Attempting to Avoid Paying Taxes On Purpose

In India, mandatory taxes include income tax, goods and services tax, import-export tax,
state border tax, and so on. Despite the rules and regulations governing these taxes, some
individuals attempt to avoid paying them. This can be accomplished in a variety of ways.
Tax evasion, on the other hand, might result in harsh fines. This article discusses Judicial
Precedents and Legal Provisions. The Authority and the court in which the case is heard,
adjudicated, and a decision is made. Other major legal concerns concerning the subject of
tax evasion under the Black Money (Undisclosed Foreign Income and Assets) And
Imposition of Tax Act, 2015 include potential grounds for challenge to the claims made
under the Act, as well as other key legal concerns.

What is Tax Evasion?

Tax evasion is a criminal offence in which a person or company knowingly avoids paying
their true tax liability. Those who are detected avoiding taxes are usually charged criminally
and face severe fines. Under the Internal Revenue Service (IRS) tax code, wilfully failing to
pay taxes is a federal offence.

Basic crux Points-

 The illegal non-payment or underpayment of actual tax responsibilities owed is

referred to as tax evasion.
 Whether or not tax forms were filed with the IRS, the IRS can establish whether or
not there was tax evasion.
 To prove tax evasion, the IRS must be able to demonstrate that the taxpayer
purposefully avoided paying taxes.
 While tax evasion is against the law, tax avoidance entails finding lawful (and legal)
ways to lower a taxpayer's liabilities.

Enforcement of the Act

Parliament enacted the Black Money Act on May 11, 2015, and it obtained Presidential
assent on May 26, 2015. Section 1 sub-section (3) states that, unless otherwise stated in the
Act, it will take effect on April 1, 2016.
Section 3 states that every Assesses will be taxed tax for each assessment year beginning on
or after April 1, 2016, in respect of his total undeclared foreign income and assets for the
preceding year. The tax's rate has been determined to be thirty percent. The proviso to Sub-
section (1) of Section 3 of the Black Money Act states that concealed assets located outside
India are subject to tax based on their worth in the prior year in which the Assessing Officer
becomes aware of the asset.

A careful reading of Section 3 and Section 2(9)(d) of the Black Money Act reveals
unmistakably that the legislative intent in charging tax on undisclosed assets located outside
India is to charge tax on the value of the asset in the previous year in which it comes to the
attention of the Assessing Officer. In this situation, the preceding year would be a twelve-
month period beginning on April 1st of the relevant year and ending immediately before the
assessment year.

As a result, the preceding year in this situation would be defined as a twelve-month period
beginning on April 1st of the relevant year and ending immediately before the assessment
year.

Union of India (UOI) and Ors. Vs. Gautam Khaitan (2019)1

Facts-

The interim decision issued by the Division Bench of the High Court in Writ Petition barring
the Appellants from taking and/or continuing any action against the Respondent in
accordance with Appellant No. 2's order under Section 55 of the Black Money and
Imposition of Tax Act, 2015.

Issue Raised-

Whether the High Court was correct in observing that, in exercising its powers under
Sections 85 and 86 of the Black Money Act, the Central Government retroactively applied
the Act on July 1, 2015 and issued a restraining order?

Held-

The Black Money Act was enacted with the intent of enacting strict measures to combat the
threat of black money. Various offences have been identified, and harsh penalties have been
imposed. The Black Money Act's programme, on the other hand, allowed a one-time
opportunity to declare any concealed asset located outside India and earned from income
subject to tax under the Income-tax Act. According to Section 59 of the Black Money Act,
such a declaration must be made on or after the Act's effective date, but no later than a date
specified by the Central Government in the Official Gazette. It's also worth noting that
1
S.L.P. (Crl.) No. 4911 of 2019
Section 1 of the Black Money Act's Subsection (3) states that "save as otherwise stipulated in
this Act, this Act shall come into force on a certain date." A careful examination of the
various clauses reveals that the Assessing Officer can only charge taxes for assessment years
that begin on or after a specific date. The penalties under Sections 50 and 51 of the Black
Money Act would only apply if an Assesses had failed to take advantage of Section 59 of the
Act and had not revealed or paid the tax and penalty on assets covered by the Act. As a result,
it was determined that the High Court was incorrect in determining that the criminal penalties
were rendered retrospectively applicable by the notification/order in question.

