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2020 (12) TMI 668
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..... There is some history to the present litigation. 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 5....
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.... as follows: To call for the records and quash the impugned order passed by the respondent vide F.No.ADIT/U-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present one as well as W.P.No.31971 of 2019, were listed for hearing together and the latter came to be dismissed as withdrawn by order of this Court dated 13.11.2019.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 He contends that once W.P.No.31971 of 2019, seeking quash of order dated 11.11.2019 had been withdrawn, the petitioner is not entitled to maintain its challenge to the present impugned order.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 ....
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....14) Further, investigation has to be completed in a time-bound manner. The investigation status so far is that you and your husband have not provided conclusive explanation 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 ....
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....ally sustainable. In contrast, order dated 11.11.2019 is only a consequential order that takes wings from order dated 18.10.2019. It is specific to the request of the petitioner for travel on specified dates. Order of rejection 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....
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.... in the prescribed form from his employer; or (ii)through whom such person is in receipt of the income to the effect that tax payable by such person who is not domiciled in India shall be paid by the employer referred to in clause (i) or the person referred to in clause (ii), and the prescribed 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 ....
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....this Ministry's letter number 25022/13/78-F.I dated 5.9.1979 and OM number 25022/20/98- F.IV dated 27.12.2000. 2. It has, inter-alia, been stated in the letter dated 5.9.1979 of MHA that 'apart from the Govern India in the Ministry of Home Affairs, circulars are issued by various authorities for keeping a watch on arrival/departure of Indians and foreigners. These authorities include the Ministry 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....
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....ating agency in cognizable offences under IPC or other penal laws, where the accused was deliberately evading arrest or not appearing in the trial court despite NBWs and other coercive measures and there was likelihood of the accused leaving the country to evade trial/arrest. b) The Investigating Officer shall make a written request for LOC to the officer as notified by the circular of Ministry of Home Affairs, giving details & reasons for seeking LOC. The competent 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 agenc....
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.... from the country in order to frustrate trial/investigation. The threshold for such justification is high. In the present case, the search has taken place on 16.10.2019 and the impugned order has been passed on 18.10.2019, one day after the search. The records reveal that approval was sought from the Director General of Income Tax (Investigation) on 18.10.2019 for issuance of an order under Section 230 of the Act to the Immigration Authorities to prevent the petitioner from leaving India. Reference is made in the letter seeking approval to Instruction No.1 of 2004 dated 05.02.2004. The approval of the DGIT 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 as....
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....3.58 India has a network of treaties for avoidance of double taxation. These treaties do not provide for any bilateral arrangement for assistance in tax recovery by one country from the residents of another country. It is now learnt that OECD has proposed the incorporation of such an arrangement in all treaties and therefore India will have to renegotiate for this purpose. 3.59 The Group on Tax Policy and Tax Administration set up by the Planning Commission under the chairmanship of Dr. Parthasarathi Shome has recommended that the requirement to obtain tax clearance by foreign tourists must be dispensed with immediately. The Task Force also discussed this issue and endorsed 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 su....
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....ten resulted in. However, to balance the interests of the Revenue, the Committee has suggested that if any person has been declared to be a proclaimed offender, then in such cases alone, the Income Tax Authorities could continue to notify the Immigration/Customs Authorities to prevent his flight. The provisions of Section 230 should only be invoked in such cases, after ascertaining such necessity and not in a general manner, so as to cause great prejudice to the personal liberty of tax payers. 19. I now discuss the case law cited by the petitioner. The Calcutta High Court, In the matter of Recols (India) Ltd. [(1953) 4 STC 271], considered the question as to when sales tax is to be treated as a preferential 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 ....
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....bleness. It, therefore, follows that though s.230(1) does not provide a notice to be given to a party before arriving at an opinion so as to make the income tax authority insist upon a clearance certificate, we are of the view that a notice must be given. The law is now well settled that even in administrative proceedings which involve civil consequences, the doctrine of natural justice is applicable. Therefore, for application of s.230(1), a notice is necessary, as insistence on a clearance certificate affects, though remotely, the holder of a passport to go abroad. But it is contended by the learned counsel for the Department that if prior notice is given, the very object of s.230(1) will be stultified as the person concerned 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 ca....
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....aised (vii) the assessee was arrested in London in July, 1970, and brought to India for trial (viii) he was convinced on several counts including criminal breach of trust, cheating, and, after his release from prison in 1975 he again left India. 25. It was in the above circumstances that the Bench declines to interfere in the matter. The Bench states that though the existence or otherwise of 'circumstances' for curtailing the right of the assessee to travel was subjective, and thus beyond the pale of judicial review, such subjective satisfaction must be arrived at in an objective manner. To quote the Bench at paragraph 6: . . . . It is thus seen that the insistence on the clearance certificate or the exemption certificate is based 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.....
