Whether black money act is retrospectively applicable? October 30, 2019
Published in: Articles
Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.
Mr. Vijay Pal Dalmia, Partner
Mr. Aditya Dhar, Associate
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 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 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.
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.