Black Money Act Cannot Be Invoked To Prosecute Non-disclosure Of Foreign Assets In ITRs Filed Before 2015: Karnataka HC
The Karnataka High Court quashed criminal proceedings under Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015, against businessmen for alleged non-disclosure of foreign assets in Income Tax Returns filed for the year 2007-08 or 2009-10.
In that context, the Bench of Justice M Nagaprasanna observed that, "the prosecution so initiated against these petitioners did not and cannot pass constitutional muster under Article 20 of the Constitution of India. Non-disclosure of an assessment of the tax return for the year 2007-08 or 2009-10 cannot be used to criminally prosecute these petitioners, for an act that has come into force in the year 2015. The law, as on the date alleged, was not the law of such disclosure of assessment. Therefore, the criminal law cannot be set into motion against the petitioners in the aforesaid facts of the case, as it cannot pass muster of Article 20 of the Constitution of India."
The court was hearing a criminal case under Section 50 of the Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015. Several businessmen were charged for violations that allegedly occurred before the Act came into force. This provision penalizes failure to disclose foreign assets.
The Act was enacted on April 1, 2016, and in June 2018, assessment proceedings began, leading to prosecution sanctions against the petitioners. The petitioners argued that they were merely directors of the companies involved, which had closed in 2010, long before the Act was established.
They contended that, according to Article 20 of the Constitution, individuals can only be prosecuted for violations of the law in effect at the time of the offense, not for laws enacted afterward. Hence, they claimed that a retroactive law should not apply to them.
The respondents argued that Section 72 of the Act is retrospective, allowing proceedings under Section 72(c) even for offences committed before the Act came into effect.
The Court clarified that, "law must actually be in force on the date of commission of the offence and not deemed to be in force. It further holds that the object of Article 20 of the Constitution is law in force, actually in force and not a law deemed to be in force."
Cause Title: Dhanashree Ravindra Pandit vs The Income Tax Department & Anr.
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