TMI Blog2020 (12) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee in pending proceedings, to name a few illustrative situations. An order under Section 230(1A) cannot be arbitrary or capricious based simply on a mere assumption or presumption of the circumstances referred to therein. A general or overreaching perception of the authority that such circumstances exist is also not sufficient in the absence of more tangible material indicating a cause for alarm. In the present case, there is absolutely no material to indicate the existence of such circumstances as seen from the record. The request seeking approval from the superior authority must contain the details of the circumstances that justify such request. As perused the relevant file and find that it contains the reasons recorded by the respondent authority as well as the approval issued by the DGIT. Nowhere is there any mention any of the circumstances that would justify the invocation of Section 230(1A) as the reasons merely refer to voluminous assets found during search as well as material indicating connections abroad. These, by itself, would not justify invocation of the provision. Section 230(1A) vests substantial power upon an authority to restrain and restrict the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrangements 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 ₹ 23.87 Crores, jewellery weighing 5678.800 grams, diamond weighing 433.47 carrots and foreign currency of 1.25 million USD. 4. Mr.Sathish Parasaran, learned Senior Counsel appearing for the petitioner submitted that the petitioner is a Teacher of spirituality and philosophy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 the respondent expresses his satisfaction of the existence of circumstances that, in his opinion, make it necessary for the petitioner to obtain a tax clearance certificate prior to exiting the territory of India by land, sea or air. This satisfaction is subjective a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded 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 person: Circumstances exist had been clarified by CBDT vide its instruction No.1/2004 dated 05-02-2004 (copy enclosed). Para 3(i) clearly states that ... where a person is involved in serious financial irregularities and his presence is necessary in investigation of cases under the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 above reasons, this writ petition is held to be maintainable. 11. The petitioner claims to be a teacher of spirituality and philosophy and the founder of various academies that disseminate philosophical concepts to the public at large. The Income Tax Authorities had carried out a search in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity 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 to income-tax or he is not required to obtain a permanent account number under this Act, such person shall furnish a certificate in the prescribed form; (b) the purpose of his visit outside India; (c) the estimated period of his stay outside India: Provided that no person- (i) who is domiciled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 watch will be maintained by the person concerned at the immigration check posts only for that period.' 3. The OM dated 27.12.2000 of MHA specifies the steps required to be taken for opening an LOC in respect of an Indian citizen. It has been mentioned in the said OM that the request for opening an LOC in respect of an Indian citizen i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 agency or Court of law. The subordinate courts' jurisdiction in affirming or cancelling LOC is commensurate with the jurisdiction of cancellation of NBWs or affirming NBWs. 8. In accordance with the order dated 26.7.2010 of the High Court of Delhi, the matter has been discussed with the concerned agencies and the following guidelines are hereby laid down reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance 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 assessee, in whose case a demand of tax has been raised or is imminent, and who is expected to frustrate the recovery of the dues by absconding from the country and constituting a flight risk. The twin conditions, of pending or imminent tax dues and flight risk are to be based on tangible materials. My attention is drawn to the Report of the Task Force on Direct Tax, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icy 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 subjected to the process of tax clearance as against the present practice of requiring all and sundry to comply with the requirement of obtaining tax clearance before leaving the country. 3.61 In terms of the policy of the Government of India, patronage in the form of grant of license, government contracts, permits, etc should be extended only to honest taxpayers. All the Ministries, their attached and subor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessments had been completed and, according to the revenue, there were pending arrears. In Mrs.A.Sattlar s case (supra), the assessment originally framed had itself been set aside and there was thus no basis for the order under Section 230(1). In Laura Hamilton s case (supra), the petitioner therein had stood guarantee for the income tax arrears of one Lisbet Holmes for the purpose of issue of TCC in the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 case to then decide whether the invocation was warranted and justified from the reasons and materials on record or whether it is an excess of authority. In the case of Jayanthi Dharma Teja (supra) wherein the Bench of the AP High Court dismissed the challenge to an order under Section 230(1), there are several material distinctions on facts from the present case. 23. Assessments of income and wealth had been finali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urtailing 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. But that subjective satisfaction must be arrived at in an objective way, that is to say, there must be some material on the basis of which such opinion could be reasonably formed as it affects the right to go abroad which is part of the right of liberty. The question, therefore, is whether any such material exists in the present case. The petitioner was living mostly outside India. His presence could not be secured when pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son . 