Preetha Krishna v. The Assistant Commissionerof Income Tax (Inv) Unit-4(3),Investigation Wing,Room

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 07.09.2020 CORAM THE HONOURABLE DR. JUSTICE ANITA SUMANTH Writ Petition No.31383 of 2019 and WMP.No.31550 of 2019 Preetha Krishna ...Petitioner Vs. The Assistant Commissionerof Income Tax (INV) Unit-4(3),Investigation Wing,Room No.110, 1[st ]Floor,New No.46, Old No.108,Nungambakkam High Road,Chennai-600 034 ...Respondent PRAYER: PETITION filed under Article 226 of the Constitution ofIndia praying for the issuance of Writ of CertiorarifiedMandamus, calling for the records and quash the impugned orderpassed by the respondent vide F.No.ADIT/U-4(3)/2019-20 dated18.10.2019, U/S. 230(1A) of the Income Tax Act, 1961 andconsequentially direct the respondent herein to permit thepetitioner to travel abroad as and when required in exercise ofhis fundamental right to travel abroad guaranteed under Article21 of the Indian Constitution, by permanently removing alltravel restrictions whatsoever, with immediate effect. For Petitioner: Mr.Nithyaesh Natraj For Respondent: Mr.A.P.Srinivas Senior Standing CounselO R D E R An interesting and important issue arises in this writpetition. The petitioner has approached this Court challengingan order under Section 230(1A) of the Income Tax Act, 1961 (inshort 'IT Act'), the prayer couched in the following terms: https://hcservices.ecourts.gov.in/hcservices/ To call for the records and quash the impugned orderpassed by the respondent vide F.No.ADIT/U-4(3)/2019-20dated 18.10.2019, U/S. 230(1A) of the Income Tax Act,1961 and consequentially direct the respondent herein topermit the petitioner to travel abroad as and whenrequired in exercise of his fundamental right to travelabroad guaranteed under Article 21 of the IndianConstitution, by permanently removing all travelrestrictions whatsoever, with immediate effect. 2. There is some history to the present litigation. Whilehearing this writ petition on 07.11.2019, this Court had noticedthat Section 230(1A) offered opportunity to an assessee torepresent to the assessing officer that satisfactoryarrangements had been made to defray the tax and otherliabilities, if any, computed, in which case the necessary TaxClearance Certificate (TCC) could well be issued by the officerpermitting the assessee to travel out of the country. Thefollowing order thus came to be passed: Mr.A.P.Srinivas, learned standing counsel takes noticefor the respondent. 2. The challenge made in this writ petition is againstthe order passed under Section 230(1A) of the IncomeTax Act, 1961, dated 18.10.2019. Through the impugnedproceedings, the respondent called upon the petitionerto obtain a Tax Clearance Certificate under Section230(1A) from the respondent before leaving theterritory of India by land, sea or air. 3. The above said order was issued in pursuant to thesearch conducted at the premises of the petitionerunder Section 132 of the Income Tax Act, 1961, andseizure of cash to the tune of Rs.23.87 Crores,jewellery weighing 5678.800 grams, diamond weighing433.47 carrots and foreign currency of 1.25 millionUSD. 4. Mr.Sathish Parasaran, learned Senior Counselappearing for the petitioner submitted that thepetitioner is a Teacher of spirituality and philosophyand has to attend conference in a foreign country andthus, she has to leave Chennai immediately andtherefore, the interest of the petitioner to travelabroad and come back is to be protected. 5. The learned standing counsel for the respondentsubmitted that it is for the petitioner to approach the respondent as per the first Proviso to Section 230(1A) of the Income Tax Act, 1961. 4. Mr.Sathish Parasaran, learned Senior Counselappearing for the petitioner submitted that thepetitioner is a Teacher of spirituality and philosophyand has to attend conference in a foreign country andthus, she has to leave Chennai immediately andtherefore, the interest of the petitioner to travelabroad and come back is to be protected. 5. The learned standing counsel for the respondentsubmitted that it is for the petitioner to approach the respondent as per the first Proviso to Section 230(1A) of the Income Tax Act, 1961. 6. Section 230 of the Income Tax Act, 1961, deals withthe Tax Clearance Certificate, more particularly,first Proviso to Section 230(1A) therein contemplatesthat no person, who is domiciled in India at the timeof his departure and in respect of whom circumstancesexist, which in the opinion of an income tax authorityrender it necessary for such person to obtain a TaxClearance Certificate, leaving the territory of India,unless he obtains a Certificate from the Income TaxAuthority stating that he has no liability under thisAct or that satisfactory arrangements have been madefor the payment of all or any of such taxes, which areor may become payable by that person. Therefore, goingby the above provision of law, this Court is of theview that the petitioner, instead of approaching thisCourt, ought to have approached the respondent andsatisfied that the satisfactory arrangements have beenmade by her for the payment of all such taxes or whichare become payable by her. Therefore, it is for thepetitioner to approach the respondent, if she intendsto leave abroad, even before completion ofconsequential proceedings pursuant to search andseizure. 