TaxTMI 
TaxTMI 
2022 (9) TMI 1099
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....C) Nos. 594/2021; 596/2021; and 597/2021, the Petitioners have assailed the validity of the notices dated 6th of July, 2018 issued by the Respondents under Section 10 (1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (for short 'the Act of 2015') as also show cause notices dated 18th of March, 2021. Thereafter, by medium of Writ Petitions bearing WP (C) Nos. 802/2021; 803/2021 and 806/2021, the Petitioners have challenged the penalty notices dated 29th of March, 2021, assessment orders dated 31st of March, 2021 and demand notices dated 31st of March, 2021. iii. Genesis of the present litigation: 03. One Abdul Rashid Mir had three children, namely, Late Mujeeb Mir; Late Sabeha Mir; and Tabasum Mir. Late Mujeeb Mir is stated to have been a citizen of India who, however, primarily lived outside India since his childhood and his primary place of residence was at Bangkok, Thailand. The said Mujeeb Mir is claimed to be a Non-Resident Indian for the purpose of Income Tax Act, 1961 (hereinafter referred to as 'the Act of 1961') since 1990. On 22nd of March, 2002, without the knowledge to the Petitioners, the said Late Mujeeb Mir issued let....
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....ficial interest in a foreign bank account. On 5th of April, 2010, the Reserve Bank of India replied to the letter of one of the Petitioners and referred to Master Circular No. 01/2009-10 which, inter alia, provided that a general permission has been granted to resident of India to hold foreign securities and to acquire shares by way of inheritance from a person resident out of India. On 28th of January, 2011, the balance lying with the foreign bank account (1/3rd share) was declared in the Wealth Tax Return for the Accounting Year (AY) 2010-11 and Accounting Year (AY) 2011-12 of the Petitioners. On 4th of July, 2011, Rs. 5,92,64,869/, being 1/3rd share of each of the Petitioner, was remitted from the bank account of Mondale SA to India. On 6th of July, 2011, the Jammu and Kashmir Bank Limited issued certificate of Foreign Inward Remittance specifying the remittance of money on account of the dissolution of the trust and 1/3rd of inheritance. In April, 2016, the Panama Paper Leaks Article was published in Indian Express newspaper giving names of various individuals reportedly having foreign assets. Thereafter, income tax proceedings under Section 131 (1-A) of the Act of 1961 initiat....
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....rt challenging the notices issued under Section 10(1) of the Act dated 6th of July, 2018 as also the show cause notices dated 18th of March, 2021. On 29th of March, 2021, this Court passed order directing the Respondents to go ahead with the assessment, but not to proceed with prosecution and penalty proceedings. On 29th of March, 2021, the Petitioners received three notices each dated 29th of March, 2021 under Section 46 read with Sections 41, 42 and 43 of the Act of 2015, respectively, for imposition for penalty. On 31st of March, 2021, vide the assessment Orders dated 31st of March, 2021, the Petitioners were assessed to tax under Section 10 of the Act of 2015 and the total value of undisclosed foreign assets was determined and total tax, accordingly, computed to be paid on account of said undisclosed foreign assets. On 31st of March, 2021, demand notice dated 31st of March, 2021 was issued directing the Petitioners to pay the tax determined within a period of 30 days. Thereafter, penalty notices dated 29th of March, 2021, the assessment orders dated 31st of March, 2021 and demand notices dated 31st of March, 2021 were challenged by the Petitioners through WP (C) Nos. 802/2021; ....
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.... prosecution be launched against her. It is averred that the aforesaid show cause notice is neither a notice issued under Section 10 nor a notice under any other provisions of the Act and, as such, is without jurisdiction. The Petitioner cannot be prosecuted and saddled with penalties without there being the assessment order passed under Section 10. 06. In WP (C) No. 597/2021, the Petitioners, Abdul Rashid Mir & Ors., contend that their predecessor-in-interest- Ms. Sabeha Mir, is a beneficiary of a Trust which was created and established abroad. The Petitioners brought benefit/money of their share in the country upon permission granted by the Reserve Bank of India. In the meantime, the Act of 2015 has been enforced with effect from 1st of April 2015 or 1st of July 2015. In view of the said Act, a notice under Section 10(1) and thereafter under Section 10(2) were issued requiring certain information from the predecessor-in-interest of the Petitioners. The said notice was duly replied by the Petitioners, but till date, no order of assessment as contemplated under Section 10 has been passed against the predecessor- in-interest of the Petitioners or the Petitioners. At the same time....
