TaxTMI 
TaxTMI 
2024 (11) TMI 649
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....losed Foreign Income and Assets and Imposition of Tax) Act, 2015 (hereinafter referred to as the "Black Money Act"). The complaint alleges that a search and seizure operation was conducted on the assessee's premises at B-217, Greater Kailash-I, New Delhi, on 27.04.2016. 2. During the search and seizure operation, incriminating documentary evidence and information were discovered, establishing that the accused (Sanjay Bhandari) held the following undisclosed bank accounts and properties, tabulated as under; S.No. Foreign Bank Accounts SI.No. Foreign Properties including interests in foreign companies. 1. Offset India Solutions FZC 1. Property No. C-303, Maurya Grandeur, Palm Jumeirah, Dubai (in Sanjay Bhandari name) 2. Santech International FZC 2. Flat No. 6, Grosvenor Hill Court, Bourdon Street, London. (In the name of Shamian Gros whose beneficial owner was Sanjay Bhandari) 3. Serra Dues Technologies Ltd. 3. Property no. 12, Ellerton House, Bryanston Square, London, (Held by Vertex Management Holdings Lt. whose shares were purchased by Sanjay Bhandari) 4. Shamlan Gros. Panama 4. Companies where Sanjay Bhandari is a Director or has shares in Sanjay Bhandari....
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....tablished that the accused, Sanjay Bhandari, was preparing to alienate his foreign assets and offshore entities by backdating documents to evade taxes under the Black Money Act, 2015. The investigation revealed that the accused held foreign assets in the form of foreign bank accounts, immovable properties, and interests in foreign entities. He had incorporated entities in Dubai as a director and/or beneficial shareholder, and further inquiries indicated he had financial interests in an entity incorporated in Panama. Notices under Section 10 (1) of the Black Money Act, 2015, were issued to the accused on 22.09.2016 and 10.10.2016, which he responded to on 03.11.2016. 7. The complainant alleged that evidence, including the admission of Sh. Sanjeev Kapoor, the accused's Chartered Accountant, revealed a scheme to appoint the accused as the sole trustee of the Alrahma Trust (based in the UAE) effective from 2006, to show that all foreign assets/offshore entities held by him were in a fiduciary capacity as trustee rather than in his individual capacity. It was alleged that the accused planned to transfer the sole trusteeship to Sumit Chadha, a close associate and UK national, from March....
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....d to the petitioner remained unserved, as he does not reside at the address given in the complaint and has been abroad for over three years. It was argued that the learned Magistrate illegally issued non-bailable warrants, against which Criminal Revision Petition No. 444/2019 was filed but subsequently dismissed. 11. The petitioner has predominantly sought the quashing of the criminal complaints on the following grounds; A. The impugned criminal complaint fails to disclose any evidence linking the alleged foreign assets to the petitioner. The Income Tax Department, has not produced any evidence in the complaint to connect the petitioner with the alleged assets. In the absence of such evidence, no case is made out against the petitioner as the essential elements of the offense are not established. B. The complaint in paragraph 3 states that "information was received through FT and TR regarding undisclosed foreign bank accounts and foreign properties etc.," with Annexure E (colly) attached for detailed information. However, this annexure only includes letters dated 25.09.2017 and 26.09.2017 from the Assistant Director of Income Tax (Investigation) Unit 6 (2) to the Assistant/Dep....
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....g of Sections 2, 10, 13, and 30 of the Black Money Act, 2015. It is settled proposition that if criminal prosecution is contingent on the determination of tax evasion, it cannot be initiated before completing assessment proceedings. G. The Income Tax Department cannot proceed with a case under Section 51 of the Black Money Act unless the petitioner is first assessed to tax under Section 10, is issued a demand under Section 13, and declared to be in default under Section 30 (4). Section 30 (4) of the Black Money Act states that an assessee will be considered in default if tax arrears remain unpaid after 30 days from receipt of the demand notice. Once an assessee is declared in default, recovery proceedings follow, as outlined in the Act. It is essential for the assessing officer to establish tax liability before alleging that an assessee attempted to evade tax. H. A notice was issued to the petitioner under Section 10 of the Black Money Act on 22.09.2016. The petitioner responded on 03.11.2016, clearly stating that he is not the owner or beneficial owner of any alleged foreign assets. The petitioner also asserted that his statements made during a search and seizure in April 2016....
