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TMI Blog2024 (6) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... t was not in existence at the time of the alleged offense HELD THAT:- The prosecution so initiated against these petitioners did not and cannot pass constitutional muster under Article 20 of the Constitution of India. Non-disclosure of an assessment of the tax return for the year 2007-08 or 2009-10 cannot be used to criminally prosecute these petitioners, for an act that has come into force in the year 2015. The law, as on the date alleged, was not the law of such disclosure of assessment. Therefore, the criminal law cannot be set into motion against the petitioners in the aforesaid facts of the case, as it cannot pass muster of Article 20 of the Constitution of India. A caveat, this Court is considering the criminal liability fastened upon the petitioners by the prosecution including under Section 72 (c) of the Act and the consideration has led to an unmistakable conclusion that it falls foul of Article 20 of the Constitution of India. The Special enactment is a statute. Article 20 comes under Chapter III of the Constitution of India, a fundamental right. Constitution of India is not a statute. It is the fountain head of all statutes including the special statute. Therefore, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Act. The Assessing Officer on 26-03-2018 issues summons to petitioners invoking Section 8 of the Act. The petitioners are all members of one and the same family. On 09-04-2018 one of the petitioners tenders oral deposition before the respondent who was declared to be the Assessing Officer under the Act. On 25-06-2018 assessment proceedings under the Act are commenced by issuance of a notice under Section 10(1) of the Act for the financial year 2018-19 and assessment year 2019-20. 5. After about six months of commencement of proceedings, two show cause notices are issued by the respondent seeking to show cause as to why prosecution should not be initiated against all the petitioners under Sections 50 and 52 of the Act. The petitioners submit their interim reply on 21.02.2019 and additional reply on 14-03-2019. The Competent Authority then grants sanction to prosecute the petitioners for the offences under the Act. After obtaining such sanction, two complaints come to be registered before the IV Additional Judicial Magistrate First Class, Belagavi under Section 200 of the CrPC alleging offences punishable under Sections 50 and 52 of the Act. The registration of criminal case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive learned counsel and have perused the material on record. In furtherance whereof, the issue that falls for my consideration is, Whether the proceedings instituted against the petitioners under the Act for the alleged offences are tenable in law? 9. Before embarking upon consideration of facts of the case, I deem it appropriate to notice the objects and reasons behind the enactment and the provisions of the Act insofar as they are germane. The objects and reasons to bring in the subject Act are as follows:- An Act to make provisions to deal with the problem of the Black money that is undisclosed foreign income and assets, the procedure for dealing with such income and assets and to provide for imposition of tax on any undisclosed foreign income and asset held outside India and for matters connected therewith or incidental thereto Be it enacted by Parliament in the Sixty-sixth Year of the Republic of India as follows: Statement of Objects and Reasons. Stashing away of black money abroad by some people with intent to evade taxes has been a matter of deep concern to the nation. Black Money is a common expression used in reference to tax-evaded income. Evasion of tax robs the natio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act or any other authority under any law for the time being in force or on coming of any information to his notice, serve on any person, a notice requiring him on a date to be specified to produce or cause to be produced such accounts or documents or evidence as the Assessing Officer may require for the purposes of this Act and may, from time to time, serve further notices requiring the production of such other accounts or documents or evidence as he may require. (2) The Assessing Officer may make such inquiry, as he considers necessary, for the purpose of obtaining full information in respect of undisclosed foreign income and asset of any person for the relevant financial year or years. (3) The Assessing Officer, after considering such accounts, documents or evidence, as he has obtained under sub-section (1), and after taking into account any relevant material which he has gathered, under sub-section (2) and any other evidence produced by the assessee, shall by an order in writing, assess [or reassess] the undisclosed foreign income and asset and determine the sum payable by the assessee. (4) If any person fails to comply with all the terms of the notice under sub-section (1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or imposable under this Act or the payment thereof shall include a case where any person (i) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or (ii) makes or causes to be made any false entry or statement in such books of account or other documents; or (iii) willlfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or (iv) causes any other circumstance to exist which will have the effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof. 52. Punishment for false statement in verification. If a person, makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, 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. Chapter-VI deals with tax complian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn income and asset , to mean total amount of undisclosed income of an assessee from a source located outside India and the value