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 search and seizure operation conducted on 15.10.2019 in the residential premises of the petitioner as well as Kalki Bhagwan and Companies and Trusts run by them, in all 38 premises at various locations in Chennai, Chitoor, Hyderabad, Bangalore and other places. In the petitioners residence cash of ₹ 23.87 crores, foreign currency of 1.25 Million USD (INR 9 crore approx), jewellery worth 5678 grams valued at ₹ 1.68 crores a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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 stipulated period and that her family including her husband and daughter live in India permanently. She emphasizes that there are no permanent assets or properties in her name in any other country other than India and reiterates that she has been and will always extend full co-operation with the on-going investigation. 31. Per contra, reply dated 15.02.2020 is filed to the letter of undertaking estimating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 Not appeared and not furnished any details Smt.Preetha Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015) 25-11-19 02-12-2019 Not appeared and not furnished any details 33. In the course of hearing on 13.02.2020 it was noted that there were errors in the dates and 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 petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4.2.2020 stating that I was waited in your office upto 1:30 PM on 28.11.2019 in compliance with the summon. No case for levy of penalty Summons issued to assessee requiring her to appear on 02-12-1029 not on 28-11-2019 3. Notice u/s 10(2) 14.01.2020 22.01.2020 Not appeared, vide letter dt. 4.2.2020 stating that adjournment was granted though email. Not granted any such adjournment 4. Summons u/s sec.8 28.01.2020 03.02.2020 Appeared and sought time for filing submissions 5. Penalty Show-cause letter for non-appearance to summon u/s.8 dated 25.11.2019 31.01.2020 04.02.2020 Not appeared, vide letter dt.04.02.2020 requested to drop penalty proceedings. 6 Penalty Show cause letter for nonappearance to 10(2) notice dated 14.01.2020 31.01.2020 04.02.2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a communication seeking adjournment, on almost all the dates when hearings had been fixed. There is nothing amiss at this stage to lead me to the conclusion that the petitioner has been avoiding the hearings or subverted the same, to procrastinate or drag the proceedings needlessly. 38. As regards the submissions relating to the scope of Section 230A, no specific submissions have been adverted to by the revenue except to say that the volume of assets seized are sufficiently large to prima facie incriminate the petitioner and require such certification to be obtained. In my view, this, by itself, is insufficient for the Revenue to have arrived at a proper satisfaction that the petitioner is a flight risk or would not co-operate with the Department or that the demands anticipated would not be remitted. In fact, in the communication seeking approval, the respondent himself only states that it is likely that a tax demand will be raised against him . The communication is clearly mechanical, since it is a cut and paste effort in the case of not just the petitioner but others as well who were involved in the search proceedings, such as Kalki Bhagwan, Padmavathi, N.K.V. Krishna and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 230, may be required to be obtained by persons domiciled in India in the following circumstance: (i) where the person is involved in serious financial irregularities and his presence is necessary in investigation of cases under the Income-tax Act or the Wealth-tax Act and it is likely that a tax demand will be raised against him, or (ii) where the person has direct tax arrears exceeding ₹ 10 lakh outstanding against him which have not been stayed by any authority. 4. The Chief Commissioner of Income-tax, after satisfying himself that the departure of such persons from India will prejudicially affect the interest of revenue, may authorise the Assessing Officer to require that such persons obtain a tax clearance certificate. The Assessing Officer, thereafter, shall inform the immigration authorities accordingly. 41. According to the petitioner, a comparison of the definitions of CCIT and DGIT would bring home the fact that the CCIT/PCIT and DGIT/DIT are separate and distinct categories of officials who are to each exercise a distinct set of functions. While the positions of CCIT/PCIT or CIT/DIT/PDIT are interchangeable, no such overlap is envisaged a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted by the satisfaction of the other authority. It is trite that when a statute requires, a thing to be done in a certain manner, it shall be done in that manner alone and the Court would not expect its being done in some other manner. It was so held in the following decisions: (i) CIT Vs. Naveen Khanna (dated 18.11.2009 in ITA No.21/2009 (DHC). (ii) State of Bihar Vs. J.A.C. Saldanna Ors. AIR (1980) SC 326. (iii) State of Gujarat Vs. Shantilal Mangaldas, AIR (1969) SCN 634. 