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....uded post the search, does not thus arise. Admittedly, there are no arrears that are outstanding in the case of this petitioner from earlier assessments. Having said so, a plain reading of Section 230(1A) does not reveal any requirement of a completed assessment or pending demand, since the phrase used is 'satisfactory arrangements have been made for the payment of all or any of such taxes which are or may become payable by that person'. Thus, Section 230(1A) also stands triggered in the case of anticipated demands. However, the threshold for the application of the provision is high and the provision cannot be invoked unless the material available on file indicates circumstances that support the position that the assessee in question is a habitual offender, has criminal antecedents 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 sear....
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....by the petitioner were asked to remit the course fee in undisclosed bank accounts abroad including in the account of one EHEYI Development (Shanghai) Co. Ltd and utilized for investment and asset creation outside the country. 30. In rejoinder dated 30.01.2020, the petitioner denied the allegations primarily on the ground that they are baseless and highly premature. She points out that the affidavit had been filed by an Investigating Officer, who is a part of the search team and whose duty was merely to collate the details of assets and evidences found in search for appraisal and further action by the Assessing Officer of the petitioner. She has filed an affidavit of undertaking dated 06.02.2020 pointing out that she has co-operated thus far in the enquiry conducted by the Department, 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 sti....
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.... comments as above and the revenue was permitted to file an amended counter, filed on 15.02.2020. As per the amended counter, it is seen that summons issued on 22.10.2019 under the IT Act listed the assessment for hearing on 24.10.2019, in response to which the petitioner had appeared. This fact has not mentioned in the original counter. Then again there is reference to summons dated 25.102.2019 listing the matter for hearing on 29.10.2019 where the remark is that the petitioner has appeared and a sworn statement recorded. In the original counter the respondent had remarked that there had been no response from the petitioner to the summons dated 25.10.2019. 34. The revised details of proceedings under the IT and BM Act in the case of the petitioner are as follows: Proceedings of Income Tax Act S.No. Summon/Letter date Hearing date Description Remarks 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 grante....
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.... assessee to the posting of matter, are thus critical. To this end, affidavit dated 20.01.2020 falls far short of expectation and requirement. The second/corrected counter, dated 15.02.2020 casually brushes away the earlier mistakes and errors as 'inadvertant'. 36. The Revenue would also emphasise the non-co-operation by the petitioner to the on-going investigation. As regards this aspect, the revised details of hearings that have been circulated vide additional affidavit make it clear that the petitioner has attended two of the five hearings scheduled, has sought an adjournment on two of the four occasions when summons was issued and on two other occasions, i.e., 02.12.2019 and 30.12.2019. A letter dated 27.12.2019 calling for details to be filed on 30.12.2019 was also responded to by way of a request for adjournment. In response to penalty notices for non-appearance to summons dated 25.11.2019 and 27.12.2019, the petitioner, while not appearing, has filed a letter dated 27.01.2020 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....
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....atutorily required. The argument of the revenue is that the roles of a DGIT and CCIT are interchangeable for the purposes of granting of approval in terms of Section 230(1A). 40. My attention is drawn to the provision itself which is categoric in regard to the requirement of approval from the CCIT as well as Instruction No.1 of 2004 dated 05.02.2004, which reiterates this requirement. The Instruction is extracted below: INSTRUCTION NO.1/2004 SECTION 230 OF THE INCOME-TAX ACT, 1961- COLLECTION AND RECOVERY OF TAX- TAX CLEARANCE CERTIFICATES CIRCUMSTANCES IN WHICH TAX CLEARANCES CERTIFICATE, AS REQUIRED UNDER THE FIRST PROVISO TO SECTION 230(1A), MAY BE REQUIRED TO BE OBTAINED BY PERSONS DOMICILED IN INDIA INSTRUCTION NO.1/2004, DATED 5-2-2004 1. Section 230 of the Income-tax Act, 1961 relating to tax clearance certificates was amended by the Finance Act, 2003. The section was amended, inter alia, by way of insertion of a new sub-section (1A) which provides for the information to be 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 acco....