thereof, the computation is referable to Sections 4 and 5 of the Act. Chapter-II deals with basis of charge . Charge of tax is under Section 3. Therefore, Section 3 becomes a charging section. Section 10 deals with assessment . For the purpose of assessment or re-assessment, a notice is to be issued on any person for production of accounts or documents or evidence which may be required for the purpose of the Act. What the Assessing Officer would undertake is dealt with under sub-sections (2) to (4) of Section 10. Section 50 which comes under Chapter-V dealing with offences and prosecutions and punishes a person on his failure to furnish in the return of income or any information about an asset located outside India. Section 51 deals with willful attempt of an assessee to evade tax. Section 52 deals with a statement of the assessee which is found to be false on verification of a document which would become an offence under the Act. Section 72 which deals with removal of doubts is what forms the fulcrum of the issue in the lis. Whenever doubts would occur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Hence, his presence may kindly be dispensed with in accordance with u/s 256 of The Code of Criminal Procedure. 2) The complainant submits that the Principal Director of Income Tax (Investigation), Panaji has authorized the filing of the complaint vide his Sanction Order dt.: 25/03/2019. 3) The accused is assessable to tax under the jurisdiction of Deputy Commissioner of Income Tax, Circle-1, Belagavi; the assessment under the Act of the accused is under progress with Deputy Director of Income Tax (Inv.), Unit-1, Belagavi. That the Act will henceforth called as the Act in the top-numbered case for brevity and convenience. 4) Show cause notice u/s. 52 of the Act was issued to the accused on 31.01.2019. As per the information received from tax authorities of British Virgin Islands (BVI) and Singapore establishes that the accused was a director of Oriental success Universal Corporation (OSUC) Limited. Information so received also establishes that the accused was one of the beneficial owners of the bank account no. 152007 of the Oriental Success Universal Corporation (OSUC) Limited maintained with UBS Bank, Singapore. The said bank account shows credits of USD 16,000 on 08.01.2010 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal Success Universal Corporation Ltd, BVI along with her description as the director of the said entity which has also been used as one of the KYC document. (iv) Singapore Tax Authorities have also provided the bank statement of the said account maintained with UBS AG, Singapore and as per the analysis of the said account, two major deposits amounting to USD 16,000 and USD 40,000, were credited in the said account on 08.01.2010 and 16.03.2010 respectively. (v) The signatures of the accused on all statements recorded before the Assistant Director of Income Tax (Inv.), Unit-1, Belagavi match with her signatures on the documents provided by UBS AG through Inland Revenue Authority of Singapore. 6) However, the accused has made false statement u/s 8 (1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 recorded on 09.04.2018 in the office of Assistant Director of Income Tax(Inv.), Unit-1, Belagavi. The accused has denied having any interest in any foreign entity located outside India or having beneficial ownership of the foreign bank account as discussed above. The accused has failed to provide correct information regarding his interests in Ori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stated that her personal details have been misused but it evident from the information received from UBS, Singapore that the accused himself has signed on the 'Corporate Certificate' that contains the passport numbers of the accused and her family members. It is clearly mentioned on the 'Corporate Certificate' that the specimen signatures set out above are the authentic signatures of the named persons . The 'Corporate Certificate' has been certified by the father (Shri. Arvind Balakrishna Gogte) and mother (Smt. Mangal Arvind Gogte) of the accused. The signature of the accused on the 'Corporate Certificate' is the same as the signature of the accused on statement recorded u/s 8 (1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Therefore, accused statement that her personal details like passport number, etc had been misused is false. 9) The accused in her reply dated 14.03.2019 raised objections regarding jurisdiction of the undersigned to issue show cause notices for prosecution. As per accused reply, section 55 of the Act does not mention Principal Director of Income Tax as sanctioning authority. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cused. 12) In view of the above, the accused is liable to be prosecuted for the offence punishable u/s 52 of the Black Money (Undisclosed Foreign Income and Assets) 13) The offence is committed within the jurisdiction of this hon'ble Court. Hence this hon'ble is competent to try the offence. PRAYER WHEREFORE, the complainant prays that this hon'ble Court may be pleased take cognizance of the offence punishable u/s 52 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, summon the accused, him and punish him in accordance with law in the interest of justice. Place: Belagavi Date: 29/03/2019 (Emphasis added) The crux of the complaint is that UBS Bank, Singapore has in its statement divulged that the petitioners in the years 2009-10 had deposited US$16000 and US$40000 in two different transactions and that would become an offence under Sections 50 and 52 of the Act. Section 50 makes it an offence if the assessee fails to furnish any information of an asset located outside India including financial interest. As on the date of the Act coming into force, there was neither any financial interest of the petitioners nor any foreign asset, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manner provided under Section 421 (1). This would, however, be without the necessity for recording any special reasons. This is because Section 421 (1) proviso contains the disjunctive or following the recommendation of the Law Commission, that the proviso to old Section 386 (1) should not be a bar to the issue of a warrant for levy of fine, even when a sentence of imprisonment for default has been fully undergone. The last part inserted into the proviso to Section 421 (1) as a result of this recommendation of the Law Commission is a category by itself which applies to compensation payable out of a fine under Section 357 (1) and, by applying the fiction contained in Section 431, to compensation payable under Section 357 (3). 