Retrospective applicability of Black Money Act-Supreme Court quashed High Court order that Govt. made the Act retrospectively applicable from 01.07.2015
ABCAUS Case Law Citation:
ABCAUS 3172 (2019) (10) SC
In the instant case, the Union of India had challenged the interim order passed by the Division Bench of the Delhi High Court restraining the Govt. from taking any action against respondent under Section 55 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“Black Money Act”).
Retrospective applicability of Black Money Act
The question of law for consideration was as to whether the High Court was right in observing that in exercise of the powers under the provisions of Sections 85 and 86 of the Black Money Act, the Central Government had made the said Act retrospectively applicable from 01.07.2015 passing the restraint order?
The Black Money Act had been passed by the Parliament on 11.05.2015 and it had received Presidential assent on 26.05.2015. Subsection (3) of Section 1 provided, that save as otherwise provided in the said Act, it shall come into force on the 1st day of April, 2016. However, by the notification/ order notified on 01.07.2015 it had been provided, that the Black Money Act shall come into force on 01.07.2015, i.e., the date on which the order was issued under the provisions of subsection (1) of Section 86 of the Black Money Act.
The Hon’ble Supreme Court observed that provisions of Section 3 read with Section 2(9)(d) of the Black Money Act unambiguously show, that the legislative intent insofar as the charging tax on undisclosed asset located outside India is concerned, is to charge the tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer. The previous year in the instant case would be a period of twelve months commencing on the 1st day of April of the relevant year and which immediately precedes the assessment year.
The Hon’ble Supreme Court opined that Section 3 read with Section 2 (9)(d) of the Black Money Act would permit the Assessing Officer, while assessing the case of an assessee for assessment year commencing after 01.04.2016, to bring the undisclosed asset located outside India under the tax net on the value of the said property within a period of twelve months, prior to the date on which such asset comes to the notice of the Assessing Officer. Thus, by virtue of these provisions, if such asset comes to the notice of Assessing Officer on 01.04.2016, he could charge such asset(s) on the basis of its value as would be ascertained in a previous year ending on 31.03.2016.
The Hon’ble Supreme Court stated that Section 3 of the Black Money Act reveals, that what is relevant is the date on which the Assessing Officer notices the acquisition by an assessee of undisclosed asset located outside India. However, for the purposes of taxation, the value of such asset has to be ascertained as is in the immediate previous year.
It was further noted that under Section 59 of the Black Money Act an opportunity is given to the assessee to make a declaration in respect of any undisclosed asset located outside India and acquired from income chargeable to tax under the Income Act, for any assessment year prior to the assessment year beginning on 01.04.2016. Further, Section 59 provides, that such a declaration has to be made on or after the date of commencement of the Black Money Act, however, before the date to be notified by the Central Government.
It was observed that the Central Government, in exercise of the powers under Section 59 of the Black Money Act, published the Notification on 01.07.2015, notifying 30.09.2015 as the date on or before which a person is required to make a declaration in respect of an undisclosed asset located outside India. It also notified 31.12.2015 as the date on or before which the person shall pay the tax and penalty in respect of such undisclosed asset located outside India.
It was also observed that where no declaration in respect of the asset covered under the Black Money Act is made such asset would be deemed to have been acquired or made in the year in which a notice under Section 10 is issued by the Assessing Officer and the provisions of the Act shall apply accordingly.
The Hon’ble Supreme Court noted 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 Incometax Act.
The Hon’ble Supreme Court explained that Section 59 of the Black Money Act provided that the 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 30.09.2015 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 subsection (3) of Section 1 of the Black Money Act was to be retained as 01.04.2016, then the period for making a declaration would have been lapsed by 30.09.2015 and the date for payment of tax and penalty would have also been lapsed by 31.12.2015. However, in view of the date originally prescribed by subsection (3) of Section 1 of the Black Money Act, such a declaration could have been made only after 01.04.2016. Therefore, in order to give the benefit to the assessee(s) and to remove the anomalies the date 01.07.2015 had been substituted.
The Hon’ble Supreme Court further clarified that the said substitution was done, so as to enable the assessee desiring to take benefit of Section 59 of the Black Money Act. By doing so, the assesses, who desired to take the benefit of one time opportunity, could have made declaration prior to 30th September, 2015 and paid the tax and penalty prior to 31st December, 2015.
The Hon’ble Supreme Court pointed out that subsection (3) of Section 1 of the Black Money Act, itself provides that save as otherwise provided in this Act, it shall come into force on 1st day of July, 2015. A conjoint reading of the various provisions would reveal, that the Assessing Officer can charge the taxes only from the assessment year commencing on or after 01.04.2016. However, the value of the said asset has to be as per its valuation in the previous year. As such, even if there was no change of date in subsection (3) of Section 1 of the Black Money Act, the value of the asset was to be determined as per its valuation in the previous year. The date has been changed only for the purpose of enabling the assessee(s) to take benefit of Section 59 of the Black Money Act. The power has been exercised only in order to remove difficulties. The penal provisions under Sections 50 and 51 of the Black Money Act would come into play only when an assessee has failed to take benefit of Section 59 and neither disclosed assets covered by the Black Money Act nor paid the tax and penalty thereon.
The Hon’ble Supreme Court opined that the High Court was not right in holding that, by the notification/order impugned before it, the penal provisions were made retrospectively applicable. Accordingly, the interim order passed by the High Court was held to be not sustainable in law, the same was quashed and set aside.
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