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Denies Stay to Black Money Accused Over Late Retrospectivity Challenge
The has declined to grant an interim under the , ruling that a belated challenge to the retrospective operation of its provisions does not automatically entitle an accused to stall criminal proceedings. The Division Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta made it clear that if the petitioner was aggrieved by the retrospective application, he should have raised the constitutional challenge at the earliest possible opportunity—not after participating in the assessment process and receiving an adverse order.
The case arose from a petition challenging the constitutional validity of three key provisions of the 2015 Act: Sections 50, 51, and 72(c). penalizes a resident who, having filed an income tax return, wilfully fails to disclose information relating to a foreign asset (including a financial interest in an entity) or fails to disclose income from a foreign source. prescribes punishment for a wilful attempt to evade tax, penalty, or interest under the Act. contains a deeming provision: where a person acquired an asset before the Act came into force and did not declare it under the one-time disclosure scheme, the asset is deemed to have been acquired in the year in which the Assessing Officer issues a notice under . Once that notice is issued, all provisions of the Act apply to that asset as if it were acquired after the Act's commencement.
The petitioner, who had been issued a notice under on , actively participated in the ensuing proceedings. The Assessing Officer subsequently passed an assessment order on , which the petitioner appealed. Meanwhile, the tax authorities launched prosecution under Sections 50 and 51, issuing summons to the petitioner. In the present writ petition, the petitioner sought an of the prosecution, arguing that the retrospective operation of and other provisions violated constitutional guarantees. He also pointed out that the High Court was already hearing similar petitions challenging these very provisions and had granted interim relief in those matters.
Court's Reasoning: Timing Matters
The Bench, however, was unpersuaded. While acknowledging that other petitions were pending, the judges emphasized that the petitioner's own conduct was fatal to his request for emergency relief. The court observed:
“If he was aggrieved, he ought to have laid challenge to the of the provisions at the first available opportunity.”
The court noted that the petitioner had full knowledge of the retrospective impact of the Act from the moment he received the notice in June 2022. That notice itself triggered 's , bringing the pre-2015 asset within the Act's ambit. Instead of challenging the provision at that stage, the petitioner chose to comply with the notice, participate in the assessment, and only later file an appeal against the assessment order. Only after prosecution was launched did he file the present writ petition challenging the constitutional validity of the provisions.
Consequently, the Division Bench held that the petitioner’s belated challenge could not, by itself, justify an . The court refused to halt the prosecution proceedings before the respondents had filed their reply. It directed the and the to file their counter-affidavits and listed the matter for further hearing on .
Legal Analysis: The Perils of Delay in Constitutional Challenges
This ruling underscores a critical procedural principle in constitutional litigation: challenges to the of a statute must be brought promptly once the aggrieved party becomes aware of the alleged harm. Courts are generally reluctant to grant interim relief—especially a stay of criminal prosecution—when a petitioner has slept on their rights.
The Black Money Act, enacted in 2015, was designed to tackle undisclosed foreign assets and income. Its retrospective provisions, particularly , have been a source of controversy since the law's inception. The one-time compliance window allowed taxpayers to declare pre-existing foreign assets without penalty, but those who did not come forward now face the full force of the Act, including potential criminal prosecution for wilful non-disclosure.
The 's refusal to stay the prosecution sends a clear signal that delay in challenging retroactive provisions can be a significant barrier to obtaining relief. For legal practitioners, this case highlights the importance of advising clients to challenge constitutional issues at the earliest possible stage—ideally when the first notice is issued under , rather than after the assessment is complete and prosecution has commenced.
Broader Implications for the Legal Community
The decision also has implications for the many other petitions pending before the that challenge similar provisions. While those petitioners may have obtained interim orders, the court's reasoning suggests that the timing of the challenge could be a differentiating factor. Future litigants may need to demonstrate that they raised their objections promptly to benefit from any interim protection against prosecution.
Moreover, the court's focus on the petitioner's participation in the assessment process indicates that engaging with tax proceedings after receiving a notice may be construed as , weakening the argument for retrospective unconstitutionality. This could encourage affected taxpayers to file writ petitions immediately upon receiving the notice, rather than waiting for the assessment to conclude.
Conclusion
For now, the petitioner must face prosecution under Sections 50 and 51 of the Black Money Act while the constitutional challenge proceeds on a slower track. The case, listed for October 2026, will inevitably be watched closely by tax lawyers and constitutional experts. The ’s message is clear: those who seek to strike down a law's retrospectivity must act swiftly—or risk being left without a shield against criminal proceedings.
