9911796707
TMI Blog2020 (12) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... . While hearing this writ petition on 07.11.2019, this Court had noticed that Section 230(1A) offered opportunity to an assessee to represent to the assessing officer that satisfactory arrangements had been made to defray the tax and other liabilities, if any, computed, in which case the necessary Tax Clearance Certificate (TCC) could well be issued by the officer permitting the assessee to travel out of the country. The following order thus came to be passed: Mr.A.P.Srinivas, learned standing counsel takes notice for the respondent. 2. The challenge made in this writ petition is against the order passed under Section 230(1A) of the Income Tax Act, 1961, dated 18.10.2019. Through the impugned proceedings, the respondent called upon the petitioner to obtain a Tax Clearance Certificate under Section 230(1A) from the respondent before leaving the territory of India by land, sea or air. 3. The above said order was issued in pursuant to the search conducted at the premises of the petitioner under Section 132 of the Income Tax Act, 1961, and seizure of cash to the tune of Rs. 23.87 Crores, jewellery weighing 5678.800 grams, diamond weighing 433.47 carrots and foreign currency of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -4(3)/Preetha/2019-20 dated 11.11.2019, U/S. 230(1A) of the Income Tax Act, 1961 and consequentially direct the respondent herein to permit the petitioner to travel abroad as and when required in exercise of his fundamental right to travel abroad guaranteed under Article 21 of the Indian Constitution, by permanently removing all travel restrictions whatsoever, with immediate effect. 4. Both writ petitions, the present one as well as W.P.No.31971 of 2019, were listed for hearing together and the latter came to be dismissed as withdrawn by order of this Court dated 13.11.2019. Thereafter, the petitioner has been pursuing the present writ petition alone. 5. A serious objection is raised by Mr.A.P.Srinivas, learned Senior Standing Counsel for the respondent, to the maintainability of the present writ petition. He contends that once W.P.No.31971 of 2019, seeking quash of order dated 11.11.2019 had been withdrawn, the petitioner is not entitled to maintain its challenge to the present impugned order. He states that an order under Section 230(1A) is merely one wherein the respondent expresses his satisfaction of the existence of circumstances that, in his opinion, make it necessary for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation for any of the search findings, the details as required in various questions (as per statement recorded to him u/s.132(4). 15) Hence, in view of the above your presence in India is inevitable, look out notice u/sec.230(1A) of the Income Tax Act, 1961, had been issued, which reads as under: Provided that no person (i) Who is domiciled in India at the time of his departure; and (ii) In respect of whom circumstances exist which, in the opinion of an income-tax authority render it necessary for such person to obtain a certificate under this section, shall leave the territory of India by land, sea or air unless he obtains a certificate from the income-tax authority stating that he has no liabilities under this Act, or the Wealth-tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the Expenditure-tax Act, 1987 (35 of 1987), or that satisfactory arrangements have been made for the payment of all or any of such taxes which are or may become payable by that person: "Circumstances exist" had been clarified by CBDT vide its instruction No.1/2004 dated 05-02-2004 (copy enclosed). Para 3(i) clearly states that ... where a person is involved in serious fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion dated 11.11.2019 will thus not have a bearing on the legal issues raised by the petitioner in the present writ petition. For the aforesaid reasons, the withdrawal of W.P.No.31971 of 2019 will also not preclude the adjudication of this Writ Petition on merits. 9. The argument of the revenue to the effect that the petitioner can always seek issuance of a TCC afresh also does not impress as the validity of an order passed under Section 230(1A) has to be tested with reference to that order alone. Moreover, the rejection of a request relates back to a valid order under Section 230(1A) and if one were to take a view that the assumption of jurisdiction under Section 230 (1A) was lacking, all subsequent orders would consequently be rendered bad in law. The grant of a TCC begs the question of whether the order requiring such certificate is itself valid. The latter question has necessarily to be decided first as it forms the substratum of the lis. 10. For the above reasons, this writ petition is held to be maintainable. 11. The petitioner claims to be a teacher of spirituality and philosophy and the founder of various academies that disseminate philosophical concepts to the public at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed authority shall, on receipt of the undertaking, immediately give to such person a no objection certificate, for leaving India: Provided that nothing contained in sub-section (1) shall apply to a person who is not domiciled in India but visits India as a foreign tourist or for any other purpose not connected with business, profession or employment. (1A) Subject to such exceptions as the Central Government may, by notification in the Official Gazette, specify in this behalf, every person, who is domiciled in India at the time of his departure from India, shall furnish, in the prescribed form to the income-tax authority or such other authority as may be