Union of India and Ors. v. Gautam Khaitan
[Citation -2019-LL-1015-23]

Citation 2019-LL-1015-23
Appellant Name Union of India and Ors.
Respondent Name Gautam Khaitan
Court SUPREME COURT
Relevant Act Other Acts
Date of Order 15/10/2019
Assessment Year 2019-20
Judgment View Judgment
Keyword Tags undisclosed asset located outside india • undisclosed foreign income • undisclosed income • unaccounted money • imposition of tax • beneficial owner • black money • evade tax
Bot Summary: The proviso to sub section of Section 3 of the Black Money Act provides, that undisclosed assets located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer. A bare reading of the provisions of Section 3 read with Section 2(9)(d) of the Black Money Act would 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. If any person, being a resident other than not ordinarily resident in India within the meaning of clause of section 6 of the Income tax Act, who has furnished the return of income for any previous year under sub section or sub section or sub section of section 139 of that Act, wilfully fails to furnish in such return any information relating to an asset located outside India, held by him, as 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. Section 50 provides that if any person, being a resident other than not ordinarily resident in India, who has furnished the return of income for any previous year under sub section or sub section or sub section of Section 139 of the Income tax Act, wilfully fails to furnish in such return any information relating to an asset located outside India, held by a beneficial owner or 10 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. An anomalous situation was arising if the date under sub section 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. Even if there was no change of date in sub section 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 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.


1 REPORTABLE IN SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL No.1563 OF 2019 (Arising out of S.L.P.(Crl.) No. 4911 of 2019) UNION OF INDIA AND ORS. APPELLANT(S) VERSUS GAUTAM KHAITAN RESPONDENT(S) JUDGMENT B.R. GAVAI, J. Leave granted. 2. present appeal challenges interim order passed by Division Bench of Delhi High Court in Writ Petition (Crl.) No. 618 of 2019 dated 16.05.2019 thereby, restraining appellants herein from taking and/or continuing any action Signature Not Verified against writ petitioner (respondent herein) pursuant to Digitally signed by SATISH KUMAR YADAV Date: 2019.10.15 17:00:45 IST Reason: Order dated 22.01.2019 under Section 55 of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax 2 Act, 2015 (hereinafter referred to as Black Money Act ) passed by Appellant No. 2 herein. 3. We have heard Mr. Tushar Mehta, learned Solicitor General appearing on behalf of appellants, and Mr. P.V. Kapur, learned senior counsel appearing on behalf of sole respondent. 4. short question that falls for consideration is, as to whether High Court was right in observing that while exercise of powers under provisions of Sections 85 and 86 of Black Money Act, Central Government has made said Act retrospectively applicable from 01.07.2015 and passed restraint order. 5. From Statement of Objects and Reasons, it could be seen that Black Money Act has been enacted for following purposes : (a) To unearth black money stashed in foreign countries; and (b) To prevent unaccounted money going abroad. (c) To punish persons indulging in illegitimate means of generating money causing loss to revenue (d) To prevent illegitimate income and assets kept outside country from being utilised in ways which are detrimental to India s social, economic and strategic interest and its national security. 3 6. Black Money Act has been passed by Parliament on 11.05.2015 and it has received Presidential assent on 26.05.2015. Sub section (3) of Section 1 provides, that save as otherwise provided in said Act, it shall come into force on 1st day of April, 2016. However, by notification/ order notified on 01.07.2015, which have been impugned before High Court, it has been provided, that Black Money Act shall come into force on 01.07.2015, i.e., date on which order is issued under provisions of sub section (1) of Section 86 of Black Money Act. 7. It will be relevant to refer to Section 3 of Black Money Act, which is charging section. 3. Charge of Tax (1) There shall be charged on every assessee for every assessment year commencing on or after 1st day of April, 2016, subject to provisions of this Act, tax in respect of his total undisclosed foreign income and asset of previous year at rate of thirty per cent of such undisclosed income and asset: Provided that undisclosed asset located outside India shall be charged to tax on its value in previous year in which such asset comes to notice of Assessing Officer. (2) For purposes of this section, value of undisclosed asset means fair market value of asset (including financial interest in any entity) determined in such manner as may be prescribed. 4 8. It could thus be seen, that Section 3 provides that tax shall be charged on every assessee for every assessment year commencing on or after 1st day of April, 2016 in respect of his total undisclosed foreign income and assets of previous year. rate of said tax has been quantified at thirty per cent. proviso to sub section (1) of Section 3 of Black Money Act provides, that undisclosed assets located outside India shall be charged to tax on its value in previous year in which such asset comes to notice of Assessing Officer. 