Black Money Stashed Abroad Threatens National Security : J&K&L High Court

The court made these observations in six petitions filed through senior Supreme Court counsel P Chidambaram challenging the validity of the notices dated July 6, 2018 issued by the respondents (Union of India, Finance Department, Commissioner of Income Tax, New Delhi, and Deputy Director of Income Tax (Investigation) Investigation Wing) under Section 10 (1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 as also show cause notices dated March 18, 2021.

The petitioners had also challenged the penalty notices dated March 29, 2021, assessment orders dated March 31, 2021 and demand notices dated March 31, 2021.

In their plea, the petitioners claimed to be the beneficiaries of Mondale Irrevocable Discretionary Trust which was created and established abroad in Bangkok, Thailand.

The petitioners brought money of their share in India upon permission granted by the Reserve Bank of India.

In the meantime, Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was enforced with effect from 2015 and in view of the said Act, a notice under Section 10(1) and thereafter under Section 10(2) were issued requiring certain information from the petitioners.

The plea stated that the said notice was duly replied by the petitioners, but till date, no order of assessment as contemplated under Section 10 has been passed against the petitioners.

At the same time, it stated, a further show cause notice dated March 18, 2021 was issued requiring the petitioners to show cause why in respect of some of the assets, the petitioners should not be taxed under the Act and penalties and prosecution be launched against them.

Petitioners further averred that the aforesaid show cause notice is neither a notice issued under Section 10 nor a notice under any other provisions of the Act and, as such, is without jurisdiction. The petitioners cannot be prosecuted and saddled with penalties without there being the assessment order passed under Section 10, the counsel argued.

Senior Supreme Court counsel P Chidambaram submitted that the action initiated by the 'assessing authority' was without jurisdiction as the provisions of the Act of 2015, under the shade and cover of which the entire action has been initiated, are not applicable to the asset subject matter of the case in hand, being created by Non-Resident Indians out of income generated abroad which was not chargeable to tax in India.

On the other hand, counsel representing the respondents had raised objections regarding the maintainability of the petitions.

While holding the petitions "not maintainable" as petitioners had not exhausted the remedy available in the legislation, the court granted liberty to the petitioners to challenge the same before the appellate authority.

Adjudicating upon the matter the division bench of Justices Ali Mohammad Magrey and M.A Chowdhary observed that tax evasion puts a disproportionate burden on the honest taxpayers as they have to bear the brunt of higher taxes to make up for the revenue leakage caused by the evasion.

The court added that stashing away of black money abroad by some people with the intent to evade taxes has been a matter of deep concern to the nation.

Dismissing a batch of petitions challenging orders and notices passed by the authorities under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act (the Act of 2015), the court observed that evasion of tax robs the nation of critical resources necessary to undertake programs for social inclusion and economic development.

The bench noted that the Act of 2015 provides complete machinery for the person aggrieved of any action taken by the Assessing Officer and the said person could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had the adequate remedy open to him by way of an appeal to the Commissioner of Appeals.

"The remedy under the statute, however, must be effective and not a mere formality with no substantial relief," the bench said.

In the present case, the court pointed out, neither have the petitioners described the available alternate remedy under the Act as ineffectual and non-efficacious while invoking the writ jurisdiction of the court nor have they ascribed cogent and satisfactory reasons before the Court so as to enable it to exercise jurisdiction under Article 226 of the Constitution in tune with the facts and circumstances of the case.

"All the contentions of the petitioners, as raised in these petitions, including the issue of jurisdiction, applicability or otherwise of the act, can very conveniently be dealt with by the appellate authority in tune with the mandate of Sections 15 and 17 of the Act of 2015," the bench said.

However, keeping in view that the petitioners have been bonafidely pursuing their claim before it by filing these writ petitions at the relevant point of time and the decision in these petitions has consumed more than one year, the court granted liberty to the petitioners to avail the aforesaid statutory remedy of appeal against the proceedings initiated against them by the concerned authority including the show cause notices, assessment orders, penalty notices, demand notices, within one month from the date of announcement of this Judgment.

In the event any such appeal/s is/ are filed before the appellate authority within the stipulated time in accordance with the mandate of the Act of 2015, the court directed the Deputy Director of Income Tax (Investigation) Investigation Wing, to consider the same only on merits without making any reference to the period of limitation.

The bench asked the authorities not to take any punitive action against petitioners in case they file an appeal within one month.

The court also made it clear to the appellate authority not to get influenced by any observation made by the bench while deciding these writ petitions.

Case Title : Tabasum Mir Vs Union of India

Citation : 2022 LiveLaw (JKL) 161

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