TaxTMI 
TaxTMI 
2026 (4) TMI 870
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....ing a declaration of the Appellant as a Fugitive Economic Offender. 3. The brief facts as stated in the Misc. Application, was that ED is a statutory Agency under Fugitive Economic Offender's Act (FEO Act), entrusted with the authority to implement the provisions of the Act. It is also a Competent Agency to investigate into offences under Prevention of Money Laundering Act, 2002. 4. It was stated that a Prosecution Complaint bearing CC No.2121/2019 dated 22.12.2018 under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act (Black Money Act), 2015 was initiated against the Appellant Sanjay Bhandari, by the Income Tax Authorities, which is pending adjudication before the learned ACMM. It disclosed that the Accused/Petitioner had wilfully not disclosed various mandatory information in his Returns of Income, relating to foreign assets (including financial interest in any entity) acquired by him, outside India. 5. Further, by acquisition of Al-Rahma Trust in Dubai and a change in its structure as a part of the pre-meditated scheme to dissociate himself from all his offshore entities/foreign assets and by fabricating and back dating the documents, he....
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....he process of law despite being aware and having knowledge of the aforementioned developments and has deliberately chosen not to return to India. 10. The undisclosed Bank Accounts and Properties held by Mr. Sanjay Bhandari outside India, are tabulated in the Prosecution Complaint filed by the Income Tax Authorities, as under: Details of Foreign Assets of Sh. Sanjay Bhandari Sr.Nos. Nature of Asset Details of asset Location/Country Relation with Sh. Sanjay Bhandari Time period Value/Amount Exchange Rates in INR 1. Shareholding in Company Offset India Solutions, FZC, UAE UAE Shareholder of 90% shares 23.02.2009 1.35Lakh Dirham 13.74 1854900 2. Bank A/c of Offset India Solutions FZC, UAE P Emirates International Bank, Dubai Authorised Signatory Feb-14 1878AED 16.85 31644.3 3. Bank A/c of Offset India Solutions FZC, UAE 1021507 575303 Emirates International Bank, Dubai Authorised Signatory 18 Sept 2010 to 04 Jun 2012 19057 82 Euro 64.7 123304095.4 4. Bank A/c of Offset India Solutions FZC, UAE 1021507 575304 Emirates International Bank, Dubai Auth....
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.... 16.64 91159744 17. Immovable properties 2414, Burj Khalifa, UAE UAE Sanjay Bhandari purchased this property on 09.11.2014 09.11.2014 2350000 Dirham 16.75 39362500 Total 22091,98,865.13 11. During the investigations, it was found that the Accused was having various properties not only in the foreign countries, but also in India as well. These assets were found either in the name of the Accused or held by Benamidar of the Accused, as the properties were acquired from the funds of the Accused. The names of various Companies/ benami holders were mentioned in the Application filed, before the learned ACMM. 12. The information available about the whereabouts of the Accused, is that he is presently residing in United Kingdom where he has substantial pecuniary interest. All the efforts made by ED to bring back the fugitive to India to face criminal proceedings, have not been successful till date. The list of properties/value of the properties connected to proceed of crime for which confiscation is sought, has also been filed. 13. It was thus, submitted that since the proceeds....
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....sional Attachment Order dated 01.06.2017. The reason for rejection was that no scheduled offence under Part C of PMLA and specifically no offence of cross border implications including Section 51 Black Money Act, was made out. It was held that "the case was out of the purview of the scheduled offence and hence the PMLA Act was not applicable". 18. It is further submitted that the Appeal is still pending adjudication before PMLA Appellate Tribunal and no stay has been granted against the Judgment dated 17.11.2017. 19. It is further submitted that the assets attached vide Order dated 26.12.2017 by ED under FEMA, was challenged in WP(C) No.4000/2018, whereby this Court vide Order dated 12.07.2018 permitted the Companies to operate the bank accounts, subject to the balance being maintained as on the said date. 20. The Appellant submitted that on the very next date i.e. 13.07.2018, the Directorate of Enforcement issued Provisional Attachment Order No. 5/2018 dated 13.07.2018 under PMLA, even though this Order failed to meet even the basic requirements under PMLA. 21. It is further submitted that the Provisional Attachment Order No. 5/2018 dated 13.07.2018 and the subsequent ....