9. It could thus clearly be seen, that proviso to sub section (1) of Section 3 of Black Money Act, makes it clear that undisclosed asset located outside India shall be charged to tax on its value in previous year in which, such asset comes to notice of Assessing Officer. Clause (9) of Section 2 of Black Money Act defines previous year . Four different definitions have been given in sub clauses (a), (b), (c) and (d). For present matter, sub clause (d) of clause (9) of Section 2 would be relevant, which reads thus: (9) previous year means (a) (b) 5 (c) (d) period of twelve months commencing on 1st day of April of relevant year in any other case, and which immediately precedes assessment year. 10. It could thus be seen, that previous year in present case would mean period of twelve months commencing on 1st day of April of relevant year and which immediately precedes assessment year. 11. bare reading of provisions of Section 3 read with Section 2(9)(d) of Black Money Act would unambiguously show, that legislative intent insofar as charging tax on undisclosed asset located outside India is concerned, is to charge tax on its value in previous year in which such asset comes to notice of Assessing Officer. previous year in present case would be period of twelve months commencing on 1st day of April of relevant year and which immediately precedes assessment year. 12. It could thus be seen, that Section 3 read with Section 2 (9)(d) of Black Money Act would permit Assessing Officer, while assessing case of assessee for assessment year commencing after 01.04.2016, to bring undisclosed asset located outside India under tax net on value of 6 said property within period of twelve months, prior to date on which such asset comes to notice of Assessing Officer. By virtue of these provisions, if such asset comes to notice of Assessing Officer on 01.04.2016, he could charge such asset(s) on basis of its value as would be ascertained in previous year ending on 31.03.2016. perusal of Section 3 of Black Money Act would further reveal, that what is relevant is date on which Assessing Officer notices acquisition by assessee of undisclosed asset located outside India. However, for purposes of taxation, value of such asset has to be ascertained as is in immediate previous year. 13. perusal of Section 59 of Black Money Act would further reveal, that opportunity is given to assessee to make declaration in respect of any undisclosed asset located outside India and acquired from income chargeable to tax under Income tax Act, for any assessment year prior to assessment year beginning on 01.04.2016. Section 59 further provides, that such declaration has to be made on or after date of commencement of Black Money Act, however, before date to be notified by Central Government. Central Government, in exercise of powers under Section 59 of Black Money Act, published Notification on 01.07.2015, 7 notifying 30.09.2015 as date on or before which person is required to make declaration in respect of undisclosed asset located outside India. It also notifies 31.12.2015 as date on or before which person shall pay tax and penalty in respect of such undisclosed asset located outside India. 14. It could thus be seen, that Section 59 of Black Money Act gives opportunity to assessees who have acquired asset located outside India, which is acquired from income chargeable to tax under Income tax Act. assessee has been given opportunity to declare such asset and pay tax and penalty thereon. consequences of non declaration have been provided under Section 72(c) of Black Money Act, which reads thus: Section 72 Removal of doubts. For removal of doubts, it is hereby declared that (a) (b) (c) where any asset has been acquired or made prior to commencement of this Act, and no declaration in respect of such asset is made under this Chapter, such asset shall be deemed to have been acquired or made in year in which notice under section 10 is issued by Assessing Officer and provisions of this Act shall apply accordingly. 15. It could therefore be seen, that where no declaration in respect of asset covered under Black Money Act is made, 8 such asset would be deemed to have been acquired or made in year in which notice under Section 10 is issued by Assessing Officer and provisions of Act shall apply accordingly. 16. offences in respect of which sanction has been granted are under Sections 50 and 51 of Black Money Act, which read thus : 50. Punishment for failure to furnish in return of income, any information about asset (including financial interest in any entity) located outside India. If any person, being resident other than not ordinarily resident in India within meaning of clause (6) of section 6 of Income tax Act, who has furnished return of income for any previous year under sub section (1) or sub section (4) or sub section (5) of section 139 of that Act, wilfully fails to furnish in such return any information relating to asset (including financial interest in any entity) located outside India, held by him, as beneficial owner or otherwise or in which he was beneficiary, at any time during such previous year, or disclose any income from source outside India, he shall be punishable with rigorous imprisonment for term which shall not be less than six months but which may extend to seven years and with fine. 51. Punishment for wilful attempt to evade tax (1) If person, being resident other than not ordinarily resident in India within meaning of clause (6) of section 6 of Income tax Act, wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall be punishable with rigorous imprisonment for term which shall not be less than three years but which may extend to ten years and with fine. 9 (2) If person wilfully attempts in any manner whatsoever to evade payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for term which shall not be less than three months but which may extend to three years and shall, in discretion of court, also be liable to fine. (3) For purposes of this section, wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or payment thereof shall include 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 false entry or statement; (ii) makes or causes to be made any false entry or statement in such books of account or other documents; or (iii) wilfully 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 effect of enabling such person to evade any tax, penalty or interest chargeable or imposable under this Act or payment thereof. 