Budget 2025 Expectations :  provide relaxation from prosecution for non-disclosure of foreign movable assets under Black Money Act

By | January 25, 2025
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Budget 2025 Expectations :  provide relaxation from prosecution for non-disclosure of foreign movable assets under Black Money Act

This Aarticle discusses an inconsistency in India’s Black Money Act (BMA) regarding penalties and prosecution for non-disclosure of foreign assets. Here’s a breakdown:

Recent Amendment (Finance Act 2024):

  • Relaxation of Penalty: Increased the threshold for penalty on non-disclosure of movable foreign assets from ₹5 lakhs to ₹20 lakhs. This means no penalty will be levied if the value of undisclosed assets is below ₹20 lakhs.
  • Rationale: The amendment acknowledges that the previous threshold was too low, leading to disproportionate penalties compared to the value of assets.

Inconsistency:

  • No Change in Prosecution: While the penalty threshold was relaxed, the BMA still allows prosecution for non-disclosure of foreign assets, even if their value is below ₹20 lakhs.
  • Dichotomy: This creates a situation where a taxpayer may not be penalized for non-disclosure but could still face prosecution for the same offense.

Argument for Relaxation:

  • Alignment with Penalty Provisions: It is argued that the relaxation from prosecution should be aligned with the relaxation from penalty. If the value of undisclosed assets is below the threshold for penalty, it should also be below the threshold for prosecution.
  • Legal Precedents: The author cites Supreme Court rulings (Uttam Chand, GL Didwania, K.C. Builders) that discourage prosecution in cases where penalty is considered sufficient.
  • Rationale: Since the penalty exemption is based on the materiality threshold (i.e., the low value of assets), the same rationale should apply to prosecution.

Suggestion:

  • Amend BMA: The author recommends amending Sections 49 and 50 of the BMA to provide relaxation from prosecution for non-disclosure of foreign movable assets with a value up to ₹20 lakhs.

In conclusion, the article highlights an anomaly in the Black Money Act where a taxpayer can be prosecuted even if the value of undisclosed assets is too low to attract a penalty. The suggested amendment would harmonize the provisions related to penalty and prosecution, ensuring fairness and consistency in the application of the law.