HC seeks AGI reply to Anil Ambani’s plea on I-T notice

The Bombay high court on Monday issued a notice to the Attorney General of India in a petition filed by industrialist Anil Ambani challenging the vires of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 under which he was asked by the Income Tax (I-T) department to explain the foreign transactions done by his firm in the years 2006-2007 and 2012

Mumbai: The Bombay high court on Monday issued a notice to the Attorney General of India in a petition filed by industrialist Anil Ambani challenging the vires of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 under which he was asked by the Income Tax (I-T) department to explain the foreign transactions done by his firm in the years 2006-2007 and 2012.

Mumbai: ADAG Chairman Anil Ambani addresses a press conference to announce the completion of Reliance Infrastructure Ltd's 100% sale of its integrated Mumbai Power Distribution business to Adani Transmission Business, in Mumbai on Wednesday, August 29, 2018. (PTI Photo/ Shirish Shete)(PTI8_29_2018_000253B) (PTI)

A division bench of justice G S Patel and justice S G Dige was hearing Ambani’s plea challenging a show cause notice issued to him by the I-T department on August 8. The notice alleged that Ambani had evaded ₹420 crore in taxes on ₹814 crore held in two Swiss bank accounts and hence was liable for prosecution under the Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015.

Ambani claimed that the Act came into force in 2015 and as the transactions were done prior to it. His petition also challenged the constitutional validity of sections 3(1), 50, 51, 59 and 72C of the Act claiming that it violated his fundamental rights guaranteed under the Constitution of India as the transactions referred to in the notice were of 2006 and 2012.

During arguments, senior counsel Rafiq Dada for Ambani had informed the bench that the notice issued under sections 50 and 51 of the Act were not valid as it was enacted in 2015 and the department could not have issued show cause notice for transactions done prior to that. The bench was informed that the notices were being applied retrospectively.

The bench then questioned the I-T department how can the Act have a retrospective effect. “A person behaves in a certain manner, then you criminalise it with retrospective effect. how does he conduct himself,” the bench questioned.

The bench further noted that if the I-T department had told a person that a particular act was criminal and henceforth, he cannot indulge in such acts without informing from when it was effective was absurd. The bench remarked that a person was not expected to know what the government was going to do 10 years later and hence a retrospective action could not be initiated against that person.

Thereafter the bench issued a notice to AGI to respond to the challenge to the vires of the 2015 law. The HC posted the matter for hearing on February 20 and directed the I-Tax department not to take action against Ambani till then.

Ambani had approached the Commissioner of Income Tax (Appeals) against the assessing officer’s March 31, 2022 order wherein he was asked to pay ₹420 crore in taxes on transactions done in 2006 and 2012. Even as the hearing was pending, the department issued a show cause notice on August 8 seeking to initiate prosecution proceedings on the basis of the assessment order.