Introduction
In a recent ruling, the Hon’ble Madhya Pradesh High Court in Sanjay Vijay Shinde v. Directorate General of Income Tax[i] addressed the complex issue of retrospective application of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (‘Black Money Act’). The High Court’s decision to grant anticipatory bail to Sanjay Vijay Shinde (‘Applicant’) reflects a cautious approach to the retrospective application of laws, highlighting the importance of protecting constitutional rights in the face of stringent economic legislation.
Brief Facts
The Applicant, who served as the sole director of his company, had been accused of not disclosing a foreign bank account held in Singapore. During a search operation conducted under s. 132 of the Income-tax Act, 1961, it was discovered that the company held a foreign bank account in Singapore from the assessment years 2009-10 to 2014-15.
These assets were not disclosed in the company’s income tax returns for the relevant assessment year, leading to the imposition of the Black Money Act. Consequently, the Competent Authority filed a complaint against the Applicant under ss. 50, 51(1), and 51(2) of the Black Money Act.
The Applicant filed this anticipatory bail before the High Court, arguing that the provisions of the Black Money Act, which came into force on 01.04.2016, could not be retrospectively applied. The Assessee further contended that the income and assets of the company could not be attributed to the Assessee personally, given the company’s status as a separate legal entity.
The Applicant also relied upon Tarsem Lal v. Directorate of Enforcement[ii], wherein the Hon’ble Supreme Court held that in cases where no arrest has been made before filing a complaint, the concerned department must seek the court’s permission before arresting the accused.
Held
The High Court acknowledged that the Black Money Act was not applicable to the assessment years 2009-10 to 2014-15, as it was enacted after these periods.
In reaching its decision, the High Court relied on Smt. Dhanashree Ravindra Pandit v. Dy. Director of Income-tax[iii], in which the Karnataka High Court quashed similar proceedings initiated under the Black Money Act on the grounds of retrospective application.
The High Court granted anticipatory bail to the Applicant, imposing certain conditions, including that the Applicant cooperate with the income tax department during any investigation or proceedings.
Our Analysis
This judgement serves as a critical reminder of the constitutional protections against retrospective criminal laws, as enshrined in a. 20(1) of the Constitution of India. By granting anticipatory bail, the High Court effectively safeguarded the Applicant from prosecution under a law that was not in force during the relevant assessment years. This decision reflects the fundamental legal principle that a citizen cannot be subjected to a punishment greater than what was sanctioned by the law when the offence was committed, nor can they be held responsible for an offence that was not in force at the time of the action. Applying laws retrospectively would disrupt the certainty and predictability of the legal system, creating a climate of fear and uncertainty that undermines public confidence in the rule of law.
However, the High Court balanced this protection with specific conditions attached to the grant of anticipatory bail, requiring the Applicant to cooperate fully with the investigation, refrain from influencing witnesses, and avoid committing similar offences in the future. These conditions serve as a reminder that while constitutional rights must be upheld, they do not absolve individuals from their legal responsibilities.
End Notes
[i] [2024] 165 taxmann.com 677 (Madhya Pradesh) [03-07-2024].
[ii] Tarsem Lal v. Enforcement Directorate, (2024) 7 SCC 61.
[iii] Dhanashree Ravindra Pandit v. Income-tax Department, 2024 SCC OnLine Kar 58
Authored by Priyavansh Kaushik, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.
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