Darius Sammotashaw v. Dy. Director Of Income Tax (Inv) Unit 2(4), Mumbai & Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. WRIT PETITION NO. 675 OF 2019 Darius Sammotashaw..Petitioner Versus Dy. Director of Income Tax (Inv) Unit 2(4), Mumbai & Ors. ..Respondents ................... Mr. Firoze Andhyarujina, Sr. Counsel a/w Mr. ManeckAndhyarujina i/by Sameer Dalal for the Petitioner Mr. Firoze Andhyarujina, Sr. Counsel a/w Mr. ManeckAndhyarujina i/by Sameer Dalal for the Petitioner Mr. Suresh Kumar for the RespondentsMr. Suresh Kumar for the Respondents ................... CORAM : AKIL KURESHI & SARANG V. KOTWAL, JJ. DATE : APRIL 4, 2019. P.C.: 1.The petitioner, an individual has challenged theprovisional attachment orders passed by Respondent No. 1 -Dy. Director of Income Tax (Inv) on 7.2.2009, copies of whichare produced at Exh. H, H1, H2 and H3. Under these orders,the said Authority in exercise of powers under Section132(9B) of the Income Tax Act, 1961 (“the Act” for short) hasprovisionally attached the petitioner’s two immovableproperties as well as certain bank accounts in KotakMahindra Bank, Central Bank of India and Yes Bank. Thedetails of immovable properties attached are as under:- 1. Residential Flat at 10-A, Jivan, 11, L.D. Ruparel Marg,Malabar Hill, Mumbai – 400 006;Malabar Hill, Mumbai – 400 006; 2. Residential Flat at 8-C, Somerset Palace, 61 D, BhulabaiDesai Marg, Mumbai – 400 026.Desai Marg, Mumbai – 400 026. 2.This action the said Authority has taken pursuant tosearch conducted under Section 132 of the Act at thepremises of the petitioner during which the departmentcollected material to prima facie suggest that the petitionerhas sizable interest income as well as dividend incomedespite which the petitioner filed no income tax return. TheDepartment has material to suggest that the petitioner is ajoint account holder in three bank accounts in Barclays Bankin England. The petitioner has not disclosed these bankaccounts to the Income Tax Authorities. As per theinformation of the Department, currently a sum of Rs. 4.97Crores (approximately) is shown as a balance in the saidthree accounts. The respondent also points out that duringthe financial years 2011-12 to 2015-16, the petitioner hasexecuted high value transactions in buying and sellingshares. Total turnover of the petitioner for these yearscomes to Rs. 266.26 Crores. 3.On the basis of such information collected by thedepartment, the respondents hold a belief that the petitionerhas sizable undisclosed income as well as substantialundisclosed foreign income / investment. In order to protectthe interest of the Revenue, therefore, respondent No. 1 hasplaced the petitioner’s above noted immovable propertiesand bank accounts under attachment. 4.The case of the petitioner is that he does not have anytaxable income. He is a second account holder in bankaccounts maintained at U.K. His son is a permanent residentof U.K. who earns sizable income. The balance in theaccounts does not belong to the petitioner. The petitionerhas inherited sizable funds and properties from which hemakes investments. In any case, the value of the twoimmovable properties attached by the Income TaxDepartment is more than enough to cover for all possibletax, interest and penalty which may eventually arise even ifall the defences of the petitioner are negatived. Learnedcounsel for the petitioner, therefore, argued that continuingthe attachment on these immovable properties, the attachment of the bank accounts be lifted. He submittedthat the petitioner himself is aged about 65 years, needsfunds for his day to day expenses as well as medicaltreatment. The petitioner’s mother is aged about 94 yearsand she is a heart patient. Her medical treatment requiresconstant expenses. It is pointed out that the total balanceattached in the bank accounts comes to approximately Rs. 3Crores. attachment of the bank accounts be lifted. He submittedthat the petitioner himself is aged about 65 years, needsfunds for his day to day expenses as well as medicaltreatment. The petitioner’s mother is aged about 94 yearsand she is a heart patient. Her medical treatment requiresconstant expenses. It is pointed out that the total balanceattached in the bank accounts comes to approximately Rs. 3Crores. 5.On the other hand, the Department strongly opposesany interference with the attachment orders. It was arguedthat the Authorities have exercised the discretionary powersafter taking into account all relevant facts. The petitionerhas sizable income, foreign investments despite which thepetitioner had not filed any return of income, therebywithholding such information from the Department.Learned counsel for the Department relied on the afÏdavit inreply dated 3.4.2019 filed by one Mr. Gaurav Sanjay tocontend that the possible tax, interest and penalty demandarise against the petitioner is close to Rs. 23.28 Crores. 