Delhi High Court - Orders
Late Sh. Bishnu Krishna Shrestha vs The Deputy Director Of Income Tax ... on 14 May, 2024
Author: Yashwant Varma
Bench: Yashwant Varma, Purushaindra Kumar Kaurav
$~6 to 8
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 5660/2024, CM APPL. 23336/2024 (Interim Relief)
LATE SH. BISHNU KRISHNA SHRESTHA ..... Petitioner
Through: Mr. Arvind P. Datar, Sr. Adv.
with Dr. Manas Shankar Ray,
Mr. Shouryendu Ray, Mr.
Anshul Gondale, Advs.
versus
THE DEPUTY DIRECTOR OF INCOME TAX
INVESTIGATION UNIT 6 (3) AND ORS ..... Respondents
Through: Mr. Anurag Ojha, SSC with
Mr. Virendra Kumar Saxena,
Ms. Hemlata Rawat, Adv. for
R-1.
Mr. Iram Majid, CGSC with
Mr. Mohd. Suboor, Adv. for R-
2&3.
7
+ W.P.(C) 5661/2024, CM APPL. 23339/2024
MUKUNDA RAJ SHRESTHA ..... Petitioner
Through: Mr. Arvind P. Datar, Sr. Adv.
with Dr. Manas Shankar Ray,
Mr. Shouryendu Ray, Mr.
Anshul Gondale, Advs.
versus
THE DEPUTY DIRECTOR OF INCOME TAX
INVESTIGATION UNIT 6 3 NEW DELHI AND ORS.
..... Respondent
Through: Mr. Anurag Ojha, SSC with
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 20/05/2024 at 21:09:36
Mr. Virendra Kumar Saxena,
Ms. Hemlata Rawat, Adv. for
R-1.
Mr. Rohan Jaitley, CGSC with
Mr. Dev Pratap Shahi, Adv. for
R-2,3
8
+ W.P.(C) 5662/2024, CM APPL. 23342/2024
SMT SHOBHA SHRESTHA ..... Petitioner
Through: Mr. Arvind P. Datar, Sr. Adv.
with Dr. Manas Shankar Ray,
Mr. Shouryendu Ray, Mr.
Anshul Gondale, Advs.
versus
THE DEPUTY DIRECTOR OF INCOME TAX
INVESTIGATION UNIT 6 (3) AND ORS. ..... Respondent
Through: Mr. Anurag Ojha, SSC with
Mr. Virendra Kumar Saxena,
Ms. Hemlata Rawat, Adv. for
R-1.
Mr. Shashank Bajpai, CGSC
with Ms. Stuti Karwal, Mr.
Shubhankar Singh, Mr.
Kaveesh Nair, Advs. for R-2,3
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR
KAURAV
ORDER
% 14.05.2024
1. The instant writ petitions have been preferred seeking the following reliefs:
"a. Pass a declaration of Section 2(2) of the BMA being unconstitutional and arbitrary in so far as it concerns individuals who may be covered by the residency tests provided in the various DTAAs entered into by India, whereunder they are deemed to be This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:09:36 residents of the other contracting state, in accordance with Section 90(2) of the Income Tax Act, which allows the individual to apply the more beneficial provisions b. Issue a writ in the nature of certiorari, or any other appropriate writ, direction or order, quashing the Impugned Order dated 31.03.2024 and consequent Demand Notice dated 31.03.2024 passed by the Respondent;
c. Pass such other order or orders as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case."
2. Since the respondents are duly represented, we issue notice presently confining the challenge at this stage to the relief claimed in clause (b). Insofar as the challenge to the constitutionality of Section 2(2) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 ["BMA"] is concerned, we would like to hear parties at greater length before we issue notice thereon.
3. The noticed respondents may file a reply on the writ petition within a period of four weeks. The petitioner shall have two weeks thereafter to file a rejoinder affidavit. We take note of the following facts which emerge from the record.
4. A search and seizure action was conducted on 31 October 2018 in SBL Group. The Petitioners had been filing Income Tax Returns ['ITR'] in India. The Petitioners filed their ITRs under the status of "resident". During the course of the investigation, the Income Tax Department noticed several foreign assets/income belonging to the Petitioners which were not disclosed/reported in Schedule FA. The investigation also revealed that the Petitioners were the beneficial owners/beneficiaries of these foreign assets.
5. The respondent sent a letter to the Foreigner Regional Registration Officer ["FRRO"] dated 23 April 2019, in response to which the FRRO provided information on 8 May 2019 which facilitated the determination of the residential status of the Petitioners This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:09:37 for various Financial Years ["FYs"]. Based on this information, the respondent established that the Petitioners were residents in FY 2018- 19 (relevant to AY 2019-20), when the foreign assets/income came to the notice of the Department.
