TaxTMI 
TaxTMI 
2026 (5) TMI 1673
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....manating therefrom by the issuance of a writ of certiorari or such other writ, order or direction; B. Call for the records leading to issuance of Exhibits P-6 to P-9 Summons dated 08.04.2024 and Exhibit P-11 email dated 11.04.2024 by the Respondent and quash the same by the issuance of a writ of certiorari or such other writ, order or direction; C. Writ of Mandamus or any other writ, order or direction, directing the respondent to comply with the request made by the Petitioner company in Exhibit P-10 email dated 10.04.2024. D. Pass such other orders and grant such other reliefs as this Hon'ble Court may deem fit, proper, just and necessary in the facts and circumstances of this case and in the interest of justice, equity and good conscience." 2. On 25.01.2019, a search was carried out by the officers of the Income Tax Department, at the factory and offices of the 1st petitioner Company and the residences of the Managing Director and key employees of the 1st petitioner, under Section 132 of the Income Tax Act, 1961. On 29.11.2019, notices were issued under Section 153A and Section 143A of the Income Tax Act with reference to Assessment Years 2013-14 to ....
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....rmed the petitioners 2 and 3, that the reply sent on their behalf cannot be accepted, and directed them to appear on 12.04.2024. This led to the filing of the writ petition on 12.04.2024. 4. The writ petition was admitted on 12.04.2024 and this Court recorded the submission of the counsel for the respondent that no coercive steps are to be taken against the petitioners. The date for joining the investigation was extended by this Court till 15.4.2024. On 16.04.2024, the petitioners filed IA Nos.1 to 3 of 2024. Along with IA No. 1 of 2024, Exhibits P12 to P15 were produced and the following prayers were made. 1. Order the immediate release of Petitioners No.2 to 4 who have been restrained illegally, in violation of the interim order dated 12.04.2024, by the officers of the Respondent. 2. Order the preservation and retention of the CCTV footage of the interrogation of Petitioners No. 2 to 4 by the Respondent on 15.04.2024-16.04.2024 in terms of the orders of the Hon'ble Supreme Court in Paramvir Singh Saini v. Baljit Singh, (2020) 7 SCC 397. 3. Order the preservation and retention of the Call Detail Records (CDRs) of the Petitioners No. 2 to 4 as well as ....
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....l Nadu [SLP (Crl.) No. 1959-1963/2024]. It was also contended that the reliance placed on the judgment in Pavana Dibbur v. Enforcement Directorate [2023 SCC OnLine SC 1586] and Yash Tuteja v. Union of India [2024 SCC OnLine SC 533] are wholly misplaced. On facts, it was contended that the search conducted by the Income Tax Department had revealed that the 1st petitioner Company had inflated its expenditures by Rs.133.82 Crores, by booking bogus expenses in cash under the heads transportation and sludge handling, during the financial years 2012-2013 to 2018-2019, and generated, cash which was used for making illegal payments to politicians, parties, media houses and public servants. It is stated that the CFO and MD of the Company had admitted before the Income Tax authorities that such cash payments were made to ensure smooth business operations, as they were facing threats of closure of the business and environmental challenges. It is also stated that the search revealed that the Company booked bogus expense of Rs.1.72 Crores under the head Software Services and the amount was paid to Smt. Veena Vijayan and her Company M/s. Exalogic Solutions Pvt. Ltd. without any such services ....
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....e, and hence the entire proceedings are without any jurisdiction. The next contention raised is that the respondent could have initiated an investigation under the PMLA only on a valid FIR/complaint registered by a Criminal Investigation Agency in respect of a predicate offence, included as a "scheduled offence" under the PMLA. It is contended that the commission of a predicate/scheduled offence should have resulted in certain proceeds of crime, and only then would the respondent have jurisdiction to investigate whether the proceeds of crime have been laundered. It is contended that the only offence under the Companies Act, 2013, which has been included in the schedule to the PMLA with effect from 19.04.2018, is the offence under Section 447 of the Companies Act, dealing with punishment for fraud. It is further contended that on a combined reading of Sections 3, 4, 2(1)(u), 2(1)(x) and 2(1)(y) of the PMLA, only such acts relatable to a scheduled offence would come within its purview. The counsel contends that only the crime investigation agency prima facie concludes that a criminal offence involving "proceeds of crime has been committed, an investigation into money laundering by th....
