Menu
Tax Notes logo

U.S. Citizen Files Petition to Quash Indian Treaty Request Summons for Bank Info

AUG. 12, 2020

Sabena Puri v. United States

DATED AUG. 12, 2020
DOCUMENT ATTRIBUTES

Sabena Puri v. United States

SABENA PURI,
Petitioner,
v.
UNITED STATES OF AMERICA,
Respondent.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

PETITION TO QUASH THIRD PARTY SUMMONS ISSUED TO CITIBANK, N.A. BY THE INTERNAL REVENUE SERVICE

Scott E. Schutzman, Esq. SBN 140962
LAW OFFICES OF SCOTT E. SCHUTZMAN
2124 Main Street, Suite 130
Huntington Beach, California 92648
Tel: 714-374-0099
Email: schutzy@msn.com

Jeffrey A. Neiman, Esq. Pro Hac Vice To Be Filed
MARCUS NEIMAN RASHBAUM & PINEIRO LLP
100 Southeast Third Avenue, Suite 805
Fort Lauderdale, Florida 33394
Tel: 305-400-4269
Email: jneiman@mnrlawfirm.com

Attorneys for Petitioner, SabenaPuri

Petitioner Sabena Puri, pursuant to 26 U.S.C. § 7609(b), moves the Court to quash a third-party summons issued on or about July 23, 2020, by the Department of Treasury, Internal Revenue Service, to Citibank N.A. Per 26 U.S.C. § 7609, Petitioner Puri has the right to intervene with respect to the third-party summons because it seeks records relating to her. In support of her Petition, she states as follows:

PARTIES, JURISDICTION, AND VENUE

1. Sabena Puri is a natural person. She is a United States citizen whose address is 2149 High Street, Palo Alto, California 94301.

2. This Court has subject matter jurisdiction over this Petition pursuant to 28 U.S.C. § 1331 and 26 U.S.C. § 7609(h). Citibank N.A. is found in this judicial district because it has a physical presence here. Specifically, Citibank N.A. has at least four branch offices in Orange County California, which include a branch office at 18232 Irvine Blvd., Tustin, California, 92780. See Williams v. United States, Case No. 1:05-mc-6, 2005 WL 3105404, at *2 (E.D. Tenn July 29, 2005). (“A branch office indicates a significant presence within the district, and I conclude it is sufficient to support subject matter jurisdiction under 26 U.S.C. § 7609(h)(1).”) Further, the summons calls for delivery of the requested document to take place in this judicial district.

3. Venue is proper pursuant to 28 U.S.C. § 1391(e) because the respondent is the United States and a substantial part of the events or omissions giving rise to the claim is to occur here. Specifically, the summons calls for delivery of the requested documents to take place here.

THE SUMMONS AND NOTICE

4. On or about July 23, 2020, the Internal Revenue Service issued a third-party summons (“the Summons”) to Citibank N.A. that requests certain bank records related to Petitioner for the sixteen-year period from April 1, 2003 to March 31, 2019, and beyond. A copy of the Summons is attached to this Petition as Exhibit A. The Summons specifically requests records from Citibank N.A. that include “Account opening documents (regardless of date);” “Account signature cards (regardless of date);” “Know-Your-Customer and Customer Due Diligence records, as required to be collected and maintained under the law (regardless of date);” “Monthly account statements;” and “Correspondence (including e-mail) and memorandum files related to the account (excluding marketing material).” The Summons defines the term “account” broadly, to encompass “all transactions between you and the [Petitioner], such as private banking accounts or activities, the purchase of certificates of deposit, or the leasing of a safe deposit box, regardless of whether you consider such arrangements to constitute an account.”

5. This Summons is substantially identical to a prior summons that the IRS served upon Citibank N.A. in March of this year. The IRS failed to serve proper notice of that summons as required by Internal Revenue Code § 7609(a)(1). For this reason, and the facial overbreadth and inappropriate nature of the summons itself, Puri filed a petition to quash the original summons in Case No. 20-cv-04792 before this Court. Shortly thereafter, the IRS withdrew the summons and has now reissued it with proper notice to Petitioner. However, the substantive problems with the Summons remain.