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.... main corpus of the said discretionary trust dissolved on 11th of September, 2009. Accordingly, as stated, the shareholding of the trust was transferred equally in favour of the beneficiaries concerned, including the sister of the Petitioner. Thereafter, the sister of the Petitioner, namely, Sabeha Mir, brought the fact of creation of the Trust by her brother, Late Mujeeb Mir, into the notice of the Reserve Bank of India, thereby apprising it about the inheritance on account of demise of her brother and sought permission under Section 6(5) of the Foreign Exchange Management Act, 1999 to hold securities in a foreign company and consequent beneficial interest in a foreign bank account owned by the said foreign company. The Petitioner has proceeded to state that, thereafter, in the year 2015, the Parliament, promulgated the Act of 2015, which came into force on 1st of April, 2016. The said Act is claimed to have been enacted to address the mischief of such undisclosed assets and undisclosed foreign income and assets located outside India that were acquired using income that, even though chargeable to Tax under the Income Tax Act, was not so offered to tax in India, but was illegally r....
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....ter of the petitioner. Thereafter, the daughter of the Petitioner, namely, Sabeha Mir, brought the fact of creation of the Trust by her brother, Late Mujeeb Mir, into the notice of the Reserve Bank of India, thereby apprising it about the inheritance on account of demise of her brother and sought permission under Section 6(5) of the Foreign Exchange Management Act, 1999 to hold securities in a foreign company and consequent beneficial interest in a foreign bank account owned by the said foreign company. The Petitioner has proceeded to state that, thereafter, in the year 2015, the Parliament, promulgated the Act of 2015, which came into force on 1st of April, 2016. The said Act is claimed to have been enacted to address the mischief of such undisclosed assets and undisclosed foreign income and assets located outside India that were acquired using income that, even though chargeable to Tax under the Income Tax Act, was not so offered to tax in India, but was illegally routed out of India and was used in creation of said undisclosed assets. Besides, the Act is also stated to have provided for penalty and prosecution in relation to the said undisclosed foreign assets and income and a w....
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....ank of India, thereby apprising it about the inheritance on account of demise of her brother and sought permission under Section 6(5) of the Foreign Exchange Management Act, 1999 to hold securities in a foreign company and consequent beneficial interest in a foreign bank account owned by the said foreign company. The petitioner has proceeded to state that, thereafter, in the year 2015, the Parliament, promulgated the Act of 2015, which came into force on 1st of April, 2016. The said Act is claimed to have been enacted to address the mischief of such undisclosed assets and undisclosed foreign income and assets located outside India that were acquired using income that, even though chargeable to Tax under the Income Tax Act, was not so offered to tax in India, but was illegally routed out of India and was used in creation of said undisclosed assets. Besides, the Act is also stated to have provided for penalty and prosecution in relation to the said undisclosed foreign assets and income and a window of opportunity to residents who held undisclosed foreign assets abroad to declare the same with the authorities in India so as to prevent them from any penalties and prosecutions under the....
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.... 15. It is also pleaded that here asset is no longer in existence after the year 2012-13. The Petitioners became beneficiaries in year 2002 which fact was unknown to the Petitioners till the year 2007 and it is only in the year 2010 that the Petitioners became owner and, accordingly, they brought back the bank account to India on 6th of July, 2011, whereafter they included it in the wealth tax return for the relevant year, as such, the asset does not, in any way, come within the tentacles of the Act of 2015. 16. It is averred that the Statute cannot be applied in an absurd manner with respect to an inheritance when the same only applies to a foreign undisclosed asset and not on inheritance. The action of the Respondents is hit by Article 20 because the Respondents cannot impose penalty upon the Petitioners for something which was not the law on the said date. 17. It is submitted that there is no scope for the Respondent-assessing authority to issue the impugned order of assessment without taking into consideration the Objections so submitted before it by the Petitioners qua the issue of jurisdiction. 18. It is further submitted that there are no foreign assets existing ou....