8. Thus, if authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorised under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be independent and not borrowed or dictated satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that as per section 2(16) of the Income-tax Act, 1961, the word Commissioner has been defined, inter-alia, to include a person appointed as Principal Director of Income-tax and since the Commissioner is also one of the competent authority for according sanction under section 55 of the Black Money Act, the same covers the Principal Director of Income-tax also. Except Mr.ARL.Sundaresan, learned Senior Counsel for the petitioners, no serious contentions, on the above aspect, were made. Respondents have explained the competence of the Principal Director of Income Tax, and other authorities under the Income Tax Act, 1961, to accord sanction for prosecution and going through the provisions of the Income Tax Act, 1961, we do not accept the contention of the petitioners that the Principal Director of Income Tax is not an authority, jurisdiction/competence under Section 55 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, to sanction prosecution or file a prosecution complaint for offences, under Section 50 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. 48. Having considered the rival submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director General of Income-tax or, as the case may be, a Director of Income-tax or a Principal Director of Income-tax, under sub-section (1) of section 117, and includes a person appointed under that sub-section to be an Additional Director of Income-tax or a Joint Director of Income-tax or an Assistant Director or Deputy Director of Income-tax; 50. In this case, the Assessing Authority has parallelly initiated proceedings under the Black Money Act. One question that would arise is whether at all, the provisions of Section 230 would stand attracted to proceedings under The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. 51. India has long been grappling with the recoupment of undisclosed assets and income that are stashed overseas and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 has been enacted with effect from 26.05.2015 to deal with black money , that is, undisclosed foreign income and assets. It sets out the procedure for dealing with such income and assets and to provide for the imposition of tax on such undisclosed assets held outside India and this enactment marks a great milestone in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld also be used in ways which could threaten the national security. 2. The Central Government is strongly committed to the task of tracking down and bringing back undisclosed foreign assets and income which legitimately belong to the nation. Recognising the limitations of the existing legislation, it is proposed to introduce a new legislation to deal with undisclosed assets and income stashed away abroad. 3. The Supreme Court of India has also expressed concern over this issue. The Special Investigation Team constituted by the Central Government to implement the decision of the Supreme Court, has also expressed the views that measures may be taken to curb the menace of black money. Internationally, a new regime for automatic exchange of financial information is fast taking shape and India is a leading force in this effort. 4. The new legislation will apply to all persons resident in India and holding undisclosed foreign income and assets. A limited window is proposed to persons who have any undisclosed foreign assets. Such persons may file a declaration before the specified tax authority within a specified period, followed by payment of tax at the rate of 30 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of evidence, impounding of books of account and documents. (v) The Central Government has been empowered to enter into agreements with other countries, specified territories and associations outside India inter alia for exchange of information, recovery of tax and avoidance of double taxation. (vi) Safeguards to prevent misuse have been embedded in the Bill. It will be mandatory to issue notices and grant of opportunity of being heard, record reasons for various actions and pass written orders. Appeal to the Income-tax Appellate Tribunal, and to the jurisdictional High Court and the Supreme Court on substantial questions of law have been provided for. (vii) Persons holding foreign accounts with minor balances which may not have been reported out of oversight or ignorance have been protected from criminal consequences. (viii) The Bill also proposes to amend Prevention of Money Laundering Act (PMLA), 2002 to include offence of tax evasion under the proposed legislation as a scheduled offence under PMLA. 6. The enactment of the proposed new Bill will enable the Central Government to tax undisclosed foreign income and assets acquired from such undisclosed forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision that the assessee should be called upon to obtain a TCC. The satisfaction must be based on tangible material including (i) a history of previous incidents or events that establish the reluctance of the assessee to co-operate with the authorities or comply with statutory requirements, (ii) substantial outstanding arrears under tax enactments (iii) attempts by the assessee to evade the payment of the arrears (iv) difficulties faced by the authorities in collecting outstanding arrears or in ensuring appearance of the assessee in pending proceedings (v) nonco- operation on the part of the assessee in pending proceedings, to name a few illustrative situations. 58. An order under Section 230(1A) cannot be arbitrary or capricious based simply on a mere assumption or presumption of the circumstances referred to therein. A general or overreaching perception of the authority that such circumstances exist is also not sufficient in the absence of more tangible material indicating a cause for alarm. In the present case, there is absolutely no material to indicate the existence of such circumstances as seen from the record. The request seeking approval from the superior authority must ..... X X X X Extracts X X X X X X X X Extracts X X X X
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