TaxTMI 
TaxTMI 
2026 (7) TMI 1393
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....ellant. 2. On the facts and circumstances of the case and in law, CIT(A) erred in not considering detailed submission made vide letter dated 17th January 2024 and rejecting the grounds raised before CIT(A). 3. On the facts and circumstances of the case and in law, CIT(A) erred in confirming the Value of Undisclosed Foreign Income and Asset Located Outside India for Assessment Year 2019-20 at Rs. 3,17,53,815 determined by the Assessing Officer ("the AO") under section 10 of the Black Money (Undisclosed Foreign Income and Asset) & Imposition of Tax Act, 2015 ("BM Act"). 4.1 On the facts and circumstances of the case and in law, CIT(A) erred in confirming the taxing of credits appearing in the bank accounts prior to 1st July 2015 as 'undisclosed foreign income' of the Appellant considered by AO without appreciating the fact that the BM Act has come into force from 1" July 2015. 4.2 Without prejudice to above, on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the taxing of assets acquired prior to 1th July 2015 (the day on which BM Act came into force) as 'undisclosed asset located outside India' by....
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....rch 2021. 6.3 On facts and circumstances of the case and in law, the CIT(A) erred in confirming the opinion of AO in disbelieving the affidavit of Mr. Zoltan Ceross, Appellant's financial advisor who had helped the Appellant in recovering part of the investment made under LRS.7. Without prejudice to above, on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the treatment of following credits into bank account no. 1151006210 with SPARKASSE OBERHESSEN as 'undisclosed foreign income' of the Appellant considered by AO without appreciating the fact that the Appellant has duly provided explanation for said credit entries:" Description Amount (euro) Amount (USD) Refund of account 299.00 Credit entry 1 1,40,000.00 Credit entry 2 7,517.57 Credit entry 3 25,183.46 Credit entry 4 975.82 Credit entry in bank a/c no.250013809 1,79,795.57/- 3. The brief facts of the case are that the assessee is a India National and Tax Resident of India the assessee is semi-retired person and income from salary and other sources. The Ld. AO received t....
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....Ld. AO at pages 34 to 35 of the impugned assessment order, wherein the submissions of the assessee have been noted. "1. The assessee has merely provided an affidavit dated 18.01.2020 by your son, Mr Ajay Rao, regarding the payment of EUR 140,000 by him to the assessee for his medical treatment. However, no bank statement of Mr. Ajay Rao or any document has been provided which shows that EUR 140,000 was paid by him to the assessee for medical purpose. 2. Without prejudice to the above, if the purpose of payment of EUR 140,000 was for assessee's medical treatment, then why was no amount utilized for any medical purposes. As per the assessee, the whole amount received was invested in a Savings Bond. 3. As per submission filed dated 26.02.2019, a Saving Bond-2027531426 was purchased on 18.05.2006 which was redeemed on 18.05.2010. However, as claimed by the assessee, the remittance was received from his son for medical treatment in Oct 2003; then why was the fund invested in a bond only after 3 years of its receipt. 4. No document regarding the purchase of the Savings Bond 2027531426 in 2006 has been provided, which can relate it to the money sent....
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....respondence has been provided. 5. No mention or reference of amount of USD 179,797.57 having been received from Provartis is mentioned in the bank statement dated 17.12.2014 of Account Number 250013809. 6. The date of affidavit is 10.07.2019, which is after the tax proceedings had started. 7. These all affirm that the affidavit is just an afterthought to provide a fictitious source to USD 179,797.57 which was found to be credited into the bank account 250013809 on 17.12.2014." 7. The Ld. AR argued that related to bank account nos.250013809 and 3151047199 the Ld. AO had computed the income in following manners in assessment orders page No.40 and 41. For ascertain the correct fact observation noted by the Ld. AO in relevant pages is reproduced as below: "3. Bank A/C No: 250013809 (Amount in USD) Column Labels FY Opening Balance Consultation Fees Credit Entry Grand Total 2013-14 0 0 2014-15 1000 179795.57 180795.57 (blank) Grand Total 0 1000 179795.57 180795.57 No satisfactory document or evidence has b....
