UNION OF INDIA AND ORS. versus GAUTAM KHAITAN on 15 October 2019

[2019] 13 S.C.R. 721

UNION OF INDIA AND ORS.

v.

GAUTAM KHAITAN

(Criminal Appeal No.1563 of 2019)

OCTOBER 15, 2019

[ARUN MISHRA, M. R. SHAH AND B. R. GAVAI, JJ.]

Black Money (Undisclosed Foreign Income and Assets) andImposition of Tax Act, 2015 – ss.1(3), 2(9)(d), 3, 9, 10, 50, 51,55, 59, 72, 85 & 86 – 2015 Act, if made retrospectively applicable– Notification/Order notified on 01.07.2015 providing that the Actshall come into force on 01.07.2015– Interim order passed by theHigh Court restraining the appellants from taking and/orcontinuing any action against the respondent pursuant to the Orderpassed u/s.55 by the appellant no.2 – High Court inter alia observedthat while exercising the powers u/ss.85 & 86, the CentralGovernment made the said Act retrospectively applicable from01.07.2015 and passed restraint order – On appeal, held:BlackMoney Act provides stringent measures for curbing the menace ofblack money – Sub-s.(3) of s.1 provides, that save as otherwiseprovided in the said Act, it shall come into force on the 1[st] day ofApril, 2016 – Various offences have been defined and stringentpunishments have also been provided– However, the scheme of theAct also provided one time opportunity to make declaration inrespect of any undisclosed asset located outside India and acquiredfrom income chargeable to tax under the Income-tax Act –s.59provided that such declaration was to be made on or after the dateof commencement of the Act, but on or before a date notified bythe Central Government in the Official Gazette – Date so notifiedfor making declaration is 30.09.2015 whereas, the date forpayment of tax and penalty was notified to be 31.12.2015 –Assuch, an anomalous situation was arising if the date u/s.1(3) wasto be retained as 01.04.2016, then the period for makingdeclaration would have lapsed by 30.09.2015 and the date forpayment of tax and penalty would have also lapsed by31.12.2015– However, in view of the date originally prescribed bys.1(3), such declaration could have been made only after01.04.2016 – Therefore, in order to give the benefit to the

721

A

B

CDE

FGH

SUPREME COURT REPORTS

Aassessee(s) and to remove the anomalies, the date 01.07.2015 wassubstituted in s.1(3), in place of 01.04.2016 –By doing so, theassessees, who desired to take the benefit of one time opportunity,could have made declaration prior to 30.09.2015 and paid the taxand penalty prior to 31.12.2015 – Further, conjoint reading of thevarious provisions reveal that the Assessing Officer can charge theBtaxes only from the assessment year commencing on or after01.04.2016 – However, the value of the said asset has to be asper its valuation in the previous year – As such, even if there wasno change of date in s.1(3), the value of the asset was to bedetermined as per its valuation in the previous year – Date hasCbeen changed only for the purpose of enabling the assessee(s) totake benefit of s.59 – Power was exercised only in order to removedifficulties – In any case, in the present case, the assessment yearin consideration was 2019-2020 and the previous year relevantto the assessment year was the year ending on 31.03.2019 –Interim order passed by the High Court holding that by theDnotification/order dated 01.07.2015, the penal provisions weremade retrospectively applicable is set aside – High Court to decidethe writ petition on its own merits, uninfluenced by the presentobservations made only for the purposes of examining thecorrectness of the interim order – Income Tax Act, 1961 – s.139.

EAllowing the appeal, the Court

Conclusion

EAllowing the appeal, the Court

HELD: 1.1 A perusal of Section 59 of the Black Money(Undisclosed Foreign Income and Assets) and Imposition of TaxAct, 2015 would further reveal, that an opportunity is given tothe assessee to make a declaration in respect of any undisclosedFasset located outside India and acquired from income chargeableto tax under the Income-tax Act, for any assessment year priorto the assessment year beginning on 01.04.2016. Section 59further provides, that such a declaration has to be made on orafter the date of commencement of the Black Money Act,however, before the date to be notified by the CentralGGovernment. The consequences of the non-declaration havebeen provided under Section 72(c) of the Black Money Act.Where no declaration in respect of the asset covered under theBlack Money Act is made, such asset would be deemed to havebeen acquired or made in the year in which a notice underHSection 10 is issued by the Assessing Officer and the provisions of the Act shall apply accordingly. The offences in respect ofwhich sanction has been granted are under Sections 50 and 51of the Black Money Act. [Paras 13, 16] [728-A-B-D-G-H; 729-A]

