2024 (11) TMI 649 - HC - Income Tax

Petition dismissed challenging summoning order for undisclosed foreign assets under Section 16 Black Money Act

Sanjay Bhandari Versus Income Tax Office

Delhi HC dismissed petition challenging summoning order for undisclosed foreign assets under Black Money Act, 2015. Petitioner allegedly fabricated and ... Challenge to summoning order and seeking quashing of the complaint - Allegations of Undisclosed Foreign Assets - Applicability of Sections 50 and 51 of the Black Money Act, 2015 - petitioner has argued vehemently that the present complaint could not have been filed before completion of the assessment - Case of the complainant/Income-Tax Department is that the petitioner stated that his association with certain foreign assets was only in the past and that too in the capacity of a trustee, and that he had resigned from all such fiduciary positions in relation to such foreign assets prior to April 2015 HELD THAT:- Black Money Act came into force on 01.07.2015. Additionally, the case of the complainant is that on 07.02.2017, a search was conducted against one Sanjeev Kapur, who was the Chartered Accountant of the petitioner. During the course of the search, it was discovered that the petitioner had attempted to fabricate and back-date documents to show that the foreign assets/offshore entities were held by the petitioner not in his individual capacity but in a fiduciary capacity as a trustee of the Alrahma Trust, purportedly settled in the UAE in 2006 by one Mr. Hussain Darwish Saleh Alrahma. The documents were also made to show that the petitioner had transferred the sole trusteeship to one Mr. Sumit Chadha in March 2015. It is also pertinent to mention that as per complainant Mr. Sanjeev Kapur stated that the petitioner met him in June-July 2016 along with the petitioner’s legal team, and it was decided that a trust structure of the nature described above would be set up, wherein the accused would be appointed as the sole trustee. Thereafter, Alrahma Trust was acquired in Dubai, UAE, and the accused was appointed as the sole trustee, effective from February 2006. Subsequently, it was decided that the accused would resign as the sole trustee effective from March 2015. The complainant alleges that the creation of the Alrahma Trust and changes in the structure of the trust were part of a premeditated scheme to dissociate the accused/petitioner from all his offshore entities/foreign assets by back-dating documents to evade the proceedings under the Black Money Act. The complainant is not required to bring the material on record that could prove the guilt of the accused or even be sufficient for framing the charge. This is a very initial stage where the Magistrate has to form an opinion that there are sufficient grounds for issuing the process. Such an opinion is to be formed based on the entire material on record. The objections of the petitioner regarding the assessment are not relevant, and the petitioner is required to seek the appropriate remedies to challenge the assessment order. In regard to the evidence to show that the petitioner owned foreign assets, the complainant shall be obliged to produce the same at an appropriate time. It is relevant to note that during the course of submissions, learned counsel for the respondent submitted that the petitioner prepared fabricated/back-dated documents to show him holding his foreign assets as a trustee of the Alrahma Trust effective from February 2006 and having resigned as trustee from March 2015. Furthermore, several documents, which form part of the scheme, including trust deeds, resignation letters, and correspondences, were signed by the accused/petitioner and his aides.It was submitted that this constitutes an overt act on the part ofthe Petitioner towards the commission of the offence. Case of the complainant is that in his reply to the notice under Section 10 of the Black Money Act dated 03.11.2016, the petitioner stated that the foreign assets were held by him the capacity of a trustee. It has been contended that this statement could be substantiated only by means of the fabricated/back dated documents. It has been submitted that petitioner has done everything which he could do to evade tax. However, the conspiracy unearthed as a result of the discovery made pursuant to the search conducted on 07.02.2017 at the premises of Mr. Sanjeev Kapur. It is also pertinent to mention here that whether act of the petitioner amounts to preparation or attempt is a matter of trial - also pointed out that there is wrong mentioning of the provisions in the summoning order. However, we consider that only on this ground, the summoning order cannot be set aside as the court has to see the entire record as a whole some and not in piece-mail. Petitioner had also moved an application for amendment of the present petition to challenge the assessment order dated 23.03.2020. Consider that has no substance as the petitioner has an