TaxTMI 
TaxTMI 
2026 (3) TMI 1213
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....lay in filing the appeal and proceed to dispose of the appeal on merits. 3. The Revenue has preferred appeal being BMA No.04/Kol/2025 and the assessee has filed cross-objection bearing no. C.O 71/Kol/2025 taking the legal ground. Since, the assessee has filed cross-objection by taking legal ground regarding the validity of assumption of jurisdiction of the Assessing Officer to issue notice u/s. 10(1) of BMA Act, therefore, we decide to take the cross-objection first for which the department has not raised any objection. C.O No.71/Kol/2025 4. The assessee in its cross-objection has taken the following grounds: "1. That the Ld. CIT(A) erred in upholding the assumption of jurisdiction u/s. 10 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tas Act, 2015 (BMA), which is bad in law inasmuch as the investment in the impugned foreign bank accounts represented capital inherited by the Assessee from his late father and was therefore not 'undisclosed foreign income or asset chargeable to tax in India under the Income-tax Act, 1961 (the ITA') 2. That the Ld. CIT(A) erred in upholding the applicability of the BMA, which came to force ....
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....uring F.Y. 2016-17 through investigation-stage summons, statements, voluntary disclosure letters and its reporting in the revised returns dated 04.12.2016 for A.Ys 2015-16 and 2016-17, all of which occurred in FY 2016-17; the subsequent administrative authorisation of the ADIT as A.O, in March 2018 could not defer the year of chargeability fixed by the proviso, which, if at all, was A.V. 2017-18 (FY 2016-17) and not A.Y 2019-20 7. That, in continuation of the preceding ground and without prejudice to it, the L. CIT(A) further med in law in sustaining the assessment of the value of the impugned foreign bank accounts in AY 2019-20 by relying on section 72(c) of the BMA, whereas the proviso to section 3(1)-being part of the charging section fixes the year of chargeability as the previous year in which the asset first came to the notice of the Department, namely FY 2016-17 (AY 2017-18); the deeming fiction la section 72(c) cannot override the charging provision to shift the charge to the year of issue of notice (FY 2018-19). 8. That further and without prejudice, even on the Department's own contention that the impugned foreign bank accounts came to the notice of ....
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....r revising returns u/s. 139(5) had already expired for those earlier years, the assessee requested the Assessing Officer to regularise such disclosure by issuing notices u/s. 148 of the Act thereby enabling him to pay due taxes in accordance with law. The Assessing Officer rejected the submission filed by the assessee vide order dated 05.03.2021 u/s. 10(3) of the BMA for A.Y. 2019-20 by treating the entire deposits in the impugned bank accounts jointly held by the assessee with his wife comprising the inherited deposits as well as accrued interest and capital gains as "undisclosed assets located outside India" and calculated total credits at Rs. 30,75,85,044/- and apportioned 50% in the hands of the assessee (15,37,92,522/-) which was added by the Assessing Officer in the hands of the assessee in the order passed u/s. 10(3) of BMA dated 05.03.2021 and 50% in the hands of his wife in the manner as follows: Name of Bank Account Head Amount in Foreign Currency Exchange Rate (reference rate as on 01.04.2018) Amount in INR HSBC 15882338, Jersey, UK Initial Fund Credit GBP 32,50,000 91.4563 29,72,32,975 Interest (for F.Y. 2009-10 to 2015-16) GBP 71,704....
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....rred by limitation. However, on perusal of the assessment order, I found that the AO has duly addressed the concern of the appellant regarding the time limitation for issuance of notice u/s. 10(1) of the Act. The AO in para 2 of the assessment order has categorically stated that since the PAN-AFYPP9398B was assessed at Kolkata. Hence as per the provision of the BM Act, 2015 the proper jurisdiction for the investigation and assessment of the case was with the DGIT (Inv), WB, Sikkim & NER. Hence, with the approval of competent authority the jurisdiction of the assessee was assigned for investigation and assessment of the case to the DGIT(Inv), WB, Sikkim & NER. The AO has further stated in Para 4 of the assessment order that the Assistant/Deputy Director of Investigation, Unit 3(4), Kolkata was authorized to exercise the concurrent power and perform the function of Assessing officer in the case of Shri Ajay Kumar Patel by the PDIT(Inv), Kolkata vide order No. 125/2017-18 dated 28.03.2018. Therefore, the AO i.e ADIT(Inv), Unit 3(4), Kolkata issued the notice u/s. 10(1) of the Act on 13.04.2018 for the assessment of the case under the provision of the BM Act, 2015. As it is clear that ....
