RAVINA & ASSOCIATES PVT. LTD. vs. COMMISSIONER OF INCOME TAX & ORS.

REPORTABLE
* IN THE HIGH COURT OF DELHI AT NEW DELHI

+ WRIT PETITION(C)No.328/2010

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Reserved on:15 February, 2011
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% Date of Decision: 20 April, 2011

Ravina and Associates Private Limited and Another..Petitioner
Through Mr. C.S. Aggarwal,
Sr. Advocate with
Mr. Prakash Kumar
and Mr. Sandeep
Kapur, Advocates.

VERSUS

Commissioner of Income Tax, Delhi-V, New Delhi and Others
....Respondent
Through Ms. P.L. Bansal, Sr.
Standing Counsel with Mr.
Deepak Anand, Jr. Standing
Counsel.
Mr. Vikas Pahwa, Standing
Counsel CBI.

WRIT PETITION(C)No.340/2010


Ravina Khurana ....Petitioner
Through Mr. C.S. Aggarwal,
Sr. Advocate with Mr.
Prakash Kumar and Mr.
Sandeep Kapur, Advocates.

VERSUS

Commissioner of Income Tax, Delhi-V, New Delhi and Others
....Respondents
W.P.(C) No.328/2010 Page 1 of 14


Through Ms. P.L. Bansal, Sr.
Standing Counsel with Mr.
Deepak Anand, Jr. Standing
Counsel.
Mr. Vikas Pahwa, Standing
Counsel CBI.

CORAM:
HON’BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJIV KHANNA

1. Whether Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporter or not ? YES
3. Whether the judgment should be reported
in the Digest ? YES

SANJIV KHANNA, J.

Ravina and Associates Private Limited and Ravina Khurana have
filed the present writ petitions for stay of recovery of the outstanding
demand of Rs.54,91,15,497/- for the assessment years 2004-2005, 2005-
2006 and 2006-2007 in the case of Ravina and Associates Private
Limited and Rs.5,02,17,426/- for assessment years 2000-2001 to 2004-
2005 in the case of Ravina Khurana. In the alternative, the two
petitioners have made a prayer that the outstanding amount should be
recovered from the accounts of the petitioners in the NatWest Bank,
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London. Challenge is also made to the order dated 7 January, 2010
passed by the Commissioner of Income Tax, Delhi-V rejecting the
W.P.(C) No.328/2010 Page 2 of 14


application for stay of demand. It is submitted that the petitioners cannot
be treated as assessees in default in view of sub-section 7 to Section 220
of the Income Tax Act, 1961 (for brevity, „the Act‟).
2. Though the facts are almost similar, yet for the sake of clarity, the
factual matrix in the two cases may be noticed separately.
Ravina and Associates Private Limited
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3. Ravina and Associates Private Limited, incorporated on 22 July,
1987, was/is engaged in the business of providing technical support
services to Russian companies. For the assessment years 2004-2005 and
2005-2006, income tax returns were filed by the said petitioner company
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declaring income of Rs.31,77,400/- and 49,97,160/- on 31 October,
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2004 and 31 October, 2005, respectively.
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4. Notice for reopening under Section 148 of the Act dated 22
May, 2006 were issued for the assessment years 2004-2005 and 2005-
2006.
5. It is accepted and admitted that Ravina and Associates Private
Limited had received and accredited sum of Rs.108,39,46,971/- during
financial years 2004-2005 to 2006-2007 under the agreements entered
into with M/s Techno Prom Export, Moscow, Russia.
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6. The said proceeds had been deposited in NatWest Bank, London
and were not brought to India.
7. Central Bureau of Investigation had registered a criminal case on
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6 March, 2006 under Section 120-B of the Indian Penal Code, 1860
read with Sections 7, 8, 13(2) and read with Section 13(1)(d) of the
Prevention of Corruption Act, 1988 against unknown officials of
National Thermal Power Corporation (NTPC), M/s Fgup „Vo‟ Techno
Prom Export (TPE), Moscow, Russia (Russian Company, for short) and
others unknown. The allegations are that during the period 2002-2005,
certain unknown officials of NTPC had entered into a criminal
conspiracy with the unknown officials of the Russian company and
pursuant to the aforesaid conspiracy, public servants of NTPC by
abusing their official position had obtained illegal gratification in the
matter of award of contract for a super thermal power station at Barh,
District Patna, Bihar. Information was received from Interpol, London
that funds were available in the U.K. account in excess of £ 15 million
relating to commission payments. The information indicated that these
were crime proceeds. Investigation was initiated regarding origin and
flow of funds.
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8. On an application moved by the CBI, a letter of rogatory was
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issued by the Special Judge, Delhi on 22 March, 2006. The same was
forwarded to the Central Authority, U.K. and acting on the same, the
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competent court of U.K. issued a restraint order dated 20 April, 2006 in
respect of the said funds in the name of Ravina and Associates Private
Limited.
9. Investigations have further revealed that NTPC had entered into
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three contracts with the said Russian company on 14 March, 2005 and
advance payment of $ 53,633,554 was released by NTPC to the Russian
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company on 31 March, 2005. It has come to light that the Russian
company had transferred $10,373,621.06 and $10,372,441.07 to the
account of Ravina and Associates Private Limited at NatWest Bank,
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London on 5 May, 2005 and 18 May, 2005 respectively, immediately
after the NTPC made the said payment. Further amount of Rs.
3,33,06,123.61/- equivalent to $ 762,686.83 was transferred by the
Russian company to Ravina and Associates Private Limited in their
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account in Deutsche Bank, New Delhi on 20 April, 2005. Another
payment of $ 825,481.77 was transferred by the Russian company to
Ravina and Associates Private Limited.
W.P.(C) No.328/2010 Page 5 of 14


