The Delhi High Court set aside the penalty order passed under Black Money (Undisclosed Foreign Income And Assets) And the Imposition of Tax Act without considering the reply of the assessee.
The Petitioner, Mr. Prateek Chitkara, prayed for the quashing of, and seeking the reasons for, the issuance and continuation of the Look-Out Circular (“LOC”) issued against him at the behest of the Income Tax Department.
The Petitioner is an Indian citizen who claims to have deep roots in society, and whose parents, wife, and brother permanently reside in India. The petitioner has built various well-recognised businesses including in the hospitality, jewelry, and electronics sectors.
A search and seizure action was conducted under Section 132(3) of the Income Tax Act, 1961. It was claimed by the Income Tax Authorities, that the Petitioner remained untraceable and non-cooperative during the said search and seizure proceedings.
A notice was issued to the Petitioner under Section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“Black Money Act, 2015”), requiring him to furnish information about the undisclosed foreign assets that were found during the investigations.
As per the Income Tax Authorities, the Petitioner was found to be running a network of companies through which funds were being transferred to Hong Kong. It was discovered that the Petitioner was a beneficial owner, shareholder, and director in a Hong Kong-based entity, namely, M/s Wise Sharp Tech Group Limited (“WSTGL”) which was incorporated in Hong Kong on 13 March 2014. The said company is stated to be struck off on 27th July 2018.
Further, information regarding transactions to the tune of about Rs. 300 crores undertaken in the bank account of the Hong Kong-based company, was also received from the Competent Authority of Hong Kong. It was found that the Petitioner was the authorized signatory in the said bank account. This information had not been declared by the Petitioner in his income tax returns.
It was claimed by the Petitioner, that he has been traveling abroad regularly, for both personal and professional reasons, especially between the years 2016 to 2018, without any hindrance. While boarding a flight from Delhi to Dubai to meet his sister and niece, he was stopped by the immigration authorities at the Delhi International Airport. The Petitioner was orally informed by the concerned officer, that a LOC had been issued against him and thus, he would not be permitted to fly out of the country. His request for a copy of the said LOC was also denied.
The Petitioner visited the office of Respondent No. 4, where he was orally informed by the concerned officer, that a LOC had been issued owing to the pendency of the proceedings against him under the Black Money Act, 2015.
On being asked as to why he did not declare his shareholding in WSTGL, the Petitioner answered that it was because he was unaware of the relevant provisions under the Income Tax Act, of 1961. Accordingly, proceedings under the Black Money Act, 2015 were also commenced.
The Petitioner’s statements were duly recorded, wherein he stated that the transactions had not been undertaken by him, but by one Mr. Sachiv Batra, resident of RBI colony, Paschim Vihar, Delhi. The Petitioner was unable to tender any proof regarding the same.
As per the Assessment Order dated 30th March 2022, a total sum of Rs. 187,85,00,650.10/- was assessed as being the undisclosed income of the Petitioner over which he was liable to pay 30% tax in terms of Section 3(1) of the Black Money Act, 2015. Further, a demand for an amount of Rs. 56,35,50,210/- was raised under the Black Money Act, 2015 and penalty proceedings under Section 41 of the Black Money Act, 2015 were initiated against the Petitioner vide the said order.
While the demand against the Petitioner has already been raised and the assessment order has already been passed under the Black Money Act, 2015, the appeal before the Commissioner of Income Tax (Appeals) is still pending.
The writ petition is directed against the penalty order dated 29.03.2023 passed by respondent no.1/revenue under Section 41 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 [“B.M. Act”].
Mr Ruchesh Sinha, who appeared on behalf of the petitioner/assessee, Clause(b) of sub-section (4) of Section 46 of the B.M. Act, requires that the penalty order should have been passed by the officer who is in the rank of Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director, albeit, with the approval by the Joint Commissioner or the Joint Director.
A division bench comprising of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju observed that being said, the petitioner/assessee’s reply was on record which, for some reason, was not taken into account by the concerned officer while passing the impugned penalty order. The Court set aside the impugned penalty order, with a direction to the concerned authority to conduct a de novo exercise.
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