6.On 28.3.2019, the Court had passed the followingorder:- “1. Learned counsel for the petitioner stated that the petitionerhas two immovable properties situated at Mumbai, valuation of whichfar exceeds any possible income tax liability which may arise even ifthe petitioner’s all legal contentions were to be negatived. He,therefore, submitted that keeping such properties under attachment,the petitioner’s bank accounts may be released. 2. Learned counsel for the department may file reply before thenext date of hearing. He may also indicate the possible approximateliability of the tax which may arise in case of the petitioner. Thepetitioner shall file an affidavit declaring that the two immovableproperties exclusively belong to him and that the same carry noencumbrances. 7.Material on record would suggest that the Departmentproceeded on material collected during the search and hasformulated a prima facie belief that the petitioner hasundisclosed income as well as undisclosed foreigninvestment. In order to protect the interest of the Revenue,therefore, the petitioner’s bank accounts and two immovableproperties have been put under provisional attachment. Bysuch action, the Department has virtually prevented thepetitioner for accessing his own funds in the bank accountswhich would undisputedly cause great difÏculty to the petitioner in meeting his day to day expenses, to meet withspecial requirements for medical attention for himself and hisaged mother. While, therefore, without harming the interestof the Revenue, we would like to give limited relief to thepetitioner against such action of the Department. Whiledoing so, we must bear in mind that the approximate tax,interest and penalty liability which the Department hascomputed, firstly even the basis of maximum penalty whichis impossible, secondly the same is in realm of possibilities.The petitioner has filed an additional afÏdavit dated 2.4.2019pursuant to our order dated 28.3.2019. In such afÏdavit, hehas stated two things, firstly, that both the flats placed underattachment belong to him. In support of the statement, thepetitioner has produced copies of the share certificatesissued by the respective housing societies. The seconddeclaration that the petitioner has made is that the value ofthe flat at Jivan Building as per the Government readyreckoner is Rs. 9.43 Crores and the Somerset flat is Rs. 6.79Crores. The combined value of these two flats thus exceedsRs. 16 Crores. The petitioner has also produced valuationreport of the Government registered valuer showing the approximate value of these flats at Rs. 10.81 Crores and 6.34Crores respectively. Going by this valuation, combined valueof the flats would be in excess of Rs. 17 Crores. We havealso required the petitioner to state that the said immovableproperties are unencumbered. In the said afÏdavit, he hasdeclared as under :- approximate value of these flats at Rs. 10.81 Crores and 6.34Crores respectively. Going by this valuation, combined valueof the flats would be in excess of Rs. 17 Crores. We havealso required the petitioner to state that the said immovableproperties are unencumbered. In the said afÏdavit, he hasdeclared as under :- “5. I say that both the flats, that is, Jivan and Somerset are un-encumbered and I have not crated any encumbrances, mortgage,charge or lien or any kind nor, created any third-party rights. I saythat both the flats are in my sole and exclusive possession till date.” 8.In totality of the above noted facts and circumstances,in our opinion, while maintaining the attachment of the twoimmovable properties of the petitioner, his bank accountscan be released from attachment. Even if the Departmentwere to succeed substantially in its present stand, thepetitioner’s tax, interest and possible penalty liabilities areunlikely to exceed the valuation of the two immovableproperties. 9.Under these circumstances, the attachment of thepetitioner’s two immovable properties is not disturbed. The petitioner is prevented from selling, transferring, creatingany charge or encumbrances on the said two immovableproperties till the present litigation is over or without leave ofthe Court. 10. Subject to above directions, the provisional attachmenton the petitioner’s bank accounts are set aside. Orders atannexures H1, H2 and H3 are quashed. 11. The petition is disposed of accordingly. [ SARANG V. KOTWAL, J. ] [ AKIL KURESHI, J ]