Mr. Moin A. Qureshi v. Commissioner Of Income Tax (Central) – Ii, Newdelhi & Anr

$~4 *IN THE HIGH COURT OF DELHI AT NEW DELHI +W.P.(C) 8101/2015 & CM No. 16773/2015 MR. MOIN A. QURESHI ..... Petitioner Through: Mr. R.K. Handoo, Mr. YoginderHandoo, Mr. Aditya Chaudhary, Mr. Nikhil Bhatand Mr. Nishant Kumar, Advocates. versus COMMISSIONER OF INCOME TAX (CENTRAL) – II, NEWDELHI & ANR. ..... Respondents Through: Mr. Dileep Shivpuri, Mr. Sanjay Kumarand Mr. Vikrant A. Maheshwari, Advocates. CORAM:JUSTICE S.MURALIDHARJUSTICE NAJMI WAZIRIO R D E R%13.04.2017 1. This writ petition challenges two orders; first the order dated 04[th]June,2015, and then an order dated 26[th]June, 2015 passed by the Income TaxSettlement Commission (ITSC). This writ petition is in fact a second of itskind by the same petitioner. 2. The earlier Writ Petition (Civil) No. 4900 of 2015 was filed by thePetitioner challenging the order dated 24[th]February, 2015 passed by theITSC. By an order dated 18[th]May, 2015, that writ petition was allowed bythis Court and the order dated 24[th]February, 2015 of the ITSC was set aside.The reason was that on the date of hearing before the ITSC i.e. 19[th]February, 2015, an additional set of documents, running to over 200 pages, was placed by the Commissioner Income Tax (CIT) before the ITSC. Apartfrom the hearing conducted on the very next date i.e. 20[th]February 2015,there was no occasion for the Petitioner to deal with the additional set ofdocuments and address the ITSC on them. This Court noted that the ITSChad in fact relied upon the additional documents in arriving at a conclusionin its order dated 24[th]February, 2015 that the Petitioner had not made a fulland true disclosure of all facts as was required by Section 245C of theIncome Tax Act, 1961 ('Act'). 3. The operative portion of the order passed by this Court on 18[th]May, 2015allowing W.P. (C) No. 4900 of 2015 reads as under:allowing W.P. (C) No. 4900 of 2015 reads as under: “..... For this reason we are setting aside the impugned orderdated 24.02.2015. We are remitting the matter to theSettlement Commission to the stage of consideration of theCommissioner’s report and of giving an opportunity ofhearing to the petitioner. Mr. Syali, the learned senior counselappearing on behalf of the petitioner, states that he shall nottake the plea of limitation with regard to the additionaldocuments dated 19.02.2015 and they shall be construed anddeemed to be part of the original report dated 10.02.2015submitted by the Commissioner.dated 24.02.2015. We are remitting the matter to theSettlement Commission to the stage of consideration of theCommissioner’s report and of giving an opportunity ofhearing to the petitioner. Mr. Syali, the learned senior counselappearing on behalf of the petitioner, states that he shall nottake the plea of limitation with regard to the additionaldocuments dated 19.02.2015 and they shall be construed anddeemed to be part of the original report dated 10.02.2015submitted by the Commissioner. Consequently, we direct the Settlement Commission torender its decision at the stage of Section 245D (2C) of thesaid Act within 10 days from the first date of hearing beforethe Settlement Commission. The hearing shall be granted tothe petitioner by the Settlement Commission, in the firstinstance, on 25.05.2015. Before that date, the petitioner shallsubmit its response to the documents which were filed on19.02.2015. The writ petition stands allowed to the aforesaid extent. We are making it clear that we have not expressed any opinion on the merits of the matter and that the setting asideof the order dated 24.02.2015 shall not come in the way ofthe Settlement Commission on taking a view on the matter. Dasti under the signature of the Court Master....” Consequently, we direct the Settlement Commission torender its decision at the stage of Section 245D (2C) of thesaid Act within 10 days from the first date of hearing beforethe Settlement Commission. The hearing shall be granted tothe petitioner by the Settlement Commission, in the firstinstance, on 25.05.2015. Before that date, the petitioner shallsubmit its response to the documents which were filed on19.02.2015. The writ petition stands allowed to the aforesaid extent. We are making it clear that we have not expressed any opinion on the merits of the matter and that the setting asideof the order dated 24.02.2015 shall not come in the way ofthe Settlement Commission on taking a view on the matter. Dasti under the signature of the Court Master....” 