SC stays Delhi HC order disallowing black money law to operate retrospectively
The Supreme Court on Tuesday stayed a Delhi High Court’s order that in effect had restrained the government from applying the Black Money Act, 2016, retrospectively. The HC had on May 16 restrained the government and the I-T department from proceeding against AgustaWestland VVIP chopper scam accused Gautam Khaitan under the Act, stating that the black money law cannot be allowed to operate with retrospective effect from July 2015 to book and probe offenders. The HC had also in its interim order stayed the Centre’s notification to make operational the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, with effect form July 1, 2015.
The Vacation Bench led by justice Arun Mishra sought response within six weeks from Khaitan against whom a black money case has been lodged. Khaitan had challenged various sections of the Act on the ground that the government’s notification that declared the date of enforcement of the Black Money Act as July 1, 2015, was ultra vires the Act itself.
Challenging the HC’s order, the government stated that the HC had committed a grave error of law by granting stay of the proceedings under Section 10 as well as granting stay of the order sanctioning prosecution of Khaitan under Section 55 of the 2015 Act even before the commencement of the prosecution and that too without examining the prima facie case against the private person.
The government said the HC reasoning that it had no powers to issue notifications under Section 85 and 86 of the Act prior to April 1, 2016, “is not only erroneous but also completely academic or irrelevant for the present proceedings” since the action sought to be taken against the present accused in this case under the Act pertain to FY19 and therefore, much later than April 1, 2016, which, according to the high court is the date on which the Act should have come into force.
“It was impermissible for the HC to stay the assessment proceedings under Section 10 as well as the prosecution without examining or even applying its mind to the prima facie case of the Revenue. The present case did not call for any interference …wherein the private respondent has willfully failed to disclose the income in his return of income to evade tax on income generated from foreign assets,” the government stated in its appeal.
Khaitan had also challenged the I-T department’s January 22 order granting sanction to lodge a criminal complaint against him under Section 51 of the Act which provides for jail term between 3 to 10 years if found guilty of wilfully attempting to evade tax. He had told the HC that the amendment to Section 1(3) stating that the Act would come into force from July 1, 2015, instead of April 1, 2016, was done in exercise of power under Section 86 of the Act. Since Section 86 was yet to be in operation, the Centre could not have exercised power under it, he argued.
He argued that the assessing officer was “not entitled to charge tax on a foreign undisclosed asset, which ceased to exist prior to the Act coming into force, only on the ground that such asset came to the notice of the assessing officer after the Act came into force.”
The HC had agreed with his contention, saying the Centre could not, prior to the Act coming into force, alter the date on which the enactment came into force by exercising the powers under the Act.