1.2 The scheme of the Black Money Act is to providestringent measures for curbing the menace of black money.Various offences have been defined and stringent punishmentshave also been provided. However, the scheme of the BlackMoney Act also provided one time opportunity to make adeclaration in respect of any undisclosed asset located outsideIndia and acquired from income chargeable to tax under theIncome-tax Act. Section 59 of the Black Money Act providedthat such a declaration was to be made on or after the date ofcommencement of the Black Money Act, but on or before a datenotified by the Central Government in the Official Gazette. Thedate so notified for making a declaration is 30.09.2015 whereas,the date for payment of tax and penalty was notified to be31.12.2015. As such, an anomalous situation was arising if thedate under sub-section (3) of Section 1 of the Black Money Actwas to be retained as 01.04.2016, then the period for making adeclaration would have been lapsed by 30.09.2015 and the datefor payment of tax and penalty would have also been lapsed by31.12.2015. However, in view of the date originally prescribedby sub-section (3) of Section 1 of the Black Money Act, such adeclaration could have been made only after 01.04.2016.Therefore, in order to give the benefit to the assessee(s) andto remove the anomalies the date 01.07.2015 has beensubstituted in sub-section (3) of Section 1 of the Black MoneyAct, in place of 01.04.2016. This is done, so as to enable theassessee desiring to take benefit of Section 59 of the BlackMoney Act. By doing so, the assessees, who desired to takethe benefit of one time opportunity, could have made declarationprior to 30[th] September, 2015 and paid the tax and penalty priorto 31[st] December, 2015. Sub-section (3) of Section 1 of the BlackMoney Act, itself provides that save as otherwise provided inthis Act, it shall come into force on 1[st] day of July, 2015. Aconjoint reading of the various provisions would reveal, that theAssessing Officer can charge the taxes only from the assessmentyear commencing on or after 01.04.2016. However, the value A

BC

D

E

F

GH

A

BC

D

E

F

GH

Aof the said asset has to be as per its valuation in the previousyear. As such, even if there was no change of date in sub-section(3) of Section 1 of the Black Money Act, the value of the assetwas to be determined as per its valuation in the previous year.The date has been changed only for the purpose of enabling theassessee(s) to take benefit of Section 59 of the Black MoneyBAct. The power has been exercised only in order to removedifficulties. The penal provisions under Sections 50 and 51 ofthe Black Money Act would come into play only when anassessee has failed to take benefit of Section 59 and neitherdisclosed assets covered by the Black Money Act nor paid theCtax and penalty thereon. As such, the High Court was not rightin holding that, by the notification/order impugned before it, thepenal provisions were made retrospectively applicable. [Paras19-20] [731-A-H; 732-A-B]

1.3 In any case, in the factual scenario of the present case,Dthe assessment year in consideration was 2019-2020 and theprevious year relevant to the assessment year was the yearending on 31.03.2019. In that view of the matter, the interimorder passed by the High Court is not sustainable in law, thesame is quashed and set aside. The High Court is requested todecide the writ petition on its own merits. However, it is clarifiedEthat the observations made are only for the purposes ofexamining the correctness of the interim order passed by theHigh Court and the High Court would decide the writ petitionuninfluenced by the same. [Paras 21-23] [732-B-D]

CRIMINAL APPELLATE JURISDICTION : Criminal AppealFNo. 1563 of 2019.

From the Judgment and Order dated 16.05.2019 of the HighCourt of Delhi at New Delhi in Crl. M.A.No. 4336/2019 in W.P. (Crl.)No. 618/2019.GTushar Mehta, Solicitor General, Zoheb Hossain, Rajat Nair, KanuAggarwal, Piyush Goyal, Mrs. Anil Katiyar, Advs. for the Appellants.

P. V. Kapur, Siddharth Luthra, Sr. Advs., A. T. Patra, MadhavKhurana, Mrs. Roopa Dayal, V. K. Naghrath, Aditya Ghadge, SidhantKapur, Ms. Sheena T., Ms. Kaveri Gupta, Mrs. Bina Gupta, Advs. forHthe Respondent.

The Judgment of the Court was delivered by A

B. R. GAVAI, J.

1. Leave granted.

2. The present appeal challenges the interim order passed by theDivision Bench of the Delhi High Court in Writ Petition (Crl.) No. 618of 2019 dated 16.05.2019 thereby, restraining the appellants herein fromtaking and/or continuing any action against the writ petitioner (respondentherein) pursuant to the Order dated 22.01.2019 under Section 55 ofthe Black Money (Undisclosed Foreign Income and Assets) andImposition of Tax Act, 2015 (hereinafter referred to as the “BlackMoney Act”) passed by Appellant No. 2 herein.

