AI Drafter 
TaxTMI 
TaxTMI 
2024 (6) TMI 943
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..... The petitioners, in all these cases, are office bearers of certain business establishments who have been charged with the allegation of violation of the provisions of the Act. For the sake of convenience, the facts obtaining in Criminal Petition No. 101368 of 2019, which are common to all the other petitions, would be noticed. 2. Heard Sri Sangram S. Kulkarni, learned counsel appearing for the petitioners and Sri Y.V. Raviraj, learned counsel appearing for the respondent. 3. Facts adumbrated are as follows:- During the financial year 2007-08 and in specific on 17-03-2008 Gleaming Snow Worldwide Limited was incorporated as a British Virgin Island ('BVI') Company. On 12-05-2009 Oriental Success Universal Corporation ('Corporation' for short) gets incorporated as a BVI Company. On 12-06-2009 bank account of Oriental Success Universal Corporation is opened in UBS, Singapore. The bank account opening form submitted by the Corporation included 'Know Your Customer' documents and declaration of beneficial owner's identity in terms of laws prevailing in Singapore. The Gleaming Snow Worldwide Limited which was incorporated on 17-03-2008 is struck off at BVI. On 2 dates in th....
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....011 itself. The petitioners were only Directors of the said Companies and not the share holders. Therefore, for a law that comes after the closer of Companies the petitioners cannot be hauled into the web of crime. He would submit that Article 20 of the Constitution of India provides that a person can be proceeded against only for any violation of law at the time of commission of offence and not any law that would come in future. The allegations levelled against the petitioners do not constitute an offence under Sections 50 or 52 of the Act. The Income Tax Act which governed the petitioners at the relevant point in time does not allege any violation of the said Act. Therefore, a post-facto law cannot be made applicable to the petitioners alleging violation of the Act. He would emphasize on the fact that admittedly the allegations pertained to the year 2009-10 and the Act has come into force in the year 2016 and, therefore, the entire proceedings are without jurisdiction. 7. On the other hand, the learned counsel representing the respondent Sri Y.V. Raviraj would seek to defend the action on the score that Section 72 of the Act is retrospective in operation and, therefore, procee....
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.... "2. Definitions.-In this Act, unless the context otherwise requires,- ... ... ... (11) "undisclosed asset located outside India" means an asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the Assessing Officer unsatisfactory; (12) "undisclosed foreign income and asset" means the total amount of undisclosed income of an assessee from a source located outside India and the value of an undisclosed asset located outside India, referred to in Section 4, and computed in the manner laid down in Section 5". Section 3 deals with 'charge of tax'. Therefore, it is the charging section. It reads as follows: "3. Charge of tax.-(1) There shall be charged on every assessee for every assessment year commencing on or after the 1st day of April, 2016, subject to the provisions of this Act, a tax in respect of his total undisclosed foreign income and asset of the previous year at the rate of thirty per cent of such undisclosed income....
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....for failure to furnish in return of income, any information about an asset (including financial interest in any entity) located outside India.- If any person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of Section 6 of the Income Tax Act, 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 that Act, willfully fails to furnish in such return any information relating to an asset (including financial interest in any entity) located outside India, held by him, as 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. 51. Punishment for willful attempt to evade tax.-(1) If a person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of Section 6 of the Income Tax Act, willfully attempts in any manner whatsoever to evade any tax, penalty or interest cha....
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....et 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 1st day of April, 2016- (a) for which he has failed to furnish a return under Section 139 of the Income Tax Act; (b) which he has failed to disclose in a return of income furnished by him under the Income Tax Act before the date of commencement of this Act; (c) which has escaped assessment by reason of the omission or failure on the part of such person to make a return under the Income Tax Act or to disclose fully and truly all material facts necessary for the assessment or otherwise." Section 72 reads as follows: "72. Removal of doubts.-For the removal of doubts, it is hereby declared that- (a) save as otherwise expressly provided in the Explanation to sub-section (1) of Section 69, nothing contained in this Chapter shall be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under this Chapter; (b) where any declaration has been made under Section 59 but no tax and penalty has been paid within the time....
