The Bombay High Court on Wednesday granted interim protection to industrialist Anil Ambani from prosecution and penalty in an alleged tax evasion case, while admitting his challenge to the constitutional validity of certain provisions of the Black Money Act.
Court's Decision and Arguments
Ambani had approached the court challenging provisions of the Undisclosed Foreign Income and Assets and Imposition of Tax Act, 2015, calling them ultra vires (beyond the powers or violative) to the Constitution of India. A bench of Justices B P Colabawalla and Firdosh Pooniwalla on Tuesday noted that similar petitions against the Act were already pending before the court and admitted Ambani's plea. The matter will be taken up for final hearing in due course.
The court directed the Union government to file its affidavit in response to Ambani's petition. The HC noted that an assessment order against Ambani had already been passed and that he had filed an appeal before the Commissioner of Income Tax (Appeals).
"The said appeal can proceed and orders can be passed thereon. However, we clarify that no coercive action shall be taken against the petitioner, including that of prosecution and penalty, till the hearing and final disposal of this writ petition," the HC said.
Background of the Case
The Income Tax department had issued a notice to Ambani on August 8, 2022, alleging that he evaded Rs 420 crore in taxes on undisclosed funds of more than Rs 814 crore held in two Swiss bank accounts. The department said Ambani was liable to be prosecuted under Sections 50 and 51 of the Black Money Act, which provide for a maximum punishment of 10 years imprisonment along with a fine. The tax authorities accused Ambani of "wilful" evasion, claiming he "intentionally" did not disclose his foreign bank accounts and financial interests to Indian authorities.
Ambani's Arguments
In his petition, Ambani argued that the Black Money Act came into force in 2015, while the alleged transactions relate to assessment years 2006-2007 and 2010-2011. He claimed the provisions of the Act cannot be applied retrospectively. According to the I-T department's notice, Ambani was an "economic contributor as well as beneficial owner" of a Bahamas-based entity called 'Diamond Trust' and Northern Atlantic Trading Unlimited (NATU), incorporated in the British Virgin Islands (BVI). The department alleged that Ambani "failed to disclose" these foreign assets in his income tax returns and violated provisions of the Black Money Act. The tax authorities assessed the total value of the undisclosed funds in the two accounts at Rs 8,14,27,95,784, with tax payable on the amount estimated at Rs 4,20,29,04,040.