7. Accordingly, without prejudice to the contentionraised in this writ petition, it is open to thepetitioner to approach the respondent even today,itself and satisfy him that the satisfactoryarrangements have been made for the payment of all orany of such taxes, which are or may become payable byher. Post the writ petition on 21.11.2019. 3. The petitioner filed a representation on the same date,that is, 07.11.2019 that came to be rejected by order dated11.11.2019, challenged in W.P.No 1971 of 2019. The prayer soughtin that writ petition was as follows:To call for the records and quash the impugnedorder passed by the respondent vide F.No.ADIT/U-4(3)/Preetha/2019-20 dated 11.11.2019, U/S. 230(1A) of theIncome Tax Act, 1961 and consequentially direct therespondent herein to permit the petitioner to travelabroad as and when required in exercise of hisfundamental right to travel abroad guaranteed under https://hcservices.ecourts.gov.in/hcservices/ Article 21 of the Indian Constitution, by permanentlyremoving all travel restrictions whatsoever, withimmediate effect. 4. Both writ petitions, the present one as well asW.P.No.31971 of 2019, were listed for hearing together and thelatter came to be dismissed as withdrawn by order of this Courtdated 13.11.2019. Thereafter, the petitioner has been pursuingthe present writ petition alone. https://hcservices.ecourts.gov.in/hcservices/ Article 21 of the Indian Constitution, by permanentlyremoving all travel restrictions whatsoever, withimmediate effect. 4. Both writ petitions, the present one as well asW.P.No.31971 of 2019, were listed for hearing together and thelatter came to be dismissed as withdrawn by order of this Courtdated 13.11.2019. Thereafter, the petitioner has been pursuingthe present writ petition alone. 5. A serious objection is raised by Mr.A.P.Srinivas,learned Senior Standing Counsel for the respondent, to themaintainability of the present writ petition. He contends thatonce W.P.No.31971 of 2019, seeking quash of order dated11.11.2019 had been withdrawn, the petitioner is not entitled tomaintain its challenge to the present impugned order. He statesthat an order under Section 230(1A) is merely one wherein therespondent expresses his satisfaction of the existence ofcircumstances that, in his opinion, make it necessary for thepetitioner to obtain a tax clearance certificate prior toexiting the territory of India by land, sea or air. Thissatisfaction is subjective and not one which is amenable tointerference in terms of Article 226 of the Constitution ofIndia. He points out that it is always open to the petitioner,pursuant to passing of an order under Section 230(1A), to seekissuance of tax clearance certificate, that might either begranted or rejected, based on the merits of the matter. Theimpugned order is thus only a preliminary order and does notgive rise to a legitimate cause of action, particularly in thelight of the withdrawal of W.P.No.31971 of 2019. 6. The order passed by the respondent on 11.11.2019rejecting the petitioners' request for TCC is in the followingterms: ‘Whereas, a search & seizure operation u/s 132 of ITAct 1961 was conducted in your case at your residenceat No.11, Shyamala Gardens, Akkarai, ECR, Chennaialongwith in the case of Shri.NKV.Krishna and the groupconcerns including trusts in which you are either aDirector/shareholder/trustee on 16.10.2019. Besides,simultaneous search action was also conducted in thecase of Shri Sri Bhagavan and Smt PadmavathiVijayaKumar and the trusts/companies run by them in acoordinated operation of the department, 38 premiseswere covered by various locations – Chennai, Chittoor,Hyderabad, Bengaluru etc. During the course of search action at yourresidence at No.11 Shyamala Gardens, ECR, Akkarai,Chennai, unaccounted case of Rs.23.87 crores andforeign currency of 1.25 Million USD (valued approximately Rs.9 crores) had been found and seized,jewellery worth Rs.5678 grams valued at Rs.1.68 croresand diamond worth 433.47 carots valued at Rs.1.7 croresapproximately had been found and placed under‘Prohibitory Order’ at your residence. .......... 13) Further, the search action initiated in your owncase and in your group entities had only beentemporarily concluded and ‘Prohibitory Orders’ has beenplaced at your residence and at the Corporate premises.Hence, a statement u/s.132 (4) of I.T.Act, 1961 has tobe recorded for all the findings during the search, forwhich your presence is imminent as required under thelaw. 14) Further, investigation has to be completed in atime-bound manner. The investigation status so far isthat you and your husband have not provided conclusiveexplanation for any of the search findings, the detailsas required in various questions (as per statementrecorded to him u/s.132(4). 15) Hence, in view of the above your presence in Indiais inevitable, look out notice u/sec.230(1A) of theIncome Tax Act, 1961, had been issued, which reads asunder: Provided that no person (i) Who is domiciled in India at the time of hisdeparture; and 14) Further, investigation has to be completed in atime-bound manner. The investigation status so far isthat you and your husband have not provided conclusiveexplanation for any of the search findings, the detailsas required in various questions (as per statementrecorded to him u/s.132(4). 