4. The matter then went back to the ITSC. It appears that within four days ofthe passing of the above order by this Court, the Petitioner tendered awritten note of submissions dated 22[nd]May, 2015 before the ITSC. TheDepartment appears to have objected to the ITSC considering this writtennote of submissions. This is evident from para 13.2 of the impugned order.In para 13.3 of the impugned order dated 4[th]June, 2015 the ITSC observedas under: “13.3. We have considered the submissions made by the ARand the CIT. The Hon’ble High Court has remitted the matterback to us to allow an opportunity to the applicant to give hissubmissions on the entire 260 pages (rest being forwardingletters) which we find relate to the bank accounts atSingapore and the Flat at London. The Commission does nothave to travel beyond the directions of the Hon’ble HighCourt referred at para 13.2.3 above which unequivocallystated that the said writ petition is allowed to the aforesaidextent....”and the CIT. The Hon’ble High Court has remitted the matterback to us to allow an opportunity to the applicant to give hissubmissions on the entire 260 pages (rest being forwardingletters) which we find relate to the bank accounts atSingapore and the Flat at London. The Commission does nothave to travel beyond the directions of the Hon’ble HighCourt referred at para 13.2.3 above which unequivocallystated that the said writ petition is allowed to the aforesaidextent....” 5. Mr. Handoo, the learned counsel for the Petitioner, submitted that theabove written submissions were not considered by the ITSC. This appears tobe correct. The Court is unable to find in what manner in the impugnedorder has the ITSC considered those submissions. The said submissions aresignificant in view of the two factors adverted to by the ITSC in theimpugned order which weighed with it in reiterating its conclusion that the Petitioner had not made a full and true disclosure of all facts within hisknowledge. In this connection a reference needs to be made to para 14.3(a)of the impugned order where the ITSC adverts to the two pieces ofinformation that apparently was received by the Department on 20[th]February, 2015 and 12[th]March, 2015. Para 14.3 of the impugned order ofthe ITSC reads as under: 5. Mr. Handoo, the learned counsel for the Petitioner, submitted that theabove written submissions were not considered by the ITSC. This appears tobe correct. The Court is unable to find in what manner in the impugnedorder has the ITSC considered those submissions. The said submissions aresignificant in view of the two factors adverted to by the ITSC in theimpugned order which weighed with it in reiterating its conclusion that the Petitioner had not made a full and true disclosure of all facts within hisknowledge. In this connection a reference needs to be made to para 14.3(a)of the impugned order where the ITSC adverts to the two pieces ofinformation that apparently was received by the Department on 20[th]February, 2015 and 12[th]March, 2015. Para 14.3 of the impugned order ofthe ITSC reads as under: “14.3 (a) The issue before us is whether the informationreceived by the Department dated 12.03.2015 by the JS (FT& TR), CBDT and by the DIT (Investigation) on 20.02.2015relating to the bank account opened/ operated by theapplicant is to be taken into consideration during the presentproceeding or not.It is the submission of the Departmentthat these two informations are very vital to determine thetruth in the matter and it will be fatal on the part of theCommission to ignore the same. It is also the submission ofthe Department that these two letters relate only to the issueof the bank account and the flat at London which are inconsideration and remitted by the Hon’ble High Court to theCommission.received by the Department dated 12.03.2015 by the JS (FT& TR), CBDT and by the DIT (Investigation) on 20.02.2015relating to the bank account opened/ operated by theapplicant is to be taken into consideration during the presentproceeding or not.It is the submission of the Departmentthat these two informations are very vital to determine thetruth in the matter and it will be fatal on the part of theCommission to ignore the same. It is also the submission ofthe Department that these two letters relate only to the issueof the bank account and the flat at London which are inconsideration and remitted by the Hon’ble High Court to theCommission. (b) We agree with the submissions made by the Departmentthat these two informations submitted by the Departmentdated 25.05.2015 with the Commission and received by theDepartmentsubsequentdated19.02.2015helpstheCommission to determine whether the disclosure made by theapplicant is full and true or not.Hence these documentsrequire to be considered and the applicant can very well givehis comments on these documents....” 