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....t, which are nothing but undisclosed asset located outside India as per the provisions of Section 2(11) of the Act of 2015, as such proceedings were initiated against the Petitioners. It is further submitted that although the Petitioners had full knowledge of being the beneficial owners of the assets of the Trust from the financial year 2006-07, but they did not disclose it in front of any income Tax authority. It is also submitted that the Petitioners have not even provided any details regarding the source of funds in the Mondale SA and the Trust. Mr Areeb further pleaded that the Petitioners, being the beneficiaries of the Trust and having received huge amount from the Trust, had not declared the same in their Income Tax Returns, as such, it was held in the assessment order that the case is fully covered under the Act of 2015 and that the Petitioners, having beneficial interest, was brought to tax under the provisions of the Act of 2015. It is also averred that it was only in pursuance of the directions passed by this Court in terms of Order dated 29th of March, 2021 in the earlier Writ Petition filed by the Petitioner bearing WP (C) No. 594 of 2021 that the answering Respondent ....
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....olicitor General of India (DSGI), appearing on behalf of Respondent No.1, while supporting the arguments advanced by the learned Counsel representing the Respondent Nos. 2 and 3, submitted that since the Petitioners did not comply with the mandate of Section 59 of the Act, so they cannot claim exemption under Section 72 of the Act of 2015. It is contended that as the Petitioners did not file the ITR with regard to the income subject matter of assessment, therefore, the Act of 2015 clearly applied to their case. 25. In rebuttal, Mr Chidambaram, the learned Senior Counsel, with great eloquence, argued that the basic facts pleaded in the Writ Petitions have not been denied by the Respondents. It is submitted that there is no allegation or finding in the impugned show cause notice or in the assessment order dated 31st of March, 2021 that the purported undisclosed foreign asset was acquired from income chargeable to tax under the Income Tax Act, 1961 and that there is no denial of the fact that Mr Mujeeb Mir was always a Non-Resident Indian and had income outside India not liable to tax under the Act of 1961 and had acquired the foreign asset out of such income. It is reiterated that....
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....e of the Bank Account. However, the Respondent No.3 has added the bank balance as on 31st of December, 2003, 30th of June, 2005 and 30th of June, 2011 and arrived at an astronomical number which is manifestly absurd. It is also urged that the Petitioners have repeatedly explained the source of the money out of which the shares and the bank account were acquired by Mr Mujeeb Mir, namely, the income earned by the Non-Resident Mr Mujeeb Mir which was not taxable in India. Since, the Petitioners have no knowledge of the business of Mr Mujeeb Mir or the fact that he had acquired shares and a bank account, the Petitioners stated that the source of the alleged undisclosed foreign asset was the income earned by Mr Mujeeb Mir when he was a Non- Resident. However, at internal Page 33 of the impugned assessment order dated 31st of March, 2021, the Respondent No.3 has said that the Petitioners have not explained the source of the source. This is contrary to the settled law. When a person is called upon to explain the source of funds, he is not obliged to explain the source of the source of the funds. 26. We have heard the learned appearing Counsel for the parties, perused the pleadings on r....
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....slation desires to make provisions to deal with the problem of the Black money that is undisclosed foreign income and assets, the procedure for dealing with such income and assets and to provide for imposition of tax on any undisclosed foreign income and asset held outside India and for matters connected therewith or incidental thereto. This Act was enacted on 26th of May, 2015 and was ordained to come into force on the 1st day of July, 2015. 28. Having gone through the definition and the object of the Act of 2015, the first and foremost issue that is required to be considered by this Court relates to the preliminary objection raised by the Counsel for the Respondent Nos. 2 and 3 vis-à-vis the maintainability of the instant Petitions before this Court in view of the alternate/ statutory remedy of appeal being available to the Petitioners before the Commissioner (Appeals) in terms of Section 15 of the Act of 2015 itself. 29. Learned Counsel for Respondent Nos. 2 and 3 has laid much emphasis on the fact that the Writ Petitions are not maintainable before this Court on the ground that the Petitioners were having the statutory remedy of appeal before the Commissioner (Appe....