efficacious statutory remedy against the assessment order dated 23.02.2020 by way of filing an appeal under Section 16 of the Black Money Act. It is a settled proposition that if there is an adequate efficacious alternative remedy is available and the jurisdiction of the High Court has been invoked without availing the same, except in the exceptional cases, such a writ petition is not required to be entertained. Reference can be made in Genpack India Pvt. Ltd. vs. Deputy Commissioner of Income Tax and Anr. [2019 (11) TMI 1118 - SUPREME COURT]. Finally, the respondent department has also pointed out towards the conduct of the petitioner. It has been pointed out that the petitioner’s affidavit has not been property attested and even he has not disclosed his the address at United Kingdom. It has also been alleged that the petitioner is evading the process of law. The party who approaches the Court must come with clean hands. Petitioner in the present case as alleged has not disclosed his United Kingdom address. The petitioner is thus has not approached the Court with clean hand. In view of the discussions made herein above, the Court is of the considered view that the petition is liable to be dismissed. Issues Involved:1. Quashing of Criminal Complaint and Summoning Order.2. Allegations of Undisclosed Foreign Assets.3. Applicability of Sections 50 and 51 of the Black Money Act, 2015.4. Dependency of Prosecution on Completion of Assessment.5. Validity of the Summoning Order.6. Petitioner's Conduct and Legal Remedies.Detailed Analysis:1. Quashing of Criminal Complaint and Summoning Order:The petitioner sought the quashing of Criminal Complaint No. 2121/2019 and the summoning order dated 10.05.2019 issued by the learned ACMM, Tis Hazari Court, Delhi. The petitioner argued that no prima facie case was made against him, as there was no evidence linking him to the alleged foreign assets. The court examined whether the allegations in the complaint, if taken at face value, constituted a prima facie offense. It was determined that the complaint did provide sufficient grounds for proceeding, and thus, the petition for quashing was dismissed.2. Allegations of Undisclosed Foreign Assets:The complaint alleged that the petitioner held undisclosed foreign bank accounts and properties, which were not declared in his income tax returns. The petitioner contended that there was no evidence of his ownership of these assets. However, the court noted that the evidence, including statements and documents, suggested a scheme to backdate and fabricate documents to portray the petitioner as holding the assets in a fiduciary capacity. The court found that the allegations warranted further examination during the trial.3. Applicability of Sections 50 and 51 of the Black Money Act, 2015:The petitioner argued that the allegations pertained only to non-disclosure under Section 50, not a willful attempt to evade tax under Section 51. The court clarified that Sections 50 and 51 address different offenses: non-disclosure of foreign assets and willful attempt to evade tax, respectively. The court held that the prosecution under Section 51 was justified as the complaint alleged an attempt to evade tax through fabrication and backdating of documents.4. Dependency of Prosecution on Completion of Assessment:The petitioner contended that prosecution should not commence without completing the assessment proceedings. The court referred to Section 48 of the Black Money Act, which states that prosecution is independent of any assessment order. The court also cited precedents affirming that prosecution can proceed independently of assessment completion. Thus, the argument that prosecution was contingent on assessment was rejected.5. Validity of the Summoning Order:The petitioner challenged the summoning order as being mechanical and lacking judicial application of mind. The court emphasized that summoning an accused is a serious matter and requires credible material on record. It found that the learned ACMM had sufficient grounds to issue the summons based on the complaint and supporting evidence. The court also noted that any discrepancies in the order's language did not invalidate the summons.6. Petitioner's Conduct and Legal Remedies:The court observed that the petitioner had not disclosed his address in the United Kingdom and had not approached the court with clean hands. The petitioner was advised to pursue statutory remedies against the assessment order, as the court would not entertain the petition without exhausting alternative remedies. The court highlighted the importance of approaching the court with transparency and dismissed the petition due to the petitioner's conduct and the availability of other legal avenues.In conclusion, the court dismissed the petition, affirming the validity of the criminal complaint and the summoning order, and emphasized the independence of prosecution from assessment proceedings under the Black Money Act, 2015.