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....endment application, and stated that the affidavits filed with the petition and amendment were drawn in London, U.K. As per law, affidavits executed abroad must be legalized or apostilled, and thus, the affidavits lack legal validity. It was further argued that Section 51 (1) of the Black Money Act, under Chapter V, operates independently under Section 48(2) and is not dependent on any assessment order under the Act. Therefore, any order not made due to time limitations or other reasons cannot be used as a defense. The deponent emphasized that assessment proceedings and orders are entirely separate from the prosecution initiated against the petitioner. 14. Additionally, the deponent submitted that if the petitioner is aggrieved by the assessment order, he has an effective alternative remedy under Section 15 of the Black Money Act, 2015, by way of filing of an appeal. The respondent asserted that the assessment order is a separate matter from the initiation of prosecution and has no bearing on it. It was argued that the Black Money Act does not require the completion of an assessment before filing prosecution under Sections 50 or 51. 15. Reliance was placed on P. Jayappan v. S.K. ....
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....sel highlighted that a notice under Section 10 (1) was issued on 22.09.2016, which the respondent replied to on 09.07.2019, confirming the petitioner's assessment was still incomplete. He pointed out that the complaint was filed on 22.12.2018, prior to the assessment order issued on 23.02.2020. Reliance was placed on Akhil Krishan Maggu v. Dy. Director, GST, 2019 SCC OnLine P&H 7785. 19. Learned senior counsel also highlighted discrepancies between the complaint and the assessment order dated 23.03.2020, claiming that several alleged undisclosed properties in the complaint were omitted from the assessment order. He argued that the assessment order itself was time-barred and should be set aside, as there can be no tax evasion without a valid assessment. He further argued that the alleged fabrication of documents amounts only to preparation, not an attempt to willfully evade tax, and therefore, no offense under Section 51 is established. Learned senior counsel submitted that the summoning order lacked application of judicial mind, as the learned ACMM initially mentioned a prima facie case under Section 50 but then took cognizance under Section 51 (1). He argued that the order was me....
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....hin the window provided under Section 59 of the Black Money Act. It has further been submitted that pursuant to the search and the notice under Section 10 (1) of the Black Money Act served upon the Petitioner he hatched a scheme to back-date and fabricate documents in order to project himself as holding the properties as a sole-trustee/in fiduciary capacity and in order to project that sole trustee ship was transferred. Learned Standing counsel further submitted that these allegations, taken at face value, make out a prima-facie case of commission of the offence of willful attempt to evade tax under Section 51 of the Black Money Act. 24. Learned Standing counsel further submitted that Assessment and Prosecution are independent proceedings. Reliance has been placed upon P. Jayappan (Supra), Radheshyam Kejriwal v. State of W.B., (2011) 3 SCC 581and Sasi Enterprises v. ACIT (2014) 5 SCC 139. It was submitted that the Section 51 of the Black Money Act makes an "attempt" to willfully evade tax an offence. It was submitted that an "attempt" to commit an act need not have consummated into the Act. Reliance has been placed upon Koppula Venkat Rao v. State of A.P., (2004) 3 SCC 602. It was....
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....ss of an assessment. This judgment is also distinguished on the facts and circumstances of this case, as the procedures in the CGST Act and the Black Money Act are entirely different. 30. Learned senior counsel for the petitioner has also relied upon Makemytrip (India) Pvt. Ltd. vs. Union of India & Ors., 2016 SCC OnLine Del 4951, which was upheld in Union of India vs. Make My Trip India Pvt. Ltd. (2019) 11 SCC 765. The reliance has been placed on this to buttress the point that prosecution should normally be launched only after the adjudication is complete. It is pertinent to mention that this case relates to the Finance Act, 1994. This case involved the power of the Directorate General of Central Excise Intelligence (DGCEI) regarding the investigation and assessment of service tax under the provisions of the Finance Act, 1994. This court considers that this case is also respectfully distinguished on the facts and circumstances of this case. 31. Learned senior counsel for the petitioner has also heavily relied upon Birla Corporation Ltd. vs. Adventz Investments & Holdings Ltd., (2019) 16 SCC 10 to buttress the point that summoning an accused in a criminal case is a serious matte....
