The issuance of Look-Out Circulars must be justified by valid grounds such as cognizable offences or compelling economic interests; mere allegations without formal charges do not suffice.

JUDGMENT

Prathiba M. Singh, J.

Brief Facts

1. The present petition has been filed by the Petitioner - Mr. Prateek Chitkara, holder of Indian Passport nos. Z2303946 (valid until 31st January 2023) and Z6212946, praying for the quashing of, and seeking the reasons for, the issuance and continuation of the Look-Out Circular (hereinafter "LOC") issued against him at the behest of the Income Tax Department.

2. The Petitioner is an Indian citizen who claims to have deep roots in society, whose parents, wife and brother permanently reside in India. He is an educated and qualified young entrepreneur, who has built various well-recognised businesses including in the hospitality, jewellery and electronics sector.

3. According to the Petitioner, in recognition of his entrepreneurial skills, he has been conferred with various awards within India as well as internationally. The details of his ventures have been set out in paragraph 6 of the petition, which reads as under:

"6. After completing his formal education, the Petitioner ventured into business without any support or backing and very soon, at a very young age, launched various successful ventures such as Dengen Products India, Tiana (a famous silver jewellery brand which has two stores in the premium markets of Delhi, i.e. Khan market and Greater Kailash 1), Playboy Club Delhi (franchise of the world famous group), RSVP Club, Jazbaa, Velvet Room (all are famous hospitality clubs/restaurants) etc. In addition, the Petitioner has also successfully ventured into businesses relating to electronics. All the said brands are very successful in their right, having been singularly driven by the Petitioner's passion, commitment and hard work. All the said ventures required the Petitioner to constantly travel abroad for reasons including, but not limited to purchase of goods, negotiations, collaborating with entities abroad, entering into agreements etc. In fact, the Petitioner travelled extensively to China and Hong Kong for purchasing products from 2011 to 2016. In addition, the Petitioner has also frequently travelled abroad for personal reasons, including visits to his family."

4. On 7th December 2018, a search and seizure action was conducted under Section 132(3) of the INCOME TAX ACT , 1961, at the residence of the Petitioner at S-79, Greater Kailash-II, Delhi. It is claimed by the Income Tax Authorities, that the Petitioner remained untraceable and non-cooperative during the said search and seizure proceedings.

5. On 14th December 2018, notice was issued to the Petitioner under Section 10 (1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter "Black Money Act, 2015"), requiring him to furnish information in relation to the undisclosed foreign assets that were found during the course of the investigations. The same was duly replied to by the Petitioner.

6. As per the Income Tax Authorities, the Petitioner was found to be running a network of companies through which funds were being transferred to Hong Kong. It was discovered that the Petitioner was a beneficial owner, shareholder and director in a Hong Kong based entity, namely, M/s Wise Sharp Tech Group Limited (hereinafter "WSTGL") which was incorporated in Hong Kong on 13th March 2014.The said company is stated to be struck off on 27th July 20