prescribed- (a) the permanent account number allotted to him under section 139A: Provided that in case no such permanent account number has been allotted to him, or his total income is not chargeable to income-tax or he is not required to obtain a permanent account number under this Act, such person shall furnish a certificate in the prescribed form; (b) the purpose of his visit outside India; (c) the estimated period of his stay outside India: Provided that no person- (i) who is domiciled in India at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istry of External Affairs, the Customs and Income Tax Departments, Directorate of Revenue intelligence, Central Bureau of Investigation, Interpol, Regional Passport Officers, Police authorities in various States, etc.' It has further been stated that 'unless otherwise specified in the warning circular itself, the circulars issued by any of the various authorities specified above will be regarded as invalid if it is more than one year old and the card will be weeded out. For the future, it is considered that whenever any authority issues a warning circular to the immigration authorities, the period of validity should be clearly specified in the circular. If this is not done, the circular will be considered to be valid only for a period of one year from the date of issue and a watch will be maintained by the person concerned at the immigration check posts only for that period.' 3. The OM dated 27.12.2000 of MHA specifies the steps required to be taken for opening an LOC in respect of an Indian citizen. It has been mentioned in the said OM that the request for opening an LOC in respect of an Indian citizen is required to be made to all the Immigration Check Posts (ICP) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt officer alone shall give directions for opening LOC by passing an order in this respect. c) The person against whom LOC is issued must join investigation by appearing before I.O. or should surrender before the court concerned or should satisfy the court that LOC was wrongly issued against him. He may also approach the officer who ordered issuance of LOC & explain that LOC was wrongly issued against him. LOC can be withdrawn by the authority that issued and can also be rescinded by the trial court where case is pending or having jurisdiction over concerned police station on an application by the person concerned. d) LOC is a coercive measure to make a person surrender to the investigating agency or Court of law. The subordinate courts' jurisdiction in affirming or cancelling LOC is commensurate with the jurisdiction of cancellation of NBWs or affirming NBWs. 8. In accordance with the order dated 26.7.2010 of the High Court of Delhi, the matter has been discussed with the concerned agencies and the following guidelines are hereby laid down regarding issuance of LOCs in respect of Indian citizens and foreigners: a) The request for opening an LOC would be made by the ori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT has been conveyed on the same day, i.e., 18.10.2019 and the impugned order under Section 230 (1A) passed on the same date conveying to the petitioner that she is required to obtain a Tax Clearance Certificate before leaving the territory of India. In response thereto, the Bureau of Immigration, Ministry of Home Affairs has opened a look out circular restraining the movement of the petitioner for a period of one year. 17. Let us now examine the purpose and intent of Section 230. Evidently, the provision is intended to protect the interests of the revenue in the case of an assessee, in whose case a demand of tax has been raised or is imminent, and who is expected to frustrate the recovery of the dues by absconding from the country and constituting a flight risk. The twin conditions, of pending or imminent tax dues and flight risk are to be based on tangible materials. My attention is drawn to the Report of the Task Force on Direct Tax, constituted under the Chairmanship of Dr.Vijay Kelkar, commonly referred to as Vijay Kelkar Committee (2002) Recommendations on Direct Taxes, wherein at Chapter 3, the subject of Income Tax Clearance Certificate has been specifically referred to. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orsed the view of the Group. 3.60 It is therefore recommended that the present requirement of obtaining a tax clearance certificate before leaving the country must be abolished. However, in order to protect the interest of revenue, we can continue to allow the income tax authorities to notify the immigration/custom authorities to prevent any particular person from leaving the country if such person is considered to be a proclaimed offender. As a 56 result only a handful of notified persons will be subjected to the process of tax clearance as against the present practice of requiring all and sundry to comply with the requirement of obtaining tax clearance before leaving the country. 3.61 In terms of the policy of the Government of India, patronage in the form of grant of license, government contracts, permits, etc should be extended only to honest taxpayers. All the Ministries, their attached and subordinate offices, public sector undertakings, ordnance factories, Directorate-General of Supplies and Disposals and Central Public Works Department strictly ensure that those who fail to discharge their tax obligations do not get any patronage from them. The concerned Department/Agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erential debt for the purposes of Section 230 of the Companies Act, whether from date of demand or date of receipt of sale price. This is not the question raised in this writ petition. 