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....accused may have. It is not the province of the magistrate to enter into a detailed discussion of the merits or demerits of the case nor can the High Court go into this matter in its revisional jurisdiction which is a very limited one. In proceedings under Section 202 the accused bas got absolutely no locus standi and is not entitled to be heard on the question whether the process should be issued against him or not. However, the magistrate in such proceedings can take into consideration inherent improbabilities appearing on the face of the complaint or in the evidence led by the complainant in support of the allegations but there appears to be a very thin line of demarcation between a probability of conviction of the accused and establishment of a prima facie case against him. The magistrate has been given an un-doubted discretion in the matter and the discretion has to be judicially exercised by him. Once the magistrate has exercised his discretion it is not for the High Court, or even the Supreme Court, to substitute its own discretion for that of the magistrate or to examine the case on merits with a view to find out whether or not the allegations in the complaint, if proved,....
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.... in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. (2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156 (1) of the Code except under an order of a Magistrate within the purview of Section 155 (2) of the Code. (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused (4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155 (2) of the Code (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for pro....
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....ding for prosecution for offences there under. (2) The provisions of this Chapter shall be independent of any order under this Act that may be made, or has not been made, on any person and it shall be no defence that the order has not been made on account of time limitation or for any other reason. 37. The bare perusal of Section 48 of the Black Money Act makes it clear that the offences and prosecution which falls in Chapter V of the Black Money Act are independent of any order made under this Act. It is relevant to note that the assessment under the Black Money Act is being made under Section 10, which falls in Chapter III of the Act. Therefore, this submission of the petitioner does not hold any force in the eyes of the law. The initiation of the prosecution is not dependent on the completion of assessment, if the conditions as required under Section 51 Black Money Act are fulfilled. 38. The petitioner has also argued in detail that since the complaint under Section 50 had already been filed, there was no occasion of filing the complaint under Section 51 of the Black Money Act. Sections 50 and 51 of the Black Money Act came up before the Supreme Court in Union of India vs. G....
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....Act) containing a false entry or statement; or (ii) makes or causes to be made any false entry or statement in such books of account or other documents; or (iii) wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or (iv) causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof." 17. Section 50 provides that if any person, being a resident other than not ordinarily resident in India, who has furnished the return of income for any previous year under sub-section (1) or sub-section (4) or sub-section (5) of Section 139 of the Income Tax Act, wilfully fails to furnish in such return any information relating to an asset (including financial interest in any entity) located outside India, held by a beneficial owner or otherwise or in which he was a beneficiary, at any time during such previous year, or disclose any income from a source outside India, he shall be punishable with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years a....
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....ior to 30-9-2015 and paid the tax and penalty prior to 31-12-2015." 39. Thus Section 50 of Black Money Act provides punishment for failure to furnish in return of income, any information about an asset (including financial interest in any entity) located outside India, whereas Section 51 of Black Money Act provide punishment for willful attempt to evade tax. Besides this, the bare perusal of Sections 50 and 51 makes it clear that both the provisions function in different realms. The non-disclosure of an information about an asset (including financial interest in any entity) located outside India is to be dealt with differently than the willful attempt to evade tax. It is also pertinent to mention here that Section 51 Sub-section (3) of the Black Money Act defines willful attempt, which reads as under: (3) For the purposes of this section, a wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person- (i) has in his possession or control any books of account or other documents(being books of account or other documents relevant to any proceeding under this Act) containing a false entry o....
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....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. 43. 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 ....
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....nder changes his mind and does not proceed further in its progress, the acts already done would be completely harmless." 46. Reliance was also placed on Koppula Venkat Rao v. State of A.P., (2004) 3 SCC 602 wherein it was held as under: "10. An attempt to commit an offence is an act, or a series of acts, which leads inevitably to the commission of the offence, unless something, which the doer of the act neither foresaw nor intended, happens to prevent this. An attempt may be described to be an act done in part-execution of a criminal design, amounting to more than mere preparation, but falling short of actual consummation, and, possessing, except for failure to consummate, all the elements of the substantive crime. In other words, an attempt consists in it the intent to commit a crime, falling short consummation/completion." 47. It is also relevant to note that the 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 doc....