2024 (10) TMI 590 - AT - Income Tax

Income Tax findings not binding on Black Money Act proceedings despite similar facts under Section 4(3)

Captain Vilas Waman Katre Versus Additional Commissioner of Income tax, Central Range-7, Mumbai

ITAT Mumbai held that findings in Income Tax proceedings do not bind BMA proceedings despite similar facts. The Third Member resolved disagreement between ... Binding effect on Findings recorded by the ITAT in Income Tax Proceedings in Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“BMA”) - difference proposed by the Ld. Members for the decision of the Third Member. AM was of the firm belief that the additions made under the Income Tax Act and BMA, are almost the same and since the Co-ordinate Bench in Income Tax proceedings passed an order [2022 (1) TMI 1467 - ITAT MUMBAI] wherein the Bench considered the facts of the present case and decided the issue in favour of the assessee and since the Ld. AM was also of the view that information relied upon by the AO for initiating the proceedings under the BMA are similar to the Income Tax Act proceedings, the basic facts are unchanged in the proceedings initiated under BMA, the Ld. AM took a view that ITAT cannot take different view under different proceedings after evaluation of the same facts on record and following the order of the Co-ordinate Bench, held that the decision awarded in the Income Tax proceedings has to be applied in the present proceedings and decided the issues in favour of the assessee - JM was of the opinion that though the Tribunal has discharged the assessee from its liability in the Income Tax proceedings, the same will not have a binding effect on the BMA proceedings and went on to decide the appeal under BMA. HELD THAT:- The scope of total income under the Income Tax Act includes all income from whatever source derived unless specifically exempt from tax or not included in total taxable income whereas under the BMA only undisclosed asset located outside India and undisclosed foreign income and assets are considered. It would be pertinent to refer to Clause (3) of Section 4 of the BMA, which reads as under:- “(3) The income included in the total undisclosed foreign income and asset under this Act shall not form part of the total income under the Income-tax Act.” Thus, any addition made as undisclosed foreign income and asset under the BMA, shall not be repeated under the Income Tax Act but there is no corresponding provision under the Income tax Act, which means that addition/s made under the Income tax Act have no bearing under the BMA. Scope of total income - It has been specifically provided u/s 65 of the BMA that, the declarant shall not be entitled, in respect of undisclosed asset located outside India declared or any amount of tax paid thereon, to reopen any assessment or reassessment made under the Income-tax Act or the Wealth-tax Act or claim any set-off or relief in any appeal, reference or other proceeding in relation to any such assessment or reassessment. Thus, it is only under the BMA that such provisions have been provided whereas no such corresponding provisions are provided under the Income tax Act. This also goes to show that the proceedings under both the Act are clearly distinguishable and moreover, the proceedings under the Income tax Act, have no binding effect on the proceedings under the BMA inasmuch as the scope of income is totally different under both the Acts. Wherever the legislators thought of providing specific provisions, it has been provided but no such corresponding provisions are provided under the Income Tax Act, which again go to show that the proceedings under Income Tax Act and BMA cannot be equated. Considering the scope of income vis-à-vis the proceedings under both the Act, I am of the considered view that having different scope of income, the findings given under the Income Tax proceedings may have a guiding force but certainly not a binding force under the BMA proceedings and, therefore AM grossly erred in following blindly the findings given by the Co-ordinate bench in the Income Tax proceedings. Moreover, under the Income tax proceedings, additions were made u/s 68 & 69 of the Act and both the provisions are deeming provisions. Under section 68, assessee is only required to establish the identity, creditworthiness and genuineness of the transactions and capacity of the lender and now also the source of the source of these are required to be proved prima facie. Similarly, u/s 69 of the Act, the assessee has to show that the investments are recorded in the books of accounts and offer explanation about the nature and source of the investments. Whereas under BMA, Section 2(11) provides that “undisclosed asset located outside India' means an asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the Assessing Officer unsatisfactory; & Section 2(12) provides that 'undisclosed foreign income and asset' means the total amount of undisclosed income of an assessee from a source located outside India and the value of an undisclosed asset located outside India, referred to in section 4, and computed in the manner laid down in section 5.”, and it can be seen that none of the above is a deeming provisions and have different implications than Section 68 & 69 of the Act. Therefore, we considered view that Ld. AM should have decided the quarrel within the four walls of BMA. As mentioned elsewhere, since the Ld. AM has not given any finding in respect of the other issues, decided by the Ld. JM, there is no question of any dissent and, therefore, the decision of the Ld. JM shall prevail. Whether the assessee is obliged to make any disclosure of his assets/income held overseas in any capacity whatsoever during the relevant Assessment years 2008-09 to 2012-13 in the Income Tax Return Forms where there was no specific column in the ITR to that effect? - The declaration has to be made after the date of commencement of BMA on or before a date notified by the Central Government which is effective from 01/04/2016 and after the date of notification, the assessee can declare undisclosed foreign assets and not necessarily in the return of income for AYs 2008-09 to 2012-13. Therefore, the answer to the question posed by the Ld. AM is YES. ORDER: 1. Whether the finding recorded by the Income Tax Appellate Tribunal in Income Tax Proceedings be binding on the Tribunal in MBA Proceedings when the lower authorities under BMA itself relied only on their respective orders passed under Income Tax Proceedings? - Answer: NO. 2. Whether the assessee is obliged to make any disclosure of his assets/income held overseas in any capacity whatsoever during the relevant Assessment Years 2008-09 to 2012-13 in the Income Tax Return Forms when there was no specific column in the ITR to that effect? - Answer: YES. Issues Involved:1. Whether findings recorded by the Income Tax Appellate Tribunal (ITAT) in Income Tax Proceedings are binding on the Tribunal in Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA) proceedings.2. Whether the assessee is obliged to disclose overseas assets/income during the relevant Assessment Years 2008-09 to 2012-13 in the Income Tax Return Forms when there was no specific column for such disclosure.Issue-wise Detailed Analysis:1. Binding Nature of ITAT Findings on BMA Proceedings:The core issue addressed was whether the findings recorded by the ITAT in Income Tax Proceedings should be binding in BMA proceedings. It was argued that both statutes, the Income Tax Act and the BMA, serve different purposes and have distinct scopes. The BMA specifically targets undisclosed foreign income and assets, aiming to penalize illegitimate means of generating money and causing loss to the Revenue. The judgment clarified that the scope of income under both Acts is different, with the Income Tax Act encompassing all income unless exempt, while the BMA focuses solely on undisclosed foreign income and assets. The judgment concluded that the findings in Income Tax proceedings may serve as guidance but do not have a binding effect on BMA proceedings. The decision of the Ld. Accountant Member (AM) to follow the ITAT findings blindly in BMA proceedings was deemed erroneous, as the proceedings under both Acts are distinguishable.2. Obligation to Disclose Overseas Assets/Income:The second issue examined was whether the assessee was required to disclose overseas assets/income in the Income Tax Return Forms during the Assessment Years 2008-09 to 2012-13, despite the absence of a specific column for such disclosure. The judgment referred to Section 59 of the BMA, which provides for the declaration of undisclosed foreign assets post the commencement of the Act. This section allowed for declarations to be made after the Act's commencement and not necessarily in the return of income for the relevant assessment years. Therefore, the judgment concluded that the assessee was indeed obliged to make such disclosures, affirming that the declaration could be made after the BMA's commencement date.Conclusion:The judgment concluded with clear answers to the framed questions: the findings of the ITAT in Income Tax Proceedings are not binding on BMA proceedings, and the assessee is obliged to disclose overseas assets/income for the relevant assessment years, even in the absence of a specific column in the Income Tax Return Forms. The decision underscored the distinct nature and objectives of the Income Tax Act and the BMA, emphasizing the need for separate consideration under each statute.