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.... shred of evidence whatsoever to show the value of the proceeds of crime as asserted. It was further claimed that there was only one communication dated 09.07.2019 from Income-Tax Department, which was the basis for the Miscellaneous Application. However, in the absence of any conclusive assessment against the Accused under Black Money Act, no proceedings under FEO Act, could have been initiated, which are premature and politically motivated. A mere Letter from IT Department to ED, cannot form the basis for proving that the Accused had committed the Scheduled Offence. 27. The Miscellaneous Application under FEO Act, entails very serious consequences including confiscation of his property and barring him from defending civil claims and effectively amounting to economic death penalty. It was further asserted that the Directorate of Enforcement had failed to appreciate that the mandatory time period for Section 11of Black Money Act, for carrying out the assessment, has expired and assessment has admittedly yet not been completed, therefore, the entire commercial proceedings are without jurisdiction. 28. Enforcement also had to satisfy themselves for "reasons to believe on the ba....
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....Ors., decided on 23.08.2018 by the Co-ordinate Bench of this Court. It is further asserted that the first Provisional Order No. 03/2017 dated 01.06.2017 had been challenged before the adjudicating authority under PMLA, who vide Order dated 01.06.2017 categorically held that they cannot be any prosecution under Section 51 of the Black Money Act, without first completely making an assessment and that the Scheduled Offence under PMLA, was not made out. It was held that the alleged properties were in existence prior to enactment of the Black Money Act and therefore, cannot be termed as proceeds of crime. 34. Furthermore, Adjudicating Authority vide Judgment dated 17.11.2017 had observed that no Scheduled Offence had been made out. 35. It was further asserted that the Directorate of Enforcement had also attached the assets of certain Companies under Foreign Exchange Management Act in which the Accused is a shareholder vide Order dated 26.12.2017. The first Provisional Order No. 03/2017 dated 01.06.2017 and thereafter, vide Judgement dated 17.11.2017 such attachment, has been rejected. The Order was challenged by the Appellant in W.P.(C) 4000/2018 before this Court wherein vide Ord....
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....oney (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter referred to as "Black Money Act"), which deals with wilful attempt to evade tax. 41. The FEO Act gives a detailed procedure to be followed to declare a person as Fugitive. As per Sections 2(1)(f) read with Section 2(1)(m) of the FEO Act, the necessary ingredients for declaring an individual as a Fugitive Economic Offender, are as follows: (i) There must be a warrant of arrest against a person in a Schedule Offence; (ii) The said person must have left India to avoid prosecution or being abroad, refuses to return to India to face criminal prosecution; (iii) The value involved in the Schedule Offence is Rs. 100 Crores or more. 42. Section 4 of FEO sets out the procedure to be followed to declare a person Fugitive Economic Offender. Section 4(1) specifically requires a Director to have "reasons to believe", to be recorded in writing based on material in his possession. Section 4(2) (a) and (c) requires that the Officer must be satisfied that a person fulfils the definition of Section 2(1)(f) read with Section 2(1)(m), in every respect. 43. Furthermore, Section 1....
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....efore the Commissioner (Appeals). 49. Further, the Appellant vide Crl. MC No. 1002/2020 dated 19.02.2020 before this Court, sought quashing of present Misc. Application No. 249/2019 under the Fugitive Economic Offender Act and all proceedings emanating therefrom. However, this Petition was dismissed by this Court vide Judgment dated 08.11.2024. 50. The impugned Judgment dated 05.07.2025 was passed declaring the Appellant as a Fugitive Economic Offender, without taking into consideration that the essential ingredients required under the Act, are not made out. The matter is now listed for further proceedings under Section 12 of the Fugitive Economic Offenders Act, for confiscation of the assets, on 02.08.2025. Without, the Accused being declared as a Fugitive Economic Offender, the Civil Appeals filed by the Accused, are being deferred. 51. PMLA Appeal No.12/2023 filed by the Appellant in this Court, has been adjourned on the ground that further proceedings under the FEOA, is pending. 52. The grounds of challenge are that the Government of India, had sent Extradition requests for two proceedings/trials i.e. Section 51 of the Black Money Act and Section 3/4 of PMLA, to the....