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....swami v. State of Tamil Nadu [(1971) 2 SCC 641], Rohit Tandon v. The Directorate of Enforcement [(2018) 11 SCC 46], Satyender Kumar Jain v. Directorate of Enforcement [2024 INSC 217], Suresh Dhanuka v. Sunita Mohapatra [(2012) 1 SCC 578] and Puran Singh & Ors. v. State of Punjab & Ors. [(1996) 2 SCC 205]. The Counsel also submitted on the judgments in C.M. Raveendran (supra), Vijay Madanlal Choudhary (supra), P.T. Anthony (supra), Dhanraj Kochar (supra), and Pawan Insaa (supra). 10. Sri. ARL Sundaresan, Additional Solicitor General, endorsed the arguments raised by Sri. Zoheb Hossain. Based on the pleadings and the arguments, the issues that arise can be summarised as follows. 1. Whether the writ petition is maintainable against a summons issued by the respondent under the PMLA? 2. Whether enquiries under the PMLA can commence in the absence of an FIR in respect of a scheduled offence? 3. Whether immunity under the PMLA can be claimed based on the immunity granted under the Income Tax Act? 4. Whether the powers of the respondent under the PMLA are dependent on the final report of the SFIO under Section 212 of the Companies Act? 5. Whe....
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....rge-sheet or show-cause notice does not give rise to any cause of action, because it does not amount to an adverse order which affects the rights of any party unless the same has been issued by a person having no jurisdiction to do so. It is quite possible that after considering the reply to the show-cause notice or after holding an enquiry the authority concerned may drop the proceedings and/or hold that the charges are not established. It is well settled that a writ petition lies when some right of any party is infringed. A mere show-cause notice or charge-sheet does not infringe the right of anyone. It is only when a final order imposing some punishment or otherwise adversely affecting a party is passed, that the said party can be said to have any grievance." The decision of the High Court of Delhi in Virbhadra Singh and Another v. Directorate of Enforcement and Another [2017 SCC Online Del 8930] was cited to contend that no person is entitled in law to evade the command of the summons issued under Section 50 of the Act on the ground that he may be prosecuted in future. Attention was drawn to the observations of the Honourable Supreme Court in Pool Pandi v. Sup....
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....rned ASG cited the decision in Commissioner of Customs, Calcutta and Others v. M.M .Exports and Another [(2010) 15 SCC 647], wherein the Apex Court had cautioned that, as far as possible, High Courts should not interfere at the stage when the Department has issued summons. In Dukhishyam Benupani v. Assistant Director, Enforcement Directorate v. Arun Kumar Bajoria [(1998)1 SCC 52], interference by the High Court into the interrogation of a person summoned under Section 40 of the FERA, by fixing the time and venue for interrogation, was frowned upon and the Honourable Supreme Court observed that it is not the function of the court to monitor investigation processes so long as such investigation does not transgress any provision of law and that, the decision regarding the venue, the timings, the questions and the manner of putting such questions to persons involved in such offences, is best left to the discretion of the investigating agency. 6. I find substantial force in the preliminary objection regarding maintainability raised by the learned ASG. Exhibit P11 summons is issued under Section 50(2) of the Act. A person issued with summons is bound to attend in person or throu....
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.... claimed based on the immunity granted under the Income Tax Act? 13. I shall next address the question of immunity granted under the Income Tax Act. Under Section 245(C), an assessee can, at any stage of a case relating to him, apply to the Settlement Commission to have his case settled. The application should contain a full and true disclosure of the income that has not been disclosed, the way the income was derived, the tax payable thereon, etc. The Settlement Commission can, on receipt of an application under Section 245(C), consider the same and pass an order under Section 245(D)(4). The Settlement Commission grants immunity under Section 245(H), which reads thus; "245H. (1) The Settlement Commission may, if it is satisfied that any person who made the application for settlement under section 245C has co-operated with the Settlement Commission in the proceedings before it and has made a full and true disclosure of his income and the manner in which such income has been derived, grant to such person, subject to such conditions as it may think fit to impose for the reasons to be recorded in writing, immunity from prosecution for any offence under this Act or under the....
