The Black Money's Act retroactive implementation violates the provision of the Indian Constitution
Heny Shah,
Auro Universitiy
It aims to curb black money or undeclared foreign assets and income and impose taxes and penalties on such income. This bill was passed by both houses of the parliament. This bill was assented to by the President of India on 26 May 2015 and came into force on 1 July 2015.The government used its authority under section 86(1) to issue a notification before the statute's implementation, and it also modified its effective date to July 1, 2015. On the same day, notice under sections 59(1) and 63(1) was sent out with the deadlines for submitting the declaration (during the one-time compliance window) and for paying the taxes and penalties associated with hidden foreign assets.
Courts’ Judgments
Karnataka High Court, in the case of Dhanashree Ravindra Pandit v. The Income Tax Department also said that prosecution under Article 20 of the Constitution of India for pre-trial violation of the Black Money Act was not valid. The precedent of this Court is Rao Shiv Bahadur Singh v State of Vindhya Pradesh. In this instance, the court ruled that a person is entitled to a basic right under Article 20 of the Constitution, which guarantees that he will not be found guilty of a crime unless the conduct was illegal at the time the crime was committed.
For the implication of the application and to interpret the laws, it is significant to understand the difference between three types of laws i.e. Prospective, Retrospective, and Retroactive Laws.
Prospective laws operate from the date it was enforced, to grant new rights or to impose new duties. They do not affect the past cases. Whereas, Retrospective laws operate on the past cases or take away the given rights under existing laws. It seeks to amend the legal consequences of the past cases. In contrast to retrospective laws, which function retroactively, retroactive laws are based on a character or status that existed before. Their functioning is predicated on prerequisites or prior occurrences.
Expert’s Views
"Article 20(1) is a crucial constitutional safeguard in cases where a subsequent criminal law is intended to be made applicable to a person's past conduct by deeming fiction," stated Rony Oommen John, a Supreme Court advocate on record. It upholds the well-established tenet that there can be no crime without law, or nullumcrimen sans lege. When an offense is committed, a law imposing penalty must unavoidably be in effect."
He goes on, "However, it is expected that the Karnataka High Court's ruling will only be applied narrowly in two circumstances: (i) when the resident assesse did not have to disclose foreign income and assets at the time the asset was held, or (ii) when the asset was diluted or eliminated before the Black Money Act went into effect. This case was determined to meet both of these requirements. It is also submitted that offenses under the Black Money Act fall within the ambit of Section 20(1) in other cases where these conditions are not present. What the law does is that all provisions of the law are retroactive unless it expressly states that those provisions will be reused.
In accordance with the rules of the Black Money Act, the Income Tax Department sent notifications to several individuals after the law went into effect asking them to disclose overseas assets they had acquired well before the law's implementation.
This judgment of Karnataka High court will have huge impact as the applicability of Article 20 of the Constitution of India would render also those notices of Income Tax Department as infructuous which were issued about foreign assets taken before 1st July, 2015."
Noting, "This ruling confirms that non-disclosure of foreign assets acquired on or after July 1, 2015, will be subject to the black money statute. A number of applications addressing the same subject are currently pending before the Hon'ble High Court of Delhi. The Tax Department will be concerned about the application of Article 20 of the Black Money Law as it will have a big effect on the exchequer amount that the IT Department was meant to collect as a penalty for failing to disclose foreign assets, regardless of the date of acquisition"[i]
Comparison between India and Other Countries’ Laws
It is essential to analysis the comparison of the retrospective application of the Black Money Act in India and other countries’ laws. Apart from India, many countries have adopted retrospective taxation, including the United States, United Kingdom, Australia, Netherlands, Belgium, Canada and Italy. In order to eliminate flaws or irregularities in their previous tax laws that let businesses avoid tax laws, these nations have imposed retroactive taxes on businesses.
"Repair any deviations in the taxation policies that, in the past, allowed firms to take advantage of any loophole" is the general purpose of retrospective taxation. Companies that had applied the tax laws differently, whether intentionally or inadvertently, are impacted.
