The Supreme Court on Tuesday admitted the income tax department’s appeal questioning its settlement commission’s (the Income Tax Settlement Commission) powers to entertain cases related to black money in foreign countries held by NRIs.
British Virgin Islands firm Overseas Pearl (OPL), belonging to UAE residents Vimal K Patel, Samir K Patel and Mehul K Patel, was named in the 2016 Panama papers expose. The three brothers are also the promoters of Vadodara-based Banco Products, the parent company of OPL. The assessees never disclosed any foreign income or asset, including foreign bank accounts, in their tax returns though they were tax residents in India from 2005-06 to 2013-14, according to the department.
Challenging the Gujarat High Court’s judgment that upheld the jurisdiction of the Income Tax Settlement Commission to entertain the case of black money in foreign countries held by Patels, the I-T department told the apex court that the Commission lacked jurisdiction over the matters where proceedings were initiated under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
A Bench led by justice DY Chandrachud issued notice to the settlement commission and the three Patel brothers on the I-T’s plea alleging that Patels being the owners of the firm were liable to action under the 2015 Act, and the Commission had no power to settle the issue as the black money law bars it from settling the matter under the I-T Act.
It said that the Black Money Act being a special legislation would prevail over the I-T Act for the purpose of assessment of undisclosed-foreign income and assets. “As far as domestic income and assets are concerned, it is the I-T authorities who have the jurisdiction; however, in case of undisclosed foreign income or assets, it is the authorities appointed under the Black Money Act who have the jurisdiction,” the appeal stated.
“The HC has also failed to appreciate that the legislature specifically intended for retrospective applicability of the amendment by “providing that the amendments shall be applicable with effect from July 1, 2015, which is the date of coming into force of the Black Money Act”, it said.
The department had raided the premises of Banco Products in 2016 and while the search and seizure operations were under way, Patels moved the Commission disclosing more than Rs 100 crore lying in various countries, including Singapore, Zurich and Dubai. They later disclosed additional income and offered to pay tax on more than Rs 129.1 crore of undisclosed money before the Commission in July 2017. In January 2019, the Commission ordered the owners to pay the department within a year in four instalments. On appeal, the HC dismissed the Revenue’s appeal against its Settlement Commission’s order.
SC admits I-T appeal challenging settlement commission’s powers
The department said that the HC had failed to appreciate that the proceedings under Black Money were still pending in case of all the three assesses while deciding that the retrospective amendment made in section 2(2) of the Black Money Act will not affect its case as their proceedings have already attained finality under the I-T laws.