1. Now, we have Dr. Dharma Teja, a well known figure in the shipping industry before us in this case. He calls in question the notice issued by the ITO, New Delhi, to the Pan American Airways not to book any passage or issue air ticket to Dr. Dharma Teja without insisting on income-tax clearance certificate as required under s. 230(1) of the I.T. Act as unconstitutional and arbitrary.
2. Dr. Teja is citizen of India. He started a shipping company by name said company.
3. He was its chairman. The company was taken over in 1966-67 and nationalised during 1971-72 by the Government of India. During this time, there were several complaints about the affairs of the company as a result of which an enquiry was conducted and prosecutions were launched against Dr. Teja which ended in conviction and, ultimately, Dr. Teja was brought to India under extradition proceedings where he served the sentences until he was released under the amnesty. In October, 1966, his passport was also impounded. While this was on, the tax authorities started proceedings under the I.T. and the W.T. Acts. Assessments were made ex parte as notices sent to the known address of Dr. Teja outside the country were returned either unserved or refused. As per the assessments, tax to the tune of several crores was due from Dr Teja. A sum of , Rs. 3,72,94,000 awarded as compensation towards the shares held by him in the shipping company consequent on its being nationalised was adjusted. Still a huge amount to the tune of some crores was outstanding. But for some reason or other, the circular issued for impounding Dr. Teja's passport was withdrawn and he was granted a fresh passport on May 12, 1977. Dr. Teja once again left the country in July, 1977. Three was a controversy both in and out of Parliament and according to the petitioner, the then Prime Minister of India, Sri Morarji Desai, made a statement in Parliament in answer to a query by one of its members that 'Dr. Teja was free to come and go as and when he chooses and the country owes to him more than what he owns to the country.' After a period of five years, Dr. Teja had come to the Indian soil in February, 1983. On coming to know of his arrival, the ITO, New Delhi, issued a notice to the Pan American Airways on March 8, 1983, informing the latter that Dr. Teja was in huge arrears of income-tax and wealth-tax and that if he approaches for an air ticket for going out of India, they should insist on an income-tax clearance certificate as required under s. 230(1) of the I.T. Act, 1961. The Pan American Airways was further informed that in case they chose to issue a ticket to Dr. Teja for his travel by their aircraft, they will be treated as an assessee in default for an amount of Rs. 13,53,58,763 under sub-s. (2) of s. 230 of the I.T. Act, 1961. On April 19, 1983, the TRO, New Delhi, addressed a later to Dr. Teja reminding him about the income-tax and wealth-tax demands outstanding against him and the tax recovery certificates received by him from time to time. The TRO requested Dr. Teja to make arrangements for immediate payment of the amounts and to attend his office on May 16, 1983, to furnish the details of all his movable and immovable assets both in India and abroad. To this letter, the TRO enclosed a list of outstanding demands and a notice under r. 83 of the Second Schedule to the I.T. Act, 1961. The notice indicated an amount of Rs. 8,62,22,599 as due. The notice also mentioned that if Dr. Teja failed to attend and give evidence on the points involved, he would be liable for legal action as provided under s. 32 of the Civil Procedure Code.
4. To this letter, Dr. Teja gave a reply on May 7, 1983, stating that he has no assets in his name or to his account either in India or abroad, that the only asset that may accrue to him would be compensation declared for his shares in Jayanti Shipping Company which was never paid to him, that he appealed to the Finance Minister and the Chairman of the Central Board of Direct Taxes to review the tax claims and compensation payable to him and settle the issue once for all. Stating this, he requested for postponement of the date May 16, 1983, fixed for his appearance to a later date. To this letter, the TRO replied by his letter dated May 28, 1983, that the matter was posted for his appearance on June 16, 1983, at 11 a.m. before him. A notice under r. 83 was enclosed to this letter also asking Dr. Teja to attend the office to give evidence either personally or through authorized representative, the non-compliance of which incurs a penalty of Rs. 500 fine as per s. 32 of the C.P.C. It was at this stage this writ petition was a filed challenging the notice dated March 8, 1983, issued by the ITO to Pan American Airways not to book any passage or issue an air ticket permitting Dr. Teja to travel by their aircraft to any country outside India without insisting on income-tax clearance certificate as required under s. 230(1) of the I.T. Act, 1961.
