The Bombay High Court has granted interim protection to industrialist Anil Ambani from prosecution and penalty in an alleged Rs 420-crore tax evasion case under the Black Money Act, while admitting his petition challenging the constitutional validity of certain provisions of the law.

A division bench of Justices B P Colabawalla and Firdosh Pooniwalla on Tuesday noted that similar petitions challenging provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 are pending before the court and admitted Ambani's plea for final hearing at a later date.

Ambani has argued in his petition that certain provisions of the Act are "ultra vires" (beyond the powers/violative) to the Constitution of India. The court has directed the Union government to file its affidavit in response to the plea.

The High Court noted that an assessment order has already been passed against Ambani and that he has challenged it before the Commissioner of Income Tax (Appeals).

"The said appeal can proceed and orders can be passed thereon. However, we clarify that no coercive action shall be taken against the petitioner, including that of prosecution and penalty, till the hearing and final disposal of this writ petition," the HC said.

The Income Tax Department had issued a notice to Ambani on August 8, 2022, alleging that he evaded taxes amounting to Rs 420 crore on undisclosed funds exceeding Rs 814 crore held in two Swiss bank accounts.

According to the notice, Ambani could face prosecution under Sections 50 and 51 of the Black Money Act, which provide for a maximum punishment of 10 years' imprisonment along with a fine.

The department has accused Ambani of "wilful" tax evasion, alleging that he "intentionally" failed to disclose details of foreign bank accounts and financial interests to Indian tax authorities.

In his petition, Ambani contended that the Black Money Act came into force in 2015, whereas the transactions under scrutiny pertain to assessment years 2006-07 and 2010-11. He argued that the provisions of the Act cannot be applied retrospectively.

As per the Income Tax Department's notice, Ambani was an "economic contributor as well as beneficial owner" of a Bahamas-based entity named 'Diamond Trust' and another company, Northern Atlantic Trading Unlimited (NATU), incorporated in the British Virgin Islands.

The department alleged that Ambani "failed to disclose" these foreign assets in his income tax return filings, thereby violating provisions of the Black Money Act.

Tax authorities have assessed the total value of the alleged undisclosed funds in the two foreign accounts at Rs 814.27 crore, with the corresponding tax liability pegged at Rs 420.29 crore.