2025 (2) TMI 48 - HC - Income Tax

Black Money proceedings continue despite the settlement of the petitioners income - Assessee s statement that it has already been offered to tax under the Income Tax Act 1961 - scope of income liable to tax under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 settlement under Chapter XIX-A (19-A) of the Income Tax Act 1961 - HELD THAT - In this case admittedly the Return of Income was filed by the respective petitioners on 21.05.2015 which is prior to the implementation of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 with effect from 01.07.2015. Therefore continuance of the proceedings under the provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 cannot be countenanced. Court taking note of the above by its Order 2016 (7) TMI 402 - MADRAS HIGH COURT has clearly held that merely because the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 came into force would not be a bar on the respective petitioners to settle the dispute under Chapter XIX-A of the Income Tax Act 1961. Court also took note of the Explanatory Note in Circular No.12 of 2015 dated 02.07.2015 of the Central Board of Direct Taxes to substantiate the Order dated 10.07.2015 of the Settlement Commission. Thus the continuance of the proceedings under the Impugned Notices dated 27.02.2018 cannot be countenanced. It would defeat from the purpose of Chapter XIX-A of the Income Tax Act 1961. It would have been different if the petitioner had not filed Return of Income and had also operate to settle the dispute under Chapter XIX-A of the Income Tax Act 1961. Since the dispute has been settled under Chapter XIX-A of the Income Tax Act 1961 the continuance of the proceedings under the Impugned Notices dated 27.02.2018 issued under Section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 cannot be allowed to continue. The Order of the Interim Board of Settlement-II dated 26.08.2022 is a fait accompli .

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the proceedings initiated under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 can continue despite the settlement of the petitioners' income tax disputes under Chapter XIX-A of the Income Tax Act, 1961.
Whether the notices issued under Section 10(1) of the Black Money Act are maintainable given the subsequent settlement by the Interim Board of Settlement.
The applicability of penalties and prosecution under the Black Money Act despite the settlement of income tax assessments.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Continuation of Proceedings under Black Money Act

Relevant legal framework and precedents: The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, and Chapter XIX-A of the Income Tax Act, 1961 are central to this issue. The Black Money Act came into force on 01.07.2015, and the petitioners had filed their income tax returns before this date.
Court's interpretation and reasoning: The Court noted that the petitioners had filed their income tax returns on 21.05.2015, prior to the Black Money Act's implementation. The Court emphasized that the settlement under the Income Tax Act predated the Black Money Act, thus precluding further proceedings under the latter.
Key evidence and findings: The petitioners had already disclosed their foreign assets and settled their tax liabilities under the Income Tax Act, which was accepted by the Interim Board of Settlement on 26.08.2022.
Application of law to facts: The Court applied the provisions of the Income Tax Act to conclude that the settlement precluded further action under the Black Money Act.
Treatment of competing arguments: The respondents argued that penalties and prosecution under the Black Money Act were independent of the tax assessment. However, the Court found this argument unpersuasive given the settlement under the Income Tax Act.
Conclusions: The Court concluded that the continuation of proceedings under the Black Money Act was not permissible, as the petitioners had already settled their tax matters under the Income Tax Act.

Issue 2: Maintainability of Notices under Section 10(1) of the Black Money Act

Relevant legal framework and precedents: Section 10(1) of the Black Money Act pertains to the issuance of notices regarding undisclosed foreign income and assets.
Court's interpretation and reasoning: The Court interpreted that since the petitioners' cases were settled under the Income Tax Act, the notices under the Black Money Act were not maintainable.
Key evidence and findings: The Interim Board of Settlement's acceptance of the settlement application was pivotal in determining the non-maintainability of the notices.
Application of law to facts: The application of the Black Money Act was deemed inappropriate due to the prior settlement under the Income Tax Act.
Treatment of competing arguments: The respondents' stance on maintaining the notices for penalties and prosecution was rejected in light of the settlement.
Conclusions: The Court concluded that the notices issued under Section 10(1) of the Black Money Act could not proceed.

3. SIGNIFICANT HOLDINGS

Verbatim quotes of crucial legal reasoning: "The continuance of the proceedings under the provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 cannot be countenanced."
Core principles established: The settlement of tax disputes under the Income Tax Act precludes further proceedings under the Black Money Act for the same assessment years.
Final determinations on each issue: The Court determined that the proceedings under the Black Money Act could not continue, and the notices issued under Section 10(1) were not maintainable.

The Court allowed the writ petitions, providing consequential relief to the petitioners, and closed the connected writ miscellaneous petitions.

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