5. Mr. P. Ramachandra Reddy, the learned counsel for the petitioner, has raised the following points :
(1) The foundation of jurisdiction under s. 230(1) of the Act depends on the formation of an opinion by the ITO that the assessee is not likely to return to India. That opinion must be based on some material. Since there is no such material in the present case, the foundation itself is vitiated.
(2) The action is arbitrary and violative of art. 14 as no notice was given to the petitioner before issueing the impugned notice.
(3) Imposition of any restriction by way of production of income-tax clearance certificate can only be on the basis that the assessee has some assets either in India or abroad. In the case of an assessee who has no assets, insistence on a clearance certificate is an unreasonable restriction on the right to go abroad and, therefore, violative of arts. 19 and 21 of the Constitution of India.
(4) There is no consistent case regarding the amounts due. The action is, therefore, unwarranted.
6. Before we deal with these contentions seriatim, we must clear the ground on two factors namely, (1) that the assessments are not challenged, with the result that there is not dispute about the factum of arrears. The only dispute is with regard to the variations with which we will dwell upon a little later, and (2) the vires of s. 230(1) of the I.T. Act is not challenged.
7. We will now consider the submissions in this background. Section 230 of the I.T. Act is as follows :
'230. (1) Subject to such exceptions as the Central Government may, by notification in the Official Gazette, specify in this behalf, no person who is not domiciled in India, or who, even if domiciled in India at the time of his departure, has, in the opinion of an income-tax authority, no intention of returning to India, shall leave the territory of India by land, sea or air unless he first obtains from such authority as may be appointed by the Central Government in this behalf (hereinafter in this section referred to as the 'competent authority') a certificate stating that he has no liabilities under this Act, the Excess Profits Tax Act, 1940 (15 of 1940), the Business Profits Tax Act, 1947 (21 of 1947), the Indian Income-tax Act, 1922 (11 of 1922), the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1957(29 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or that satisfactory arrangements have been made for the payments of all or any of such taxes which are or may become payable by that person :
Provided that in the case of a person not domiciled in India the competent authority may, if it is satisfied that such person intends to return to India, issue an exemption certificate either in respect of a single journey or in respect of all journeys to be under taken by that person within such period as may be specified in the certificate.
(2) If the owner of charterer of any ship or aircraft carrying persons from any place in the territory of India to any place outside India allows any person to whom, sub-section (1) applies to travel by such ship or aircraft without first satisfying himself that such person is in possession of a certificate as required by that sub-section, he shall be personally liable to pay the whole or any part of the amount of tax, if any, payable by such person as the Income-tax Officer may, having regard to the circumstances of the case,determine.
(3) In respect of any sum payable by the owner or charterer of any ship or aircraft under sub-section (2), the owner or character, as the case may be, shall be deemed to an assessee in default for such sum, and such sum shall be recoverable from him in the manner provided in this Chapter as if it were an arrear of tax.
(4) The Board may make rules for regulating any matter necessary for, or incidental to, the purpose of carrying out the provisions of this section.'
Under sub-s. (1) no person who is not an Indian domicile or even if he is an Indian domicile, if in the opinion of the income-tax authority has no intention of returning to India, shall leave the country unless he obtains a certificate to the effect that he has no liabilities under any tax enactments mentioned therein or that satisfactory arrangements have been made for payment of the taxes which are or may become payable. It leaves no room for any doubt that if in the opinion of the ITO, a person is not likely to return to India, he cannot leave the country without obtaining a tax clearance certificate. In the case of a person not domiciled in India, if he satisfies the competent authority, he may obtain an exemption certificate. It is thus seen that the insistence on the clearance certificate or the exemption certificate is based on the opinion of the income-tax authority that a person is not likely to return to India. It is argued by the learned counsel for the Department that the expression 'of the opinion' indicates that it is the subjective satisfaction of the authority and beyond the pale of judicial review. It is no doubt true that the words in s. 230(1) 'in the opinion of the income-tax authority' means subjective satisfaction of the authority. But that subjective satisfaction must be arrived at in an objective way, that is to say, there must be some material on the basis of which such opinion could be reasonably formed as it affects the right to go abroad which is part of the right of liberty. The question, therefore, is whether any such material exists in the present case. The petitioner was living mostly outside India. His presence could not be secured when prosecutions were launched. The Government of India had to take extradition proceedings. All the assessments under the tax enactments were made ex parte as the notice to his known address abroad were returned either unserved or refused. He left India in 1977 and returned only in February, 1983, after a period of five years. These facts speak for themselves. In the counter-affidavit filed on behalf of the respondents, it is stated that the petitioner was arrested in London in July, 1970, and brought to India for trial, that he was convinced on several counts including criminal breach of trust, cheating, and forget, that after his release from prison in 1975 he again left India in 1977, that assessment for the year 1961-62 were made ex parte as his presence could not be secured, that efforts were made for recovery of the compensation payable to the petitioner consequent on the 'Jayanti' being nationalised and after protracted correspondence a sum of rupees 3 crores odd was realised and adjusted towards the outstanding tax demands, that there was a furore in the Indian Parliament as to how Dr. Teja was allowed to go outside India when tax arrears to the tune of some crores was outstanding, that he left India in 1977 and that he returned only in February, 1983. These facts are sufficient to warrant the formation of an opinion on the part of the income-tax authority that the petitioner is not likely to return to India. We are, therefore, unable to appreciate the argument advanced on behalf of the petitioner that there is no material on the basis of which such opinion could have been formed. Whether a person has intention or not is a matter to be inferred from the circumstances. Such an inference, in the present case, is wholly permissible, in our view.
