2022 (9) TMI 1099 - HC - Income Tax

Black Money - scope of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - maintainability of the present Petitions before this Court - asset created by a Non-Resident Indian out of income generated abroad - Petitioner contended that she is a beneficiary of a Trust which was created and established abroad AND had brought benefit/money of her share in the country upon permission granted by the Reserve Bank of India - Petitioners deny their liability to be assessed under the Act of 2015 as the foreign asset does not come within the contours of the income to be charged to tax - HELD THAT - Act of 2015 provides complete machinery for the person aggrieved of any action taken by the Assessing Officer and the said person could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had the adequate remedy open to him by way of an appeal to the Commissioner of Appeals. The remedy under the statute, however, must be effective and not a mere formality with no substantial relief. In the present case, neither have the Petitioners described the available alternate remedy under the Act of 2015 as ineffectual and non-efficacious while invoking the Writ jurisdiction of this Court nor have they ascribed cogent and satisfactory reasons before the Court so as to enable it to exercise jurisdiction under Article 226 of the Constitution in tune with the facts and circumstances of the case. All the contentions of the Petitioners, as raised in these Petitions, including the issue of jurisdiction, applicability or otherwise of the act, can very conveniently be dealt with by the Appellate Authority in tune with the mandate of Sections 15 and 17 of the Act of 2015. Reference, in this behalf, can be had to the law laid down by the Hon ble Apex Court in case titled Commissioner of Income Tax Ors. v. Chhabil Dass Agarwal reported as 2013 (8) TMI 458 - SUPREME COURT , as cited by the learned Counsel representing the Respondent Nos. 2 and 3. We declare that these Writ Petitions are not maintainable before this Court in view of the efficacious and statutory remedy of appeal being available to the Petitioners in terms of the mandate of Sections 15 and 17 of the Act of 2015. Accordingly, the preliminary objection raised by the Respondents with regard to the maintainability of these Petitions before this Court sustains, as a sequel thereto, all these Petitions shall stand dismissed. This shall also dispose of any pending miscellaneous application(s) accordingly. Having regard to the fact that the Petitioners have been bonafidely pursuing their claim before this Court by filing these Writ Petitions under Article 226 of the Constitution at the relevant point of time and, admittedly, the decision in these Writ Petitions has consumed more than one year, grant liberty to the Petitioners to avail the aforesaid statutory remedy of appeal against the proceedings initiated against them by the Respondent No.3, including the show cause notices, assessment orders, penalty notices, demand notices, within one month from the date of announcement of this Judgment. In the event any such appeal/s is/ are filed before the appellate authority within the time so granted by this Court in accordance with the mandate of the Act of 2015, the appellate authority shall consider the same only on merits without making any reference to the period of limitation and, till then, no punitive action shall be taken against the Petitioners.

Summary

Issues Involved:
1. Common questions of fact and law.
2. Nature of the challenge.
3. Genesis of the litigation.
4. Details of the writ petitions.
5. Arguments of the parties.
6. Discussion and analysis.
7. Conclusion.

Issue-wise Detailed Analysis:

i. Common Questions of Fact and Law:
The court noted that the six connected petitions involved common questions of fact and law, and thus were decided by a common order.

ii. Nature of Challenge:
The first three writ petitions challenged the validity of notices issued under Section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, and show cause notices. The subsequent three writ petitions challenged penalty notices, assessment orders, and demand notices.

iii. Genesis of the Litigation:
The litigation arose from the undisclosed foreign assets and income of Late Mujeeb Mir, who had established the Mondale Irrevocable Discretionary Trust. Following his death, his beneficiaries, including the petitioners, inherited the assets. The petitioners disclosed these assets to the Reserve Bank of India and included them in their wealth tax returns. However, following the Panama Papers leak, income tax proceedings were initiated against them under the Act of 2015.

iv. Details of the Writ Petitions:
The petitioners contended that they were beneficiaries of a trust created abroad and had brought their share of the money to India with RBI's permission. They argued that the show cause notices and subsequent assessment orders were without jurisdiction as they were issued without passing an assessment order under Section 10 of the Act of 2015.

v. Arguments of the Parties:
- Petitioners' Arguments:
- The action by the assessing authority was without jurisdiction as the Act of 2015 did not apply to assets created by a Non-Resident Indian from income generated abroad.
- The Act of 2015 applies only to undisclosed foreign assets held on 1st July 2015, and the petitioners did not hold any such assets at that time.
- The assessment year should be 2015-16, and the assessing authority cannot go beyond this period.
- The assets were inherited and not undisclosed foreign assets, thus not falling under the Act of 2015.
- The assessment order was passed without considering the objections regarding jurisdiction.
- The petitioners sought a declaration of non-applicability of the Act retrospectively.

- Respondents' Arguments:
- The writ petitions were not maintainable due to the availability of an alternate remedy of appeal under the Act of 2015.
- The petitioners had full knowledge of being beneficial owners of the trust assets but did not disclose them in their income tax returns.
- The petitioners failed to provide details regarding the source of funds in the trust.
- The assessment order and penalty notices were issued in compliance with the court's directions.

vi. Discussion and Analysis:
The court discussed the genesis of the Act of 2015, which was enacted to address the issue of black money stashed abroad. The court noted that the Act provided a complete machinery for assessment and appeal, and the petitioners could not bypass this mechanism by filing writ petitions. The court emphasized the rule of self-imposed limitation in exercising jurisdiction under Article 226 of the Constitution when an alternate remedy is available.

vii. Conclusion:
The court declared that the writ petitions were not maintainable due to the availability of an efficacious and statutory remedy of appeal under Sections 15 and 17 of the Act of 2015. The petitions were dismissed, but the court granted the petitioners liberty to file appeals within one month and directed the appellate authority to consider the appeals on merits without reference to the period of limitation. The court also directed that no punitive action be taken against the petitioners until the appeals were decided.