No Prosecution for Non-disclosure of Foreign Assets in ITR if It Occurred Before Enactment of Black Money Act | HC

Case Details: Smt. Dhanashree Ravindra Pandit v. Deputy Director of Income-tax (Investigation) - [2024] 163 taxmann.com 695 (Karnataka)

Judiciary and Counsel Details

• M. Nagaprasanna, J.
• Sangram S. Kulkarni, Adv. for the Petitioner.
• Y.V. Raviraj & Tulajappa Kalaburgi, Advs. for the Respondent.

Facts of the Case

The assessee was the Directors of two British Virgin Island Companies. A complaint under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (‘BM Act’) was filed against the assessee for not disclosing the information of the assets located outside India, including financial interest in any entity, in the income tax return (ITR).

The complaint was filed under section 50 of the BM Act. Section 50 makes it an offence if the assessee fails to furnish any information about an asset located outside India, including financial interest. The section further provides for punishment with rigorous imprisonment, which shall not be less than 6 months but may extend to 7 years, and with a fine.

Assessee filed a writ petition to the Karnataka High Court contending that the complaint was filed for the act committed in 2009. The BM Act came into force on 01-07-2015. Thus, the said act does not fall within the ambit of Article 20(1) of the Constitution of India, which provides that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence.

High Court Held

The High Court ruled that the Apex Court, in the case of Rao Shiv Bahadur Singh v. State of Vindhya Pradesh (1953 AIR 394), held that Article 20 of the Constitution of India grants a fundamental right to a person. This right ensures that a person cannot be convicted of an offence unless it violates the law in force at the time of the act, nor can they be subjected to a penalty greater than that which could have been imposed under the law in force at that time.

The Apex Court held that a legal fiction or a deeming fiction should not be extended beyond the purpose of the Act for which it is created or beyond the language deployed in the enactment. If the deeming section is given credence and criminal law is affirmed, it would defeat the tenor of Article 20 of the Constitution, as every post-facto law could be made retrospective.

In the present case, the assessee was prosecuted for the act committed before the BM Act came into force. The BM Act came into force on 01-07-2015, and the assessee was prosecuted for the act committed in 2009. Therefore, the assessee cannot be convicted of any offence except for violating the law in force at the time of committing the act charged as an offence.

List of Cases Referred to

• Union of India v. Gautam Khaitan (2019) 10 SCC 108 (para 14).