TaxTMI 
TaxTMI 
2026 (7) TMI 1295
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....he appeal vide ex parte order dated 26.06.2025 in spite of the fact that during the assessment proceeding u/s. 10(3) of the Black Money Act, 2015 as well proceeding u/s. 50 of the said Act before the Ld. PDIT (Inv), Kolkata the assessee had filed all the required information, supporting details, documents etc. substantiating that be being a NRI at the relevant time was not required to file ITR and the same formed part of the assessment records (2) That, even on merits of the case the Ld. CIT(A) erred in law in having confirmed the addition of Rs 21,63,645/- made by the A.O. on the allegation that although the assessee as a beneficial ow received 33,333 shares of an offshore company M/s Arvis Trading Ltd. in the years 2005 & 2008 on payment equivalent to INR of Rs. 21,63,645/-but the same were not disclosed in Schedule-FA of his ITR for the relevant assessment years in spite of the fact that payment against 16,667 subscribed shares had been made on 12/05/2012 (AY 2013-14) from his foreign bank account when the assessee was a NRI and hence outside the purview of Black Money Act. (3) That, the Ld. CIT(A) while upholding the addition of Rs. 21,63,645/- made u/s. 10(3)....
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....mely "Universis Resources SA" was incorporated in British Virgin Islands (BVI) on 18th October 2004 as per The International Business Companies Act (CAP.291) and the appellant was one of the director in company since incorporation. Copy of certificate of Incorporation along with the details of directors is enclosed at page 1-3 of the Paper Book. The company was incorporated with share capital of USD 1000 i.e. 1000 Nos of shares of $1 each wherein the shareholder was K&K Exports. Copy of share certificate is enclosed at page 4 of the Paper Book. As per section 5(1) of the International Business Companies Act, a company registered as International Business Company was not allowed to carry on business with person's resident in the British Virgin Islands. The International Business Companies Act (CAP.291) was replaced by BV1 Business Companies Act (No 16 of 2004) from 1 January 2005. On 1st September, 2005, Universis Resources SA issued 16,667 ordinary shares to the assessee, 16,667 ordinary shares to Mr. Sanjiv Jain and 16,666 shares to Mr. Dipankar Saha. Copy of Minutes of Meeting dated 1" September 2005 is available at page 5 of the Paper Book. The shares were issued by the comp....
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....t Visas are enclosed at page 117-121 of Paper book. 4.3. That the appellant returned India on 21 December 2016. The period of stay in India after 21 December 2016 is 80 days and in F.Y. 2017-18 is 275 days. His residential status as per section 6 of the Income Tax 1961 was as Not Ordinarily Resident in F.Y. 2017-18 and in F.Y. 2018-19 and thereafter resident from F.Y. 2019-20 till date. 4.4. Immediately after his returning to India, the proceedings under Black Money Act, was initiated vide notice u/s. 10(1) of the Act dated 05.02.2018 on the basis of information that Vijendra Kedia was associated with BVI entity Arvis Trading Co. Limited. The AO on the basis of income tax return filed by the assessee for the assessment year noted that the assessee has not disclosed the foreign assets (shares in Arvis trading Co Limited) in Schedule FA in ITR filed. Accordingly, the assessee has failed to furnish the information relating to financial interest in entities located outside India which are held by the assessee as beneficiary owner. The ld. AO also referred to Government of India Scheme providing opportunity to the assessee to come clean in respect of undisclosed foreign assets and....
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....to the AO's observation that the assessee has failed to produce the foreign bank statement and also failed to report the foreign assets and therefore, undisclosed foreign asset as per provision of Rule 3(1)(e) of the Act, applicable for determining the value of the bank. It was also observed by the ld. AO that Section 72(c) of the Act applied for determination of previous year i.e. year in which the notice u/s. 10(1) of the Act is issued and thereafter, value was determined by applying section 5 of Black Money Act Rule 3 and 4 of Black Money Rules. The ld. AR submitted that the ld. AO has made the entire assessment without proper application of mind to the facts of the case. The ld. AR submitted that though the ld. AO had information about the assessee being beneficiary of Arvis Trading Co. Ltd. an entity incorporated in British Virgin Islands (BVI) and also referred to consent letter for acting as Director and share allotment certificates but there was no reference to any other document like financial statements of the company, bank account of the company or any business transactions undertaken by the company after its incorporation. The ld. AR further submitted that the ld. AO wa....
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....the time of issuance of share as the same was issued under debt obligation. The ld. AR submitted that the assessee also acquired the share from Mr. Dipankar Saha for USD $10,000 with the obligation to pay the said amount to the company directly but no payment was made for acquisition of these shares. The ld. AR also made without prejudice submission that even if it is presumed that the appellant had made payment of USD $10,000 to Mr. Dipankar Saha for acquisition shares then the payment could only be made from the income earned in Singapore not chargeable to tax in India. The ld. AR submitted that F.Y. 2007-08 and 2008-09, the assessee was working in Singapore by referring to employment pass to Singapore which are available at page no.114 to 116 of the Paper Book. The ld. AR submitted that the assessee's only income was from source in Singapore which was not taxable in India and therefore, even if it is presumed that assessee had made payment on 28.02.2008, the payment was made for acquisition of shares from the income earned in Singapore which was not taxable in India. Further, the ld. AR submitted that the assessee was non-resident in F.Y. 2007-08, 2008-09 and from F.Y. 2010-11 t....