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10. CBI has stated that the bid form dated 4 November, 2004 for
Barh Super Thermal Power Plant did not have any provision for payment
of commission to any agent. Investigations have further revealed that
more than $ 20.7 million was paid by the Russian company to Ravina
and Associates Private Limited as a percentage of the contract value.
11. The contention of the respondents both CBI as well as the Income
Tax Department is that Ravina and Associates Private Limited did not
include the commission payments in their declared returns of income till
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the registration of the case by the CBI on 6 March, 2006. The revised
returns or statement of accounts were filed by Ravina and Associates
Private Limited after the registration of the case. The allegation of the
CBI is that the money received by Ravina and Associates Private
Limited is corruption/bribe money meant to be transferred to public
servants and, therefore, is liable to be confiscated. These, it is alleged,
are illegal kickbacks. Investigations have further revealed that certain
amounts were transferred to one M/s Prime Services International Ltd. at
Riga, Latvia. There is also allegation that Ravina and Associates Private
Limited had transferred funds to certain persons/firms in few other
countries. The investigations for tracing out these funds are in progress.
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12. For the sake of convenience it may be appropriate to reproduce
below in form of a table/chart, date of filling of the original return,
income declared and dates of filling of the two revised returns/statement
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of income with figures of returned income. The date 6 March, 2006,
when the case was registered by the CBI has to be kept in mind while
reading and appreciating the table/chart given below:

13. Ms. Ravina Khurana had filed her income tax returns for the
assessment years 2000-2001 to 2004-2005 declaring income from the
business of providing consultancy. The original returns and income
declared for these assessment years are as per the details given below:-

W.P.(C) No.328/2010 Page 7 of 14

13. As noticed above, the criminal complaint was registered and
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investigation was started by the CBI on 6 March, 2006 and thereafter
the letter of rogatory was issued by the Special Judge, CBI, Delhi.
Information was received that in addition to bank accounts of Ravina
and Associates Private Limited in NatWest Bank, London, Ravina
Khurana has a personal account in the same bank. Subsequently, Ravina
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Khurana revised her returns on 12 February, 2007 as per the details
given below:-

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The self assessment tax was not paid.
14. These returns were filed after the period of filing of revised
returns under Section 139 (5) of Act had expired and, therefore,
proceedings for re-opening of assessment under Section 147 of Act were
initiated against the said assessee. Ravina Khurana vide her reply dated
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12 July, 2007 submitted that she was the regional representative of M/s
Intersputnik International Organization of Space Communications in
India and she had received retainership fees from them. She had also
received receipts by way of bank interest, miscellaneous receipts and
salary from Airoflot Tour India Pvt. Ltd. during these years. In response
to the notice under Section 147, Ravina Khurana had declared a bank
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balance of Rs.6,83,31,926/- as on 31 March, 2000 in NatWest Bank,
London, whereas in the original return for the relevant assessment year
1999-2000, no closing balance was shown. The investigations have
further revealed that the following deposits made in her bank in London,
which were not declared in her original returns:-

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15. On the basis of the declared income, the following assessment
orders have been passed and demands detailed below have been raised:-