Purpose of the Act

The Black Money Act was enacted for the following purposes, according to the Statement of
Objects and Reasons:

 to locate hidden illegal money in other countries; and

 To stop money from going missing and ending up in the wrong hands.
 To punish those who engage in illegal means of making money, resulting in revenue
loss.
 To prohibit illicit income and assets held outside India from being used in ways that
harm India's social, economic, and strategic interests, as well as its national security.

Punishment for Tax Evasion

A deliberate attempt to dodge any tax, penalty, or interest charged or imposed under this Act,
or the payment thereof, includes any situation in which any person:2

 has any books of account or other documents containing a false entry or statement in
his custody or control (being books of account or other documents relevant to any
procedure under this Act);
 any false entry or statement in such books of account or other documents is made or
caused to be made; or
 any relevant entry or statement in such books of account or other documents is
wilfully omitted or caused to be omitted; or
 causes any other circumstance to exist with the effect of enabling such person to
dodge payment of any tax, penalty, or interest assessed or imposed under this Act.

2
THE BLACK MONEY (UNDISCLOSED FOREIGN INCOMEAND ASSETS) AND IMPOSITION OF TAX
ACT, 2015, NO. 22 OF 2015
Under Sections 50 and 51 of the Black Money Act, penalty has been given for the following
offences:

Section 50 of the Act of 2015 states that any person who has filed a return of income for a
previous year under Sub-section (1), Sub-section (4), or Sub-section (5) of Section 139 of the
Income-tax Act wilfully fails to include any information relating to an asset (including a
financial interest in any entity) located outside of India in such return, he shall be punished
with rigorous imprisonment for a term not less than six months but not more than seven years
and a fine if he fails to disclose any income from a source outside India, whether held by a
beneficial owner or otherwise, or in which he was a beneficiary, at any time during the
previous year.

Penalties for the offences wilful attempt in any manner to dodge the payment of any tax,
penalty, or interest chargeable or imposable under the Income-tax Act is punishable under
Section 51. Sub-section (1) provides for a sentence of rigorous imprisonment for a period of
not less than three years but not more than ten years, as well as a fine. Any other person who
is not covered by Sub-section (1) of Section 51 is subject to a sentence of rigorous
imprisonment for a period of not less than three months but not more than three years, as well
as a fine, at the discretion of the court.

It's also worth noting that Section 1 of the Black Money Act's Subsection (3) states that
"unless as otherwise provided in this Act, this Act shall come into force on the first day of
July, 2015." The Assessing Officer can only charge taxes from the assessment year beginning
on or after 01.04.2016, according to a combined reading of the relevant rules. The value of
the item must, however, be the same as it was the prior year. As a result, even though Sub-
section (3) of Section 1 of the Black Money Act did not modify the date, the asset's value was
to be assessed based on its value the previous year. The date has simply been modified to
allow the Assessee(s) to take advantage of Section 59 of the Black Money Act. Only in order
to remove issues has the power been used. Only when an Assessee has failed to take
advantage of Section 59 and has not declared or paid the tax and penalty on assets covered by
the Black Money Act will the punitive provisions of Sections 50 and 51 of the Black Money
Act come into effect.

