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

Karnataka HC quashed prosecution under Black Money Act sections 50 and 52 against petitioners who were office bearers of British companies. The court held that prosecuting petitioners for non-disclosure of foreign assets in 2007-08 and 2009-10 tax returns under an Act that came into force in 2015 violated Article 20 of the Constitution. The prosecution failed constitutional scrutiny as criminal law cannot be applied retrospectively for acts committed before the law's existence, rendering the charges invalid.

---

---

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 Act
The 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.

---