Initiation Of Prosecution U/S 51 Of Black Money Act Not Dependent On Completion Of Assessment Proceedings U/S 10 For Tax Evasion: Delhi HC

The Delhi High Court has held that initiation of prosecution under Section 51 of the Black Money (Undisclosed Foreign Income and Assets and Imposition of Tax) Act, 2015 is not dependent on completion of assessment proceedings initiated against an accused under Section 10 to determine tax evasion. The Black Money Act, 2015 is designed to address "undisclosed assets located outside India" that are held by an assessee either as the owner or as the beneficial owner. Section 51 penalizes wilful attempt of a resident to evade tax on foreign income and assets. Section 10 makes provision for assessment or reassessment on suspicion of undisclosed foreign income and asset in the relevant financial year. Justice Dinesh Kumar Sharma observed, “Section 48 of the Black Money Act makes it clear that the offences and prosecution which falls in Chapter V of the Black Money Act are independent of any order made under this Act. It is relevant to note that the assessment under the Black Money Act is being made under Section 10, which falls in Chapter III of the Act…The initiation of the prosecution is not dependent on the completion of assessment, if the conditions as required under Section 51 Black Money Act are fulfilled.” In the case at hand, the Petitioner is accused of holding undisclosed foreign bank accounts and properties and it was alleged that he was preparing to alienate his foreign assets and offshore entities by backdating documents to evade taxes under the Black Money Act. Accordingly, a notice for assessment was issued to him under Section 10(1). Petitioner filed a reply, denying ownership of the alleged foreign assets. Meanwhile, the Special Court summoned him for an offense under Section 51(1). Aggrieved by this, the petitioner approached the High Court. He argued that the prosecution was initiated without completing the assessment proceedings, and there is no finding by the Department that he evaded any tax. Criminal prosecution should not commence without first completing the petitioner's assessment proceedings to determine any tax evasion, it was argued. The Department on the other hand relied on P.Jayappan vs. S.K.Perumal (1984) where the Supreme Court, in the context of Income Tax Act, held that there is no provision in law which provides that a prosecution for the offences in question cannot be launched until reassessment proceedings initiated against the assessee are completed. The High Court held, “Section 51 of Black Money Act would come into play if even before filing of a return of income, the person is found to have done any of the acts as prescribed in Section 51(3) of Black Money Act, 2015. Apparently the prosecution under this provision cannot be dependent on the assessment. As the offence, if proved, stands completed as soon as the conditions as required under Section 51(3) of Black Money Act, 2015 are fulfilled, irrespective of return of income.” The Court said though Petitioner had denied ownership of foreign assets, the Department will be obliged to produce evidence in this regard at an appropriate time during trial. Significant to note that Petitioner had also argued that since a complaint against him under Section 50 had already been filed, there was no occasion of filing another complaint under Section 51. Section 50 provides punishment for failure to furnish in return of income, any information about an asset (including financial interest in any entity) located outside India. Section 51 provides punishment for willful attempt to evade tax. The High Court held, “Bare perusal of Sections 50 and 51 makes it clear that both the provisions function in different realms. The non-disclosure of an information about an asset (including financial interest in any entity) located outside India is to be dealt with differently than the willful attempt to evade tax.” Accordingly, it refused to quash the criminal complaint against Petitioner and dismissed the plea. Appearance: Sr. Advocate Dayan Krishnan with Advocates Avneesh Arputham, Ankit Sharma and Abhishek for Petitioner; Sr. Standing counsel Zoheb Hossain for Revenue with Jr. standing counsel Sanjeev Menon, Advocates Vivek Gurnani and Manish Dubey Case title: Sanjay Bhandari v. Income Tax Office Case no.: CRL.M.C. 805/2020, CRL.M.A. 3314/2020, CRL.M.A. 10806/2020, CRL.M.A. 10808/2020 Click Here To Read/Download The Order

Initiation Of Prosecution U/S 51 Of Black Money Act Not Dependent On Completion Of Assessment Proceedings U/S 10 For Tax Evasion: Delhi HC

Kapil Dhyani

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