15) Hence, in view of the above your presence in Indiais inevitable, look out notice u/sec.230(1A) of theIncome Tax Act, 1961, had been issued, which reads asunder: Provided that no person (i) Who is domiciled in India at the time of hisdeparture; and (ii) In respect of whom circumstances exist which, inthe opinion of an income-tax authority render itnecessary for such person to obtain a certificate underthis section, shall leave the territory of India by land, sea or airunless he obtains a certificate from the income-taxauthority stating that he has no liabilities under thisAct, or the Wealth-tax Act, 1957 (27 of 1957), or theGift-tax Act, 1958 (18 of 1958), or the Expenditure-taxAct, 1987 (35 of 1987), or that satisfactoryarrangements have been made for the payment of all orany of such taxes which are or may become payable bythat person: “Circumstances exist” had been clarified by CBDTvide its instruction No.1/2004 dated 05-02-2004 (copy enclosed). Para 3(i) clearly states that ... where aperson is involved in serious financial irregularitiesand his presence is necessary in investigation of casesunder the income tax act or the wealth tax and it islikely that a tax demand will be raised against him... In view of the above provisions of the law, asappended with the findings of the search (Undisclosedincome, Hawala transactions etc) your presence isnecessary in investigation under Income Tax Act andWealth Tax Act, hence the look-out notice issued by theundersigned is in order and the permission fortravelling abroad (USA, Ukraine) as per your requestcannot be granted. As this will hamper theinvestigation which are required to be carried arementioned in para 1 to 15 above. Accordingly, your request for “Tax ClearanceCertificate” for the above mentioned dates (as in yourrequest), is hereby rejected.’ 7. The portion that I have not extracted above sets out inextenso between paragraphs 1 and 12, the details of substantialamount of cash, deposits in bank, jewellery, foreign currencyand overseas investments alleged to be unaccounted, the detailsof Companies and Trusts in which the petitioner, her husband andher father-in-law are stated to be involved and details ofstatements recorded from two individuals, who according to theDepartment have acquiesced to having engaged in Hawalatransactions to send the money abroad, since the details per seare not entirely relevant for the purpose of this Writ Petition.Suffice it to note that the allegations as against thepetitioner in the matter of alleged tax evasion are grave,subject to assessments to be made in this regard. 8. This order, rejecting the request of the petitioner, isspecific to the travel plans of the petitioner 11[th] to 18[th]November, 2019 to Canyon Ranch Arizona USA and 21[st] to 25[th]November, 2019 to Kyiv, Ukraine. Such a rejection, in myconsidered view, will not stand in the way of the largerchallenge raised in the present writ petition which turns on amore fundamental premise. The petitioner has advanced multi-pronged arguments on the veracity of the impugned order that, inmy view, go to the root of the matter and impinge on whethersuch an order is jurisdictionally and legally sustainable. Incontrast, order dated 11.11.2019 is only a consequential orderthat takes wings from order dated 18.10.2019. It is specific tothe request of the petitioner for travel on specified dates.Order of rejection dated 11.11.2019 will thus not have a bearingon the legal issues raised by the petitioner in the present writpetition. For the aforesaid reasons, the withdrawal of W.P.No.31971 of 2019 will also not preclude the adjudication ofthis Writ Petition on merits. 9. The argument of the revenue to the effect that thepetitioner can always seek issuance of a TCC afresh also doesnot 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 validorder under Section 230(1A) and if one were to take a view thatthe assumption of jurisdiction under Section 230 (1A) waslacking, all subsequent orders would consequently be renderedbad in law. The grant of a TCC begs the question of whether theorder requiring such certificate is itself valid. The latterquestion has necessarily to be decided first as it forms thesubstratum of the lis. 10. For the above reasons, this writ petition is held to bemaintainable. 11. The petitioner claims to be a teacher of spiritualityand philosophy and the founder of various academies thatdisseminate philosophical concepts to the public at large. TheIncome Tax Authorities had carried out a search in terms ofSection 132 of the Act in the premises of the petitioner on18.102.2019. The search, according to the counter filed by therespondent, revealed unaccounted cash of a sum of Rs.23.87crores, foreign currency of Rs.1.25 million USD (valuedapproximately at INR 9 crores), jewellery of 5678 gms. (valuedat Rs.1.68 crores approx.) and diamonds worth Rs.430.74 carats(valued at Rs.1.78 crores approx). 12. According to the revenue, these assets are unaccountedand have been generated by several companies abroad in which thepetitioner is either shareholder or trustee along with herhusband N.K.V.Krishna and father in law, Kalki Bhagvan. Thereare allegations in the counter in regard to the engagement ofthe petitioner in hawala transactions with dubious companiessituated abroad. Statements appear to have been recorded fromemployees that are also relied upon by the revenue as supportingthe hawala transactions engaged in by the petitioner incompanies in Dubai, Europe, United States of America andSingapore. 