These demands have not been paid.
16. It is clear from the aforesaid facts that the two petitioners viz.,
Ravina and Associates Private Limited and Ravina Khurana have
accepted and admitted their liability to pay tax including the
amounts/incomes deposited in their bank accounts in NatWest Bank,
London. The said amounts had not been declared in their original returns
filed by Ravina and Associates Private Limited for the assessment years
2004-2005 and 2005-2006 and by Ravina Khurana for the assessment
years 2000-2001 to 2004-2005. The said amounts were later on included
in the revised returns filed by Ravina and Associates Private Limited on
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21 June, 2006 for assessment years 2004-2005 and on 21 August,
2006 for assessment years 2005-2006. These returns were subsequently
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revised for a second time on 12 February, 2007. Return for the
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assessment years 2006-2007 by Ravina and Associates Private Limited
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were filed only on 12 February, 2007.
17. The petitioners have raised a contention that they were not aware
and had no knowledge that the money received by them abroad is to be
accounted for and taxed in India. The said contention per se and ex facie
is too far-fetched to be accepted or even considered. The accounts of the
two petitioners are audited and they had/have access to expert and
professional advice. The amounts involved are substantial. The plea
raised is preposterous, especially, keeping in view the amount involved.
The present case is apparently one wherein funds have not been brought
to India, have been slashed and kept abroad in a clandestine manner. The
contention of the CBI is that this is corruption or bribe money. This
aspect, however, is to be examined in the criminal proceedings.
18. The contention of the two petitioners that the Income Tax
department should recover the taxes due along with interest from the
bank account at NatWest Bank, London, on the basis of the principles of
equity and fair play, has no merit. The conduct of the two petitioners has
already been referred to and hardly justifies exercise of equitable and
discretionary jurisdiction in their favour. The petitioners do not have any
regard for law. Further, the money in the NatWest Bank, London is
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subject matter of the restraint order passed by the court of U.K. on the
letter of rogatory of the Special Judge, Delhi. The petitioner may not
have any right to claim the said money if it is corruption or bribe money.
The said money may be forfeited under the foreign exchange law or
Prevention of Corruption Act or Money Launderings Act etc. The facts
of the present case do not compel and commend us to accept the
contention of the petitioners.
19. The last question, which arises for consideration, is the effect of
sub-section 7 of the Section 220 of the Act and whether it comes to the
protection and aid of the petitioners. The said section reads as under:-
Section 220: When tax payable and when assessee
deemed in default :
(7) Where an assessee has been assessed in
respect of income arising outside India in a country
the law of which prohibit or restrict the remittance
of money to India, the Assessing Officer shall not
treat the assessee as in default in respect of that part
of the tax which is due in respect of that amount of
his income which, by reason of such prohibition or
restriction, cannot be brought into India, and shall
continue to treat the assessee as not in default in
respect of such part of the tax until the prohibition
or restriction is removed.”

20. The aforesaid provision is an equitable provision and states that
when an assessee has to be assessed and taxed on income arising in a
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third country outside India, where the laws of that country prohibit or
restrict remittance of money to India, the Assessing Officer shall not
treat the person as an “assessee as in default” in respect of such income
which by reason of such prohibition or restriction, cannot be brought
into India.
21. For the Section to apply, the following conditions should be
satisfied:-
(i) The assessee should be assessed in respect of income which arises
in another country i.e. in a country outside India.
(ii) The laws of the country where the income arises should prohibit
or restrict remittance of money to India.
(iii) The Assessing Officer shall not treat the assessee as in default in
respect of that part of the tax equal to the amount of income, which by
reasons of such prohibition or restriction cannot be brought to India from
the country where the income had arisen.
22. In the present case, income had arisen in Russia and not in U.K.
There was/is no bar or restriction of transfer of that income and
remittance thereof from Russia to India. No such bar is pleaded or urged.
The petitioners have not relied upon, claimed or stated that there was any
bar and embargo in the laws of Russia against the remittance of the said
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income to India. In fact, it cannot be so pleaded because admittedly
payments have been made by the Russian company to the petitioners and
have been deposited abroad in a third country in the NatWest Bank,
London. Nothing prevented or prohibited the petitioners from bringing
the proceeds to India, but the petitioners-assessees by their own conduct
have slashed away and kept the money in their bank accounts in London.
In such circumstances, we do not think that the petitioners are entitled to
protection or benefit under Section 220(7) of the Act.
23. In view of the aforesaid, we do not find any merit in the present
writ petitions and the same are accordingly dismissed. The petitioners
will pay consolidated costs of Rs.20,000/- to the respondents.



(SANJIV KHANNA)
JUDGE



( DIPAK MISRA )
CHIEF JUSTICE

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APRIL 20 , 2011
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