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....he Appellant has succeeded in his right not to return to India, to face criminal prosecution as it would violate his human rights. 59. The Complaint under Section 51 of the Black Money Act, was filed on 22.12.2018, when the Appellant was in the UK. The Appellant cannot be said to come in the definition of Section 2(1)(f) (ii) of the FEO Act, especially when he has succeeded in the proceedings and the request of Government of India, has been rejected. 60. Therefore, the requirement under Section 2(1)(f) is not made out and on this ground alone, the Application is ought to be dismissed. 61. The next ground of challenge of the Impugned Order, is that the Respondent did not have any reason to believe on the basis of material in its possession, that the Appellant is a Fugitive Economic Offender. In Paragraph 8(C) of the Appeal, it is stated that "the proceeds of crime in the Scheduled Offence, are in excess of Rs. 100 Crores, which is confirmed by the Income Tax Authorities, vide communication dated 09.07.2019". There is not a shred of evidence whatsoever to show that the Scheduled Offence involves a total value of Rs. 100 Crores or more. 62. The Respondent has relied on the....
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....the accused is covered under the definition of Fugitive Economic Offender as defined under Section 2(f) of the Act. The amount involved in the Scheduled Offence, is more than Rs. 100 crores." 68. Aside from this Letter filed along with the Prosecution Complaint, there is no document whatsoever to disclose the monetary value of the alleged Scheduled Offence under Section 51 of the Black Money Act. The Impugned Judgment also fails to consider that a mere Letter from the Income-Tax Department to the Directorate of Enforcement, cannot form the basis for reasons to believe that the Appellant has committed a Scheduled Offence involving a total value of Rs. 100 Crores or more. 69. The deficiency in the 'reasons to believe' cannot be supplemented by additional reasoning or material in a counter/rejoinder affidavit, as has been sought to be done in the present case. 70. The "reasons to believe" must have a direct nexus and a live link with the formation of an opinion by the Respondent, to initiate the proceeding against the Appellant. The Respondent has referred to the Appellant's alleged foreign assets, but no monetary valuation has been given of the said properties. It is only in....
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....the Non-Bailable Warrants dated 31.10.2019 was not issued for the purposes of the extradition proceedings, even though the said warrant was a mandatory requirement for initiating the Extradition proceedings and the Appellant was even arrested in London, based on the Warrant. 76. The Appellant Sanjay Bhandari has contended that there is no valid subsisting NBW which was the prerequisite for initiating any proceeding under FEO Act. There was one NBW issued by the learned ACMM, but they got executed on the basis of which the extradition proceedings were initiated in UK. Consequent to such NBW, he was arrested in extradition proceedings in UK but was admitted to bail. The Extradition Petition has been denied. Therefore, the warrants issued against the Appellant got exhausted and there was no subsisting NBWs, which are subsisting against the Appellant, and therefore, the impugned Order is liable to be set aside. 77. Sections 2(1)(f) read with Section 2(1)(m) of the FEO Act provide that the necessary ingredients for making that have to be proved for declaring an individual as a Fugitive Economic Offender are as follows: a. There must be a warrant of arrest against a person....
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.... Act, effectively amounting to a civil death. Such a declaration must strictly comply with the requirements of Section 4, in the absence of which, any Notice under Section 10 of the FEO, is bad in law as the Application is not 'duly filed'. 84. It is, therefore, submitted that the Impugned Judgment dated 05.07.2025, be set-aside. 85. The Appellant has filed Written Submissions, which are on the same lines as the Petition. 86. Written Submissions have been filed on behalf of the Directorate of Enforcement wherein it is submitted that the FEO Act was enacted to address the specific mischief, namely, the growing trend of economic offenders committing large-scale financial frauds and fleeing the country, to evade prosecution. The FEO is intended to ensure that such offenders are deprived of the benefits of their crimes and are compelled to submit the jurisdiction of Indian Courts. The Court must be guided by the Mischief Rule of interpretation, as laid down in Heydon's Case (1584). This Rule requires the Court to identify the mischief the statute intends to suppress and to adopt an interpretation that advances the legislative remedy. 87. Where two interpretations are possib....