13. I refrain from referring in detail to the transactions,since the investigation is stated to be ongoing and theenquiries/investigations are evidently at a preliminary stage.Suffice it to say that proceedings have been initiated by theDepartment both in terms of the IT as well as the Black MoneyAct, 2015 (in short 'BM Act') for the assessment of the incomeunearthed, found and seized in search. The impugned order beingpassed in terms of Section 230(1A), the provisions are extractedbelow as follows: Tax clearance certificate. 230. (1) Subject to such exceptions as the CentralGovernment may, by notification in the OfficialGazette, specify in this behalf, no person,— (a) who is not domiciled in India; (b) who has come to India in connection with business,profession or employment; and (c) who has income derived from any source in India,shall leave the territory of India by land, sea or airunless he furnishes to such authority as may beprescribed— (i) an undertaking in the prescribed form from hisemployer; or (ii)through whom such person is in receipt of theincome to the effect that tax payable by such person who isnot domiciled in India shall be paid by the employerreferred to in clause (i) or the person referred to inclause (ii), and the prescribed authority shall, onreceipt of the undertaking, immediately give to suchperson 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 Indiabut visits India as a foreign tourist or for any otherpurpose not connected with business, profession oremployment. (i) an undertaking in the prescribed form from hisemployer; or (ii)through whom such person is in receipt of theincome to the effect that tax payable by such person who isnot domiciled in India shall be paid by the employerreferred to in clause (i) or the person referred to inclause (ii), and the prescribed authority shall, onreceipt of the undertaking, immediately give to suchperson 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 Indiabut visits India as a foreign tourist or for any otherpurpose not connected with business, profession oremployment. (1A) Subject to such exceptions as the CentralGovernment may, by notification in the OfficialGazette, specify in this behalf, every person, who isdomiciled in India at the time of his departure fromIndia, shall furnish, in the prescribed form to theincome-tax authority or such other authority as may beprescribed— (a) the permanent account number allotted to him under section 139A: Provided that in case no such permanent account numberhas been allotted to him, or his total income is notchargeable to income-tax or he is not required toobtain a permanent account number under this Act, suchperson shall furnish a certificate in the prescribedform; (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 in India at the time of hisdeparture; and (ii) in respect of whom circumstances exist which, inthe opinion of an income-tax authority render itnecessary for such person to obtain a certificateunder this section, shall leave the territory of India by land, sea or airunless he obtains a certificate from the income-taxauthority stating that he has no liabilities underthis Act, or the Wealth-tax Act, 1957 (27 of 1957), orthe Gift-tax Act, 1958 (18 of 1958), or theExpenditure-tax Act, 1987 (35 of 1987), or thatsatisfactory arrangements have been made for thepayment of all or any of such taxes which are or maybecome payable by that person : Provided that no income-tax authority shall make itnecessary for any person who is domiciled in India toobtain a certificate under this section unless herecords the reasons therefor and obtains the priorapproval of the Principal Chief Commissioner or ChiefCommissioner of Income-tax. . . . . 14. We are, in this case, concerned with the provisions ofSection 230(1A), specifically the second proviso thereto thatstates that places a restriction on any person domiciled inIndia at the time of departure from leaving the Country where,circumstances exist which, in the opinion of an income-taxauthority render it necessary for that person to obtain acertificate from the authority to the effect that the person hasno liabilities under revenue laws or that satisfactoryarrangements have been made for meeting liabilities, if any.Admittedly, there are no outstanding arrears of income, wealth,gift or expenditure tax in the case of this petitioner. 15. It is also relevant to note the circumstances underwhich a Look-out Circular would be issued by the Government ofIndia, Ministry of Home Affairs at the instance of therespondent. The Circular is extracted below: OFFICE MEMORANDU Subject: Issuance of Look Out Circulars (LOC) inrespect of Indian citizens and foreignersUnder the existing practice, the issuance of LOCs isgoverned by this Ministry's letter number 25022/13/78-F.I dated 5.9.1979 and OM number 25022/20/98-F.IVdated 27.12.2000. 2. It has, inter-alia, been stated in the letterdated 5.9.1979 of MHA that ‘apart from the Govern https://hcservices.ecourts.gov.in/hcservices/ OFFICE MEMORANDU Subject: Issuance of Look Out Circulars (LOC) inrespect of Indian citizens and foreignersUnder the existing practice, the issuance of LOCs isgoverned by this Ministry's letter number 25022/13/78-F.I dated 5.9.1979 and OM number 25022/20/98-F.IVdated 27.12.2000. 