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....ctions in the Act dealing with appellate remedy and provisions touching upon exercise of such right of appeal. Sections 246(1) and 246A(1) being relevant for the present purposes are extracted hereunder:- '246. Appealable orders - (1) Subject to the provisions of sub-section (2), any assessee aggrieved by any of the following orders of an Assessing Officer other than the Joint Commissioner may appeal to the Deputy Commissioner (Appeals) before the 1st day of June, 2000 against such order- (a) an order against the assessee, where the assessee denies his liability to be assessed under this Act, or an intimation under sub-section (1) or sub- section (IB) of section 143, where the assessee objects to the making of adjustments, or any order of assessment under sub-section (3) of section 143 or section 144, where the assesse objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed; (b) an order of assessment, reassessment or Re-computation under section 147 or section 150; (c) an order under section 154 or section 155 having the effect of enhancing the a....
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....144, to the income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed; (aa)an order of assessment under sub-section (3) of section 115WE or section 115WF, where the assessee, being an employer objects to the value of fringe benefits assessed; (ab)an order of assessment or reassessment under section 115WG; (b) an order of assessment, reassessment or re-computation under section 147 except an order passed in pursuance of directions of the Dispute Resolution Panel or an order referred to in sub- section (12) of section 144BA or section 150; (ba) an order of assessment or reassessment under section 153A except an order passed in pursuance of directions of the Dispute Resolution Panel or an order referred to in sub-section (12) of section 144BA; (bb)an order of assessment or reassessment under subsection (3) of section 92CD; (c) an order made under section 154 or section 155 having the effect of enhancing the assessment or reducing a refund or an order refusing to allow the claim made by the assessee under either of the said sections except of an order referred....
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....ovisions of this Act in the case of such person or class of persons, as the Board may, having regard to the nature of the cases, the complexities involved and other relevant considerations direct. Explanation- For the purposes of this sub-section, where on or after the 1st day of October, 1998, the post of Deputy Commissioner has been redesignated as Joint Commissioner and the post of Deputy Director has been redesignated as joint Director, the references in this subsection for "Deputy Commissioner" and "Deputy Director" shall be substituted by "Joint Commissioner" and "Joint Director" respectively.' ... 11. We may now consider kinds of orders or situations that are referred to in Section 246(1)(a) of the Act, which are: - (i) An order against the assessee, where the assessee denies his liability to be assessed under this Act, or (ii) An intimation under sub-section (1) or sub-section (1B) of Section 143 where the assessee objects to the making of adjustments, or (iii) Any order of assessment under sub-section (3) of Section 143 or Section 144, where the assessee objects:- to the amount of income assessed, or t....
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....w that non-entertainment of petitions under writ jurisdiction by the High Court when an efficacious alternative remedy is available is a rule of self-imposed limitation. It is essentially a rule of policy, convenience and discretion rather than a rule of law. Undoubtedly, it is within the discretion of the High Court to grant relief under Article 226 despite the existence of an alternative remedy. However, the High Court must not interfere if there is an adequate efficacious alternative remedy available to the petitioner and he has approached the High Court without availing the same unless he has made out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary jurisdiction under Article 226. 12. The Constitution Benches of this Court in K.S. Rashid and Son v. Income Tax Investigation Commission7, Sangram Singh v. Election Tribunal8, Union of India v. T.R. Varma9, State of U.P. v. Mohd. Nooh3 and K.S. Venkataraman and Co. (P) Ltd. v. State of Madras10 have held that though Article 226 confers very wide powers in the matter of issuing writs on the High Court, the remedy of writ is absolutely discretionary in character. I....
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...., may not be correct. The first order dated 25.01.2017 passed by the High Court did record the preliminary objection but was prima facie of the view that the transactions defined in Section 115QA were initially confined only to those covered by Section 77A of the Companies Act. Therefore, without rejecting the preliminary objection, notice was issued in the matter. The subsequent order undoubtedly made the earlier interim order absolute. However, the preliminary objection having not been dealt with and disposed of, the matter was still at large. In State of U.P. v. U.P. Rajya Khanij Vikas Nigam Sangharsh Samiti and others, MANU/SC/7603/2008: (2008) 12 SCC 675, this Court dealt with an issue whether after admission, the Writ Petition could not be dismissed on the ground of alternate remedy. The submission was considered by this Court as under: '38. With respect to the learned Judge, it is neither the legal position nor such a proposition has been laid down in Suresh Chandra Tewari that once a petition is admitted, it cannot be dismissed on the ground of alternative remedy. It is no doubt correct that in the headnote of All India Reporter (p. 331), it is stated that....
