Vijay Pal Dalmia, Advocate
Supreme Court of India & Delhi High Court
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The Hon'ble Supreme Court of India passed a judgment on 15.10.2019 in an appeal filed by the Union of India against an interim order dated 16.05.2019 passed by the Division Bench of the Delhi High Court in a writ petition filed by Mr. Gautam Khaitan restraining the Union of India from taking any action against him.
The question that was put before the Apex Court, was whether the High Court was right in observing that while exercise of the powers under the provisions of Sections 85 and 86 of the Black Money Act, the Central Government has made the said act retrospectively applicable from 01.07.2015 and passed a restraint order?
While answering the said questions, the Apex discussed various provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
- The Black Money Act was passed by the Parliament on 11.05.2015 and it has received Presidential assent on 26.05.2015.
- Sub-section (3) of Section 1 provides, that save as otherwise provided in the said Act, it shall come into force on the 1st day of April, 2016.
- By the notification/order notified on 01.07.2015, it has been provided, that the Black Money Act shall come into force on 01.07.2015, i.e., the date on which the order is issued under the provisions of Sub-section (1) of Section 86 of the Black Money Act.
- As per Section 3 of the Black Money Act, tax shall be charged on every Assessee for every assessment year commencing on or after the 1st day of April, 2016 in respect of his total undisclosed foreign income and assets of the previous year.
The proviso to Section 3 (1) of the Black Money Act provides, that undisclosed assets located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer.
- Section 2 (9) (d) of the Black Money Act defines "previous year" as period of twelve months commencing on the 1st day of April of the relevant year and which immediately precedes the assessment year.
- Section 59 of the Black Money Act gives an opportunity to the Assessee to make a declaration in respect of any undisclosed asset located outside India and acquired from income chargeable to tax under the Income-tax Act, for any assessment year prior to the assessment year beginning on 01.04.2016.
Section 59 further provides, that such a declaration has to be made on or after the date of commencement of the Black Money Act, however, before the date to be notified by the Central Government.
The Central Government, in exercise of the powers under Section 59 of the Black Money Act, published a Notification on 01.07.2015, notifying 30.09.2015 as the date on or before which a person is required to make a declaration in respect of an undisclosed asset located outside India. It also notifies 31.12.2015 as the date on or before which the person shall pay the tax and penalty in respect of such undisclosed asset located outside India.
CONSEQUENCE OF NON DECLARATION UNDER SECTION 59 OF THE BLACK MONEY ACT
As per Section 72 of the Black Money Act, where no declaration in respect of the asset covered under the Black Money Act is made, such asset would be deemed to have been acquired or made in the year in which a notice under Section 10 is issued by the Assessing Officer and the provisions of the Act shall apply accordingly.
- Section 50 provides that if any person, being a resident other than not ordinarily resident in India, who has furnished the return of income for any previous year under Sub-section (1) or Sub-section (4) or Sub-section (5) of Section 139 of the Income Tax Act, wilfully fails to furnish in such return any information relating to an asset (including financial interest in any entity) located outside India, held by a beneficial owner or otherwise or in which he was a beneficiary, at any time during such previous year, or disclose any income from a source outside India, he shall be punishable with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine.
- On the other hand, Section 51 provides for penalty for wilful attempt in any manner whatsoever to evade the payment of any tax, penalty or interest chargeable or imposable under the Income-tax Act. The punishment provided under Sub-section (1) is for rigorous imprisonment for a term which shall not be less than three years but which may extend to ten years and with fine. In respect to any other person not covered by Sub-section (1) of Section 51, the punishment provided is rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and shall, in the discretion of the court, also be liable to fine.
In order to give the benefit to the Assessee(s) and to remove the anomalies the date 01.07.2015 has been substituted in Sub-section (3) of Section 1 of the Black Money Act, in place of 01.04.2016. This is done, so as to enable the Assessee desiring to take benefit of Section 59 of the Black Money Act. By doing so, the Assessees, who desired to take the benefit of one time opportunity, could have made declaration prior to 30th September, 2015 and paid the tax and penalty prior to 31st December, 2015.
A conjoint reading of the various provisions would reveal, that the Assessing Officer can charge the taxes only from the assessment year commencing on or after 01.04.2016. However, the value of the said asset has to be as per its valuation in the previous year. The Apex Court further observed that even if there was no change of date in Sub-section (3) of Section 1 of the Black Money Act, the value of the asset was to be determined as per its valuation in the previous year. The date has been changed only for the purpose of enabling the Assessee(s) to take benefit of Section 59 of the Black Money Act. Section 50 & 51 would come into play only when an Assessee has failed to take benefit of Section 59 and neither disclosed assets covered by the Black Money Act nor paid the tax and penalty thereon.
In view of the above explanation, the Apex Court observed that the High Court was not right in holding that, by the notification/order impugned before it, the penal provisions were made retrospectively applicable.
Finally, the Apex court held that the interim order passed by the High Court is not sustainable in law, the same is quashed and set aside.
The Hon'ble Supreme Court of India vide the said judgment, while allowing the appeal, requested the High Court to decide the writ petition on its own merits. However, it clarified that the observations made by it are only for the purposes of examining the correctness of the interim order passed by the High Court and the High Court would decide the writ petition uninfluenced by the same.
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