HC dismisses Capt’s plea, permits ED to inspect IT documents from France

The Punjab and Haryana High Court has dismissed petitions challenging orders permitting the Enforcement Directorate (ED) to inspect records filed by the Income Tax (IT) Department in connection with complaints against Punjab’s former Chief Minister Amarinder Singh and his son Raninder Singh.

The court held that there was “no restriction on the ED to access the information/documents placed on record before a magistrate by the IT Department for the purpose of investigation.”

Justice Tribhuvan Dahiya’s Bench was told that complaints were filed by the IT Department against the petitioners under the Income Tax Act and the IPC, wherein information in the form of master sheets – originally received in Paris by the competent authority of India/Foreign Tax and Tax Research Division of the Central Board of Direct Taxes from the competent French authority – was placed on record. The documents indicated that the petitioners were “beneficiaries of foreign assets maintained and controlled through foreign business entities.”

During pendency of proceedings before the Magistrate concerned, the ED had moved an application seeking inspection of information/documents on the ground that it was also seized of the matter and required them for investigation. The application was allowed on September 18, 2020, and a revision petition against the order was dismissed on September 2, 2021.

Upholding these orders, Justice Dahiya observed: “This court finds that the order is well-reasoned, and does not suffer from any infirmity or error of law.”

The counsel for the petitioners, however, argued that permitting inspection violated Article 28 of the Convention under the “Agreement for Avoidance of Double Taxation with France” between India and the French Republic. The provision imposed a bar on disclosing information received by the contracting State, which had to be treated as secret under domestic law, and could only be disclosed to persons or authorities involved in assessment or collection of taxes or enforcement or prosecution thereof.

Justice Dahiya asserted it remained undisputed that the information or documents placed on record before the Magistrate by the IT Department were received by it in the French Republic at Paris, and its use as well as dissemination was regulated under the agreement.

The court added: “Information regarding the foreign assets concerning the petitioners has been placed on record in the form of documents before the Magistrate by the IT department, which has been sought by another government department/ED for investigation. It is not a case that the information has been demanded for public dissemination; rather, it is only for carrying out investigation against the petitioners”.

Justice Dahiya added the petitioners had no right to object to it by alluding to the agreement.

“It is the Government of India which has entered into this agreement with the French Republic, whereunder the information has been handed over to the IT department. In case disclosure of information causes any violation of terms of the Agreement, including that of Article 28, it is for the department to oppose it on that ground and not for the petitioners.”

The Bench added the IT department itself had no objection to sharing the information with the ED for investigation. Referring to the Ram Jethmalani case, Justice Dahiya asserted it was held that a citizen or entity having information of wrongdoing regarding a bank account was required to share it with the State, which was under obligation to investigate.

“Here, the information is being sought by an organ of the State/the ED itself for investigation which cannot be taken exception to in view of the settled law… The petitions stand dismissed. The ED is permitted to inspect the record of the complaints before the Magistrate and access the information/documents; however, the same shall not be disseminated publicly unless permitted in accordance with law,” the Bench concluded.