6. Then from para 15.1 onwards, both the pieces of information arediscussed in extenso by the ITSC. In para 15.17 the conclusion drawn by it,as regards the opening of an account, reads as under: “15.17. If there was a POA (Power of Attorney) arrangementbetween Mr. Yusuf Mehboob Khan and MR. Qureshi, it wasa legal obligation of Mr. Qureshi to provide the alleged POAto the bank, as the Bank was interested in knowing theprofile, background and business interests only of the ‘RealClient’ and not of an attorney of a client. Thus, the POA andthe balance sheets of Barro and Bulova produced in supportof ownership of these entities by Mr. Yusuf Mehboob Khanare an afterthought.It is noted that these documents havealready been considered and not accepted by the Commissionin the earlier order dated 24.02.2015....” 7. The next paragraph i.e. para 15.18 deals with purchase of the property inLondon in respect of which the conclusion drawn by the ITSC reads asunder: “15.17. If there was a POA (Power of Attorney) arrangementbetween Mr. Yusuf Mehboob Khan and MR. Qureshi, it wasa legal obligation of Mr. Qureshi to provide the alleged POAto the bank, as the Bank was interested in knowing theprofile, background and business interests only of the ‘RealClient’ and not of an attorney of a client. Thus, the POA andthe balance sheets of Barro and Bulova produced in supportof ownership of these entities by Mr. Yusuf Mehboob Khanare an afterthought.It is noted that these documents havealready been considered and not accepted by the Commissionin the earlier order dated 24.02.2015....” 7. The next paragraph i.e. para 15.18 deals with purchase of the property inLondon in respect of which the conclusion drawn by the ITSC reads asunder: “... 15.18. Another very important document which is reliedby the Department is an Annexure-C of the submission dated25.05.2015 of the CIT at page 55 which is an indemnitysigned by the applicant Mr. Qureshi to the Board of Directorsof Bulova authorising them to purchase the property beingFlat NO. 4, Chesterfield House, South Audley Street, Londonfor purchase price of GBP 38,50,000/-. This indemnity alsoauthorized Board of Directors to appoint Solicitor Mischande Raya for purchase of this property at London. This furtherestablishes that the applicant Mr. Qureshi is the real owner ofthat flat. Besides that there are lots of e-mails which are partof the submission made by the CIT in their earlier submissionand earlier hearing on 10.02.2015 and 19.02.2015 where theapproval of artefacts and other furnishing including thecarpets have been done by the applicant for which e-mailshave been sent to employees of Sh. Qureshi for his approval.This also corroborates the fact of Sh. Moin Akhtar Qureshibeing the real owner of the flat at London and not a power ofattorney holder only as it is the real owner who normallyapproves/ decides, now and with what his flat is to befurnished and not the power of attorney holder....” 8. What happened before the ITSC after the passing of impugned the orderdated 4[th]June, 2015 is interesting. It appears that an application was filed,apparently, under ‘Section 154 read with Section 245D(2C) of the Act’ bythe Pr. CIT- Central-II on 12[th]June, 2015 seeking correction of a factualdiscrepancy that occurred in para 15.10 of the order dated 4[th]June, 2015. Inorder to appreciate what the correction sought was, it is necessary to set outpara 15.10 of the order dated 4[th]June, 2015, which reads as under: “15.10. All the Bank Account opening forms were signed byShri Moin Qureshi and his address mentioned is C 134Defence Colony, New Delhi – 110024, India as seen frompage 18 and 19 of pages marked as 7 to 49 received fromSingapore authorities.The copies of the passport of ShriQureshi were enclosed by Singapore authorities. The CIT(DR) argued that Shri Moin Akhtar Qureshi is thebeneficial owner of account No. 6CO3122 held by BarroHoldings Ltd. (Barro) with BSI Bank Ltd. Singapore in FormA andthat this account was opened on 22.07.2011 andclosed on 19.04.2013...” 9. The correction now sought was that the acknowledgement of the fact thatthe bank account opening forms for both Barro Holdings Ltd. and BulovaHoldings Ltd. were not signed by Sh. Moin Akhtar Qureshi but by ArcasHoldings Ltd. ‘the authorized signatory and a director of Barro and Bulova’.The important change which was sought by the Pr. CIT himself was for theITSC to now acknowledge that there did exist a Power of Attorney (POA)on record which is now enclosed by the Pr. CIT with its application seekingthe correction. 10. This application by the Pr. CIT was heard by the ITSC in the absence of any notice to the Petitioner. The ITSC accepted the application and by itssubsequent order dated 26[th]June, 2015 corrected para 15.10 to read thus: 9. The correction now sought was that the acknowledgement of the fact thatthe bank account opening forms for both Barro Holdings Ltd. and BulovaHoldings Ltd. were not signed by Sh. Moin Akhtar Qureshi but by ArcasHoldings Ltd. ‘the authorized signatory and a director of Barro and Bulova’.The important change which was sought by the Pr. CIT himself was for theITSC to now acknowledge that there did exist a Power of Attorney (POA)on record which is now enclosed by the Pr. CIT with its application seekingthe correction. 