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.... 10. The facts that led to registration of the complaint against the petitioners in all these cases are the two Companies incorporated as British Virgin Island Companies in Singapore in the names and styles of Gleaming Snow Worldwide Limited and Oriental Success Universal Corporation which came to be incorporated on two dates i.e., on 17-03-2008 and 12-05-2009 respectively. The first Company that was incorporated was struck off from BVI and what remained was the second company/Oriental Success Universal Corporation. In the said company about US$56000 was credited into the bank account of the said Corporation in UBS Bank, Singapore. After the said deposit the account in the Bank of the Corporation was closed on 27-05-2010. After closure of the account, the Corporation was also struck off from the rolls of BVI, Singapore. Therefore, the incorporation and striking off of the Companies took place between 12-06-2009 and 02-11-2010. The petitioners in all these cases are members of the same family. They were Directors of the aforesaid Companies at the time when the Companies were incorporated and closed. At that point in time, the Act was not in existence. 11. The Act, as observed he....
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.... (OSUC) Limited maintained with UBS Bank, Singapore in his statements recorded u/s 131 of the Income Tax Act, 1961 on 10.12.2015 and 17.03.2017 before the Assistant Director of Income Tax (Inv.), Unit-1 Belagavi as well as the statement recorded u/s 8( 1) of the Act 09.04.2018 before the Assistant Director of Income Tax(Inv.), Unit-1, Belagavi who has been notified under the Act to exercise the concurrent jurisdiction under Act in the case of the accused vide the Principal Director of Income Tax(Investigation) office notification F.No. PNJ/Prosn/PDIT(Inv.)/2017-18/01 dated 14.03.2018. This denial by the accused is contrary to the evidence gathered in the form of information received from the competent authorities of the foreign jurisdictions of BVI and Singapore. The evidences which establish the accused the director and shareholder of the companies, Gleaming Snow Worldwide Limited (GSWL) and Oriental Success Universal Corporation (OSUC) Limited, BVI as well as the beneficial owner of the bank account of Oriental Success Universal Corporation (OSUC) Limited maintained the UBS Bank, Singapore bearing Account number 152007 are as under: (i) The incorporation documents receiv....
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....ey (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The accused interest in the foreign entity located outside India and being beneficial owner of the foreign bank account is evident from the information received from the foreign jurisdictions of BVI and Singapore. Considering these facts, the accused was given an opportunity to show cause as why prosecution u/s 52 of the Black Money (Undisclosed, Foreign Income and Assets) and Imposition of Tax Act, 2015 should not be launched against her. 7) In her reply (dated: 21/02/2019) to the show-cause notice, the accused has submitted that the process of sanctioning of prosecution under Chapter V of the Act can be commenced only if and after the Assessing Officer has reached a conclusion adverse to the accused u/s 10 of the Act. As per the section 50 of the Act, there is no bearing on the completion of assessment u/s 10 of the Act to launch the prosecution. Prosecution u/s 52 of the Act can be launched irrespective of the completion of assessment u/s 10 of the Act. Therefore, this argument of the accused cannot be accepted. 8) The accused has further submitted that he has not made any false stateme....
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....ax Act, 1961 commissioner means a person appointed to be Principal Director of Income Tax. There is no explicit definition of 'Commissioner' in the Act, but as per the Section 2 (15) of the Act definition of 'Commissioner' can be referred as provided in Income Tax Act, 1961. Definition of the 'Commissioner' provided in section 2 (16) of Income Tax Act, 1961 is applicable in the present context as there is no other explicit definition in the Act. Therefore, the arguments of the accused in this regard are not accepted. Also, as per CBDT gazette notification dated 16.05.2017 powers have been conferred to the officers of Directorates of the Income Tax for the implementation of the Act. Therefore, proceedings such as prosecutions has to be initiated from the Directorates of Income Tax only. The accused has relied on various case laws pertaining to the Income Tax Act, 1961 to support his arguments. It is to be noted that Hon. Madras High Court in its judgment in Krishnaswamy Vijaykumar (2017) case has ruled that Principal Director of Income Tax has sufficient jurisdiction to proceed with the prosecution proceedings u/s 279 of the Income Tax Act, 1961. ....
