The Bombay High Court granted industrialist Anil Ambani interim protection from prosecution and penalties in a tax-evasion case while admitting his petition challenging provisions of the Black Money Act. Ambani contends that certain provisions of the law are unconstitutional and violate the Constitution of India.
The Bombay High Court has granted industrialist Anil Ambani interim protection from prosecution and penalty in a tax-evasion matter. The court also admitted his petition, which challenges the constitutional validity of provisions of the Black Money Act.
In his plea, Ambani argued that specific provisions of the Undisclosed Foreign Income and Assets (Imposition of Tax) Act, 2015 are “ultra vires” (beyond the powers/contrary) of the Constitution of India.
A bench comprising Justices B P Colabawalla and Firdosh Pooniwalla noted that there are other petitions pending in the High Court against the Act. The court admitted Ambani’s petition for final hearing at a later stage.
Factual Backgrounds:
The case originates from action initiated by the Income Tax Department under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, commonly known as the Black Money Act.
According to the tax authorities, Anil Ambani allegedly failed to disclose foreign assets and financial interests linked to offshore entities and bank accounts held abroad. The department claimed that undisclosed funds worth approximately Rs 814 crore were maintained in two Swiss bank accounts and that tax liability on these assets amounted to about Rs 420 crore. The authorities alleged that the non-disclosure was wilful and attracted proceedings under the Black Money Act, including prosecution provisions carrying severe penalties and possible imprisonment.
The Income Tax Department issued a show-cause notice to Anil Ambani in August 2022, alleging tax evasion and violation of disclosure requirements relating to foreign assets. The department further alleged that he was connected with offshore structures, including entities incorporated in the Bahamas and the British Virgin Islands, and had failed to disclose these interests in his income tax returns.
The High Court’s Observation
The High Court directed the Union government to file its affidavit in response to the challenge. The court also observed that an assessment order against Ambani has already been passed and that he has filed an appeal before the Commissioner of Income Tax (Appeals).
The HC said,
“The said appeal can proceed, and orders can be passed thereon. However, we clarify that no coercive action shall be taken against the petitioner, including that of prosecution and penalty, till the hearing and final disposal of this writ petition,”
Meanwhile, the Income Tax Department issued a notice to Ambani on August 8, 2022, alleging that he evaded about Rs 420 crore in taxes relating to undisclosed funds exceeding Rs 814 crore held in two Swiss bank accounts.
The department’s notice states that Ambani could be prosecuted under Sections 50 and 51 of the Black Money Act, which provides for a maximum punishment of up to 10 years imprisonment along with a fine.
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The department alleges that Ambani’s alleged evasion was “wilful,” claiming he “intentionally” failed to disclose the foreign bank account details and related financial interests to Indian tax authorities.
Ambani, in his petition, contended that the Act came into force in 2015, while the transactions in question relate to assessment years 2006-2007 and 2010-2011. He further argued that the provisions of the Act cannot operate retrospectively.
According to the Income Tax Department, Ambani was the economic contributor as well as the beneficial owner of two foreign entities Diamond Trust (a Bahamas-based entity) and Northern Atlantic Trading Unlimited (NATU) (incorporated in the British Virgin Islands). The department alleged that Ambani did not disclose these foreign assets in his Income Tax Return (ITR) filings, thereby allegedly violating the provisions of the Black Money Act.
The department has assessed the value of the undisclosed funds in the two accounts at Rs 8,14,27,95,784, and has estimated the tax payable at Rs 4,20,29,04,040.
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