Although retroactive taxes has been employed by other nations as well, the courts have particularly questioned the constitutionality of the Black Money Act's retrospective application in India, ruling that it violates the concept of non-retrospectivity.
The rulings of the High Court have brought attention to the necessity of maintaining the Constitution's provisions and providing clarification on the differences between prospective, retrospective, and retroactive legislation in India.
In contrast to other nations, India's retroactive implementation of the Black Money Act has come under stricter legal examination and may not be lawful.
The Finance Minister, in the Union Budget 2019-20, proposed to revise the provisions of Section 2(2) of the Black Money Act to include a person who has resided in India in the previous year as the main word "assesse". The year to which the income referred to Section 4 relates, or the previous year in which undisclosed assets were acquired outside India. ". The Minister of Finance also announced that Section 10 of the Black Money Law has been amended to include the words "re-assess" and "reassessment" in Articles 10(3) and (4).
Conclusion
The retrospective application of the Black Money Act appears to violate Article 20 of the Indian Constitution as it penalizes practices that preceded the enactment of the Act. In the case, the High Court emphasized that a distinction must be made between the provisions of prospective, retroactive and retroactive laws in India. In certain areas the retrospective legislation can be beneficial but it can also breached people’s right that can complicate procedural aspects. The interests of the government and the people must be balanced between necessary constraints to ensure fairness and justice for all.
The purpose of law can only be achieved by complying with the principles of democracy. Appropriate action should be taken in the case where retrospective law fails. The law remains the basis of all laws, including special laws such as the Black Money Law, and its provisions must be respected.
References
1. www.ETLegalWorld.com, Retrospective Application of the Black Money Act Violated the Art. 20, Says Legal Experts - ET LegalWorld, ETLegalWorld.com, https://legal.economictimes.indiatimes.com/news/litigation/retrospective-application-of-the-black-money-act-violated-the-art-20-says-legal-experts/111448819 (last visited Jul 6, 2024).
2.Constitutional challenges under Black Money Act, https://www.taxmann.com, https://www.taxmann.com/research/income-tax/top-story/105010000000018782/constitutional-challenges-under-black-money-act-experts-opinion (last visited Jul 6, 2024).
3. India - Income Tax - Black Money Law – Prospective And Not Retrospective Or Retroactive, An Arduous Plea, https://www.mondaq.com/india/income-tax/962514/black-money-law--prospective-and-not-retrospective-or-retroactive-an-arduous-plea (last visited Jul 6, 2024).
4. Editor_4, Explained| Retroactive, True Retroactivity, Quasi-Retroactivity, and Retrospective: Synonymous or Distinct?, SCC Times (Sep. 2, 2022), https://www.scconline.com/blog/post/2022/09/02/retrospective-retroactive-quasi-retroactive-explained-ibc-statute-interpretation-legal-news-legal-updates-supreme-court-legal-research/ (last visited Jul 6, 2024).
5. Sucheta, “It Was Unconstitutional to Fasten Criminal Liability for Non-Disclosure of Tax Return Assessment for 2007-08 or 2009-10 under Black Money Act, 2015”: Karnataka HC, SCC Times (Jun. 28, 2024), https://www.scconline.com/blog/post/2024/06/28/retrospective-application-black-money-act-tax-return-non-disclosure-unconstitutional-karnataka-hc-legal-news/ (last visited Jul 6, 2024).
6. Awstika Das, Article 20(1) Of Constitution Doesn’t Bar Retrospective Application Of Procedural Changes In Criminal Trial : Supreme Court, (2023), https://www.livelaw.in/top-stories/article-201-of-constitution-doesnt-bar-retrospective-application-of-procedural-changes-in-criminal-trial-supreme-court-237542 (last visited Jul 6, 2024).
7. Ashish Mehta, Six Years of Black Money Act - The Journey So Far & Way Ahead.
[i] www.ETLegalWorld.com, Retrospective Application of the Black Money Act Violated the Art. 20, Says Legal Experts - ET LegalWorld, ETLegalWorld.com, https://legal.economictimes.indiatimes.com/news/litigation/retrospective-application-of-the-black-money-act-violated-the-art-20-says-legal-experts/111448819 (last visited Jul 6, 2024).