High Court Sets Aside Lookout Circular Against Businessmen, Cites Violation of Fundamental Rights

The Delhi High Court set aside lookout circulars issued against businessmen, holding that the same affects the freedom of the petitioner and violates their fundamental rights.

A search was conducted at the residence of two businessmen, Gaurav Dalmia and Mridu Hari Dalmia, after which they were issued a lookout circular. The petitioners submitted a representation to allow them to travel internationally, but it was rejected. Therefore, the petitioner approached the High Court.

The petitioners told the court that they have cooperated with the Income Tax Department at all times. They submitted that they were not issued notices after June 2021, so there is no question of non-cooperation on the petitioner’s side.

The petitioners argued that no tax demand is pending against them. The petitioners, being businessmen, have to travel abroad many times for business purposes. They said that the circular affects their freedom to travel, as they have to seek permission from the tax department each time they travel abroad. They claimed this affects their business rights.

The High Court noted that tax proceedings have ended and no demand is outstanding against the petitioner. The court held that the petitioners’ rights cannot be kept suspended for an indefinite period, as the continuing lookout circulars violate the fundamental rights of the petitioners.

Therefore, the court set aside the lookout circulars. However, it directed the petitioner to submit an undertaking stating that they will not transfer or create third-party rights in their foreign assets without informing the department 30 days in advance.