheme under section 10, there would be serious ramifications but without the necessary redressal. The settled proposition is that in construing fiscal statutes and in determining the tax liability, the strict rules of interpretation will have to be followed without adding or importing significance beyond the language used in such statutes. In the light of the above, and the respondents' admitted position that the Assessing Officer must necessarily decide on the jurisdictional fact viz., whether the petitioner could be called a Beneficial Owner of the specified Undisclosed Asset considering the material that the petitioner produces, and there will be sufficient opportunity to the petitioner to produce further documents, this Court must answer the first question in the negative and in favour of the respondents Validity of issuance of notice under Section 10 of BM Act - statutory time limit is prescribed for issuance of notice under Section 10 1 of the BM Act - The contention that the Assessing Officer should be presumed to have had Information of the alleged transaction is very presumptuous, and no such presumption can be drawn at this stage to truncate the enquiry. Therefore, this Court cannot opine that the Impugned Notice is issued beyond thirty days from the date of Information and therefore prior approval had to be obtained. The Impugned Notice is very detailed and there are multiple references to different transactions between and amongst M/s. RAL and other entities. The Impugned Notice also refers to certain Minutes of Meetings and instances of payments with necessary documents illustrated. The transactions are multi-fold and make a complex web, and this Court, when the petitioner is yet to file response and produce documents/accounts/evidence, and the Assessing Officer is yet to consider those materials, cannot opine that the Impugned Notice lacks in material details or has not considered material circumstances - The question Nos.2 and 3 must therefore be answered in the negative and in favour of the respondents

Summary

Issues Involved:
1. Whether the first respondent should have held an enquiry and decided if the petitioner is a beneficial owner of the ‘Undisclosed Assets' before issuing the notice.
2. Whether the Impugned Notice was issued beyond thirty days from the date of receipt of information of the alleged Undisclosed Foreign Assets, and if so, whether it should be quashed for lack of necessary permission.
3. Whether the Impugned Notice is impermissible in law for not considering the decision by the Income Tax Appellate Tribunal (ITAT) on 30.07.2021.

Issue-Wise Detailed Analysis:

1. Enquiry Before Issuing Notice:
The petitioner argued that for assumption of jurisdiction, the existence of a "jurisdictional fact" is a condition precedent. The petitioner relied on the Supreme Court's decision in 'Arun Kumar and Others v. Union of India' to support that the existence of such a fact is necessary before any authority can proceed. The petitioner contended that the BM Act requires an enquiry to determine if an individual is a "Beneficial Owner" before issuing a notice under Section 10(1). The petitioner further argued that the ITAT had already concluded that the petitioner was not a beneficial owner of M/s. RAL or other entities, and thus, an enquiry should have been conducted before issuing the notice.

The respondents countered that the BM Act does not require a preliminary enquiry before issuing a notice under Section 10(1). They argued that the notice itself initiates an enquiry, and the "jurisdictional fact" can be determined during the assessment process. The respondents cited the Supreme Court's decision in Commissioner of Central Excise, Haldia v. M/s Krishna Wax [P] Ltd., which held that a preliminary determination before issuing a show-cause notice is not necessary.

The court concluded that the BM Act's scheme under Section 10 does not require a segregated enquiry before issuing a notice. The court noted that the Act allows the Assessing Officer to issue a notice and conduct an enquiry simultaneously. Therefore, the petitioner's argument that an enquiry must be conducted before issuing the notice was rejected.

2. Issuance of Notice Beyond Thirty Days:
The petitioner argued that the Impugned Notice was issued beyond the thirty-day period stipulated in the CBDT Guidelines and without the necessary approval from the Principal Commissioner of Income Tax. The petitioner contended that the Income Tax Authorities had prior knowledge of the alleged transactions since 2015, and thus, the notice issued on 11.08.2021 was beyond the permissible period.

The respondents argued that the information regarding the petitioner's alleged undisclosed foreign assets was received on 06.08.2021, and the notice was issued within thirty days of receiving this information. They contended that the distinction between "information" and "intelligence" as per the CBDT Guidelines was crucial, and the information received from the Joint Commissioner of Income Tax was valid.

The court held that the Impugned Notice was issued based on information received on 06.08.2021, and there was no presumption that the Assessing Officer had prior knowledge of the transactions. Therefore, the notice was not issued beyond the thirty-day period, and the requirement for prior approval did not apply.

3. Consideration of ITAT Decision:
The petitioner argued that the Impugned Notice did not consider the ITAT's decision, which had already concluded that the petitioner was not a beneficial owner of the entities in question. The petitioner contended that this omission rendered the notice impermissible in law.

The court noted that the Impugned Notice was detailed and referenced multiple transactions and documents. The court stated that the complexity of the transactions and the fact that the petitioner had not yet responded to the notice meant that it was premature to conclude that the notice lacked material details or had not considered the ITAT's decision.

Conclusion:
The court dismissed the petition, allowing the petitioner to take appropriate defenses before the Assessing Officer in further proceedings. The court answered all the questions in favor of the respondents, upholding the validity of the Impugned Notice and the initiation of proceedings under the BM Act.