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....the opinion of the Assessing officer unsatisfactory, is not appealing for the simple reason that an amount receivable from the bank in respect of a bank account is certainly an asset of the person holding that account, for all practical and legal purposes. While such a bank account is an asset, the cost of this asset is the deposit made in the account by the account holder or receipts diverted to such an account by the account holder. If the owner of a bank account has say Rs. 10 Crore in a bank account, he has to explain the source of investment in this bank account. If, for example, he can substantiate that out of this Rs. 10 Crore, he has transferred Rs. 5 Crores from his other bank account, which is duly disclosed to the tax authority, to that extent, the investment is explained. The requirements of section 2(11) can thus be clearly satisfied even in respect of a bank account. One has to understand that a bank account, in whatever way it is described, is an asset in the sense that it gives you ownership of the credit balance in the books of the bank, in that account. Of course, when it is debit balance, reflecting borrowings, that reflects a liability, but one is not really con....
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....0.09.2015. Hence, I find it appropriate to tax the amount of GBP 57700.87 equivalent to Rs. 52,77,108/- in the BM Act, 2015. Further, I also find that since the appellant has already included the interest income earned on the deposits in the HSBC bank account of GBP6,398.31 and GBP 7,605.54 pertaining to F.Y. 2014-15 & 2015-16 in the ITRs filed for the A.Y. 2015-16 and A.Y 2016-17. So, there was no occasion for the AO to include the amount of GBP6,398.31 and GBP 7,605.54 pertaining to F.Y. 2014-15 & 2015-16 in the amount assessed as the undisclosed foreign income of the appellant. Hence, in view of the above, I am inclined to confirm the addition on account of undisclosed foreign interest income up to GBP57700.87 equivalent to Rs. 52,77,108/- and delete the addition of (GBP 6,398.31 and GBP 7,605.54) equivalent to Rs. 12,80,740/- pertaining to F.Y. 2014-15 & 2015-16. As such the addition of Rs. 52,77,108/- is confirmed and the addition of Rs. 12,80,740/- is deleted out of the total addition of Rs. 65,57,848. II. Furthermore, it is also important to mention that the appellant assessee in its submission has stated that in the F.Y. 2015-16 relevant for A.Y. 2016-17, he has ea....
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....nts represented capital inherited by the assessee from his late father and was therefore not 'undisclosed foreign income or asset' chargeable to tax in India under the Income-tax Act, 1961. The ld. AR brought our attention to the legislative object and scheme of charge embodied in the BMA, the charging provision of section 3, definitional clauses of sections 2(11) and 2(12) and the scope of provisions of section 4 which together define the ambit of the expression "black money." The ld. AR further submits that the charging provision under section 3(1) applies prospectively from A.Y. 2016-17 onwards and the BMA cannot be invoked to tax the foreign income earned prior to its commencement or assets whose source is explained and not chargeable to tax under the IT Act. The ld. AR further submits that although section 4(1)(a)/(b) of the BMA does not itself specify a date of commencement, its operation is necessarily controlled by the charging words of section 3(1) of the BMA ("for every assessment year commencing on or after 1 April 2016") and clauses (a) and (b) merely describe the nature of income that may be treated as "undisclosed"; they do not, by themselves, create a charge or exten....
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....8 that the Assessee had already disclosed the impugned foreign bank accounts and the related income in the revised returns for AY 2015-16 and AY 2016-17 and paid due tax thereon. The ld. AR thus submits that once the Department had full knowledge of the asset and its source, and accepted the disclosure through processing u/s. 143(1) of the IT Act, the condition of "undisclosed assets and income" u/s. 2(11) of the BMA was no longer satisfied, so the invocation of section 10 and continuation of proceedings under the BMA was contrary to the statutory pre-conditions. 7.3 The ld. AR further challenges the validity of notice issued u/s. 10(1) of the Act thereby submitting that since the issuance of the said notice fails to specify the relevant financial year for which the assessment was proposed as required by the scheme of sections 3 and 4 of the BMA and was issued well after the close of F.Y. 2016-17 when the Department had already becomes aware of the impugned foreign bank accounts. Therefore, the said notice is a defective one and also a belated notice which vitiates the very assumption of jurisdiction under the BMA. His submission is that the omission to mention the relevant fina....