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.... fact proposition, we would notice the principle of law as laid down by this Court. It is settled law that nonentertainment of petitions under writ jurisdiction by the High Court when an efficacious alternative remedy is available is a rule of self-imposed limitation. It is essentially a rule of policy, convenience and discretion rather than a rule of law. Undoubtedly, it is within the discretion of the High Court to grant relief under Article 226 despite the existence of an alternative remedy. However, the High Court must not interfere if there is an adequate efficacious alternative remedy available to the petitioner and he has approached the High Court without availing the same unless he has made out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary jurisdiction under Article 226. ... 16. In the instant case, the Act provides complete machinery for the assessment/re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the H....
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....sel has also pleaded that the construction and interpretation of a statute is within the exclusive jurisdiction of a Court and that the provisions of Statement of Objections and Reasons and Sections 2(2)(a), Section 2(11), Section 2(15), Section 3, Section 4, Section 59 and Section 60 have to be read together in order to appreciate the scope and extent of the Act of 2015 which, if so read, make it apparent that the undisclosed foreign asset contemplated under the Act is an asset located outside India and acquired from income chargeable to tax under the Act of 1961. It is, in this regard, submitted that in the present case no undisclosed foreign asset was located outside India on 1st of April, 2016 nor such asset was held by the Petitioners on 1st of April, 2016. Reference, in support of these arguments, is made to the law laid down by Hon'ble the Supreme Court in the following cases: i.) '(1991) 4 SCC 699-Sub-Committee on Judicial Accountability v. Union of India & Ors.'-Paragraph No.121, which is reproduced hereinbelow: "121. On the first point there is and should be no difficulty. The interpretation of the law declared by this court that a motion under section 3....
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....ld as under in paragraph 19: '19. True it is not permissible to read words in a statute which are not there, but "where the alternative lies between either supplying by implication words which appear to have been accidentally omitted, or adopting a construction which deprives certain existing words of all meaning, it is permissible to supply the words" (Craies Statute Law, 7th edn., p. 109). Similar are the observations in Hameedia Hardware Stores v. B. Mohan Lal Sowcar where it was observed that the court construing a provision should not easily read into it words which have not been expressly enacted but having regard to the context in which a provision appears and the object of the statute in which the said provision is enacted the court should construe it in a harmonious way to make it meaningful. An attempt must always be made so to reconcile the relevant provisions as to advance the remedy intended by the statute. (See: Sirajul Haq Khan v. Sunni Central Board of Waqf.)' 42. The principle statute in Maxwell's Interpretation of Statutes under the Chapter "Exceptional Construction" is also relevant, which was applied in one of the judgments of this Court report....
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....alty; or b. The date on which the intimation of the order sought to be appealed against is served in any other case. (4) The Commissioner (Appeals) may admit an appeal after the expiration of the period referred to in sub-section (3)- a. If he is satisfied that the appellant had sufficient cause for not presenting it within that period; and b. The delay in preferring the appeal does not exceed a period of one year. (5) The Commissioner (Appeals) shall hear and determine the appeal and, subject to the provisions of this Act, pass such orders as he thinks fit and such orders may include an order enhancing the assessment or penalty; Provided that an order enhancing the assessment or penalty shall not be made unless the assesse has been given a reasonable opportunity of being heard. 17. Powers of Commissioner (Appeals)- (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers, namely- a. In an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; b. In an appeal against an order imposing a penalty, he may confirm or cancel or vary s....
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....ionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts and circumstances of a particular case and in tune with the mandate of law. True it is that the Courts have recognized some exceptions to the rule of alternate remedy, i.e., where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice, the proposition of law that the High Court will not entertain a Petition under Article 226 of the Constitution if an effective alternate remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. In that context, when a statutory forum is created by law for redressal of grievances, a Writ Petition cannot be entertained ignoring the statutory dispensation. We are fortified in taking this view by the law laid down by Hon'ble the Supreme Court in case reporte....