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2022 (9) TMI 1101 - HC - Income TaxOffence punishable u/s 276C(1)(i) r.w.s. 278B(1) of the Income Tax Act - provisional attachment orders u/s 132(9B) - Look Out Circular (LOC) issued against petitioner - discrimination between a foreign National and an Indian National - Petitioner as submitted that the contention that the petitioner is just an employee of the company - HELD THAT - It is essential to observe that as rightly observed by the learned Trial Court the offences alleged against the respondent are non-cognizable and bailable in relation to the allegations levelled against the respondent in the complaint filed by the complainant wherein he is arrayed as accused No.2 with it having been averred in the said complaint that it had been filed qua commission of offences punishable under Section 275B r.w.s 278B wherein it had been averred to the effect that there had been a non-congregation on part of the accused company through its team persons, namely, Mr. Li Xiongwei, Chief Executive Officer; Mr. Long Cheng, in-charge of Transfer Pricing matters; Mr. Sandeep Bhatia, Deputy CFO; and Mr. Amit Duggal, Head of Taxation on account of denial of the adequate facility to the Authorized officers empowered u/s 132 of the Income Tax Act. The said accused no.1/company is assessed for A.Y 2020-21 with office of Circle 1(1), Gurgaon. Subsequently the case has been centralized with Central Circle 02 under the jurisdiction of CCIT (Central) Delhi. Taking into account the factum that there is no extradition treaty of our country with China, the respondent thus falls within the category of a flight risk, but, the factum that he is alleged to have committed only a non-cognizable and an alleged bailable offence can also not be overlooked. Verdicts that the petitioner has relied upon all relate to alleged commission of non-bailable offences in which the issuance of the LOCs have been upheld in as much as they relate to offences inter alia punishable under the Prevention of Money Laundering Act, 2002, Prevention of Corruption Act, 1988, the Central Goods and Services Tax Act, 2017 and the non bailable offences under the Indian Penal Code, 1860. Though it is not considered appropriate by the Court to set aside the impugned order of the Trial Court which has set aside the LOC against the respondent in addition to the conditions imposed by Trial Court to the effect that in case of resignation, retirement or cessations of employment etc. of the respondent company, M/s Huawei Telecommunications (India) Company Private Limited (HTICPL) shall withhold the severance pay/severance package and other incentives/emoluments payable to the respondent and the same shall not be released without permission of this Court to which effect an undertaking has been directed to be submitted of the company to be filed before the Trial Court under intimation to the petitioner which the respondent submits has already been so submitted copy of which has also been submitted before this Court, the appropriateness of the undertaking being in consonance with the order of the learned Trial Court is an aspect to be considered by the Trial Court as has already observed herein above, it is considered appropriate to direct further in addition to the effect that the respondent shall further submit an undertaking to the Trial Court that he shall continue to join the investigation as and when directed by the Investigating Officer through video conferencing and furthermore, the respondent shall submit an undertaking to the Trial Court that on commencement of the trial, if any, against him, he shall appear before the Trial Court as and when directed and in the mode directed by the Trial Court. Respondent be permitted to travel out of India only subject to the respondent submitting an FDR drawn on a nationalized Indian bank in the learned Trial Court which on deposit is to be renewed in an automatic renewal mode which on the failure of the respondent to join the investigation twice shall stand forfeited and which also on failure to appear before the Trial Court as and when directed by the Trial Court shall be forfeited - the release of the said FDR would be subject to the determination and adjudication of the criminal complaint filed by the petitioner against the respondent herein. The respondent shall also adhere to the conditions imposed vide order in the bail order of the learned Trial Court of informing the complainant seven days prior to leaving India. The directions qua the imposition of the conditions of deposit of an FDR of an amount of Rs.5 Crores drawn on a nationalized Indian Bank and forfeiture thereof on non-joining of the investigation and non-appearance as and when directed by the Trial Court have been imposed to take into account the eventuality of the alleged commission of an offence punishable under Section 276C(1)(i) read with Section 278B(1) if any, committed by the respondent.
Issues Involved:
1. Legality of the Look Out Circular (LOC) issued against the respondent. 2. Compliance with the provisions of the Income Tax Act, 1961. 3. Conditions under which LOC can be issued and its validity. 4. The economic interest of India and its impact on the issuance of LOC. 5. The respondent's right to travel and the conditions imposed by the court. Detailed Analysis: 1. Legality of the Look Out Circular (LOC) issued against the respondent: The petitioner, Deputy Director of Income Tax (Inv) Unit-4(3), New Delhi, sought the setting aside of the impugned order dated 29.08.2022 by the ACMM, Special Acts, Tis Hazari Courts, which quashed the LOC issued against the respondent. The court observed that the LOC was issued not due to the pendency of the complaint case but for the ongoing investigation against the company. The court noted that the respondent was not evading arrest or failing to appear before the court, and the offense alleged was non-cognizable and bailable, which did not justify the issuance of the LOC. 2. Compliance with the provisions of the Income Tax Act, 1961: The petitioner alleged that the respondent, as the CEO of M/s Huawei Telecommunications (India) Company Private Limited (HTICPL), failed to comply with Section 132(1)(iib) of the Income Tax Act, 1961, by not providing the necessary facility to inspect the books of accounts during the search operation. The court noted that the complaint filed by the petitioner related to non-cognizable and bailable offenses under Section 275B read with Section 278B of the Income Tax Act, 1961. 3. Conditions under which LOC can be issued and its validity: The court referred to the Office Memorandum dated 27.10.2010 and the amended OM dated 05.12.2017, which allow the issuance of LOC in exceptional cases if the departure of a person is detrimental to the economic interest of India. The court observed that the respondent's departure could not be stated to be detrimental to the sovereignty, security, or integrity of India, nor to the bilateral relations with any country or strategic interest of the country. The court also noted that the respondent was not a flight risk as he had complied with the bail conditions and had no movable or immovable assets in India. 4. The economic interest of India and its impact on the issuance of LOC: The petitioner argued that the respondent's departure would affect the economic interest of India, as the investigation into the alleged tax evasion of more than Rs. 600 crores by HTICPL was ongoing. The court noted that the company had already secured Rs. 230 crores as per the directions of the Division Bench of the High Court in W.P.(C) 6352/2022. The court found that the respondent, being an employee and not a shareholder of the company, could not be attributed to have committed acts detrimental to the economic interest of India. 5. The respondent's right to travel and the conditions imposed by the court: The court upheld the order of the learned Trial Court quashing the LOC against the respondent but imposed additional conditions. The respondent was directed to submit an undertaking to join the investigation through video conferencing and appear before the Trial Court as and when directed. The respondent was also required to deposit an FDR of Rs. 5 crores, which would be forfeited if he failed to join the investigation or appear before the Trial Court. The court emphasized that the respondent's right to travel could not be restricted solely based on his nationality. Conclusion: The court declined the petition seeking the setting aside of the order dated 29.08.2022 by the ACMM, Special Acts, Tis Hazari Courts, and the stay of its operation. The impugned order was modified to include additional conditions for the respondent's travel and compliance with the investigation and trial proceedings. The court balanced the respondent's right to travel with the need to secure the economic interest of India and ensure his availability for the investigation and trial.
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