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....income-tax authority authorized by such Chief Commissioner or Director-General in this behalf. (2) For the purpose of sub-section (1A) of section 230, the prescribed authority shall be the Chief Commissioner of Income-tax having jurisdiction over the persons domiciled in India or any other income-tax authority authorized by him in this behalf: Provided that in the case of a person domiciled in India referred to in the first provision to sub-section (1A) of section 230, the application shall be made to the Assessing Officer who has jurisdiction to assess such person.] 43. The petitioner draws a distinction between Rules 42(1) and 42(2) as per which, the authority authorized to issue a TCC for the purpose of Section 230(1) shall be the CCIT or the DGIT, whereas for the purpose of Section 230(1A), the prescribed Authority shall be the CCIT. A clear distinction has thus been drawn, according to the petitioner, between the appropriate authority for grant of approving for those categories of persons enumerated under Section 230(1) and those enumerated in Section 230(1A). In the light of such clear categorization, the argument of the Revenue to the effect that CCIT sh....
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.... exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether. 45. In Dhanajaya Reddy Vs. State of Karnataka [(2001) 4 SCC 9], the Court held as follows: . . . . 23 It is settled principle of law that where a power is given to do a certain thing in a certain manner, the thing must be done in that way or not at all. This Court in State of Uttar Pradesh v. Singhara Singh [AIR P.361 para 8) held "A Magistrate, therefore, cannot, in the course of investigation, record a confession except in the manner laid down in Section 164. The power to record the confession had obviously been given so that the confession might be proved by the record of it made in the manner laid down". 46. The Revenue relies upon the provisions of Section 116 which enumerates various Income Tax Authorities constituted for the purposes of the Act. Section 116(b) states as follows: '116. There shall be the following classes of income-tax authorities for the purposes of this Act, namely :- (a) ....... (....
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.... be a Chief Commissioner of Income-tax 3[or a Director General of Income-tax] or a Principal Chief Commissioner of Income-tax 3[or a Principal Director General of Income-tax] under sub-section (1) of section 117; The portions in brackets have been inserted by the Finance Act 2020 specifically to take effect with effect from 01.04.2021 only. Thus, prior to A Y 2021, a Chief Commissioner while being equal in rank to a DGIT as per section 116, was functionally, a different and distinct authority from the DGIT. Any approval that was required to be granted by a CCIT for the period prior to 01.04.2021 could not be replaced by the approval of the DGIT, even though equal in rank. The decision of this Court in the case of Srinidhi Karti Chidambaram (supra) in on the question of whether a 'Commissioner' would include a person appointed as 'Principal Director of Income-tax' for the purpose of determining competence for according sanction under section 55 of the Black Money Act. This is not the question that arises in the present case and the case relied upon by the revenue is thus distinguishable. 49. Evidently, there is a statutory distinction envisaged as between the roles and respons....
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....ficer. 53. Section 84 is critical to the lis in this matter and sets out the application of certain provisions of the Income Tax Act to the Black Money Act. Section 84 reads as under: 'Application of provisions of Income-tax Act 84. The provisions of clauses (c) and (d) of sub-section (1) of section 90, clauses (c) and (d) of sub-section (1) of section 90A, sections 119, 133, 134, 135, [138, 144A], Chapter XV and sections 237, 240, 245, 280, 280A, 280B, 280D, 281, 281B and 284 of the Income-tax Act shall apply with necessary modifications as if the said provisions refer to undisclosed foreign income and asset instead of to income-tax.' 54. A critical omission from Section 84 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 is Section 230 of the Income Tax Act, 1961. It is a settled position that an omission in a statutory provision or an enactment cannot be deemed to be inadvertent. One expects that Legislature has applied its mind consciously to every word that has been selected in the framing of a statutory provision. The question that then arise is why Section 230 does not form part of Section 84. The objects and ....
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....rsons to become tax compliant before the stringent provisions of the new legislation come into force. 5. The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015 inter alia provides for the following, namely:- (i) Concealment of income in relation to a foreign asset will attract penalty equal to three times the amount of tax (i.e., 90 per cent of the undisclosed income or the value of the undisclosed asset). Failure to furnish return of income by person holding foreign asset, failure to disclose the foreign asset in the return or furnishing of inaccurate particulars of such asset shall attract a penalty of Rs. 10 lakh. (ii) The Bill provides for criminal liability with enhanced punishment. Wilful attempt to evade tax in relation to a foreign income will be punished with rigorous imprisonment from three years to ten years and with fine. Failure to furnish a return of income though holding a foreign asset, failure to disclose the foreign asset or furnishing of inaccurate particulars of the foreign asset will be punishable with rigorous imprisonment for a term of six months to seven years. The provisions will also apply to banks and ....
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.... achieve the above objectives. NEW DELHI; ARUN JAITELY The 19th March, 2015. 55. The avowed object being to deal with the issue of stashing of black money abroad, it is incumbent upon the Legislature to have extended the provisions of Section 230 to cover the Black Money Act as well. In my view, urgent amendment is called for to include reference to Section 230 of Income Tax Act, 1961 in Section 84 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2....