The Delhi High Court has allowed the Income Tax Department’s appeal against an order that had quashed a Look Out Circular (LOC) issued against businessman Vikas Chaudhary, holding that courts cannot reassess the sufficiency of material relied upon by authorities in economic matters.
A Division Bench of Justice C. Hari Shankar and Justice Om Prakash Shukla pronounced the judgment on August 12, 2026, setting aside the January 12, 2022 decision of the Single Judge.
Background of the Case
The Income Tax Department had issued the LOC through the Ministry of Home Affairs in February 2019 after searches at premises linked to Chaudhary. The searches resulted in seizure of documents, digital material and jewellery. The department cited concerns relating to undisclosed foreign interests and economic offences.
The Single Judge had later quashed the LOC, observing that its continuation for nearly three years was not justified when the material relied upon was disputed and no prosecution had been initiated under the Income Tax Act, Black Money Act or PMLA.
High Court’s Observation
The Division Bench disagreed with the approach adopted by the Single Judge. It held that although an LOC affects a person’s freedom to travel, the court cannot itself decide whether the material collected by executive authorities is sufficient to justify the restriction.
The Bench observed that
“the sufficiency of the material” fundamentally remains within the authority’s domain and that the court cannot assume the role of a “super-executive authority.”
The Court also noted that the Income Tax authorities had placed material concerning alleged over-invoiced exports, suspected hawala transactions, alleged bogus purchases, export incentives and foreign shareholding before the authorities. The Bench said it had examined the official file produced in a sealed cover and found that the material supported the assertions made by the department.
At the same time, the Bench made clear that it was not expressing any opinion on the merits of the allegations. It held only that the material could not be described as irrelevant, inadmissible or insubstantial for the purpose of issuing the LOC.
Decision
The Delhi High Court quashed and set aside the Single Judge’s January 12, 2022 judgment, dismissed Vikas Chaudhary’s writ petition challenging the LOC, and allowed the Income Tax Department’s appeal without imposing costs.
Case Details
Case Title: Income Tax Dept. v. Vikas Chaudhary & Ors.
Case Number: LPA 78/2022, CM APPLs. 5852/2022 & 31407/2025
Judge: Justice C. Hari Shankar and Justice Om Prakash Shukla
Decision Date: August 12, 2026
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