Legal Arguments for Relief Under the Black Money Act, 2015

By CA Surekha

Constitutional, Procedural & Substantive Defenses

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“BMA”) is one of India’s strictest tax statutes, imposing:

• 30% tax on undisclosed foreign assets

• Penalties up to 300%

• Prosecution provisions for failure to disclose

While severe, courts have repeatedly clarified that BMA is not impregnable. Relief is possible where assets were:

• Disclosed in ITRs

• Already assessed under the Income-tax Act

• Lawfully acquired abroad

• Inherited by legal heirs

This guidance note consolidates all legal arguments, statutory interpretations, judicial precedents, and practical defenses, making it the most comprehensive practitioner reference.

Constitutional Challenges

(a) Article 20(1): No Retrospective Criminal Liability

• Principle: Criminal liability cannot be imposed retrospectively.

• Application: Assets acquired before 1 July 2015 cannot trigger prosecution under BMA.

• Judicial support:

  • Dhanashree Pandit v. Union of India (Karnataka HC, 2023): Held that prosecution under BMA for pre-2015 assets violated Article 20(1).

• Professional commentary: Retroactive application transforms civil or pre-BMA transactions into criminal liability, which is unconstitutional.

(b) Article 20(2): Double Jeopardy

• Principle: No one shall be prosecuted or taxed twice for the same act.

• Application: Income/asset already taxed under IT Act cannot be taxed again under BMA.

• Judicial support:

  • All Cargo Global Logistics Ltd. v. DCIT (2012) 137 ITD 287 (Mum) (SB)

  • Dayawanti v. CIT (2017) 390 ITR 496 (Del)

• Professional commentary: Section 5(1)(ii) BMA excludes income already assessed under IT Act. BMA cannot serve as a backdoor for double taxation.

(c) Article 14: Protection Against Arbitrariness

• Principle: Discretionary powers must be exercised judicially, not mechanically.

• Application: Section 43 BMA confers discretion to initiate penalty/prosecution. Courts have held that ignoring bona fide circumstances is arbitrary.

• Professional commentary: Article 14 safeguards taxpayers from misuse of discretionary powers in initiating harsh proceedings.

Procedural & Jurisdictional Defenses

(a) Defective Notices (Section 10(1))

• Principle: Notice specifying the asset and scope is precondition for valid assessment.

• Judicial support: Anandi Laijawala v. DCIT (ITAT Mumbai, 2021) – Notice defect rendered assessment void ab initio.

• Professional commentary: Always verify notice particulars; incomplete or vague notices can form a primary defense.

(b) Natural Justice Violations

• Denial of opportunity to be heard, failure to furnish relied-upon documents, or hasty conclusions = violation of principles of natural justice.

(c) Limitation & Laches

• Section 11 BMA prescribes timelines for issuing notices and completing proceedings.

• Delay or revival without justification triggers statutory bar and doctrine of laches, enforceable via writ jurisdiction.

Substantive Defenses

(a) Disclosure in ITRs

• Assets disclosed in Schedule FA or other ITR fields are protected from being treated as undisclosed.

• Judicial support:

  • Prasad Nimmagadda v. UOI (Delhi HC, 2019)

  • Leena Tiwari v. ACIT (ITAT Mumbai, 2022)

• Statutory anchor: Section 5(1)(ii) BMA excludes income already assessed under IT Act.

• Professional commentary: Ensure all foreign income/assets are consistently reported across ITRs; any discrepancy can weaken the defense.

(b) Already Assessed Under IT Act

• Assets previously assessed in search or regular assessment cannot be taxed under BMA.

• Judicial support: Dayawanti (supra); Leena Tiwari (supra)

• Professional commentary: Attach prior assessment orders and tax payment proofs; reinforce argument against double taxation.

(c) Inherited Assets & Legal Heirs

Principle

• Penal/prosecution liability under BMA is personal and non-transferable.

Protective Assessments

• Revenue sometimes issues protective assessments against heirs of deceased taxpayers.

• Judicial support:

  • Amarchand N. Shroff v. CIT (1963) 48 ITR 59 (SC): Penalty is personal; does not survive.

  • S. Srinivasan v. DCIT (ITAT Chennai, 2022): Protective assessment quashed.

  • Shantilal C. Shah v. CIT (1983) 144 ITR 57 (Bom): Heirs cannot face prosecution.

Section 159 IT Act

• Assessment may extend to inherited estate, but penalties/prosecution under BMA do not follow.

Conceptual Flaw in Protective Assessment

1. Protective assessments exist to safeguard revenue where correct assessee is uncertain.

2. For deceased BMA taxpayers, asset ownership is clear; assessment against heirs is ultra vires.

3. Courts consistently hold these acts arbitrary and unconstitutional.

Practical Professional Points

• Jurisdictional bar: BMA does not cover heirs.

• Reliance on Section 159 IT Act: Liability limited to estate inherited; no penalties/prosecution.

• Article 14 challenge: Arbitrary treatment.

• Documentation: Estate inventory, probate, inheritance proofs.

(d) Lawful Acquisition Abroad

• Assets lawfully acquired while non-resident are outside BMA scope.

• Judicial support:

  • Vikash Marda v. ACIT (ITAT Kolkata, 2021)

  • Srinjoy Bose v. DCIT (ITAT Delhi, 2020)

  • Azadi Bachao Andolan v. UOI (2003) 263 ITR 706 (SC)

• Professional commentary: Section 3(1) BMA applies only to residents; non-resident lawful acquisition protected by DTAA.

Why the BMA Is Not Impregnable

1. Disclosure in ITRs – negates “undisclosed asset.”

2. Prior IT Act Assessment – prevents double taxation.

3. Inheritance & Protective Assessment – heirs cannot face penalties; protective assessments often struck down.

4. Lawful Overseas Acquisition – legitimate foreign income/assets outside BMA.

These four shields form a comprehensive protective framework against misuse of BMA.

Success Factors for Maximum Relief

• Multi-layered defense: Combine constitutional, procedural, and substantive arguments.

• Early intervention: Raise objections immediately after notice.

• Documentation: ITRs, foreign bank statements, prior assessment orders, inheritance proofs, valuations.

• Forum strategy: ITAT for factual disputes; High Court for writs on constitutional/procedural grounds.

• Expert support: Chartered accountants, tax counsel, valuers.

Conclusion

The BMA, though stringent, cannot override constitutional rights, statutory exclusions, or judicial precedents. Protective assessments against legal heirs, prior taxation, pre-2015 acquisitions, disclosure in ITRs, and lawful foreign assets have all been successfully defended. Layered, documented, and timely defenses provide the strongest shield against misuse of the Act.