2. It has, inter-alia, been stated in the letterdated 5.9.1979 of MHA that ‘apart from the Govern https://hcservices.ecourts.gov.in/hcservices/ India in the Ministry of Home Affairs, circulars areissued by various authorities for keeping a watch onarrival/departure of Indians and foreigners. Theseauthorities include the Ministry of External Affairs,the Customs and Income Tax Departments, Directorate ofRevenue intelligence, Central Bureau of Investigation,Interpol, Regional Passport Officers, Policeauthorities in various States, etc.' It has furtherbeen stated that 'unless otherwise specified in thewarning circular itself, the circulars issued by anyof the various authorities specified above will beregarded as invalid if it is more than one year oldand the card will be weeded out. For the future, it isconsidered that whenever any authority issues awarning circular to the immigration authorities, theperiod of validity should be clearly specified in thecircular. If this is not done, the circular will beconsidered to be valid only for a period of one yearfrom the date of issue and a watch will be maintainedby the person concerned at the immigration check postsonly for that period.' 3. The OM dated 27.12.2000 of MHA specifies thesteps required to be taken for opening an LOC inrespect of an Indian citizen. It has been mentioned inthe said OM that the request for opening an LOC inrespect of an Indian citizen is required to be made toall the Immigration Check Posts (ICP) in the countryin a prescribed proforma[.] It has further been statedthat the request for opening of LOC must invariably beissued with the approval of an Officer not below therank of Deputy Secretary to the Government of India /Joint Secretary in the State Government / concernedSuperintendent of Police at district level. Further,'Care must be taken by the originating agency toensure that complete identifying particulars of theperson, in respect of whom the LOC is to be opened,are indicated in the Proforma...' It is furtherprovided that 'an LOC is valid for a period of oneyear. It can, however, be extended further before theexpiry of the one year period. In case no request forextension of LOC is received before expiry of one yearperiod, an LOC will automatically be closed by theImmigration Officer concerned after expiry of one yearperiod.'….. 6. In a related judgement delivered on 11.8.2010by the Hon'ble High Court of Delhi in W.P. (Crl.) No.1315/2008-Sumer Singh Salkan Vs. Asstt. Director & Ors and Crl. Ref.1/2006-Court on its Own Motion Re: StateVs. Gurnek Singh etc., the Court has answered fourquestions raised by a lower court on the LOC. Thesequestions are as below: a) What are the categories of cases in which theinvestigating agency can seek recourse of Look-out-Circular and under what circumstances? b) What procedure is required to be followed bythe investigating agency before opening a Look-out-Circular? c) What is the remedy available to the personagainst whom such Look out-Circular has been opened? d) What is the role of the concerned Court whensuch a case is brought before it and under whatcircumstances the subordinate courts can intervene? 7. The High Court has answered these questions inits judgement dated 11.8.2010 which are reproducedbelow for guidance of all concerned agencies: a) Recourse to LOC can be taken by investigatingagency in cognizable offences under IPC or other penallaws, where the accused was deliberately evadingarrest or not appearing in the trial court despiteNBWs and other coercive measures and there waslikelihood of the accused leaving the country to evadetrial/arrest. c) What is the remedy available to the personagainst whom such Look out-Circular has been opened? d) What is the role of the concerned Court whensuch a case is brought before it and under whatcircumstances the subordinate courts can intervene? 7. The High Court has answered these questions inits judgement dated 11.8.2010 which are reproducedbelow for guidance of all concerned agencies: a) Recourse to LOC can be taken by investigatingagency in cognizable offences under IPC or other penallaws, where the accused was deliberately evadingarrest or not appearing in the trial court despiteNBWs and other coercive measures and there waslikelihood of the accused leaving the country to evadetrial/arrest. b) The Investigating Officer shall make a writtenrequest for LOC to the officer as notified by thecircular of Ministry of Home Affairs, giving details &reasons for seeking LOC. The competent officer aloneshall give directions for opening LOC by passing anorder in this respect. c) The person against whom LOC is issued must joininvestigation by appearing before I.O. or shouldsurrender before the court concerned or should satisfythe court that LOC was wrongly issued against him. Hemay also approach the officer who ordered issuance ofLOC & explain that LOC was wrongly issued against him.LOC can be withdrawn by the authority that issued andcan also be rescinded by the trial court where case ispending or having jurisdiction over concerned policestation on an application by the person concerned. d) LOC is a coercive measure to make a personsurrender to the investigating agency or Court of law.The subordinate courts' jurisdiction in affirming orcancelling LOC is commensurate with the jurisdictionof cancellation of NBWs or affirming NBWs. 8. In accordance with the order dated 26.7.2010 of theHigh Court of Delhi, the matter has been discussedwith the concerned agencies and the followingguidelines are hereby laid down regarding issuance ofLOCs in respect of Indian citizens and foreigners: a) The request for opening an LOC would be made bythe