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....e respondent would do is taking recourse to Section 72 of the Act to register the aforesaid complaint. Section 72 deals with removal of doubts and creates a deeming section in terms of Section 72 (c). Section 72 (c) directs that when an asset has been acquired prior to commencement of the Act and no declaration in respect of such asset is made under this Chapter, such asset will be deemed to have been acquired or made in the year in which notice under Section 10 is issued by the Assessing Officer and the provisions of the Act will apply. Section 72 observes that if no declaration is made by an assessee even if the asset was made prior to coming into force of the Act, it shall be deemed to be an offence under the Act. In effect what Section 72 would mean that the facts/allegations that were never in existence as on the date of commencement of the Act can also be deemed to have been committed under the Act. 12. It becomes germane, at this juncture, to consider where a legal fiction or a deeming fiction is created under Section 72 (c) of the Act or criminal liability under Sections 50 and 52 could be imposed. The Apex Court in the case of KUMARAN v. STATE OF KERALA (2017) 7 SCC 471....
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....wellings Co. Ltd. v. Finsbury Borough Council [East End Dwellings Co. Ltd. v. Finsbury Borough Council, 1952 AC 109 : (1951) 2 All ER 587 at p. 589 (HL)] : (AC pp. 132-33) "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of those in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs." 29. The legal fiction enacted under Section 431 is not limited to "the purpose of this Act" unlike Section 6-A of the Central Sales Tax Act, as was the case in Ashok Leyland Ltd. v. State of T.N. [Ashok Leyland Ltd. v. State of T.N., (2004) 3 SCC 1, paras 32 and 76] Thus it is clear that the object of the legal fiction created by Section 431 is to extend for the purpose of recovery of compensation until such recovery is compl....
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....otions of fairness and justice is treated as a ground not for invalidating the law itself but as compelling a beneficent construction thereof where the language of the statute by any means permits it. In the American system, however, such ex post facto laws are themselves rendered invalid by virtue of Article 1, Sections 9 and 10 of its Constitution. 18. It is contended by the learned Attorney General that Article 20 of the Constitution was meant to bring about nothing more than the invalidity of such ex post facto laws in the post-Constitution period but that the validity of the pre-Constitution laws in this behalf was not intended to be affected in any way. The case in Keshavan Madhava Menon v. State of Bombay [Keshavan Madhava Menon v. State of Bombay, 1951 SCC 16 : 1951 SCR 228] has been relied on to show that the fundamental rights guaranteed under the Constitution have no retrospective operation, and that the invalidity of laws brought about by Article 13 (1) of the Constitution relates only to the future operation of the pre-Constitution laws which are in violation of the fundamental rights. On this footing it was argued that even on the assumption of the conviction....
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....e, it cannot be reasonably urged that the prohibition of double jeopardy applies only when both the occasions therefor arise after the Constitution. Similarly, under Article 20 (3) it cannot be suggested that a person accused before the Constitution can be compelled to be a witness against himself, if after the Constitution the case is pending." (Emphasis supplied) The facts before the Apex Court were that accused 1 and 2 were Minister for Industries and Secretary of Commerce and Industries in the Government of Vindhya Pradesh. An agreement had been entered into on 01-08-1936 for carrying on diamond mining operation for 15 years. Accused 1 and 2 therein are alleged to have obtained illegal gratification in a sum of Rs. 25,000/- on 11-04-1949 and had also indulged in certain forgery of documents to favour the Syndicate. The allegations were the offences punishable under Section 120B, 161, 465 and 466 of the IPC. The trial Court acquitted the accused. The Appellate Court convicted accused Nos. 1 and 2 for offences punishable under Sections 120B and 161 of the IPC and in addition accused No. 1 was convicted for the offences punishable under Sections 465 and 466 of the IPC. The f....
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....n of income for any previous year under sub-section (1) or sub-section (4) or sub-section (5) of Section 139 of that 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 him, as 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. 51. Punishment for wilful attempt to evade tax.- (1) If a person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of Section 6 of the Income Tax Act, wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to ten years and with fine. (2) If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest ....
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....e 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. 19. It could therefore be seen, that the scheme of the Black Money Act is to provide stringent measures for curbing the menace of black money. Various offences have been defined and stringent punishments have also been provided. However, the scheme of the Black Money Act also provided one time opportunity 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. Section 59 of the Black Money Act provided that such a declaration was to be made on or after the date of commencement of the Black Money Act, but on or before a date notified by the Central Government in the Official Gazette. The date so notified for making a declaration is 30-9-2015 whereas, the date for payment of tax and penalty was notified to be 31-12-2015. As such, an anomalous situation was arising if the date under sub-section (3) of Section 1 of the Black Money Act was to be retained as 1-4-2016, then the period for ....