8. The next submission of Mr. P. Ramachandra Reddy is that the formation of the opinion is not preceded by any notice and the principle of audialteram parted is violated. He contends that the right to go abroad is a fundamental right guaranteed under art. 19 of the Constitution of India. It is also a part of the right of liberty enshrined under art. 21 and any action touching that right can be done only after giving a notice to they party. Since no notice or hearing was given before the impugned action was taken, the action is arbitrary and violative of arts. 14, 19 and 21 of the Constitution of India. It is now well established in Smt. Maneka Gandhi v. Union Of India, : 2SCR621 , that the expression 'personal liberty' in art. 21 is of wide amplitude and covers a variety of rights including the right to go abroad. But art. 21 limits that protection. It safeguards the right to go abroad against executive action which is not supported by any law. Thus a person cannot be deprived of this right to go abroad unless there is a law made by the competent legislature prescribing the procedure for so depriving him and the deprivation is made strictly in accordance with such procedure subject of course to the limitation that the procedure cannot be arbitrary, unfair or unreasonable. The Indian I.T. Act is a law made by Parliament. It requires every person to take tax clearance certificate or an exemption certificate before he leaves India, if in the opinion of the ITO, he is not likely to come back. Elaborate procedure is prescribed for obtaining the clearance certificate and exemption certificates. Section 230 can in no sense be regarded as offending art. 21 and in fact the vires of the section is not challenged. The only question, therefore, is whether the party is entitled to notice before he is asked to take a clearance certificate. The argument is that the insistence on a clearance certificate is only on the basis that the person has no intention to return to India. Before the authorities reach that conclusion, a notice must be given as otherwise his right to go abroad guaranteed under art. 19 is infringed. The absence of notice also vitiates art. 14 of the Constitution of India.
9. The first question is whether the right to go abroad is a fundamental right guaranteed under art. 19. It is not one of the enumerated rights in the various clauses of art. 19. In Menaka Gandhi's case, : 2SCR621 , Bhagwati J., speaking for the court, observed that 'the right to go abroad cannot in all circumstances be regarded as included in freedom of speech and expression,' (para. 77) and in that view, the Supreme Court held that the impugned order in that case did not interfere with any of the fundamental rights of freedom of speech or expression or the right to carry on any profession. But the real question for consideration is whether art. 21 is infringed in any way. The proceed contemplated by art. 21 must undoubtedly satisfy the test of reasonableness. It, therefore, follows that though s. 230(1) does not provide a notice to be given to a party before arriving at an opinion so as to make the income-tax authority insist upon a clearance certificate, we are of the view that a notice must be given. The law is now well settled that even in administrative proceedings which involve civil consequences, the doctrine of natural justice is applicable. Therefore, for application of s. 230(1), a notice is necessary, as insistence on a clearance certificate affects, though remotely, the holder of a passport to go abroad.
10. But it is contended by the learned counsel for the Department that if prior notice is given, the very object of s. 230(1) will be stultified as the person concerned may leave the country without complying with the section. We see considerable force in this submission of the learned counsel for the Department. If prior notice is given, there is a possibility of the section Administrative Action, 2nd Edn., says at page 174, that 'In administrative law a prima facie right to prior notice and opportunity to be heard may be held to be excluded by implication where an obligation to give notice and opportunity to be heard would obstruct the taking of prompt action, especially action of a preventive or remedial nature.' For instance, if we examine s. 230 the position is this.