B

C

3. We have heard Mr. Tushar Mehta, learned Solicitor Generalappearing on behalf of the appellants, and Mr. P.V. Kapur, learned seniorcounsel appearing on behalf of the sole respondent.

4. The short question that falls for consideration is, as to whetherthe High Court was right in observing that while exercise of the powersunder the provisions of Sections 85 and 86 of the Black Money Act,the Central Government has made the said Act retrospectivelyapplicable from 01.07.2015 and passed a restraint order.

D

5. From the Statement of Objects and Reasons, it could beseen that the Black Money Act has been enacted for the followingpurposes :

E

(a) To unearth the black money stashed in foreign countries;and (b) To prevent unaccounted money going abroad.

F

(c) To punish the persons indulging in illegitimate means ofgenerating money causing loss to the revenue (d) To prevent illegitimate income and assets kept outsidethe country from being utilised in ways which aredetrimental to India’s social, economic and strategicGinterest and its national security.

6. The Black Money Act has been passed by the Parliament on11.05.2015 and it has received Presidential assent on 26.05.2015. Sub-section (3) of Section 1 provides, that save as otherwise provided inthe said Act, it shall come into force on the 1[st] day of April, 2016.

H

AHowever, by the notification/ order notified on 01.07.2015, which havebeen impugned before the High Court, it has been provided, that theBlack Money Act shall come into force on 01.07.2015, i.e., the dateon which the order is issued under the provisions of sub-section (1) ofSection 86 of the Black Money Act.

B7. It will be relevant to refer to Section 3 of the Black MoneyAct, which is a charging section.

“3. Charge of Tax - (1) There shall be charged on everyassessee for every assessment year commencing on or after the1st day of April, 2016, subject to the provisions of this Act, a taxCin respect of his total undisclosed foreign income and asset ofthe previous year at the rate of thirty per cent of such undisclosedincome and asset:

Provided that an undisclosed asset located outside India shall becharged to tax on its value in the previous year in which suchDasset comes to the notice of the Assessing Officer.

(2) For the purposes of this section, “value of an undisclosedasset” means the fair market value of an asset (includingfinancial interest in any entity) determined in such manner as maybe prescribed.”

E

E8. It could thus be seen, that Section 3 provides that tax shall becharged on every assessee for every assessment year commencing onor after the 1[st] day of April, 2016 in respect of his total undisclosedforeign income and assets of the previous year. The rate of the saidtax has been quantified at thirty per cent. The proviso to sub-sectionF(1) of Section 3 of the Black Money Act provides, that undisclosedassets located outside India shall be charged to tax on its value in theprevious year in which such asset comes to the notice of the AssessingOfficer.

9. It could thus clearly be seen, that the proviso to sub-section(1) of Section 3 of the Black Money Act, makes it clear that theGundisclosed asset located outside India shall be charged to tax on itsvalue in previous year in which, such an asset comes to the notice ofAssessing Officer. Clause (9) of Section 2 of the Black Money Actdefines “previous year”. Four different definitions have been given insub-clauses (a), (b), (c) and (d). For the present matter, sub-clause (d)Hof clause (9) of Section 2 would be relevant, which reads thus:

“(9) “previous year” means—

(a) …

(b) …

(c) …

(d) the period of twelve months commencing on the 1st day ofApril of the relevant year in any other case, and whichimmediately precedes the assessment year.”

10. It could thus be seen, that the previous year in the presentcase would mean a period of twelve months commencing on the 1[st]day of April of the relevant year and which immediately precedes theassessment year.

11. A bare reading of the provisions of Section 3 read withSection 2(9)(d) of the Black Money Act would unambiguously show,that the legislative intent insofar as the charging tax on undisclosed assetlocated outside India is concerned, is to charge the tax on its value inthe previous year in which such asset comes to the notice of theAssessing Officer. The previous year in the present case would be aperiod of twelve months commencing on the 1[st] day of April of therelevant year and which immediately precedes the assessment year.

