Breather For Anil Ambani From Bombay High Court On Black Money Act Notice

In a breather for Reliance Group Chairman Anil Ambani, the Bombay High Court on Monday directed the Income Tax department not to take any coercive action against him till November 17 on a show cause notice seeking to prosecute him under the Black Money Act. When the matter came up for hearing, senior counsel Rafique Dada, appearing for Mr Ambani, said provisions of the Act cannot have a retrospective effect, while advocate Akhileshwar Sharma, appearing for the I-T department, sought time to respond to the petition.

A division bench of Justices S V Gangapurwala and R N Laddha permitted the same and posted the petition for hearing on November 17.

"The Income Tax department shall till the next date not take any coercive action against the petitioner (Ambani) in pursuance to the show cause notice," the bench said.

It also directed the I-T department to respond to Mr Ambani's contention that provisions of the Black Money Act may not have a retrospective effect.

The I-T department issued a notice to Mr 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, Mr 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 Mr Ambani (63) with "wilful" evasion, saying he "intentionally" did not disclose his foreign bank account details and financial interests to Indian tax authorities.

Mr Ambani had earlier this month approached the High Court challenging the notice, claiming that the Black Money Act was enacted in 2015 and the alleged transactions are of assessment years 2006-2007 and 2010-2011.

Mr Dada told the court that an assessment order was passed by the department in March this year and the petitioner filed an appeal against the said order before the Commissioner of Income Tax.

"Pending this civil proceeding, the department has now issued this show cause notice seeking to initiate criminal proceedings against the petitioner under the provisions of the Black Money Act," Mr Dada said.

He said when a civil proceeding is pending, criminal action cannot be sought to be initiated by the department.

"The show cause notice on the face of it was violative of Article 20 of the Constitution of India (that says no person shall be prosecuted for the same alleged offence twice). Let the civil proceedings carry on and reach its logical end," Mr Dada argued.

The court then sought to know from Mr Dada if Mr Ambani had replied to the show cause notice.

To this, Mr Dada said the petitioner has sought relevant documents from the department.

"Once the documents are received, the petitioner would file a detailed reply," he said.

Mr Dada further argued that the notice was issued prematurely and the I-T department's action was not only without jurisdiction or authority in law but also violative of the petitioner's fundamental rights.

According to the I-T department's notice, Mr 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 department alleged that Mr Ambani "failed to disclose" these foreign assets in his income tax return (ITR) filings and hence contravened the provisions of the Black Money Act, brought by the Narendra Modi government soon after it was first elected to power in 2014.

The total value of the undisclosed funds in the two accounts has been assessed by tax officials at Rs 8,14,27,95,784 (Rs 814 crore) and tax payable on this amount at Rs 4,20,29,04,040 (Rs 420 crore).