20. In The Income Tax Officer (Collection) Vs. Mrs. A. Sattlar [(1974) 4 SCC 847], the Supreme Court and in Laura Hamilton V. Vs. K.P.Menon, Tax Recovery Officer [(1990) 184 ITR 252] a learned single Judge of the Bombay High Court considered the veracity of orders under section 230(1) in cases where assessments had been completed and, according to the revenue, there were pending arrears. In Mrs.A.Sattlar's case (supra), the assessment originally framed had itself been set aside and there was thus no basis for the order under Section 230(1). In Laura Hamilton's case (supra), the petitioner therein had stood guarantee for the income tax arrears of one Lisbet Holmes for the purpose of issue of TCC in the latter's case. Lisbet Holmes left India in 1966. There appear to have arrears of tax in her case for the subsequent periods, that is, 1969-70 to 1972-73 on the basis of which the Department passed an order under Section 230(1) in the petitioner's case. Since the guarantee had been executed to cover the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned may leave the country without complying with the section. We see considerable force in this submission of the learned counsel for the Department. If prior notice is given, there is a possibility of the section becoming unworkable. . . . . 22. The object and purpose of the provision cannot be faulted in principle or theory. What remains to be tested is the satisfaction of the conditions and parametres contemplated in the provision in a specific case to then decide whether the invocation was warranted and justified from the reasons and materials on record or whether it is an excess of authority. In the case of Jayanthi Dharma Teja (supra) wherein the Bench of the AP High Court dismissed the challenge to an order under Section 230(1), there are several material distinctions on facts from the present case. 23. Assessments of income and wealth had been finalized in that case for several years raising substantial demands. There had been no co-operation extended by the assessee therein and no attendance in the hearings/proceedings. After the finalization of the assessments exparte, the department was unable to recover the demands as the assessee has left the country. After a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the opinion of the income-tax authority that a person is not likely to return to India. It is argued by the learned counsel for the Department that the expression "of the opinion" indicates that it is the subjective satisfaction of the authority and beyond the pale of judicial review. It is no doubt true that the words in s. 230(1) "in the opinion of the income-tax authority" means subjective satisfaction of the authority. But that subjective satisfaction must be arrived at in an objective way, that is to say, there must be some material on the basis of which such opinion could be reasonably formed as it affects the right to go abroad which is part of the right of liberty. The question, therefore, is whether any such material exists in the present case. The petitioner was living mostly outside India. His presence could not be secured when prosecutions were launched. The Government of India had to take extradition proceedings. All the assessments under the tax enactments were made ex parte as the notice to his known address abroad were returned either unserved or refused. He left India in 1977 and returned only in February, 1983, after a period of five years. These facts sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tecedents or is an assured flight risk all leading to the inevitable and justifiable apprehension that the anticipated demands of tax will not be met or satisfied. More so in the present case, where the search has taken place on 16.10.2019 and the respondent proceeds to pass the impugned order on 18.10.2019, just a day later. 27. The revenue has filed a counter dated 20.01.2020. Reference is made to the search and seizure operation conducted on 15.10.2019 in the residential premises of the petitioner as well as Kalki Bhagwan and Companies and Trusts run by them, in all 38 premises at various locations in Chennai, Chitoor, Hyderabad, Bangalore and other places. In the petitioners' residence cash of Rs. 23.87 crores, foreign currency of 1.25 Million USD (INR 9 crore approx), jewellery worth 5678 grams valued at Rs. 1.68 crores and diamond worth 4.33 carats valued at 1.7 crore was found and seized. In addition, cash receipts generated by the companies and trusts, in which the petitioner was either a shareholder or trustee, had been found amounting to Rs. 630 crores, wherein a sum of Rs. 221 crores had been deposited into the bank. Reference is also made to a sum of Rs. 131 crore tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, substantial assets including cash have been seized at the time of search which would, she anticipates, be more than sufficient to settle tax liabilities even if assessments are finalized as projected by the Income Tax Department, that her visits abroad are only for the purposes of disseminating spirituality, that she travels on temporary tourist visas which require her return to India within the stipulated period and that her family including her husband and daughter live in India permanently. She emphasizes that there are no permanent assets or properties in her name in any other country other than India and reiterates that she has been and will always extend full co-operation with the on-going investigation. 