The Authorities and the courts

Jurisdictional Commissioner (Appeals)-

BMA proceedings have been kept out of the jurisdiction of faceless assessments and appeals;
thus, assessments and appeals are still done the old-fashioned way. There was a lack of
clarity until recently on where to file an appeal against an order made under the BMA
because there was no designated Commissioner (Appeals) under the BMA and the
Commissioner of Income Tax (Appeals) was completely reorganised due to the introduction
of faceless appeals. The Central Board of Direct Taxes (CBDT) recently (on March 23, 2021)
alerted the jurisdictional Commissioner (Appeals) for Black Money Act of this circumstance.
For the purposes of the Black Money Act, 19 Commissioners of Income Tax (Appeals) under
the Income Tax Act were designated as Commissioners (Appeals). An appeal must be
physically filed in Form 2 (together with the necessary appeal filing fee) as defined by the
Black Money Act's requisite rules. As with appeals filed under the Income Tax Act of 1961,
the framework of a Black Money Act appeal comprises the submission of a statement of facts
and grounds of appeal.

Because the Black Money Act processes are not subject to anonymous evaluations and
appeals, the Commissioner (Appeals) will decide the appeals in the customary manner. The
Commissioner (Appeals) is required under section 16(8) of the Black Money Act to arrange
hearings as quickly as feasible and to try to resolve the appeal within one year of the end of
the financial year in which the appeal is submitted. The Black Money Act appeal process is
quite similar to the standard IT Act appeal process, and the Commissioner (Appeals) has been
given extensive powers, including enhancement-related powers (after giving requisite
opportunity to the taxpayers). The Back Money Act appeal process is quite similar to the
standard IT Act appeal process, and the Commissioner (Appeals) has been given extensive
powers, including enhancement-related powers (after giving requisite opportunity to the
taxpayers). The Commissioner (Appeals) has the authority to consider and decide any matter
that the Assessing Officer may or may not have considered.

Taxpayers may also consider writing to the Assessing Officer after filing an appeal with the
Commissioner (Appeals) to have demand recovery and penalty actions stayed until the
Commissioner (Appeals) rules on the appeal (Appeals).

Appellate hierarchy at a higher level-

The Appellate Tribunal can review an order issued by the Commissioner of Appeals. Within
60 days of receiving the Commissioner's order, an appeal must be lodged with the Appellate
Tribunal (Appeals).

By submitting an appeal within 120 days, an Appellate Tribunal order can be challenged in
the High Court. The High Court will only hear an appeal if it believes the case presents a
significant legal issue. Only if the High Court certifies the case as a fit case for appeal to the
Supreme Court can an appeal to the Supreme Court be filed against a High Court order.
It's worth noting that Section 25 of the Back Money Act stipulates those taxes due in
accordance with the assessment must be paid regardless of whether the taxpayer is appealing
to the High Court or Supreme Court.

Overall, the strongest possible defence for taxpayers against any regulatory action that may
be taken under Back Money Act will be comprehensive documentation (particularly
indicating source of funds, when relevant), proper representation, and filing answers /
submissions, combined with accurate compliances. It's also worth noting that in the case of
the Back Money Act, the repercussions of unfavourable appellate orders are extremely
severe, especially given that the act mandates payment of taxes due regardless of whether the
taxpayer is appealing to the High Court or the Supreme Court.

This provision emphasises the importance of the appeals process before the Commissioner of
Appeals and the Appellate Tribunal, because if the orders are negative, there could be
significant tax outflows on the one hand, and regulatory action such as the initiation of
prosecution proceedings by the authorities on the other. It's also important to remember that
the High Court will only hear cases involving legal issues.

As a result, it is critical to present all relevant facts and arguments to the Commissioner
(Appeals) and the Appellate Tribunal for consideration and adjudication on the merits, as the
Appellate Tribunal is the final fact-finding authority and the orders passed by the
Commissioner (Appeals) and the Appellate Tribunal will serve as the foundation for the case.

Conclusion

As a result, it is clear that the Black Money Act's goal is to enact strict measures to combat
the threat of black money. Various offences have been identified, and harsh penalties have
been imposed. The Black Money Act's programme, on the other hand, allowed a one-time
opportunity to declare any concealed asset located outside India and earned from income
subject to tax under the Income-tax Act.