Deputy Director of Income Tax (Inv) Unit-4(3) v. Xiongwei Li

1. The petitioner, i.e., the Deputy Director of Income Tax (Inv) Unit-4(3), New Delhi, vide the petition Crl.M.C. No. 4492/2022 seeks the setting aside of the impugned order dated 29.8.2022 of the Court of the learned ACMM, Special Acts, Tis Hazari Courts, and vide Crl.M.A. No. 18282/2022 seeks the stay of the operation of the 2022:DHC:3748 impugned order dated 29.08.2022 whereby the application filed by the respondent herein seeking a quashing of the Look Out Circular (LOC) issued against him at the request of the Income Tax Officer (ITO) represented now by the present petitioner was allowed with conditions imposed thereby to the effect that in case of resignation, retirement or cessation of employment etc. of the respondent herein from the company M/s Huawei Telecommunications (India) Company Private Limited (HTICPL) (hereinafter referred to as the Company, of which the respondent herein was stated to have been the CEO), was directed to withhold the Severance Pay/Severance Package and other incentives/emoluments payable to respondent herein, which were directed not to be released without prior permission of the learned Trial Court, and an undertaking to this effect was directed to be submitted by the respondent from the said company to be filed with the Court under intimation to the Deputy Director of Income Tax (Inv) Unit-4(3), Delhi, i.e., the petitioner herein, with it having been directed that on filing of the said undertaking, the DDIT (Inv) Unit-4(3), Delhi was directed to take appropriate steps for withdrawing the lookout circular against the applicant and the same was directed to be withdrawn/recalled within 7 days of filing of the undertaking by the applicant. The respondent, in terms of the impugned order dated 29.08.2022 of the Court of the learned ACMM, Special Act, Central District, Tis Hazari, is stated to have submitted the undertaking. The aspect of the undertaking being in the form of compliance of directions dated 29.08.2022, is a matter to be ascertained by the learned Trial Court itself.

2. The petitioner i.e., the Deputy Director of Income Tax (Inv), has submitted through its petition that the respondent was the CEO of the said company, and that the said company was incorporated on 23.07.2002 and 90.11 % of its shares are held by the Netherland based Huawei Technologies Cooperatief U.A. (100% owned by Huawei Investment and Holding Co. Ltd.) and the remaining 9.89% by another Huawei Tech Investment Co. Ltd. The shareholding pattern of the said company has been put forth by the petitioner as being to the effect:-

┌──────────────────────────────────────────────────────────────────────────────┐
│

┌───────────────────────────────────────────────────────────────────────────────────────────┐
│             Sl.   Name of the    Country       No. of Equity        %                     │
│             No.   Shareholder                  Shares Held                                │
├───────────────────────────────────────────────────────────────────────────────────────────┤
│             1.    Huawei Tech.    China         34119600        99.999955                 │
│                   Investment                                                              │
│ CRL.M.C. 4492/2022                                             Page 3 of 90               │
│                                                                           2022:DHC:3748   │
│                Company                                                                    │
│                Limited                                                                    │
│           2.   Huawei         Netherlands         16          0.00005                     │
│                Technologies                                                               │
│                Netherlands                                                                │
│                BV                                                                         │
│                                     Total    34119616           100                       │
│ 4.     The petitioner submits that the HTICPL is stated to be                             │
└───────────────────────────────────────────────────────────────────────────────────────────┘

79. Thus undoubtedly in terms of the said OM dated 27.10.2010 no LOC could have been issued in relation to an alleged commission of a non-cognizable offence.

80. Though vide the guidelines incorporated at 8J of the said Office Memorandum, it was observed to the effect: “ In exceptional cases, LOCs can be issued without complete parameters and/or complete details against CI suspects, terrorists, anti national elements, etc in larger national interest.”

