2024 (6) TMI 943 - HC - Income Tax

Prosecution under Black Money Act sections 50 and 52 quashed for retrospective application violating Article 20

Smt. Dhanashree Ravindra Pandit, Smt. Mangal Arvind Gogte, Shri Arvind Balkrishna Gogte, Shri Madhav Aravind Gogte, Versus The Income Tax Department Rep. By its Deputy Director of Income Tax (Investigation) Unit 1, Belagavi

Karnataka HC quashed prosecution under Black Money Act sections 50 and 52 against petitioners who were office bearers of British companies. The court held ... Offence punishable u/s 50 of the Black Money Act - non-disclosure of foreign assets and false statements made by the petitioners - petitioners, office bearers of certain business establishments of two British Companies - The Act came into force on 01-07-2015, and the petitioners were summoned and assessed u/s 10 of the Act in 2018 - Prosecution was initiated u/s 50 and 52 of the Act based on the n- petitioners contended that the Companies were closed before the Act came into force and thus, they could not be prosecuted under a law that was not in existence at the time of the alleged offense HELD 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. A caveat, this Court is considering the criminal liability fastened upon the petitioners by the prosecution including under Section 72 (c) of the Act and the consideration has led to an unmistakable conclusion that it falls foul of Article 20 of the Constitution of India. The Special enactment is a statute. Article 20 comes under Chapter III of the Constitution of India, a fundamental right. Constitution of India is not a statute. It is the fountain head of all statutes including the special statute. Therefore, the rigour of any provision of the Act should pass muster of Article 20 of the Constitution of India and it fails to pass such muster in the case at hand and the failure leads to obliteration of the crime against the petitioners. Issues Involved:1. Whether the proceedings instituted against the petitioners under the Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015 are tenable in law.Summary:Issue 1: Proceedings under the Black Money ActThe petitioners, office bearers of certain business establishments, were charged with violation of the Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015 ('the Act'). The facts pertain to the incorporation and subsequent closure of two British Virgin Island (BVI) Companies, Gleaming Snow Worldwide Limited and Oriental Success Universal Corporation, between 2008 and 2010, with financial transactions occurring in 2009-10. The Act came into force on 01-07-2015, and the petitioners were summoned and assessed u/s 10 of the Act in 2018. Prosecution was initiated u/s 50 and 52 of the Act based on the non-disclosure of foreign assets and false statements made by the petitioners.The petitioners contended that the Companies were closed before the Act came into force and thus, they could not be prosecuted under a law that was not in existence at the time of the alleged offense. They argued that Article 20 of the Constitution of India prohibits retrospective application of laws creating new offenses.The respondent argued that u/s 72 of the Act, which has retrospective operation, proceedings can be initiated for offenses committed prior to the Act's commencement.The Court, after considering the submissions and material on record, noted that the Act and its provisions, including Sections 2(11), 2(12), 3, 10, 50, 51, 52, and 72, are designed to tackle undisclosed foreign income and assets. However, the Court emphasized that Article 20 of the Constitution prohibits convictions under ex post facto laws.The Court referred to the Constitution Bench judgment in RAO SHIV BAHADUR SINGH v. STATE OF VINDHYA PRADESH (1953) 2 SCC 111, which held that laws must be in force at the time of the commission of the offense, and not deemed to be in force retrospectively. The Court also cited UNION OF INDIA v. GAUTAM KHAITAN (2019) 10 SCC 108, which interpreted the Act but did not address the retrospective application vis-à-vis Article 20.The Court concluded that the prosecution initiated against the petitioners did not pass constitutional muster under Article 20, as the alleged non-disclosure occurred before the Act's commencement. Therefore, the criminal proceedings against the petitioners were quashed.Order:(i) Criminal Petitions are allowed.(ii) The proceedings in C.C.Nos. 242 of 2019, 243 of 2019, 246 of 2019, 239 of 2019, 241 of 2019, 245 of 2019, 244 of 2019 and 240 of 2019 pending before the IV Additional Judicial Magistrate First Class, Belagavi stand quashed.(iii) Pending applications, if any, also stand disposed.