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.... disclosed the said foreign assets in the return of income for the year in Schedule FA for the relevant assessment years and accordingly, the assessee has failed to furnish the information relating to financial interest in entities located outside India held by the assessee as beneficial owner. The ld. AR submitted that a non-resident assessee is not required to file any return of income in India if he did not have any income from sources in India. The ld. AR submitted that the assessee filed the return of income in India disclosing those incomes that were received from Indian sources. The ld. AR submitted that the assessee being a non-resident was not required to disclose foreign assets held outside India because Schedule FA in ITR was not applicable to the assessee as prior to the amendment by Finance (No.2) Act 2019 in the definition of assessee in section 2(2) of the Act which was effective retrospectively from 1.7.2015, the same was applicable to residents only. The ld. AR submitted that right from F.Y. 2010-11 to 2016-17, the assessee was non-resident. Similarly, the assessee was non-resident in F.Y. 2007-08 and 2008-09. The ld. AR submitted that the assessee was resident in ....
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....addition was called for under the Black Money Act and therefore, the proceedings as well as the assessment is bad in law and may be quashed on this score also. 7. The ld. DR on the other hand relied heavily on the order of the authorities below by submitting that though the assessee was Not Ordinarily Resident during the instant financial year, which is acknowledged by the ld. AO but the fact remains that the foreign assets were not disclosed by the assessee in the ITR and therefore the proceedings were rightly initiated. The ld. DR submitted that the assessee was not even cooperative and compliant before the ld. CIT (A) and therefore, the issue could not be decided as the assessee had not furnished any evidences or materials in respect of his case therefore, the issue may be restored to the file of the ld. CIT (A) for adjudication on merit. 8. We have heard the rival contentions and perused the materials available on record. We note that the residential status of the assessee on the basis of copies of Passport was of Not Ordinarily Resident during F.Y. 2017-18, whereas it was non-resident from F.Y. 2007-08 to 2008-09 and from F.Y. 2010-11 to F.Y. 2017-18 while it is resident....
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....utside India. shall be determined without giving effect to the provisions of clause (c) of section 72.]" 8.3. We further note that later the aforesaid definition of the assessee was amended by Finance (No.2) Act, 2019, w.e.f. 01.07.2015. The amended definition of the assessee u/s. 2(2) of the Black Money Act, reads as under: (2) "assessee" means a person- (a) being a resident in India within the meaning of section 6 of the Income-tax Act, 1961 (43 of 1961) I the previous year; or (b) being a non-resident or not ordinarily resident I India within the meaning of clause (6) of section 6 of the Income-tax Act, 1961 in the previous year, who was resident in India either in the previous year to which the income referred to in section 4 relates; or in the previous year I which the undisclosed asset located outside India was acquired; Provided that the previous year, in case of acquisition of undisclosed asset outside India, shall be determined without giving effect to the provisions of clause (c) of section 72. 8.4. A perusal of the above amended Section makes it abundantly clear that in the amended definition of assessee, the Non-Resident and Not....
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.... Further, as per BVI Business Companies Act, there is a TRANSITIONAL PROVISIONS APPLYING TO IBCS THAT ARE AUTOMATICALLY RE-REGISTERED UNDER PART III wherein under "Division 3- Capital, Redemptions and Dividends", amount of consideration for shares has been provided which reads as under: "Division 3 Capital, Redemptions and Dividends Amount of consideration for shares (2) A share issued by a company upon conversion of, or in exchange for, another share or a debt obligation or other security in the company, shall be treated for all purposes as having been issued for money equal to the consideration received or deemed to have been received by the company in respect of the other share, debt obligation or security As per aforesaid section, a shares issued by a company upon a debt obligation shall be treated as having been issued for money equal to the consideration deemed to have been received by the company in respect of debt obligation. Thus, in the British Virgin Island, shares are allowed to be issued under a debt obligation considering the shares as fully paid with liability realizable in future. The assessee before the ....
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.... resident Was in Singapore under employment pass. Passport lost in Singapore and issued on 15.06.2007 in Singapore Date of issuance of new passport: 30.04.2008 Even otherwise the income was earned in Singapore which was not taxable in India. 8.8. We observe from the above that the foreign assets, if at all, were acquired from the income which were not chargeable to tax in India and therefore, the assessee was not required to make any declaration u/s. 59 of the Act. We note that there are two conditions involved in Section 59 (i) that there must exists undisclosed foreign assets within the meaning of section 2(11) of the Act and (ii) such assets must have been acquired from income chargeable to tax under Indian Income Tax Act in any year prior to A.Y. 2016-17. As is apparent from the above table that these shares were acquired in 2005 and 2008 when the assessee was non-resident and income earned outside India was not taxable under the Indian Income Tax Act. Therefore, even on this count the ld. AO observations are wrong and cannot be sustained. 8.9. We have also perused Rule 3(1)(e) of the black money rules which deals with the determination of value of bank account. For....