Clarity likely soon on grey areas in black money law
Aug 8, 2024
Synopsis
The Delhi High Court has set August 23, 2024, for the final hearing on the Black Money Act, affecting individuals such as Robert Vadra and Deepak Talwar. Central issues include the retrospective application of the law and the timing of tax notices. The court has ruled out further adjournments, seeking to resolve longstanding disputes.
Bitterly fought questions on the contentious Black Money law, like its retrospective use and the validity of delayed notices, are heading towards a closure.
Stating that "no further adjournments shall be granted", the Delhi High Court has told the Income tax (I-T) department and around 50 individuals like Robert Vadra, Deepak Talwar, Gautam Khaitan and Dhruv Lamba, among others, who are under the glare of the tax office, to submit pleadings, rebuttals and rejoinders, before the final hearing, which is set to begin on August 23, 2024.
Even as specific facts of the various cases differ, the much awaited court proceeding is expected to resolve some of crucial and vexed legal questions around the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act (BMA) which came into effect from July 1, 2015.
The most significant question, which had triggered a raft of writ petitions, is whether the law can be invoked to tax and prosecute persons who had shut their unreported foreign bank accounts or liquidated offshore assets before the law came into force.
Can such wealth - often used interchangeably with income as they were never disclosed - be taxed? And, even if these can be taxed, can individuals who are beneficiaries of such overseas bank accounts, properties and discretionary trusts be prosecuted (under a law which did not exist when the alleged violations took place)?
Another question raised by some of the assesses in challenging the legal basis of the tax notices (under BMA) was the long gap between the information received by the I-T department on offshore assets and date of issuance of notices. Under the law, the I-T department has to send notice within 30 days from the end of the financial year when it receives information.
The retrospective element in BMA has turned out to be a hotly debated issue as the law empowers tax officials to go after foreign bank accounts and assets which were opened or acquired years, or even decades, ago, but discovered only recently by the I-T department.
Till now, the revenue authorities have received information through multiple channels. Beginning with the stolen information from HSBC Geneva and multiple data leaks like the Panama Papers, information on Indians having foreign assets are routinely shared by foreign financial institutions under the 'common reporting standards' introduced by OECD and signed by more than 100 countries to curb tax evasion.
"Whichever way the division bench of the Delhi High Court (comprising Justice Yashwant Varma and Justice Tara Vitasa Gunju) gives its ruling it would serve as a strong guidance note," said a lawyer advising some of the petitions.
"Besides, there are other issues which could crop up in the course of the court hearings. These may relate to valuation of the assets, the absence of records of very old bank accounts, or ascertaining whether a person was an NRI in a particular year in the distant past," said another person.
In the past few years, hundreds of writ petitions have been filed in multiple courts to challenge the sweeping power of the law. The law stems from the Modi government's political promise to unearth and tax black money hidden in tax havens across the world - a cause for which the Income Act proved inadequate. Thus BMA was armed with powers to overcome the limitations of the I-T Act which earlier allowed the tax office to go back not more than 16 years in hunting down money stashed outside the country.
[The Economic Times]