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....Ws dated 31.10.2019 issued by learned ACMM are still subsisting and have not been exhausted. As per Section 17(2) Cr.P.C., every warrant of arrest remains enforced until it is cancelled by the Court, which issued it or until it is executed. Neither has the NBW been executed for admittedly, the Appellant has not been arrested to face the trial under the Black Money Act not have they been recalled. It is in fact an open ended NBW which is very much live. 93. The contention of the Appellant that there is no live NBW, which is required as per Sections 2(1)(f) read with Section 2(1)(m) of the FEO Act, is therefore, misplaced. The learned Special Judge, CBI, has therefore, rightly rejected this contention. 94. It is further asserted that the total value of the scheduled offence is more than Rs. 100 Crores. The Communication dated 09.07.2019 from the Income Tax Department, confirms that the value of undisclosed foreign assets exceeds Rs. 100 Crore. The undisclosed foreign income and assets mentioned in the Income-Tax prosecution Complaint, is the same income and assets, which ultimately gets quantified in the final Assessment Order, which is also on record and the final tax liabilit....
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.... contention that the power of arrest under Section 132(5) of the GST, cannot be exercised unless proceedings under Section 73 are concluded and as Assessment Order quantifying the alleged tax evasion, is passed. 100. The expression 'reason to believe' in Section 4 of the FEO Act, also means 'prima facie' belief and does not imply that such satisfaction has to be conclusively proved. Reliance is placed on CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd., (2008) 14 SCC 208. The Courts have consistently held that 'reason to believe' refers to a cause or justification based on tangible material; it does not require conclusive proof. Section 4 of the FEOA, uses the phrase 'reason to believe' making it evident that the competent authority need not await a final assessment or adjudication. The belief may be founded on the information, evidence, or material already in possession. 101. A finalised Assessment Order is not a precondition for initiating proceedings under the FEOA. Reliance is placed on Rajendra Singh Verma vs. Lt. Governor, (2011) 10 SCC 1. 102. Furthermore, Section 54 of the BMA provides that in any prosecution requiring proof of a culpable mental state, the Court shall....
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..... However, he was subsequently arrested by the authorities in London on 08.07.2021, pursuant to that very warrant via the extradition request. 109. The Appellant posits that once a warrant is executed and the person is taken into custody (even in a foreign jurisdiction) and subsequently granted Bail by a foreign court, the warrant ceases to exist in the eyes of the law. He contends that an "executed" warrant cannot serve as the basis for a declaration under the FEO Act. 110. The ED, on the other hand, argues that the Appellant's interpretation is pedantic and defeats the purposive object of the Act. The ED asserts that Section 2(1)(f) only requires that a warrant "has been issued." It does not require the warrant to be "pending" in a state of perpetual non-execution. 111. The purpose of an NBW is to secure the presence of the accused before the issuing Court in India. As long as the Appellant remains on foreign soil and hasn't been produced before the Special Court, the warrant's primary objective remains unfulfilled. 112. The ED argues that FEO proceedings are "corrective" and aimed at compelling the person to return. Arrest in a foreign jurisdiction for extradition do....
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....against individuals who are wealthy and influential enough to secure Bail in foreign jurisdictions. 122. Thus, the NBW dated 31.10.2019, remains a valid and existing basis for the FEO proceedings. The Appellant's arrest in the UK and subsequent release on Bail there does not extinguish the warrant for the purposes of the FEO Act, as he has not yet been produced before the Court that issued the warrant. 123. The challenge to the validity of the warrant is hereby rejected II. Determining the threshold of Rs. 100 crore or more 124. Now the second bone of contention is whether the mandatory monetary threshold of Rs. 100 crores, as prescribed under Section 2(1)(f) read with Section 2(1)(m) FEO Act was lawfully and sufficiently established to sustain the declaration of the Petitioner as a Fugitive Economic Offender? 125. At the outset, it is essential to understand what the FEO Act demands before any person can be declared a Fugitive Economic Offender. 126. Section 2(1)(f) defines a "Fugitive Economic Offender" as a person against whom a warrant has been issued in relation to a Scheduled Offence and who has left India, so as to avoid criminal prosecution or is a person ....
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.... tax, penalty or interest chargeable or imposable under this Act or the payment thereof." 128. Thus, the foundational requirement is that the accused must be alleged to have committed a Scheduled Offence as defined under Section 2(1)(m) of the FEO Act, and the value of that scheduled offence must be Rs. 100 crores or more. 129. In the present case, this Scheduled Offence stands on the Income Tax Authorities' Prosecution Complaint under Section 51 of the Black Money Act. 130. From the Assessment Year 2001-02 through 2017-18, the Petitioner consistently filed Income Tax Returns ("ITR") declaring NIL foreign assets in Schedule FA of the ITR 2012-13. This declaration stood in complete contradiction to what was discovered during the search and seizure operation conducted by the Income Tax Authorities on 27.04.2016, when multiple undisclosed foreign assets were detected, including foreign bank accounts, a property in London that had allegedly been sold without disclosure, and interests in offshore entities including the Al-Rahma Trust in Dubai. 131. Subsequently, the Petitioner's statements were recorded under Section 132(4) of the Income Tax Act on 29/30.04.2016, wherein he ....