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....m A.Y. 2016-17 onwards, while the proviso merely determines the year of chargeability in cases of undisclosed foreign assets- it does not create any new or independent charge. The proviso introduces a limited retrospective mechanism only for valuation purposes by deeming that an undisclosed foreign asset (and not income) shall be taxed on its value in the previous year in which such asset first comes to the notice of the Assessing Officer. This enables pre-existing assets-if truly undisclosed within the meaning of section 2(11) of the BMA-to be taxed once upon discovery. However, the proviso does not extend the charge itself to undisclosed income, which remains taxable, if at all, only prospectively under the main provision. Accordingly, while the BMA levies tax prospectively, the proviso to section 3(1) serves only as a retrospective valuation trigger for assets that are both undisclosed and unexplained. It follows that the BMA cannot be invoked to tax foreign income earned prior to its commencement or assets whose source is explained and not chargeable to tax under the ITA. The legislative intent, therefore, is unmistakable: • Undisclosed foreign income is c....
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....te legislative separation between foreign income-covered by clauses (a) and (b)-and foreign assets, governed by clause (c). This distinction becomes decisive when read with section 3(1) and its proviso: while the main charging provision applies prospectively from A.Y. 2016-17 onwards, the proviso allows a limited retrospective look-back only for the valuation of undisclosed assets. There is no parallel retrospective authority for income. Although section 4(1)(a)/(b) of the BMA does not itself specify a date of commencement, its operation is necessarily controlled by the charging words of section 3(1) of the BMA ("for every assessment year commencing on or after 1 April 2016"). Clauses (a) and (b) merely describe the nature of income that may be treated as "undisclosed"; they do not, by themselves, create a charge or extend it to periods preceding the Act. The statutory power to tax such income arises only u/s. 3(1) of the BMA, which confines the charge to assessment years beginning on or after A.Y. 2016-17. Further, both clauses (a) and (b) of section 4(1) of the BMA expressly reference the return-filing provisions of section 139(1)/(4)/(5) of the ITA. The "defaul....
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.... US$ 19,312 ≈ Rs. 52.77 lakh for A.Y. 2010-11 to 2014-15 which was voluntarily disclosed to jurisdictional ITO vide letter dated 24.01.2017 seeking regularisation u/s. 147 of IT Act. We note that the assessee voluntarily disclosed the same to his jurisdictional ITO (Ward 34(2), Kolkata) before issuance of notice u/s. 10(1) of BMA with a request that the same be regularized through issue of notice u/s. 148 of the IT Act. It is pertinent to mention here that interest & Capital Gains for later years (F.Ys 2014-15 to 2015-16) which were disclosed in revised returns u/s. 139(5) for A.Ys 2015-16 & 2016-17 on 04.12.2016 - returns were processed u/s. 143(1) of ITA. We also find that credits in Bank of America (other than transfers from HSBC Bank) of US$ 19,312 ≈ Rs. 12.44 lakh and the deposits are in the nature of gifts from relatives, reversal of bank charges/other debits, repayment of loan by ADA Global and also the same are out of earlier withdrawals and the same are not in the nature of income. Going over the sections as discussed above, the legal position is hereby summarised as under: i. The object and scope of the BMA are confined exclusively to "black money" - ....
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....taxable capital receipts and the income for AYs 2015-16 & 2016-17 had been duly disclosed and taxed in revised returns under IT Act and the income for AYs 2010-11 to 2014-15 pertained to a period prior to the enforcement of the BMA and could, if at all, be assessed only under the IT Act. Hence, there existed no "undisclosed asset" within the meaning of section 2(11), and the transitional declaration u/s. 59 of the BMA was never required. 9.4 We further find that the Ld. CIT(A) upheld the initiation of proceedings under the BMA even though the statutory condition of the foreign assets or income being 'undisclosed" as contained in sections 2(11) and 4(1)(c)] were not satisfied. The Assessing Officer himself having recorded in his letter dated 31-05-2018 that the Assessee had already disclosed the impugned foreign bank accounts and the related income in the revised returns for AY 2015-16 and AY 2016-17 and paid due tax thereon. We find the impugned foreign bank accounts were (i) inherited capital or capital receipts not chargeable under the ITA, and (ii) already disclosed in the revised returns furnished u/s. 139(5) of the IT Act and therefore follows that the assets and income....