81. The said OM dated 27.10.2010 was amended vide OM NO. 25016/10/2017-IMM (PT) dated 5.12.2017 which has been referred to else where in above wherein it had been stated to the effect that in exceptional cases LOC can be issued even in such cases as would not be covered by the guidelines above whereby the departure of a person from India may be declined at the request of the any of the authorities as mentioned in Clause 8(b) of the above referred OM i.e., the OM No. 25016/31/2010-IMM dated 27.10.2010, if it appears to such authority based on inputs received that the departure of such person is detrimental to the sovereignty, security or integrity of India or that the same is detrimental to the bilateral relations with any country or to the strategic and/or economic interest of India or if such person is allowed to leave or he may potentially indulge in an act of terrorism or offences against the State and/or that such departure ought not be permitted in the larger interest at any given point in time. Apparently as rightly observed by the learned Trial Court the allegations against the petitioner do not relate to any aspect of the departure of the respondent being detrimental to the sovereignty or security or integrity of India nor to the bilateral relations with any country nor to the strategic interest of the country nor is it brought forth in any manner by the petitioner that the respondent was potentially likely to indulge in any act of terrorism or offences against the State or that his departure ought not be permitted in the larger interest at any given point in time.

82. The petitioner too does not contend qua the applicability of the said conditions delineated herein above but submits that vide the impugned order dated 29.8.2022 the learned Trial Court did not take into account the factum that permitting the departure of the respondent would affect the economic interest of the country, in as much as, the aspect of investigation into the evasion of taxes of more than Rs.600 crores by the company M/s Huawei Telecommunications (India) Company Private Limited (HTICPL) is in progress and the respondent having been the Chief Executive Officer; at the relevant time of the alleged commission of the tax evasion to the tune of more than Rs.600 crores, in terms of Section 278B of the Income Tax Act, 1961, is liable to be guilty of the offence committed by the company and to be proceeded against accordingly qua the alleged commission of the offence punishable under Section 276C(1)(i) of the said enactment which is a nonbailable offence punishable with a maximum sentence of 7 years.

83. In terms of the order dated 12.9.2022 in the present petition, the petitioner placed on record in a sealed cover the proposal for the Look Out Circular inter alia in relation to the respondent and the approval thereof as well as the communication dated 19.2.2022 to the Deputy Director, Immigration, Bureau of Immigration (BOI), seeking the issuance of the LOC qua the respondent with Passport No. ED1033977 and the opening of the regular LOC against the respondent on 19.2.2022 whereby the said LOC qua the respondent issued by communication was to remain in force until and unless a deletion request was received from the BOI from the originator itself.

84. The proforma for issuance of the Look Out Circular indicates the nationality of the respondent to be that of China. As per the communication dated 19.2.2022 apart from the aspect of M/s Huawei Telecommunications (India) Company Private Limited (HTICPL) and M/s Huawei Technologies India Private Ltd. having been alleged to make a wilful attempt to evade tax, it had been alleged in the proposal for issuance of the Look Out Circular that during the course of the search, the companies and their officers/employees had failed to provide the adequate opportunity to the authorized officers for furnishing and examination of the Books of Accounts of the companies thus impeding the authorized officers from discharging their duties and that thus the presence of the Chief Executive Officer (the respondent herein) of M/s Huawei Telecommunications (India) Company Private Limited (HTICPL) inter alia was necessary during the course of further investigation which would be carried out and that the on going investigation into various violations submitted by the companies would take ample time due to the examination of extensive evidences that had been seized and due to offences committed by the companies and their employees thus necessitating the issuance of the LOC inter alia against the respondent. The approval accorded on 19.2.2022 to the issuance of the LOC takes into account the aspect of the respondent being a flight risk from whom a number of details are stated to be required.