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....nalty or interest which is punishable with a sentence up to 10 years. 136. It is clearly demonstrable from the two Sections, that the scope of the offence under these two sections, is essentially different. Under Section 51 mens rea is an important ingredient. It has to be demonstrated that though the assessee was having the capacity to pay the tax, penalty or interest, he evaded the payment of tax by dishonesty, disabling himself from paying such tax or fraudulently dealt with his assets or property with the intention to evade the payment of tax, penalty or interest. It would be a case where assessee practices a sort of deception by manipulating the books of account or other documents, either by making false entries or by making or omitting to make entries or such other act. The mens rea required under Section 51 is an intentional act on part of the assessee in willful evasion of tax and not mere failure to pay the tax. 137. Section 48 of the Black Money Act provides that the assessment and the prosecution proceedings, can both proceed simultaneously and it is not necessary that before launching of the prosecution under Section 51 Black Money Act, the assessment must be comp....
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....led an Application under Section 4 read with Sections 10 and 12 of the FEO Act, on 13.12.2019, before the Ld. Special Court. In the Statement of Reasons to Believe appended to this Application, the ED did not rely solely on the IT Department's letter of 09.07.2019. The material supporting the Rs. 100 crore threshold was, in fact, a composite of several independent strands of evidence: a. First, the Prosecution Complaint itself, which tabulated the undisclosed foreign bank accounts and properties. The same was confirmed by said Letter of 09.07.2019. b. Second, Annexure A-2 to the FEO Application, which listed foreign properties including the London property allegedly sold without disclosure, along with foreign bank accounts. c. Third, Annexure A-3, which catalogued properties in India held in Petitioner's name, properties held through companies under his substantial control, properties held through shell companies at his behest, and properties held through benami holders. d. Fourth, the statement of his Chartered Accountant, Sandeep Kapoor recorded on 08.02.2017 under Section 132(4) of the Income Tax Act, wherein he elaborated on the backdating of....
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.... 146. Learned Special Judge had rightly observed that Section 51 of the Black Money Act deals with the aggregate value of total tax evaded or attempted to be evaded including penalty and interest which has to be calculated from the total undisclosed foreign assets and income concealed by such person. The value can only be determined on total undisclosed income and assets and therefore, an attempted evasion would be the sum total of evaded tax or sought to be evaded. Therefore, it cannot said to be the total asset value of undisclosed foreign income and assets of an individual which he has concealed from the revenue authority but also takes into account the tax sought to be evaded on the said undisclosed foreign amount since Section 51 Black Money Act even covers an attempt to willfully evade taxes then even though the evasion of tax has not been completed, even a willful attempt to evade, would be sufficient to constitute an offence under Section 51 Black Money Act. 147. Therefore, even if there were tentative figures being calculated for tax evasion, the schedule of the properties and the assets of the Appellant was the same and there was nothing or deleted. The assessment ma....
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....he threshold beyond dispute. 152. In light of the discussion above, the Rs. 100 crore threshold is established through an evolutionary process. The Ld. Special court correctly held that the threshold was met, both at the prima facie stage when the Application was filed, and at the stage of final adjudication (Order dated 05.07.2025 wherein Assessment Order dated 23.03.2020 was also referred) thereby, conclusively establishing the foundation of the declaration of accused as a Fugitive Economic Offender. 153. An objection was taken that there was a mention of the property situated at London, UK which had allegedly been sold. However, the allegation of the Respondent/prosecuting agency was that this property never got disclosed to the Income Tax Authorities, which also became a basis for calculating the undisclosed assets of the Appellant. He apparently owned properties in India and Companies, in which shell Companies were shareholders on behalf of the Appellant. There were benami properties held by him and other umpteen number of foreign assets and bank accounts which were rightly considered by ED to form a prima facie view of initiating proceedings under Section 4 Black Money ....