SC vacates stay on retrospective applicability of black money law

The Supreme Court on Tuesday vacated a stay on the retrospective applicability of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 against VVIP chopper scam accused Gautam Khaitan.

Finance Ministry officials feel that this is a major victory in the war against black money. Last week, the Delhi High Court stayed the proceeding under the Act. The officials felt that had  the stay continued, it would have blocked the applicability of the said Act in similar matters, but now the situation has changed.

The Act was enacted in 2015. It was mentioned in the Act that it will come into effect from April 1, 2016. However, on July 1, 2015, the government issued a notification in exercise of its powers under Section 86 (Power to remove difficulties) of the Act, changing the date of commencement of the Act from April 1 2016 to July 1 2015. This issue was contested by Khaitan. He got  a relief from the High Court but not from the Supreme Court.

The Act gave a one-time opportunity to Indian residents to declare undisclosed foreign income and assets. The concerned person had to pay tax at the rate of 30 per cent and an equal amount by way of penalty, if found having undisclosed overseas wealth. However, in case of non-declaration, the provisions included slapping of tax at the rate of 30 per cent along with a penalty equal to three times the amount of tax evaded or 90 per cent of the undisclosed income or the value of the asset. There will also be punishment of jail for 3-10 years for the wilful evasion.

A senior Finance Ministry official told BusinessLine that after Delhi High Court’s ruling, the Income Tax Department worked throughout the weekend to get the stay vacated at the earliest and filed the petition on May 20. The vacation Bench listed it for hearing on Tuesday. After hearing arguments from both sides, the Bench headed by Justice Arun Khanna not just stayed the High Court order, but also issued a notice to Khaitan’s lawyer to reply within six weeks.

Khaitan had submitted in the High Court that the amendment to Section 1(3) stating that the Act  will come into force from July 1, 2015, instead of April 1, 2016, was done in exercise of power under the Section 86 of the Act. Since Section 86 was yet to be operational, the Centre could not have exercised the power under it, he argued.

Agreeing with the contention, the High Court had observed, “Parliament, in its wisdom, enacted the said Act and expressly provided therein that save as otherwise provided in the said Act, it shall come into force on the  April 1, 2016. There is, therefore, no gainsaying the legal position that the power to make Rules or remove difficulties under the provisions of Sections 85 and 86 of the said Act, could only be exercised by the Central Government, once the said Act came into force on the 1st April, 2016, the date expressly stipulated by Parliament in this behalf, and not prior thereto.”

It held that the Centre could not, prior to the Act coming into force, alter the date on which the enactment came into force by exercising the powers under the Act. The Centre challenged this order in the Supreme Court and got the relief.

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