6. On the basis of the above, the respondent issued notices under Section 10(1) of the BMA dated 03 September 2020 to each of the Petitioners, wherein the Petitioners were asked to provide the details of the foreign bank accounts and fixed assets held outside India. Since no reply was received from the Petitioners in respect of the notices under Section 10(1) of the BMA, the respondent initiated penalty proceedings under Section 45 of the BMA on 31 May 2022 by issuing show cause notices as to why penalties as per the provisions of the BMA be not imposed.
7. The authorized representative/s of the Petitioners responded to the show cause notices dated 31 May 2022, by making a submission on 10 June 2022, pleading that the Petitioners were not residents of India and requested the respondent to first consider the residential status of the Petitioners. No relevant details about the foreign assets/income were provided with respect to the notice dated 03 September 2020.
8. The respondent issued show cause notices under Section 10 of the BMA to the Petitioners on 14 February 2024, to which the Petitioners filed their responses taking the following objections:-
a. BMA does not apply to the Petitioners by virtue of them being nationals and tax residents of Nepal, as per Article 4 of the Agreement between the Government of Nepal and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:09:37 respect to Taxes on Income ["India-Nepal DTAA"]. The Petitioners submitted that they satisfied the criteria of the tie- breaker test under Article 4(2) of the India-Nepal DTAA and thereby not being liable to be viewed as "residents" of India in terms of Article 4(1) of the India-Nepal DTAA. b. In light of Section 90(2) of the Income Tax Act, 1961 ["Act"], the more beneficial provision in relation to the term "assessee" (which, under the BMA, in turn is based on the definition of "resident" under the Act), as provided for in the India-Nepal DTAA must be adopted.
c. Sh. Mukunda Raj Shrestha additionally submitted in his response that he opened various back accounts and held properties outside India. It was further asserted that he was a member of the staff of the United Nations ["UN"] for 32 years and has been repatriated back to Nepal after the cessation of his employment. He submitted that he would enjoy immunity from prosecution and the payment of taxes in India for the salary and emoluments from the UN as per Section 18 of the UN Privileges and Immunity Act, 1947.
9. It was in this backdrop that the Impugned Order has come to be passed. As the respondent found that no details regarding the source of the foreign assets/income had been furnished by the Petitioners, they were held liable for penalty under Section 41 of the BMA, which was initiated separately. The respondent takes the position that the definition of "resident" under Section 6(1) of the Act read with the definition of "assessee" under Section 2(2)(a) of the BMA was the only criteria to test the residential status of the Petitioners as This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:09:37 "assessees".
10. Prima facie and on hearing Mr. Datar, learned senior counsel appearing in support of the writ petitions as well as Mr. Ojha, learned counsel for the respondents, we take note of the challenge which stands raised to the invocation of the provisions of the BMA.
11. Mr. Datar has drawn our attention to the BMA and insofar as it defines the expression "assessee". We note that Section 2(2) of the said enactment while defining the word "assessee" describes it to include a resident of India as per Section 6 of the Act. Section 6 of the Act in turn brings within its ambit not only Indian nationals, but also those deemed to be residing in India in terms of the provisions made in clauses (a), (b) and (c) of Section 6(1) of the Act.
12. One of the principal questions which appears to arise would be whether the tax as imposed under the BMA would fall within the meaning of "identical or substantially similar taxes" as appearing in Article 2(4) of the India-Nepal DTAA.
13. We also take into consideration the contention of Mr. Datar who draws our attention to Article 4 of the India-Nepal DTAA and which in terms of its various clauses appears to stipulate the principles which must govern the identification of residency. According to Mr. Datar, be it the principles of centre of vital interests or habitual abode, the matter would have to be answered in favour of the petitioner bearing in mind the provisions contained in that Article.
14. We also take note of the fact that the petitioner in W.P.(C) 5661/2024 was employed with the UN and consequently the protection which is claimed in terms of the United Nations (Privileges and Immunities) Act, 1947.
15. All of the aforenoted questions which stand raised touch upon This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:09:37 the very jurisdiction of the respondents to initiate proceedings under the BMA and merit deeper scrutiny.
16. In view of the aforesaid and since the challenge to the assumption of jurisdiction has been entertained, we provide that till the next date of listing, the respondent shall not enforce the demands pursuant to the impugned orders dated 31 March 2024.
17. List again on 21.08.2024.
YASHWANT VARMA, J.
PURUSHAINDRA KUMAR KAURAV, J.
MAY 14, 2024/neha This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/05/2024 at 21:09:37