originating agency to Deputy Director, Bureauof Immigration (BoT), East Block VIII, RK Puram,New Deihi - 66 (Telefax: 011-2619244) in theProforma enclosed. b) The request for opening of LOC must invariablybe issued with the approval of an officer not belowthe rank of i. Deputy Secretary to the Government of India; orii. Joint Secretary in the State Government; oriii. District Magistrate of the District concerned;or iv. Superintendent of Police (SP) of the Districtconcerned; or v. SP in CBI or an officer of equivalent levelworking in CBI; or vi. Zonal Director in Na rcotics Control Bureau(NCB) or an officer of equivalent level (includingAssistant Director (Ops.) in Headquarters of NCB);or vii. Deputy Commissioner or an officer ofequivalent level in the Directorate of RevenueIntelligence or Central Board of Direct Taxes orCentral Board of Excise and Customs; or x. An officer not below the level of Superintendentof Police in National Investigation Agency, or or xi. Assistant Director of Enforcement Directorate; xii. Protector of Emigrants in the office of theProtectorate of Emigrants or an officer not belowthe rank of Deputy Secretary of the Government ofIndia; or xiii. Designated officer of Interpol Further, LOCs can also be issued as per directionsof any Criminal Court in India. vi. Zonal Director in Na rcotics Control Bureau(NCB) or an officer of equivalent level (includingAssistant Director (Ops.) in Headquarters of NCB);or vii. Deputy Commissioner or an officer ofequivalent level in the Directorate of RevenueIntelligence or Central Board of Direct Taxes orCentral Board of Excise and Customs; or x. An officer not below the level of Superintendentof Police in National Investigation Agency, or or xi. Assistant Director of Enforcement Directorate; xii. Protector of Emigrants in the office of theProtectorate of Emigrants or an officer not belowthe rank of Deputy Secretary of the Government ofIndia; or xiii. Designated officer of Interpol Further, LOCs can also be issued as per directionsof any Criminal Court in India. 16. The purpose of a lookout circular has to be seen in thecontext of points (a) and (b) of paragraph 7 extracted above.The necessity or otherwise for seeking the issuance of a lookoutcircular is only in such cases where the investigating Officeris able to establish a clear intention on the part of theaccused or the eminent possibility of the accused abscondingfrom the country in order to frustrate trial/investigation. Thethreshold for such justification is high. In the present case,the search has taken place on 16.10.2019 and the impugned orderhas been passed on 18.10.2019, one day after the search. Therecords reveal that approval was sought from the DirectorGeneral of Income Tax (Investigation) on 18.10.2019 for issuanceof an order under Section 230 of the Act to the ImmigrationAuthorities to prevent the petitioner from leaving India.Reference is made in the letter seeking approval to InstructionNo.1 of 2004 dated 05.02.2004. The approval of the DGIT has beenconveyed on the same day, i.e., 18.10.2019 and the impugnedorder under Section 230 (1A) passed on the same date conveyingto the petitioner that she is required to obtain a Tax ClearanceCertificate before leaving the territory of India. Inresponse thereto, the Bureau of Immigration, Ministry of HomeAffairs has opened a look out circular restraining the movementof the petitioner for a period of one year. 17. Let us now examine the purpose and intent of Section230. Evidently, the provision is intended to protect theinterests of the revenue in the case of an assessee, in whosecase a demand of tax has been raised or is imminent, and who isexpected to frustrate the recovery of the dues by abscondingfrom the country and constituting a flight risk. The twinconditions, of pending or imminent tax dues and flight risk areto be based on tangible materials. My attention is drawn to theReport of the Task Force on Direct Tax, constituted under the Chairmanship of Dr.Vijay Kelkar, commonly referred to as VijayKelkar Committee (2002) Recommendations on Direct Taxes,wherein at Chapter 3, the subject of Income Tax ClearanceCertificate has been specifically referred to. This is what theCommittee has to say in the context of TCC: Income Tax Clearance Certificates 3.56 A person leaving India by land, sea or air isrequired to obtain from the Competent Authority acertificate that he has no liabilities under the directtax laws or that he has made satisfactory arrangementfor payment of his existing liabilities as also forpayment of the tax that may become payable by him. Thepersons requiring income tax clearance are those: (i) not domiciled in India provided they havestayed in India over a period of 120 days. Generally, aperson holding a foreign passport is considered as notdomiciled in India; (ii) domiciled in India at the time of departure (a) intends to leave India as an Emigrant; or (b) intends to leave India on a work permit foremployment or occupation abroad; or (c) in respect of whom income tax authorityconsiders that a clearance is necessary. (i) not domiciled in India provided they havestayed in India over a period of 120 days. Generally, aperson holding a foreign passport is considered as notdomiciled in India; (ii) domiciled in India at the time of departure (a) intends to leave India as an Emigrant; or (b) intends to leave India on a work permit foremployment or occupation abroad; or (c) in respect of whom income tax authorityconsiders that a clearance is necessary. 