The court has put a hold on the department’s moves against the Reliance Group chairman, changing the dynamics of a very public tussle over the Black Money Act. You could call it a narrow form of relief, but it puts to the test just how much the 2015 statute can be applied to what was done in the past.
What the court ordered
Justices B P Colabawalla and Firdosh Pooniwalla, in a division bench, have taken up Ambani’s writ petition which takes issue with some of the Black Money law’s provisions. They have made it clear: no coercive action until this is put to rest. In the meantime, the tax appeal before the Commissioner of Income Tax (Appeals) is to go on as planned.
They have also put the onus on the Union government to come back with an affidavit. The judges were at pains to point out that there are other constitutional challenges to the 2015 Act in the pipeline, so Ambani’s is not an isolated matter.
The bench left no room for doubt on its position, laying down a few rules of the road:
– No one is to be prosecuted for the time being
– Penalty proceedings are off the table while the writ is in play
– The tax appeal is free to move forward
– A date for the final hearing will be set down later
The case and allegations
On the tax department’s side of things, Ambani is the subject of an August 8, 2022 notice. They say he has been dodging Rs 420 crore in taxes on more than Rs 814 crore in unreported money from two Swiss accounts. They are pointing to Sections 50 and 51 of the Black Money Act, where you can be looking at up to 10 years in jail and a fine.
It is an allegation of ‘wilful’ evasion. The department says he failed to put his foreign bank accounts and financial interests on the record. He is also named as the economic force and beneficial owner behind a Bahamas firm, Diamond Trust, and a BVI outfit, Northern Atlantic Trading Unlimited.
The numbers they have put on the table are precise: undisclosed funds of Rs 8,14,27,95,784 and a tax bill of Rs 4,20,29,04,040. The assessing officer has put out an order under Section 10(3) on these figures, opening the door for both a prosecution and a push to recover the revenue.
Timeline and legal path
We have an Assessment Order u/s 10(3) from March 31, 2022. Ambani has already made his case to the Commissioner of Income Tax (Appeals), the usual channel for such matters.
But in his writ, he is making a bigger argument: that certain parts of the 2015 Act run counter to the Constitution. He also makes the point that the transactions in question are from 2006-2007 and 2010-2011, so the law should not be turned back on them.
Why this matters for corporate India
You have to see the court’s hand as a way of balancing the need for due process with the urge to enforce. It is a fine line that promoters and those with high net-worth are keeping an eye on. With a number of petitions in the works, the verdict here may well colour how we look at older offshore set-ups in light of a 2015 law.
For the tax man, it is a chance to show the law has some bite. For the business community, the court has put up some guardrails that lower the risk in the short term. But either way, the courts are looking closer at the rules on disclosure and who really owns what.
Some of the takeaways from Tuesday’s ruling are:
– Expect the enforcement clock to slow down during the writ
– There is still scope for some tax relief on appeal
– A bit of constitutional clarity may change what is expected in terms of compliance
What comes next
Now it is up to the Centre to file its side of the story in an affidavit. After that, the High Court will put a date on the calendar for the final word on the writ, and we will see if the Black Money Act holds up to constitutional and retrospective scrutiny.
As for the appeal before the Commissioner of Income Tax (Ambani’s), that can carry on. The High Court has been plain about it: there will be no coercion, be it a penalty or a prosecution, until the writ is fully heard and put to bed.
So for now, the most forceful revenue moves are on ice, but the adjudication is not. What we will be watching is how the court makes sense of a 2015 anti-black money regime when the alleged conduct is from 2006 or 2010. That is the crux of it for both the enforcers and the taxpayer.