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....ce u/s. 10(1) dated 13.04.2018 does not mention the relevant financial year or assessment year and merely refers to prior statements recorded u/s. 131(1A) of the IT Act and disclosure of beneficial ownership in the impugned bank accounts, without linking such information to any chargeable year and the same was issued long after FY 2016-17, when the Department had already becomes aware of all relevant facts through statements, voluntary letters, and revised returns filed by the Assessee. We find that the summons u/s. 131(1A) of the ITA dated 20.10.2016, statements were recorded, the assessee made voluntary disclosures and filed revised returns dated 04.12.2016. We also note that the notice u/s. 10(1) of the BMA was issued much later on 13.04.2018, i.e., after more than one year from the close of FY 2016-17 and this inordinate delay not only demonstrates absence of contemporaneous satisfaction but also breaks the statutory nexus between the discovery of the asset and initiation of proceedings envisaged u/s. 3 to 5 of the BMA. We find that there was omission to mention the relevant financial year along with the delay in initiation of proceedings which goes to the root of jurisdiction ....
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.... facts have been emerged with date which is essential to reproduce herein below: Event Date / Period Summons u/s. 131(1A) issued by DDIT(Inv.), Vadodara 20.10.2016 Statements recorded under oath 24.10.2016, 05.12.2016, 14.02.2017 Revised returns filed (A.Ys. 2015-16, 2016-17) 04.12.2016 Written replies filed in response to various summons u/s. 131(1A) issued by the DDIT(Inv), Vadodara 13.01.2017, 25.01.2017 and 16.02.2017 Voluntary disclosure before ITO, Ward 34(2), Kolkata 24.01.2017 End of F.Y. 2016-17 31.03.2017 Authorisation of ADIT(Inv.), Unit-3(4), Kolkata 28.03.2018 Notice u/s. 10(1) issued under BMA 13.04.2018 9.7 We find that the assessee challenged the erroneous mention of the year of chargeability as A.Y. 2019-20, contrary to the express language and intent of the proviso to section 3(1) of the BMA. We note that the impugned foreign bank accounts did not constitute "undisclosed assets," as assets had already come to the notice of the Department during F.Y. 2016-17, and therefore, A.Y. 2017-18 would be the only possible year of chargeability and the ld. CIT(A) wrongly upheld the assessment of the impugned foreign ba....
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....gn income and undisclosed foreign assets, wherein it was held as under: (i) At paragraph 14, the Hon'ble Court drew a clear distinction between undisclosed foreign income and undisclosed foreign asset, holding as under: "While in case of undisclosed foreign income of an assessee, the same would be subject to tax under the provisions of the Black Money Act only for every assessment year commencing on or after 1-4-2016, namely assessment year 2016-17 onwards, insofar as undisclosed foreign asset located outside India is concerned, the previous year in which such asset is acquired is not relevant. In other words, an undisclosed foreign asset would be subject to tax under the Black Money Act notwithstanding the date of its acquisition, which may even be a previous year prior to the assessment year commencing on 1-4- 2016; and shall be charged to tax under this provision on the value of such asset in the previous year in which such asset comes to the notice of the Assessing Officer." (para 14) (ii) Further, at paragraph 17, the Court reaffirmed that while undisclosed foreign income becomes chargeable only prospectively from A.Y. 2016-17, undisclosed foreign as....
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....ued after sixteen years where income in relation to any asset located outside India has escaped assessment... Clearly, therefore, the scheme of the Income-tax Act, 1961, is not meant to tax only disclosed foreign income but also undisclosed foreign income." (para 37)" 9.9 Going over the discussion made above, and considering the judicial precedents, we find that the impugned interest income of Rs. 52.77 lakh (Rs. 26.38 lakh in the Assessee's share) for F.Ys. 2009-10 to 2013-14 falls squarely within the pre-2016 period to which the BMA's income- charge does not apply and the same is not part of any "undisclosed asset" u/s. 2(11), the corpus being inherited and fully explained and could have been dealt with under the reopening framework of the ITA including section 149(1)(c), which specifically covers foreign income and foreign assets up to sixteen years. Therefore, we after considering the aforementioned decision of the Gujarat High Court find that the BMA cannot be invoked to retrospectively tax historic income of earlier years that was voluntarily disclosed and is separately assessable under the IT Act. We note that the inherited corpus in the HSBC (Jersey) account is an explai....