31. Per contra, reply dated 15.02.2020 is filed to the letter of undertaking estimating the demands expected to be raised in the assessments pending finalization. In the course of the hearing, the Revenue has indicated broadly the anticipated demand in the petitioners' case but I refrain from recording any amount here, conscious that this may hamper the on-going proceedings that should be allowed to evolve and proceed unfettered by a pre-conceived target. 32. The other i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emarks Rebuttal 1 22.10.2019 24.10.2019 Summons Appeared 2 25.10.2019 29.10.2019 Summons Appeared & Sworn statement recorded 3 25.11.2019 02.12.2019 Summons Not appeared vide letter dt.27.01.20 assessee stated that "I sought adjournment in writing and granted". Not granted any such adjournment 4 27.12.2019 30.12.2019 Summons 5 27.12.2019 30.12.2019 Letter calling for details (Encl.131) 6 17.01.2020 22.01.2020 Penalty Show-cause for non appearance to 131 dt 25.11.2019 Not appeared vide letter dt.27.01.20 assessee stating the reasons and pray to drop the penalty proceedings u/s.272A. 8 17.01.2020 22.01.2020 Penalty Show-cause for non appearance to 131 dt 27.12.2019 Proceedings of Black Money Act S.No. Notice/Letter date Issued on Hearing date Remarks Rebuttal 1. Notice u/s 10(1) 23.10.2019 29.10.2019 Not appeared - Letter dt 8.11.19 seeking adjournment till 18.11.2019. Letter dated 4.2.20 stating that she has appeared before the undersigned on 29.10.2019. Required assessee to furnish details of foreign investments. However, assessee did not furnish details called for. 2. Summon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 020 setting out certain reasons for non-appearance and praying for dropping of the proposed penalty. 37. At the outset, all hearings referred to have all been scheduled post the date of impugned order dated 11.11.2019 and this one fact would be sufficient to decide that the impugned order has been passed in haste and pre-maturely. Events post the date of impugned order can hardly support the order itself as the order has to be tested on the materials available as on its date. Even otherwise, in my considered view the above sequence of proceedings do not give rise for alarm or apprehension that the petitioner would abscond. It also does not legitimize the allegation that the petitioner has not been co-operating with the Department. There has been attendance, either in person or a communication seeking adjournment, on almost all the dates when hearings had been fixed. There is nothing amiss at this stage to lead me to the conclusion that the petitioner has been avoiding the hearings or subverted the same, to procrastinate or drag the proceedings needlessly. 38. As regards the submissions relating to the scope of Section 230A, no specific submissions have been adverted to by the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished by persons domiciled in India at the time of leaving India. As per the said sub-section, persons who are domiciled in India are only required to furnish permanent account number, purpose of visit outside India and estimated period of stay outside India. 2. However, persons, in respect of whom circumstances exist which, in the opinion of an income tax authority, make it necessary for such person to obtain a tax clearance certificate, will be required to obtain such certificate. A person can be asked to obtain a tax clearance certificate only after taking approval from the Chief Commissioner of Income-tax. 3.In this regard, the Board hereby directs that tax clearance certificate, as required under the first proviso to sub-section (1A) of section 230, may be required to be obtained by persons domiciled in India in the following circumstance: (i) where the person is involved in serious financial irregularities and his presence is necessary in investigation of cases under the Income-tax Act or the Wealth-tax Act and it is likely that a tax demand will be raised against him, or (ii) where the person has direct tax arrears exceeding Rs. 10 lakh outstanding against him wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0(1A). In the light of such clear categorization, the argument of the Revenue to the effect that CCIT shall be equated to DGIT must, according to the petitioner, fail. 44. In Commissioner of Income Tax Vs. SPL's Siddhartha Ltd. [(2012) 345 ITR 223], the Court held at para 7 and 8: 7. Section 116 of the Act also defines the Income Tax Authorities as different and distinct Authorities. Such different and distinct authorities have to exercise their powers in accordance with law as per the powers given to them in specified circumstances. If powers conferred on a particular authority are arrogated by other authority without mandate of law, it will create chaos in the administration of law and hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted by the satisfaction of the other authority. It is trite that when a statute requires, a thing to be done in a certain manner, it shall be done in that manner alone and the Court would not expect its being done in some other manner. It was so held in the following decisions: (i) CIT Vs. Naveen Khanna (dated 18.11.2009 in ITA No.21/2009 (DHC). (ii) State of Bihar Vs. J.A.C. Saldanna & Ors. AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aa) ....... (b) Directors-General of Income-tax or Chief Commissioners of Income-tax,' 47. Thus, according to them the role played by a DGIT is the same as that played by a CCIT, since the word used in Section 116(b) is 'or'. In using the word 'or' Legislature has intended that a DGIT and CCIT being of equal rank, their functions are interchangeable. Reliance in this regard is placed on a decision of a Division Bench of this Court in the case of Srinidhi Karti Chidambaram Vs. Principal Chief Commissioner of Income-Tax [411 ITR 49], particularly the paragraph