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In a petition seeking modification of conditions laid down under the look-out circular, the Delhi High Court recently said that circumstances leading to the issuance of such LOC must reveal a “larger impact on the country”
The Delhi High Court recently altered the conditions of a look-out circular (LOC) issued against a Delhi-based entrepreneur, charged with penalties under the IT Act, 1961 and the Black Money Act, 2015.
"Squandering of public money/siphoning off amounts taken as loans may justify the issuance of LOCs, however, the same cannot be resorted to in every case. Ordinary citizens ought not to be harassed or deprived of their liberty to travel merely due to participation in a business in their professional or non-executive capacity", court said.
Justice Prathiba M. Singh, while issuing directions for modification of the look-out circular and evaluating the merits of the case, observed, “Petitioner has deliberately concealed the existence of a company in Hong Kong, which was under his control. He did not divulge the details of the same despite being provided with repeated opportunities to do so. Furthermore, substantial transactions have been carried out in the bank account of the said Hong Kong based entity, which was also not revealed to the authorities… the Petitioner attempted to wriggle out of giving any explanation in respect of these transactions… Under these facts and circumstances, this Court is of the opinion that stringent conditions deserve to be imposed upon the Petitioner. The LOC debarring him from traveling can be converted into an intimation about the arrival/departure of the Petitioner in terms of Clause 6(I) of the Office Memorandum of 2021.”
The counsel for the petitioner contended that the mere pendency of an appeal under the Black Money Act, 2015, against the assessment order, could not curtail the petitioner from travelling abroad. Moreover, he claimed that the OM dated 27.10.2010 and the amended clause 8(J), clearly indicated that a case of the present nature could not be claimed to be affecting the economic interests of India as an exceptional case for the issuance of an LOC.
Reliance was inter-alia placed on Sumer Singh Salkan v. Asstt. Director, 2010 SCC OnLine Del 2699, Harshavardhana Rao K. v. Union of India, WP (C) 12185 of 2022, Kondaveetin Papamma v. Union of India, WP (C) 14746 of 2022.
As per the respondents, the following were the amounts which the petitioner was assessed with; i) Outstanding demand of Rs.56,35,50,210 under Section 10(3) of the Black Money Act, 2015; ii) Outstanding demand of Rs.66.48 crores under Section 153A of the Income Tax Act, 1961; iii) Outstanding demand of Rs.5.35 crores under Section 153C of the Income Tax Act, 1961; iv) Fresh penalty proceedings under the Black Money Act, 2015 (in process); v) Prosecution proceedings under the Black Money Act, 2015 (in process).
Brief Background
The present petition was filed by an Indian Passport holder, praying for quashing of and seeking the reasons for issuance and continuation of a look-out circular issued against him by the Income Tax Department.
On 07.12.2018, a search and seizure operation was conducted under Section 132(3) of the IT Act, 1961 at the residence of the petitioner, after which a notice under Section 10(1) of the Black Money Act, 2015 was issued, asking the petitioner to furnish information in relation to the undisclosed foreign assets that were found during the course of the investigation.
As per Income Tax Authorities, the petitioner was running a network of companies through which funds were being transferred to Hong Kong based entity, M/s Wise Sharp Tech Group Limited (registered on 13.03.2014 and struck off, as stated, on 27.07.2018), of which the petitioner was a beneficial owner and a shareholder.
On 30.03.2022, an assessment order under Section 10(3) was passed whereby a total sum of Rs. 187,85,00,650.10 was assessed as being the undisclosed income of the petitioner over which he was required to pay 30% tax in terms of Section 3 of the 2015 Act, in addition to the penalty under Section 41 and a demand of Rs. 56,35,50,210. This was followed by a representation for revocation of LOC in view of the assessment being closed by the authorities and a further appeal to the Commissioner of Income Tax (Appeals) vide letter dated 20.04.2022, which was pending.
On 18.01.2019, the petitioner was stopped by the immigration authorities at the Delhi International Airport, while he was traveling to Dubai to meet his sister and niece.
Case Title: Prateek Chitkara v. Union of India | WP (C) 10998 of 2022 & CM Appl. 41138 of 2022
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