12. It could thus be seen, that Section 3 read with Section 2 (9)(d)of the Black Money Act would permit the Assessing Officer, whileassessing the case of an assessee for assessment year commencingafter 01.04.2016, to bring the undisclosed asset located outside Indiaunder the tax net on the value of the said property within a period oftwelve months, prior to the date on which such asset comes to the noticeof the Assessing Officer. By virtue of these provisions, if such assetcomes to the notice of Assessing Officer on 01.04.2016, he could chargesuch asset(s) on the basis of its value as would be ascertained in aprevious year ending on 31.03.2016. A perusal of Section 3 of the BlackMoney Act would further reveal, that what is relevant is the date onwhich the Assessing Officer notices the acquisition by an assessee ofundisclosed asset located outside India. However, for the purposes oftaxation, the value of such asset has to be ascertained as is in theimmediate previous year.

13. A perusal of Section 59 of the Black Money Act wouldfurther reveal, that an opportunity is given to the assessee to make a A

B

C

D

E

F

G

H

Adeclaration in respect of any undisclosed asset located outside Indiaand acquired from income chargeable to tax under the Income-tax Act,for any assessment year prior to the assessment year beginning on01.04.2016. Section 59 further provides, that such a declaration has tobe made on or after the date of commencement of the Black Money Act, however, before the date to be notified by the Central Government.BThe Central Government, in exercise of the powers under Section 59of the Black Money Act, published a Notification on 01.07.2015, notifying30.09.2015 as the date on or before which a person is required to makea declaration in respect of an undisclosed asset located outside India.It also notifies 31.12.2015 as the date on or before which the personCshall pay the tax and penalty in respect of such undisclosed asset locatedoutside India.

14. It could thus be seen, that Section 59 of the Black MoneyAct gives an opportunity to the assessees who have acquired an assetlocated outside India, which is acquired from income chargeable to taxDunder the Income-tax Act. The assessee has been given an opportunityto declare such asset and pay the tax and penalty thereon. Theconsequences of the non-declaration have been provided under Section72(c) of the Black Money Act, which reads thus:

“Section 72 Removal of doubts. – For the removal of doubts,Eit is hereby declared that- (a) …

(b) …

(c) where any asset has been acquired or made prior toFcommencement of this Act, and no declaration in respectof such asset is made under this Chapter, such asset shallbe deemed to have been acquired or made in the year inwhich a notice under section 10 is issued by the AssessingOfficer and the provisions of this Act shall applyGaccordingly.”

15. It could therefore be seen, that where no declaration inrespect of the asset covered under the Black Money Act is made, suchasset would be deemed to have been acquired or made in the year inwhich a notice under Section 10 is issued by the Assessing Officer andHthe provisions of the Act shall apply accordingly.

16. The offences in respect of which sanction has been grantedare under Sections 50 and 51 of the Black Money Act, which readthus :

A

“50. Punishment for failure to furnish in return of income,any information about an asset (including financial interestin any entity) located outside India.- If any person, being aresident other than not ordinarily resident in India within themeaning of clause (6) of section 6 of the Income-tax Act, whohas furnished the return of income for any previous year undersub-section (1) or sub-section (4) or sub-section (5) of section139 of that Act, wilfully fails to furnish in such return anyinformation relating to an asset (including financial interest in anyentity) located outside India, held by him, as a beneficial owneror otherwise or in which he was a beneficiary, at any time duringsuch previous year, or disclose any income from a source outsideIndia, he shall be punishable with rigorous imprisonment for aterm which shall not be less than six months but which may extendto seven years and with fine.

B

C

D

51. Punishment for wilful attempt to evade tax –

(1) If a person, being a resident other than not ordinarilyresident in India within the meaning of clause (6) ofsection 6 of the Income-tax Act, wilfully attempts in anymanner whatsoever to evade any tax, penalty or interestchargeable or imposable under this Act, he shall bepunishable with rigorous imprisonment for a term whichshall not be less than three years but which may extendto ten years and with fine.

E

F

(2) If a person wilfully attempts in any manner whatsoeverto evade the payment of any tax, penalty or interestunder this Act, he shall, without prejudice to any penaltythat may be imposable on him under any other provisionof this Act, be punishable with rigorous imprisonment forGa term which shall not be less than three months butwhich may extend to three years and shall, in thediscretion of the court, also be liable to fine.

(3) For the purposes of this section, a wilful attempt to evadeany tax, penalty or interest chargeable or imposable under H

this Act or the payment thereof shall include a casewhere any person—

A

(i) has in his possession or control any books ofaccount or other documents (being books ofaccount or other documents relevant to anyproceeding under this Act) containing a false entryor statement; B

(ii) makes or causes to be made any false entry orstatement in such books of account or otherdocuments; or C

(iii) wilfully omits or causes to be omitted any relevantentry or statement in such books of account or otherdocuments; or

(iv) causes any other circumstance to exist which willhave the effect of enabling such person to evadeany tax, penalty or interest chargeable or imposableunder this Act or the payment thereof.”