10. This application by the Pr. CIT was heard by the ITSC in the absence of any notice to the Petitioner. The ITSC accepted the application and by itssubsequent order dated 26[th]June, 2015 corrected para 15.10 to read thus: “15.10. The power of attorney for the management of assetswas signed by M/s Arcas Holding Ltd. and Shri MoinQureshi and his address mentioned is C 134 Defence Colony,New Delhi – 110024, Indas as seen from page 18 and 19 ofpages marked as 7 to 49 received from Singapore authorities.The copies of the passport of Shri Qureshi were enclosed bySingapore authorities. The CIT(DR) argued that Shri Moin Akhtar Qureshi is thebeneficial owner of account No. 6CO3122 held by BarroHoldings Ltd. (Barro) with BSI Bank Ltd. Singapore in FormA and that this account was opened on 22.07.2011 and closedon 19.04.2013....” 11. As a result of the above correction in para 15.10 the conclusion that thePetitioner had not made a full and true disclosure of the facts in respect oftheaboveaccount,completelychanged.Therewasnowanacknowledgement by the ITSC that there was no failure to make a full andtrue disclosure by the Petitioner as far as the above bank account wasconcerned. 12. The question that next arises is whether the above change brought aboutto the order dated 4[th]June, 2015 by the subsequent order dated 26[th]June,2015 would have an impact on the main conclusion drawn by the ITSC in itsorder dated 4[th]June, 2015, that the Petitioner did not make a full and truedisclosure of all facts. It will be recalled that there were two pieces ofinformation which were brought before the ITSC by the Department in thesecond round to persuade the ITSC to hold that there was no full and true disclosure by the Petitioner; one was regarding the bank account and theother was regarding the property at London. As regards the property atLondon, the case of the Petitioner is that he offered further explanationbefore the ITSC by his written submissions dated 15[th]May, 2015 enclosingcertain documents and that was never considered by the ITSC. 13. Neither the conclusion in para 15.18 of the order dated 4[th]June, 2015 orin any other portion of the said order, have the above written submissions ofthe Petitioner dated 22[nd]May, 2015 been discussed. 14. The Court is of the considered view that the ITSC ought to have, in thefirst instance, put the Petitioner on notice if it was going to entertain anapplication by the Department seeking ‘correction’ of its order.It is onething to state that the said ‘correction’ was in fact beneficial to the Petitionersince the allowing of the application meant that the Petitioner's case thatthere was no failure by him to make a full and true disclosure of factspertaining to the bank account was in fact accepted by the ITSC. But there isalso merit in the contention of the learned counsel for the Petitioner that hadthe Petitioner known of the application, the Petitioner may have been able topersuade the ITSC even as regards the other ‘errors’ which according to thePetitioner vitiate the impugned order dated 4th June 2015. Whether in factthe ITSC may have been persuaded or not is not the point. The fact remainsthat an order passed by the ITSC cannot be sought to be ‘corrected’ by itwithout putting both parties to the order to notice. The procedure adopted bythe ITSC of passing an order ex parte, correcting an earlier order, is notacceptable to the Court. 15. The Court is of the considered view that the ITSC should againundertake the exercise that it was expected to undertake pursuant to theorder passed by this Court on 18[th]May, 2015 in WP(C) No. 4900/2015.Accordingly, the impugned order dated 4[th]June, 2015 read with the orderdated 26[th]June, 2015 are hereby set aside. The result would be that theexercise that was to be undertaken by the ITSC as a result of the orderpassed by this Court on 18[th]May, 2015 will have to be undertaken by itafresh. This time round there will be no further documents filed either by theDepartment or by the Petitioner. On the basis of the existing documents, theITSC will, after giving opportunity of being heard to both the parties, pass afresh decision on merits, in accordance with law. The ITSC will pass anorder uninfluenced by any of its earlier orders that have been set aside bythis Court. 16. The writ petition and the application are disposed of in the above terms.The matter will now be placed before the ITSC on 2[nd]May, 2017. S.MURALIDHAR, J. APRIL 13, 2017kk NAJMI WAZIRI, J.