6. The Summons purports to be made pursuant to Article 28 of the Convention Between the Government of the United States of America and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (“the Convention”) and in connection with “the India Income Tax Liabilities” of the Petitioner. But, as set forth in this Petition, the Summons far exceeds the permissible scope authorized by Article 28 of the Convention.

THE SUMMONS MUST BE QUASHED BECAUSE IT LACKS A LEGITIMATE PURPOSE

7. The grounds upon which a district court must quash an IRS summons are well established. The burden of resisting a motion to quash the summons rests with the Government. “To defeat a petition to quash, or to enforce a summons, the government must establish that (1) the investigation will be conducted for a legitimate purpose; (2) the material being sought is relevant to that purpose; (3) the information sought is not already in the IRS's possession; and (4) the IRS complied with all the administrative steps required by the Internal Revenue Code.” Crystal v. United States, 172 F.3d 1141, 1143–44 (9th Cir. 1999) (emphasis added) (citing United States v. Powell, 379 U.S 48, 57–58 (1964)). Here, the IRS will be unable to meet its burden to establish that the Summons seeks material relevant to a legitimate purpose.

8. At this stage, the IRS has offered no justification for the Summons. In response to this Petition, the law requires the Government to offer its support for the Summons in the first instance, which Petitioner may then confront.

9. Nevertheless, certain features of the Summons call the legitimacy of its purpose into doubt. These features suggest that the summons is overly broad and part of an impermissible fishing expedition or, worse, a tool of political harassment against the current Indian administration's political opposition.

a. The Summons far exceeds the scope of a permissible request under applicable law.

10. A copy of the Convention Between the Government of the United States of America and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (“the Convention”) is attached to this Petition as Exhibit B. According to a notation of the face of the Summons, it seeks information under Article 28 of this Convention.

11. Article 28 of the Convention describes the permissible purposes for which information may be shared. Article 28, Paragraph 1 of the Convention permits the disclosure of tax information “in particular, for the prevention of fraud or evasion” of taxes. Upon belief, the Republic of India has not requested (and could not legitimately request) information in connection with an investigation into unpaid tax liabilities of Petitioner, and particularly fraud or evasion by Petitioner. Any disclosure of tax information for any other purpose is not permitted by the Convention and is otherwise forbidden by generally applicable US tax privacy law. See 26 U.S.C. § 6103.

12. Additionally, Article 28, Paragraph 3 of the Convention places limits on the information that may otherwise be requested under that Article. The Convention states that “in no case” shall it require the contracting states to either (a) “carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;” or (b) “supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State.” Further, Article 28, Paragraph 4 permits the obtaining of information only “in the same manner and in the same form as if the tax of the first-mentioned State were the tax of that other State and were being imposed by that other State.” United States law does not permit overbroad summons requests. Such overbroad requests are impermissible under the Convention and illegitimate under Powell

13. The summons here is overboard. It seeks sixteen years' worth of Petitioner's bank records. This spans almost the entirety of Petitioner's working life. Further, this period covers years during which Petitioner was a resident of the United States, filed United States income tax returns, claimed no foreign earned income exclusion or related excess housing cost deduction on those returns, paid all United States taxes normally imposed on filers of Form 1040, and accordingly was not properly subject to Indian income taxation. Further, on account of the broad Summons, responsive records may include reference to accounts jointly held with others who are not subject to the request.1

14. In considering similar summons issued at the request of other foreign countries, this Court has required the IRS to demonstrate that the summons is not overbroad, and that the IRS has properly evaluated the appropriateness of the requests. See Yeong Yae Yin v. United States, Case No. 00-cv-06075, 2000 WL 33267334 (C.D. Cal. 2000) (enforcing such treaty-related summons only after concluding that (1) the IRS reviewed the Korean taxing authorities' requests and determined that they were proper under the relevant convention and (2) the summons was not overbroad).

15. Given the breadth of the Summons, Petitioner's knowledge of her own lack of fraud or liability for Indian taxes, and the sixteen-year scope of the petition, it is unlikely that the IRS will be able to meet its burden to show that enforcement of the Summons is appropriate. Accordingly, the Summons must be quashed.

b. The purpose of India's information request appears to be to abuse Petitioner and her family, rather than to engage in any legitimate investigation of income tax liability.