85. Taking into account the factum that the investigation into the alleged commission of the offence punishable under Section 276C(1)(i) of the Income Tax Act, 1961, by the Companies involved allegedly including M/s Huawei Telecommunications (India) Company Private Limited (HTICPL) of which the respondent at the relevant time is stated to have been the CEO, would apparently take considerable time, the respondent herein having been alleged to have committed only a non-cognizable and bailable offence who per se himself cannot be attributed to have committed acts detrimental to the economic interest of India especially coupled with the factum that the petitioner has not alleged that the respondent is a shareholder of the said „company‟ and in relation to the which the company M/s Huawei Telecommunications (India) Company Private Limited (HTICPL) vide directions dated 30.8.2022 of the Hon‟ble Division Bench of this Court in W.P.(C) 6352/2022 has adhered to the directions therein of a fixed deposit of Rs.200 crores which is to be renewed automatically from time to time apart from refund of Rs.30 crores to the petitioner having not been directed to be released to the petitioner of that writ petition by the respondent i.e., the Deputy Director of Income Tax (INV.)-4(3), New Delhi i.e., the petitioner herein, the aspect of atleast 230 crores out of the alleged tax evasion of 600 crores as averred in the written submissions of the petitioner dated 14.9.2022 allegedby the accused No.1 in the criminal complaint filed by the petitioner before the ACMM, Special Acts Central District, Tis Hazari Courts stand secured.

86. Undoubtedly vide observations in para 9 of the verdict dated 30.8.2022 in W.P.(C) No. 6352/2022 it had been observed as under: “9. It is made clear that the above order has been passed on the basis of offer made by the Petitioner and will not be considered as a precedent in any other proceeding.” and thus the contention raised on behalf of the petitioner that the observation made in Writ Petition(C) No. 6352/22, cannot thus be considered in relation to any other proceeding, nevertheless the factum of Rs.200 crores having been deposited by the company M/s (HTICPL) with the petitioner herein with an additional refund of Rs.30 crores to the company having been prevented to be made vide order dated 30.8.2022 in W.P.(C) No. 6352/2022 cannot be overlooked.

87. Undoubtedly taking into account the factum that there is no extradition treaty of our country with China, the respondent thus falls within the category of a flight risk, but, the factum that he is alleged to have committed only a non-cognizable and an alleged bailable offence can also not be overlooked. The verdicts that the petitioner has relied upon all relate to alleged commission of non-bailable offences in which the issuance of the LOCs have been upheld in as much as they relate to offences inter alia punishable under the Prevention of Money Laundering Act, 2002, Prevention of Corruption Act, 1988, the Central Goods and Services Tax Act, 2017 and the non bailable offences under the Indian Penal Code, 1860.

CONCLUSION

88. In the circumstances, though it is not considered appropriate by the Court to set aside the impugned order dated 29.8.2022 of the learned Trial Court which has set aside the LOC against the respondent in addition to the conditions imposed by the learned Trial Court to the effect that in case of resignation, retirement or cessations of employment etc. of the respondent company, M/s (HTICPL) shall withhold the severance pay/severance package and other incentives/emoluments payable to the respondent and the same shall not be released without permission of this Court to which effect an undertaking has been directed to be submitted of the company to be filed before the Trial Court under intimation to the petitioner which the respondent submits has already been so submitted copy of which has also been submitted before this Court, the appropriateness of the undertaking being in consonance with the order dated 29.8.2022 of the learned Trial Court is an aspect to be considered by the Trial Court as has already observed herein above, it is considered appropriate to direct further in addition to the effect:  that the respondent shall further submit an undertaking to the Trial Court that he shall continue to join the investigation as and when directed by the Investigating Officer through video conferencing and furthermore,  the respondent shall submit an undertaking to the Trial Court that on commencement of the trial, if any, against him, he shall appear before the Trial Court as and when directed and in the mode directed by the Trial Court;  that the respondent be permitted to travel out of India only subject to the respondent submitting an FDR to the tune of Rs.[5] crores drawn on a nationalized Indian bank in the learned Trial Court which on deposit is to be renewed in an automatic renewal mode which on the failure of the respondent to join the investigation twice shall stand forfeited and which also on failure to appear before the Trial Court as and when directed by the Trial Court shall be forfeited;  the release of the said FDR would be subject to the determination and adjudication of the criminal complaint filed by the petitioner against the respondent herein;  further the respondent shall also adhere to the conditions imposed vide order dated 17.8.2022 in the bail order of the learned Trial Court of informing the complainant seven days prior to leaving India.