D

17. Section 50 provides that if any person, being a resident otherthan not ordinarily resident in India, who has furnished the return ofincome for any previous year under sub-section (1) or sub-section (4)Eor sub-section (5) of Section 139 of the Income-tax Act, wilfully failsto furnish in such return any information relating to an asset (includingfinancial interest in any entity) located outside India, held by a beneficialowner or otherwise or in which he was a beneficiary, at any time duringsuch previous year, or disclose any income from a source outside India,he shall be punishable with rigorous imprisonment for a term which shallFnot be less than six months but which may extend to seven years andwith fine.

18. The penalty of the offences under Section 51 is for wilfulattempt in any manner whatsoever to evade the payment of any tax,penalty or interest chargeable or imposable under the Income-tax Act.GThe punishment provided under sub-section (1) is for rigorousimprisonment for a term which shall not be less than three years butwhich may extend to ten years and with fine. In respect to any otherperson not covered by sub-section (1) of Section 51, the punishmentprovided is rigorous imprisonment for a term which shall not be lessthan three months but which may extend to three years and shall, inHthe discretion of the court, also be liable to fine.

19. It could therefore be seen, that the scheme of the BlackMoney Act is to provide stringent measures for curbing the menace ofblack money. Various offences have been defined and stringentpunishments have also been provided. However, the scheme of theBlack Money Act also provided one time opportunity to make adeclaration in respect of any undisclosed asset located outside Indiaand acquired from income chargeable to tax under the Income-tax Act.Section 59 of the Black Money Act provided that such a declarationwas to be made on or after the date of commencement of the BlackMoney Act, but on or before a date notified by the Central Governmentin the Official Gazette. The date so notified for making a declaration is30.09.2015 whereas, the date for payment of tax and penalty wasnotified to be 31.12.2015. As such, an anomalous situation was arisingif the date under sub-section (3) of Section 1 of the Black Money Actwas to be retained as 01.04.2016, then the period for making adeclaration would have been lapsed by 30.09.2015 and the date forpayment of tax and penalty would have also been lapsed by 31.12.2015.However, in view of the date originally prescribed by sub-section (3)of Section 1 of the Black Money Act, such a declaration could havebeen made only after 01.04.2016. Therefore, in order to give the benefitto the assessee(s) and to remove the anomalies the date 01.07.2015has been substituted in sub-section (3) of Section 1 of the Black MoneyAct, in place of 01.04.2016. This is done, so as to enable the assesseedesiring to take benefit of Section 59 of the Black Money Act. By doingso, the assessees, who desired to take the benefit of one timeopportunity, could have made declaration prior to 30[th] September, 2015and paid the tax and penalty prior to 31[st] December, 2015.

20. It would further be relevant to note that sub-section (3) ofSection 1 of the Black Money Act, itself provides that save as otherwiseprovided in this Act, it shall come into force on 1[st] day of July, 2015. Aconjoint reading of the various provisions would reveal, that theAssessing Officer can charge the taxes only from the assessment yearcommencing on or after 01.04.2016. However, the value of the saidasset has to be as per its valuation in the previous year. As such, evenif there was no change of date in sub-section (3) of Section 1 of theBlack Money Act, the value of the asset was to be determined as perits valuation in the previous year. The date has been changed only forthe purpose of enabling the assessee(s) to take benefit of Section 59of the Black Money Act. The power has been exercised only in order A

B

C

D

E

F

G

H

Ato remove difficulties. The penal provisions under Sections 50 and 51of the Black Money Act would come into play only when an assesseehas failed to take benefit of Section 59 and neither disclosed assetscovered 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, bythe notification/order impugned before it, the penal provisions were madeBretrospectively applicable.

21. In any case, in the factual scenario of the present case, itwould reveal, that the assessment year in consideration was 2019-2020and the previous year relevant to the assessment year was the yearending on 31.03.2019.

C

22. In that view of the matter, we find that the interim orderpassed by the High Court is not sustainable in law, the same is quashedand set aside.

23. The High Court is requested to decide the writ petition onDits own merits. However, we clarify that the observations made by usare only for the purposes of examining the correctness of the interimorder passed by the High Court and the High Court would decide thewrit petition uninfluenced by the same.

24. The appeal stands allowed as indicated above.

E

Divya Pandey

Appeal allowed.

F

G

H