extracted below: 223. Respondents in their counter affidavit have contended that as per section 2(16) of the Income-tax Act, 1961, the word "Commissioner" has been defined, inter-alia, to include a person appointed as Principal Director of Income-tax and since the Commissioner is also one of the competent authority for according sanction under section 55 of the Black Money Act, the same covers the Principal Director of Income-tax also. Except Mr.ARL.Sundaresan, learned Senior Counsel for the petitioners, no serious contentions, on the above aspect, were made. Respondents have explained the competence of the Principal Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T till the time of the amendment in 2020, as had this not been the position, there would have been no requirement for the amendment in the first place. The effect of the amendment is that reference to Chief Commissioner in the Statute can well be read to read and connote Director- General of Income tax. The office of the CCIT is thus functionally at par with that of the DGIT only w.e.f. 01.04.2021, though not vice-versa as the definition of DGIT in Section 2(21) remains unaltered, reading as below: (21) "Director General or Director" means a person appointed to be a Director General of Income-tax or a Principal Director General of Income-tax or, as the case may be, a Director of Income-tax or a Principal Director of Income-tax, under sub-section (1) of section 117, and includes a person appointed under that sub-section to be an Additional Director of Income-tax or a Joint Director of Income-tax or an Assistant Director or Deputy Director of Income-tax; 50. In this case, the Assessing Authority has parallelly initiated proceedings under the Black Money Act. One question that would arise is whether at all, the provisions of Section 230 would stand attracted to proceedings under Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow: STATEMENT OF OBJECTS AND REASONS Stashing away of black money abroad by some people with intent to evade taxes has been a matter of deep concern to the nation. 'Black Money' is a common expression used in reference to tax-evaded income. Evasion of tax robs the nation of critical resources necessary to undertake programs for social inclusion and economic development. It also puts a disproportionate burden on the honest taxpayers as they have to bear the brunt of higher taxes to make up for the revenue leakage caused by evasion. The money stashed away abroad by evading tax could also be used in ways which could threaten the national security. 2. The Central Government is strongly committed to the task of tracking down and bringing back undisclosed foreign assets and income which legitimately belong to the nation. Recognising the limitations of the existing legislation, it is proposed to introduce a new legislation to deal with undisclosed assets and income stashed away abroad. 3. The Supreme Court of India has also expressed concern over this issue. The Special Investigation Team constituted by the Central Government to implement the decision of the Supreme Court, has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Second and subsequent offence will be punishable with rigorous imprisonment for a term of three years to ten years and with fine of Rs. 1 crore to Rs. 25 lakh. In prosecution proceedings, the wilful nature of the default shall be presumed and it shall be for the accused to prove the absence of the guilty state of mind. 31 32 (iv) To facilitate enquiry and investigation, authorities under the Act have been vested with the powers of discovery and inspection, issue of commissions, issue of summonses, enforcement of attendance, production of evidence, impounding of books of account and documents. (v) The Central Government has been empowered to enter into agreements with other countries, specified territories and associations outside India inter alia for exchange of information, recovery of tax and avoidance of double taxation. (vi) Safeguards to prevent misuse have been embedded in the Bill. It will be mandatory to issue notices and grant of opportunity of being heard, record reasons for various actions and pass written orders. Appeal to the Income-tax Appellate Tribunal, and to the jurisdictional High Court and the Supreme Court on substantial questions of law have been provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved upon by additional reasons set out in the counter. He relies, in this regard, upon the judgment of the Supreme Court in the case of Mohinder Singh Gill and Another Vs. Chief Election Commissioner, New Delhi and Others [(1978) 1 SCC 405]. To this, Mr.Srinivas would state that the order does speak for itself and has been passed in line with the requirements of Section 230(1A) that makes it necessary for the respondent to obtain a certificate from an assessee if he is of the belief that such certificate were warranted. The position vests extraordinary power that vests in the authority to curtail the freedom of movement of an assessee and can be involved only in a situation where, 'circumstances exist which, in the opinion of an income-tax authority render it necessary for such person to obtain a certificate under this section'. 57. While the reasons recorded are no doubt, subjective, the circumstances on the basis of which the satisfaction is recorded must be a matter of record as should be any and all material on the basis of which the authority comes to the decision that the assessee should be called upon to obtain a TCC. The satisfaction must be based on tangible material incl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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