28. As is well known, a legal fiction is not to be extended beyond the purpose for which it is created or beyond the language of the section by which it is created. For example, see Prakash H. Jain v. Marie Fernandes [Prakash H. Jain v. Marie Fernandes, (2003) 8 SCC 431 at p. 438] . However, once the purpose of the legal fiction is ascertained, full effect must be given, and it should be carried to its logical conclusion. This is clear from the celebrated pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SHIV BAHADUR SINGH v. STATE OF VINDHYA PRADESH (1953) 2 SCC 111. In the said judgment the Apex Court interprets Article 20 of the Constitution of India. Facts obtaining before the Supreme Court are noticed at paragraphs 1 to 5. Based upon the said facts, the Apex Court holds as follows: 17. This article in its broad import has been enacted to prohibit convictions and sentences under ex post facto laws. The principle underlying such prohibition has been very elaborately discussed and pointed out in the very learned judgment of Willes, J. in the well-known case of Phillips v. Eyre [Phillips v. Eyre, (1870) LR 6 QB 1 at pp. 23 and 25 ] and also by the Supreme Court of USA in Calder v. Bull [Calder v. Bull, 1 L Ed 648 at p. 649 : 3 US (3 Dall) 386 (1798)]. In the English case it is explained that ex post facto laws are laws which voided and punished what had been lawful when done. There can be no doubt as to the paramount importance of the principle that such ex post facto laws, which retrospectively create offences and punish them are bad as being highly inequitable and unjust. In the English system of jurisprudence repugnance of such laws to universal notions of fairness and justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... future operation of the fundamental right declared in Article 20 may also in certain cases result from acts and situations which had their commencement in the pre-Constitution period. 20. In R. v. St. Mary's, Whitechapel Inhabitants [R. v. St. Mary's, Whitechapel Inhabitants, (1848) 12 QB 120 : 116 ER 811 at p. 814] Lord Denman, C.J. pointed out that a statute which in its direct operation is prospective cannot properly be called a retrospective statute because a part of the requisites for its action is drawn from a time antecedent to its passing. The general principle therefore that the fundamental rights have no retrospective operation is not in any way affected by giving the fullest effect to the wording of Article 20. This article must accordingly be taken to prohibit all convictions or subjections to penalty after the Constitution in respect of ex post facto laws whether the same was a post-Constitution law or a pre-Constitution law. That such is the intendment of the wording used in Article 20 (1) is confirmed by the similar wording used in Articles 20 (2) and 20 (3). Under Article 20 (2), for instance, it cannot be reasonably urged that the prohibition of double jeo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the provision would not pass muster of Article 20 of the Constitution of India. The said judgment has stood the test of time. 14. The Apex Court, after the Act coming into force, in the case of UNION OF INDIA v. GAUTAM KHAITAN (2019) 10 SCC 108 considering the tenor of the Act has held as follows: 15. It could therefore be seen 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. 16. The offences in respect of which sanction has been granted are under Sections 50 and 51 of the Black Money Act, which read thus: 50. Punishment 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 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (1) or sub-section (4) or sub-section (5) of Section 139 of the Income Tax 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 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. 18. The penalty of the offences under Section 51 is for wilful attempt in any manner whatsoever to evade the payment of any tax, penalty or interest chargeable or imposable under the Income Tax Act. The punishment provided under sub-section (1) is for rigorous imprisonment for a term which shall not be less than three years but which may extend to ten years and with fine. In respect to any other person not covered by sub-section (1) of Section 51, the 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 fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermined 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. As such, we find that the High Court was not right in holding that, by the notification/order impugned before it, the penal provisions were made retrospectively applicable. The crux of the case before the Apex Court or the finding as could be gathered from paragraph-20 supra is that an assessee if he fails to take benefit of Section 59 and it remains a fact that the assets are not disclosed, penal provisions under Sections 50 and 51 of the Act would kick in. A reading of the afore-quoted judgment of the Apex Court would make it clear that the question of retrospective applicability of Sections 50 and 51 qua Article 20 of the Constitution of India was not even an issue in the case before the ..... 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