Bombay HC asks I-T dept how Act can have retrospective effect in Anil Ambani Black Money Act notice

The Bombay High Court questioned the Income Tax department’s move seeking to prosecute Reliance ADAG chairman Anil Ambani under the Black Money Act for alleged tax evasion, and asked how Acts criminalising certain action can have a retrospective effect.

A division bench of Justices Gautam Patel and S G Dige, while hearing a petition by Ambani challenging a show cause notice issued to him by the I-T department, asked how a person conducting himself or herself in a certain manner will know what the government is going to do in future.

The high court posted the matter for hearing on February 20 and extended its September 2022 order directing the I-T department to not take any coercive action against Ambani till then.

The I-T department had issued a notice to Ambani on August 8, 2022, for allegedly evading Rs 420 crore in taxes on undisclosed funds worth more than Rs 814 crore held in two Swiss bank accounts.

As per the department's notice, Ambani was liable to be prosecuted under Sections 50 and 51 of the Black Money (undisclosed foreign income and assets) Imposition of Tax Act of 2015, which stipulates a maximum punishment of 10 years imprisonment with a fine.

The department has charged Ambani (63) with wilful evasion, saying he intentionally did not disclose his foreign bank account details and financial interests to Indian tax authorities.

A person behaves in a certain manner.then you (government) criminalise it with retrospective effect. How does a person then conduct himself or herself, Justice Patel said. You can say that henceforth a person cannot do this action that is fine but how can it have a retrospective effect? You can lay down a time period from which the particular action is an offence, he said.

According to the I-T notice, Ambani was an economic contributor as well as beneficial owner of a Bahamas-based entity called Diamond Trust and another company called Northern Atlantic Trading Unlimited (NATU) which was incorporated in the British Virgin Islands (BVI).

The I-T department alleged that Ambani failed to disclose these foreign assets in his income tax return (ITR) filings and hence contravened provisions of the Black Money Act, brought by the Narendra Modi government.