3.57 Case 1 was intended to facilitate collectionof taxes from foreigners in respect of income that theymay have earned during their stay in India. Case 2 wasalso intended to ensure that residents do not leaveIndia without discharging their tax liabilities.However, over time the machinery for issuing suchclearances has degenerated often leading to complaintsof harassment and unethical behavior. In fact,international travel guides advice foreign tourist tobudget for a certain sum to obtain such clearances. Thisis indeed an inhibiting factor for foreign tourists tovisit India and stay long periods. It is also learntfrom a cross section of officers and staff in theDepartment that they have yet to come across any casewhere such a clearance has facilitated recovery oftaxes. 3.58 India has a network of treaties for avoidanceof double taxation. These treaties do not provide forany bilateral arrangement for assistance in tax recovery by one country from the residents of another country. Itis now learnt that OECD has proposed the incorporationof such an arrangement in all treaties and thereforeIndia will have to renegotiate for this purpose. 3.59 The Group on Tax Policy and Tax Administrationset up by the Planning Commission under the chairmanshipof Dr. Parthasarathi Shome has recommended that therequirement to obtain tax clearance by foreign touristsmust be dispensed with immediately. The Task Force alsodiscussed this issue and endorsed the view of the Group. 3.60 It is therefore recommended that the presentrequirement of obtaining a tax clearance certificatebefore leaving the country must be abolished. However,in order to protect the interest of revenue, we cancontinue to allow the income tax authorities to notifythe immigration/custom authorities to prevent anyparticular person from leaving the country if suchperson is considered to be a proclaimed offender. As a56 result only a handful of notified persons will besubjected to the process of tax clearance as against thepresent practice of requiring all and sundry to complywith the requirement of obtaining tax clearance beforeleaving the country. 3.61 In terms of the policy of the Government ofIndia, patronage in the form of grant of license,government contracts, permits, etc should be extendedonly to honest taxpayers. All the Ministries, theirattached and subordinate offices, public sectorundertakings, ordnance factories, Directorate-General ofSupplies and Disposals and Central Public WorksDepartment strictly ensure that those who fail todischarge their tax obligations do not get any patronagefrom them. The concerned Department/Agencies, beforegranting the contract insist on the production of IncomeTax clearance certificate from the Assessing officer tothe effect that the concerned person has paid his taxesunless stayed by the competent authority; he hascooperated with the department in the completion ofassessments by filing return of income and complyingwith the notices and in the past three years, she/he hasnot been penalized or prosecuted for tax defaults. It isalso learnt that some banks have also been insisting onincome tax clearance certificate before granting loans. 3.62 Application for the tax clearance is requiredto be made to the Assessing officer having jurisdictionover his case in a specific form. This form brings outthe state of tax compliance by the concerned person. On 3.62 Application for the tax clearance is requiredto be made to the Assessing officer having jurisdictionover his case in a specific form. This form brings outthe state of tax compliance by the concerned person. On receipt of the form, the Assessing Officer verifies fromhis records the facts stated therein. He looks into theposition regarding payment of taxes, assesseescooperation in completing assessment and whether he waspenalised or prosecuted. Thereafter, the certificate oftax clearance is recorded by the Assessing Officer onthe Application form. 3.63 The certificate is valid forone year. Application for fresh certificate can be madeone month prior to the date on which the validity of theprevious certificate is due to expire. Those firms ofrepute who have clean tax records are by Governmentnotification exempted from the production of income taxclearance certificate. Such exemption certificate isissued on the recommendation of the Commissioner. 18. The opinion of the Committee was that the requirementof obtaining TCC be abolished in order to minimize or remove theharassment that it has often resulted in. However, to balancethe interests of the Revenue, the Committee has suggested thatif any person has been declared to be a proclaimed offender,then in such cases alone, the Income Tax Authorities couldcontinue to notify the Immigration/Customs Authorities toprevent his flight. The provisions of Section 230 should only beinvoked in such cases, after ascertaining such necessity and notin a general manner, so as to cause great prejudice to thepersonal liberty of tax payers. 19. I now discuss the case law cited by the petitioner. TheCalcutta High Court, In the matter of Recols (India) Ltd.[(1953) 4 STC 271], considered the question as to when sales taxis to be treated as a preferential debt for the purposes ofSection 230 of the Companies Act, whether from date of demand ordate of receipt of sale price. This is not the question raisedin this writ petition. 