17. Section 50 provides that if any person, being resident other than not ordinarily resident in India, who has furnished return of income for any previous year under sub section (1) or sub section (4) or sub section (5) of Section 139 of Income tax Act, wilfully fails to furnish in such return any information relating to asset (including financial interest in any entity) located outside India, held by beneficial owner or 10 otherwise or in which he was beneficiary, at any time during such previous year, or disclose any income from source outside India, he shall be punishable with rigorous imprisonment for term which shall not be less than six months but which may extend to seven years and with fine. 18. penalty of offences under Section 51 is for wilful attempt in any manner whatsoever to evade payment of any tax, penalty or interest chargeable or imposable under Income tax Act. punishment provided under sub section (1) is for rigorous imprisonment for 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, punishment provided is rigorous imprisonment for term which shall not be less than three months but which may extend to three years and shall, in discretion of court, also be liable to fine. 19. It could therefore be seen, that scheme of Black Money Act is to provide stringent measures for curbing menace of black money. Various offences have been defined and stringent punishments have also been provided. However, scheme of Black Money Act also provided one time opportunity to make declaration in respect of any undisclosed 11 asset located outside India and acquired from income chargeable to tax under Income tax Act. Section 59 of Black Money Act provided that such declaration was to be made on or after date of commencement of Black Money Act, but on or before date notified by Central Government in Official Gazette. date so notified for making declaration is 30.09.2015 whereas, date for payment of tax and penalty was notified to be 31.12.2015. As such, anomalous situation was arising if date under sub section (3) of Section 1 of Black Money Act was to be retained as 01.04.2016, then period for making declaration would have been lapsed by 30.09.2015 and date for payment of tax and penalty would have also been lapsed by 31.12.2015. However, in view of date originally prescribed by sub section (3) of Section 1 of Black Money Act, such declaration could have been made only after 01.04.2016. Therefore, in order to give benefit to assessee(s) and to remove anomalies date 01.07.2015 has been substituted in sub section (3) of Section 1 of Black Money Act, in place of 01.04.2016. This is done, so as to enable assessee desiring to take benefit of Section 59 of Black Money Act. By doing so, assessees, who desired to take benefit of one time opportunity, could 12 have made declaration prior to 30th September, 2015 and paid tax and penalty prior to 31st December, 2015. 20. It would further be relevant to note that sub section (3) of Section 1 of Black Money Act, itself provides that save as otherwise provided in this Act, it shall come into force on 1 st day of July, 2015. conjoint reading of various provisions would reveal, that Assessing Officer can charge taxes only from assessment year commencing on or after 01.04.2016. However, value of said asset has to be as per its valuation in previous year. As such, even if there was no change of date in sub section (3) of Section 1 of Black Money Act, value of asset was to be determined as per its valuation in previous year. date has been changed only for purpose of enabling assessee(s) to take benefit of Section 59 of Black Money Act. power has been exercised only in order to remove difficulties. penal provisions under Sections 50 and 51 of Black Money Act would come into play only when assessee has failed to take benefit of Section 59 and neither disclosed assets covered by Black Money Act nor paid tax and penalty thereon. As such, we find that High Court was not right in holding that, by 13 notification/order impugned before it, penal provisions were made retrospectively applicable. 21. In any case, in factual scenario of present case, it would reveal, that assessment year in consideration was 2019 2020 and previous year relevant to assessment year was year ending on 31.03.2019. 22. In that view of matter, we find that interim order passed by High Court is not sustainable in law, same is quashed and set aside. 23. High Court is requested to decide writ petition on its own merits. However, we clarify that observations made by us are only for purposes of examining correctness of interim order passed by High Court and High Court would decide writ petition uninfluenced by same. 24. appeal stands allowed as indicated above. J. [ARUN MISHRA] J. [M. R. SHAH] J. [B.R. GAVAI] NEW DELHI; OCTOBER 15, 2019. Union of India and Ors. v. Gautam Khaitan
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