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....Central Act for the time being in force and against imposition of any penalty under the Income Tax Act with respect to the case covered by the settlement. The proviso to the Section says that no immunity from prosecution for any offence under the Indian Penal Code or under any Central Act other than the Income Tax Act and the Wealth Tax Act, 1957, can be granted to a person who makes an application under Section 245(C) on or after 01.06.2007. Section 245(I) says that every order of settlement passed under Section 245(D)(4) shall be conclusive as to the matters stated therein. In view of the second proviso to Section 245(H)(1), the Settlement Commission cannot grant any immunity from prosecution under any Central Act other than the Income Tax Act and the Wealth Tax Act, if an application under Section 245(C) is made after 01.06.2007. Admittedly, the application to the Settlement Commission was made only on 06.11.2020. As such, the immunity, if any, available to the 1st petitioner, is only regarding prosecution under the Income Tax Act. Moreover, the Settlement Commission constituted under Section 245B of the Income Tax Act has not been vested with any power to deal with complaints r....
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....l not- (a) impound any records without recording his reasons for so doing; or (b) retain in his custody any such records for a period exceeding three months, without obtaining the previous approval of the Joint Director." 15. Exhibit P6 summons only directs an officer of the petitioner to appear in person before the respondent, to give evidence and to produce records as indicated in the annexure to the summons. The documents directed to be produced relate to the agreements entered into between the petitioner and M/s. Exalogic Solutions Private Limited/Smt. Veena Thaikkandiyil, and copies of all invoices issued by M/s. Exalogic Solutions Private Limited/Smt. Veena Thaikandiyil to the petitioner, against the services rendered and the ledger accounts containing the entries regarding the transactions. The documents produced in the writ petition indicate that the respondent is at the preliminary stage of the investigation. 16. In Vijay Madanlal Choudhary (supra), the Hon'ble Supreme Court considered the issue in detail. In paragraph 467 of the Judgment, the Hon'ble Supreme Court concluded as follows : "467. In light of the above analysis, we now proceed ....
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....rs, that only upon projecting or claiming the property in question as untainted property that the offence of Section 3 would be complete, stands rejected. (d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him. (vi) Section 5 of the 2002 Act is constitutionally valid. It provides for a balancing arrangement to secure the interests of the....
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....nd it was open to the Parliament to cure the defect noted by this Court so as to revive the same provision in the existing form. (b) We are unable to agree with the observations in Nikesh Tarachand Shah distinguishing the enunciation of the Constitution Bench decision in Kartar Singh; and other observations suggestive of doubting the perception of Parliament in regard to the seriousness of the offence of money-laundering, including about it posing serious threat to the sovereignty and integrity of the country. (c) The provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act and does not suffer from the vice of arbitrariness or unreasonableness. (d) As regards the prayer for grant of bail, irrespective of the nature of proceedings, including those under Section 438 of the 1973 Code or even upon invoking the jurisdiction of Constitutional Courts, the underlying principles and rigours of Section 45 may apply. (xiv) The beneficial provision of Section 436A of the 1973 Code could be invoked by the accused arrested fo....
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....ied in expressing serious concern bordering on causing injustice owing to the vacancies in the Appellate Tribunal. We deem it necessary to impress upon the executive to take corrective measures in this regard expeditiously. (xxi) The argument about proportionality of punishment with reference to the nature of scheduled offence is wholly unfounded and stands rejected." 17. It can be seen from sub-paragraph xviii(a) that nonrecording of an FIR regarding a scheduled offence does not impede the commencing of inquiry/investigation for initiating civil action of provisional attachment of property, being proceeds of crime, by the authorities referred to in Section 48 of the PMLA. The word 'investigation' has been defined in Section 2(n)(a) to include all proceedings conducted by the Director or by an authority authorised, for the collection of evidence. A reading of the summons issued would show that what has been initiated is only an investigation. At this stage it is not possible to state what the outcome of the investigation would be. As the law has already been laid down by the Hon'ble Supreme Court, that the existence of an FIR is not a precondition for issuing summons un....