20. In The Income Tax Officer (Collection) Vs. Mrs. A.Sattlar [(1974) 4 SCC 847], the Supreme Court and in LauraHamilton V. Vs. K.P.Menon, Tax Recovery Officer [(1990) 184 ITR252] a learned single Judge of the Bombay High Court consideredthe veracity of orders under section 230(1) in cases whereassessments had been completed and, according to the revenue,there were pending arrears. In Mrs.A.Sattlar’s case (supra), theassessment originally framed had itself been set aside and therewas thus no basis for the order under Section 230(1). In LauraHamilton’s case (supra), the petitioner therein had stoodguarantee for the income tax arrears of one Lisbet Holmes forthe purpose of issue of TCC in the latter’s case. Lisbet Holmesleft India in 1966. There appear to have arrears of tax in hercase for the subsequent periods, that is, 1969-70 to 1972-73 onthe basis of which the Department passed an order under Section230(1) in the petitioner’s case. Since the guarantee had been https://hcservices.ecourts.gov.in/hcservices/ executed to cover the tax arrears for a stipulated period, thatis, till 1966 only, the Court held that the order under Section230(1) issued to Laura Hamilton in 1983, 17 years after the dateof the execution of the guarantee, went beyond the scope of theguarantee, and thus quashed the same. 21. In Dr.Jayanti Dharma Teja Vs. Secretary, government ofIndia, Ministry of Finance, New Delhi and Others [(1984) 148 ITR316], a Bench of the Andhra Pradesh High Court consideredseveral issues arising from an order under Section 230(1). Twoof the challenges raised preliminary questions, one on theground that the restriction placed by virtue of an order underSection 230(1) militated against the right of a person totravel, unfettered, and the second that a notice must be issuedto the assessee prior to issuance of an order under Section 230(1). The conclusions of the Court are as follows: . . . . 21. In Dr.Jayanti Dharma Teja Vs. Secretary, government ofIndia, Ministry of Finance, New Delhi and Others [(1984) 148 ITR316], a Bench of the Andhra Pradesh High Court consideredseveral issues arising from an order under Section 230(1). Twoof the challenges raised preliminary questions, one on theground that the restriction placed by virtue of an order underSection 230(1) militated against the right of a person totravel, unfettered, and the second that a notice must be issuedto the assessee prior to issuance of an order under Section 230(1). The conclusions of the Court are as follows: . . . . 8. The first question is whether the right to goabroad is a fundamental right guaranteed under art.19.It is not one of the enumerated rights in the variousclauses of art.19. In Menaka Gandhi’s case, (1978) 1 SCC248 :AIR 1978 SC 597, Bhagwati J., speaking for thecourt, observed that “the right to go abroad cannot inall circumstances be regarded as included in freedom ofspeech and expression,”(para.77) and in that view, theSupreme Court held that the impugned order in that casedid not interfere with any of the fundamental rights offreedom of speech or expression or the right to carry onany profession. But the real question for considerationis whether art.21 is infringed in any way. Theprocedure contemplated by art.21 must undoubtedlysatisfy the test of reasonableness. It, therefore,follows that though s.230(1) does not provide a noticeto be given to a party before arriving at an opinion soas to make the income tax authority insist upon aclearance certificate, we are of the view that a noticemust be given. The law is now well settled that even inadministrative proceedings which involve civilconsequences, the doctrine of natural justice isapplicable. Therefore, for application of s.230(1), anotice is necessary, as insistence on a clearancecertificate affects, though remotely, the holder of apassport to go abroad. But it is contended by thelearned counsel for the Department that if prior noticeis given, the very object of s.230(1) will be stultifiedas the person concerned may leave the country withoutcomplying with the section. We see considerable force inthis submission of the learned counsel for the Department. If prior notice is given, there is apossibility of the section becoming unworkable. 22. The object and purpose of the provision cannot befaulted in principle or theory. What remains to be tested is thesatisfaction of the conditions and parametres contemplated inthe provision in a specific case to then decide whether theinvocation was warranted and justified from the reasons andmaterials on record or whether it is an excess of authority. Inthe case of Jayanthi Dharma Teja (supra) wherein the Bench ofthe AP High Court dismissed the challenge to an order underSection 230(1), there are several material distinctions on factsfrom the present case. Department. If prior notice is given, there is apossibility of the section becoming unworkable. 22. The object and purpose of the provision cannot befaulted in principle or theory. What remains to be tested is thesatisfaction of the conditions and parametres contemplated inthe provision in a specific case to then decide whether theinvocation was warranted and justified from the reasons andmaterials on record or whether it is an excess of authority. Inthe case of Jayanthi Dharma Teja (supra) wherein the Bench ofthe AP High Court dismissed the challenge to an order underSection 230(1), there are several mater