Bombay HC Stays IT Dept's Prosecution Notice To Anil Ambani Over Alleged Secret Funds In Swiss Bank Accounts

The Bombay High Court on Monday granted interim relief to Reliance ADA Group chairman Anil Ambani and restrained the Income Tax Department from acting on a prosecution notice issued to him for alleged non-disclosure of money in two Swiss Bank Accounts amounting to approximately Rs. 814 crore.

The show cause notices were issued on August 8, 2022, under sections 50 and 51 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BM Act) alleging Tax Evasion of nearly Rs. 420 crores.

A division bench of Justices SV Gangapurwala and RN Laddha noted that petitions regarding the retrospective applicability of the Act were pending before various High Courts, including the Bombay High Court.

Senior Advocate Rafiq Dada for Ambani submitted that the show cause notice and the assessment notice, which is pending before the appellate authority, is verbatim. Moreover, that his client couldn't possibly be prosecuted for alleged transactions in 2006 and 2012, when the Act itself was enforced in 2015.

"I have given a response to the show cause notice. I have asked for various documents. The show cause notice is premature," he said.

Ambani alleged that the proceedings against him are on the basis of "unsubstantiated, patently false and frivolous allegations" which relate back to the year 2006-2007 (i.e. 10 years before the promulgation of the BM Act with effect from 01.07.2015), and the year 2012-13.

Justice Gangapurwala then sought IT counsel's response on retrospective applicability and granted interim relief, after the counsel sought time to respond and had no answer.

Apart from seeking quashing of the notice, Ambani has also challenged the vires of section 3(1), sections 50,51,59 and 72C of the BM Act allowing retrospective application as being ultra vires and violative of Articles 14, 20 and 21 of the Constitution.

"That provisions of the BM Act, which came into force with effect from 1st July 2015, cannot be invoked retrospectively to tax the value of any alleged undisclosed foreign asset, which may have existed prior to its coming into force on 1st July 2015," the plea states.

Time Line

In March this year, the Assessing Officer passed an order under Section 10(3) of the BM Act, holding that Ambani had undisclosed foreign assets. Ambani filed an appeal before the Commissioner of Income Tax (Appeals) against Assessment Order dated 31/03/22.

In the meantime on August 8, the IT department issued the notices to prosecute Ambani under the Act.