2024 (2) TMI 948 - HC - Indian Laws

NRI's Look Out Circular quashed for Rs 1400 crore foreign asset evasion case due to indefinite continuation without valid reasons

Delhi HC quashed a Look Out Circular against an NRI petitioner issued for alleged evasion of Rs. 1400 crores in undisclosed foreign assets and income ... Validity of Look Out Circular dated 22.01.2020 opened against the Petitioner - evasion in disclosure of a large amount of undisclosed foreign assets/income to the tune of Rs. 1400 crores in offshore jurisdictions - use of NRI status in creating a structure of institutions/trusts in offshore jurisdictions for the benefit of the larger family and his sister - diversion of unaccounted assets/income with the purpose of circumventing the jurisdiction of Indian revenue authorities - HELD THAT:- Initially LOCs were issued against such individuals who were suspected of committing serious crimes and were indulged in anti national activities, terrorist activities, etc. However, after amendment, LOCs are now also opened at the instance of investigating agencies and banks against persons who have committed economic offences which involve offences under the Black Money Act and Prevention of Money Laundering Act including the act of siphoning off and misappropriation of funds which have been advanced to them by various banks. The scope and ambit of the term “economic interests of India” has been a subject matter of a number of judgments and most of the Courts, in unison, have held that the magnitude of the offence must be such that it has affected the economic interest of the country and larger public interest is involved. The last summon was issued to the Petitioner in March 2022, i.e. about two years back, and the Petitioner has not been summoned by the authorities since then. An LOC cannot be permitted to continue for such a long period without there being any cogent and valid reason. The Petitioner has not been called for investigation since March 2022 and the counter affidavit filed by the Respondents does not indicate as to how the Petitioner has not cooperated with the investigation. In fact, material on record discloses that the petitioner has complied with the summons and has cooperated with the ongoing investigations against him by the IT Department. Right to travel abroad has been held to be a fundamental right under Article 21 of the Constitution of India which cannot be taken away in an arbitrary and illegal manner. In view of the fact that LOC against Ms. Jyotsana Suri has been quashed and also in view of the fact that the Petitioner has not been called for investigation by the Investigating Agency for the past two years and in the absence of any material which indicates that the Petitioner is likely to be called for investigation in the near future, this Court is inclined to quash the LOC opened against the Petitioner. Mere fact that information sought through the Foreign Tax and Tax Research from other jurisdictions such as the UAE is still awaited does not persuade this Court to keep the LOC against the Petitioner pending to curtail his fundamental rights. Considering the fact that the Petitioner is an NRI citizen who stays in Dubai and in order to ensure Petitioner’s presence in India this Court is inclined to impose the conditions on the Petitioner before quashing the LOC - the LOC against the Petitioner is hereby quashed subject to conditions imposed - petition disposed off. Issues Involved:1. Validity of the Look Out Circular (LOC) against the Petitioner.2. Compliance with summons and cooperation with the investigation.3. Petitioner's right to travel abroad under Article 21 of the Constitution of India.Summary:1. Validity of the Look Out Circular (LOC) against the Petitioner:The Petitioner challenged the LOC dated 22.01.2020 issued by the Deputy Director, Income Tax (Investigation). The LOC was based on allegations that the Petitioner, an NRI living in Dubai, assisted the Suri Family in evading disclosure of Rs. 1400 crores in undisclosed foreign assets/income. The Respondents argued that the Petitioner was involved in offences under the Prevention of Money Laundering Act, 2002, and the Black Money Act, and his presence was necessary for ongoing investigations.2. Compliance with summons and cooperation with the investigation:The Petitioner complied with multiple summons issued by the IT Department, with the last summon issued on 12.03.2022. The Court noted that the Petitioner had not been summoned since then and had cooperated with the investigation. The Respondents failed to provide cogent reasons for continuing the LOC, especially since the investigation had been ongoing for over three years.3. Petitioner's right to travel abroad under Article 21 of the Constitution of India:The Court emphasized that the right to travel abroad is a fundamental right under Article 21, which cannot be arbitrarily curtailed. The Court referred to previous judgments and Office Memoranda regulating the issuance of LOCs, highlighting that LOCs should only be issued in exceptional circumstances involving serious offences. The Court found no valid reason to continue the LOC against the Petitioner, especially since the Petitioner had not been called for investigation for the past two years.Conclusion:The Court quashed the LOC against the Petitioner, imposing the following conditions to ensure the Petitioner's presence in India:a. Furnish security of Rs. 10 crores or above, or a fixed deposit of the same value.b. Furnish liquid security of Rs. 1 crore.c. Not dispose of properties furnished as security without prior leave of the Court.d. Provide the entire travel itinerary to the Investigating Officer and adhere to it.The Writ Petition was disposed of, with the Court allowing the Respondents to open a fresh LOC if any conditions were breached.