11. The authority must first form an opinion that a person is not likely to return to India. When once he forms that opinion, he has to inform the owner or charterer of any ship or aircraft not to allow such person to travel by such ship or air craft without satisfying himself that such person is in possession of a certificate as required under s. 230(1) of the Act. On such information being given, if the owner or charterer still allows a person to travel by the aircraft, under sub-s. (3) of s. 230 he will be deemed as an assessee in default and the amount can be collected from the charterer or the owner. A notice under sub-s. (2) can be given to the owner of an aircraft only in respect of a person to whom sub-s. (1) applies, i.e., in respect of a person who in the opinion of the authority has no intention to return to India. If notice is insisted prior to the formation of that opinion, there is likelihood of the person leaving India since at that stage the owner of the aircraft could have no occasion to insist on the clearance certificate. Sub-section (2) can, therefore, be effectively implemented by a notice given to the owner of the aircraft in the first instance. But that does not mean that no notice need be given to the person concerned. An opportunity of being heard, after the issuance of the notice under s. 230(2) to the owner of the aircraft, will satisfy the mandate of natural justice. Even though s. 230(1) does not provide for giving of such notice, it can be read by implication and if an opportunity is given to the party subsequent to the notice under s. 230(2), the action will not suffer from the vice of arbitrariness. The hearing may be post-decisional remedial hearing. Even after the issuance of the notice under s. 230(2), the person concerned can be given a notice under s. 230(1) why he should not be asked to furnish a clearance certificate and if the authority is satisfied, he can revoke the notice issued under s. 230(2). In the present case, the counsel for the Department assured that the ITO will consider any representation that may be made by the petitioner with regard to the requirement of his furnishing an income-tax clearance certificate. It is the case of the petitioner that after his return to India in February, 1983, he wrote a letter to the Prime Minister of India on April 16, 1983, that he plans to be in public life in India and that he has no intention to leave the country and settle down elsewhere and also a letter to the Chairman, Central Board of Direct Taxes, to cancel the tax claims. But unfortunately, the petitioner had never chosen to appear or make any representation before the authority constituted under the I.T. Act either with regard to tax claims or with regard to his stay in India. Even now it is open to the petitioner to file a representation before the concerned ITO and if so filed the same shall be considered by the tax authority within a period of four weeks from the date of receipt of the representation.
12. The next submission of Mr. P. Ramachandra Reddy is that the insistence on a clearance certificate in the case of a person who has no asset at all is an unreasonable restriction. The answer to this question depends upon the facts. The petitioner was given a number of notices by the respondents to appear before them to state whether he has any assets either in India or outside. One notice was given on April 19, 1983, asking the petitioner to appear on May 16, 1983, and to give details of his movable and immovable assets both in India and abroad. The petitioner did not choose to appear on that day, but requested for an adjournment. The adjournment was granted and he was asked to appear on June 16, 1983. Even on the adjourned day, the petitioner did not choose to be present and in the meanwhile he filed the present writ petition. The income-tax clearance certificate had not been refused in the instant case. The petitioner has not given a to the authorities to satisfy about his assets. That stage has not arisen as the petitioner has not co-operated in the enquiry. Therefor, the question of insistence on a clearance certificate in the case of a person who has no assets cannot now be countenanced as the enquiry before the appropriate authority is pending about the assets of the petitioner.
13. It is faintly hinted that there are variations in the amounts, that there is no consistency in the matter of quantum. This is not a matter which relates to the validity of the impugned notice. This question can be settled at a hearing. It is not the case of the petitioner that no amounts are due.
14. It is lastly submitted by the learned counsel for the petitioner that the letter issued by the Passport Officer in the year 1977 to the effect that Dr. Teja was given fresh passport and the earlier circulars impounding the passport we canceled implies that the petitioner is absolved of all the liabilities and no restrictions can be placed on his right to go abroad. We see no force in this submission. The letter of the Passport Officer (addressed to whomsoever it may concern) only says that a fresh passport is given to Dr. Teja and that he can travel on the said passport. It does not mean that he is absolved of all tax liabilities. The passport is subject to his fulfilling the obligations under the various enactments applicable to him.
15. It only removes the disability imposed earlier by impounding the passport and nothing more.
16. For all the above reasons, we dismiss the writ petition without costs. Advocates fee Rs. 500.