16. Indeed, the Summons appears to have been issued for an impermissible purpose: to further the nakedly political investigation of other members of Petitioner's family.

17. Petitioner's uncle is Kamal Nath, an Indian politician and a leader of the Indian National Congress. The Indian National Congress is a storied political party within India. It is the party of Mahatma Gandhi, led India to independence from Great Britain, and has been in and out of government ever since. Its chief political opposition is the Bharatiya Janata Party (“BJP”). At the moment, BJP is in government. The Indian National Congress is not.

18. The Indian press is awash in allegations that the ruling BJP government is presently using India's taxing authorities to harass its political opposition, including Indian National Congress leaders. Related press clippings are attached to this Petition as Exhibit C.

19. Upon belief, the Summons at issue in this Petition relates not to Petitioner's income tax liabilities, but rather to continued efforts to investigate and harass Petitioner's family for its opposition to BJP. Even assuming the legitimacy of any investigation, furthering such an investigation is not a permissible purpose for a summons upon Petitioner made pursuant to the Convention. This potential for abuse was noted and addressed by the U.S. Congress. As noted in in the Report of the Senate Committee on Foreign Relations [Exec. Rept. 101-25, 101st Cong., 2nd Sess.] which accompanied the 1989 U.S.-India Income Tax Treaty and related protocol, it is customary for Indian authorities to use an administrative summons to obtain information related to a person charged with a criminal offense. However, that practice is not followed in the U.S. and the Foreign Relations Committee indicated that such a request for information made after charges are brought would not be allowed in the U.S.

20. Further, Article 28 of the Convention states at Paragraph 1 that “if the information is originally regarded as secret in the transmitting State, it shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment, collection, or administration of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes which are the subject of the Convention.” (emphasis added). Of course, tax information is secret within the United States — so much so that it is a felony for IRS employees or agents to willfully improperly disclose tax information. See 26 U.S.C.  § 7216; see also 26 U.S.C. § 6103. Accordingly, information gathered through the Summons may not be used to further any non-tax criminal case, or any matter involving third parties.

21. Despite this prohibition, Indian Taxation authorities do routinely share such information with other components of the Indian government. Notably, in  2015, Germany and the United Kingdom lodged formal complaints with India  related to its handling of information provided pursuant to India's double taxation  avoidance agreements with those countries. As a result, Germany and the United Kingdom dramatically slowed their sharing of information with India. This problem does not appear to have been corrected. As recently as last month, July 2020, the Indian taxation authority (the Central Board of Direct Taxes or “CBDT”) entered into a memorandum of understanding with the Indian Securities and Exchange Board (“SEBI”) to “facilitate the sharing of data and information between CBDT and SEBI on an automatic and regular basis” and to “ensure that both CBDT and SEBI have seamless linkage for data exchange.” See Exhibit D. Such free sharing of the private tax information of United States persons is anathema to the limitations set forth in Article 28 of the Convention and US law.

Request for Limited Discovery and Evidentiary Hearing

22. This Summons should be quashed based upon its facial overbreadth in requesting sixteen years' worth of information from Citibank N.A. If this Petition is not quashed on this ground, the Court must evaluate the government's purpose in issuing the Summons. See United States v. Powell, 379 U.S 48, 57–58 (1964). Petitioner expects this to be a contested issue of fact.

23. Accordingly, Petitioner requests (1) a hearing and briefing schedule on the issues raised in this Petition; and (2) limited discovery into the purpose of the Summons and the relationship of the sought-after information to this purpose.

WHEREFORE, the Petitioner respectfully requests the Court grant this Petition to Quash the Internal Revenue Service summons, along with all such relief that is just and necessary.

Dated: August 12, 2020

Respectfully Submitted,

Scott E. Schutzman

FOOTNOTES

1Reference to these other individuals should accordingly be redacted from any information that may be produced in response to the Summons.

END FOOTNOTES

DOCUMENT ATTRIBUTES
Copy RID