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....013809 on 17.12.2014 as being refund of investment earlier made through the Liberalized Remittance Scheme of the RBI. 5. With respect to the issue referred to in para 4(a) above, it is submitted that the Act which has admittedly come into force on 01.07.2015 (see section 1(3) of the BMA Act) cannot be given retrospective effect bringing to tax foreign assets admittedly acquired before the said date. In this regard, attention is invited to judgment of the Delhi High Court in Gautam Khaitan v. UOI (2019) 415 ITR 99, wherein, the Court had granted interim relief by way of stay considering the prima facie case made out by the assessee with respect to application of the BMA Act to assets acquired prior to 01.07.2015. The said interim order came to be challenged by the Revenue before the Hon'ble Apex Court, wherein, the Court has quashed and set-aside the interim order (see the Supreme Court judgment at (2020) 420 ITR 140). Therefore, the said issue has to be now adjudicated on merits by the Delhi High Court. The said issue has also been pending before the other High Courts. 6. With respect to the issue referred to in para 4(b) hereinabove, in the present case, with....
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....n held at least for a moment during the relevant previous year in which the asset is subject to tax, otherwise this will result in an absurd situation where an account has been closed few years back and the amount credited to the said bank account in the past, will be subject to tax based on the foreign exchange conversion rate as on 01.04.2018. Since, bank account being no. 250013809 was closed on 21.04.2017 and no. 3151047199 was closed on 05.08.2010 respectively, inclusion of amounts relatable to the said bank accounts as undisclosed foreign assets during the year was not justified. However, the Mumbai Bench of the Tribunal in the case of Rashesh Manhar Bhansali v. Addl. Commissioner of Income-tax, Central Circle (1), Mumbai (2022) 193 ITD 141 has held that it is not necessary that the assets should be held during any part of the year in which it has been assessed to tax.7. With respect to the issue referred to in para 4(c) above, reference is invited to section 72(c) which read as under: "For the removal of doubts, it is hereby declared that- (c) where any asset has been acquired or made prior to commencement of this Act and no declaration in respect of such a....
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....is graduation in India, he went to the USA for further studies and obtained degree in Business Administration in the year 1999 from the college of William and Mary. Thereafter, he worked in the US with a fortune 500 company being American Management Systems for over four years. During this period, he was drawing annual remuneration of USD 65,000 plus bonus and stock options. During this period, his wife was also engaged as a babysitter as well as was earning income from food catering business. These earnings were invested in stocks and bonds from time to time. Consequent thereto, between Mr. Ajay Rao and his wife they managed to save close to USD 190,000. In the year 2003, the assessee was diagnosed with stage III of Follicular Lymphoma a type of cancer. He, being the only child and considering the seriousness of the illness, decided to return to India in November 2003 to be with the assessee. Whilst, he was winding up his affairs in the USA, the assessee was advised that if the treatment in India did not yield the desired result he may be required to travel outside India for medical treatment. Since, funds may be required outside India for the medical treatment, before relocating ....
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.... the CIT(A) were not justified in rejecting the contents of the Affidavit on the ground that the underlying evidence is not available. They ought to have appreciated that the need to file an affidavit had arisen as the matter was old and the underlying documents were not available with the assessee/his son. In this regard, attention of the Hon'ble Bench is invited to the judgment of the Supreme Court in Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 and the Madras High Court in CIT v. T. Perumal (2015) 370 ITR 313, wherein, the evidentiary value of an affidavit has been explained where in case if no cross examination has been made of persons who had made statement on oath in affidavit, revenue cannot challenge the correctness of the statements made by the deponents in their affidavits. Further based on the contents of the affidavits, the additions made by revenue was deleted in both the cases. Further, reliance was also placed on judgment of the Hon'ble bench 'E' of Mumbai ITAT in Nirmal Jethalal Modi v. DDIT/ADIT (Inv.)-2(1) [2025] 173 taxmann.com 400 wherein, in the context of receipt of a foreign asset by inheritance and where the perfect evidence was not available,....
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.... a group company of Provartis. The investment was made around March, 2013, Letter of Guarantee and Debenture Subscription Agreement with Provartis was dated 01 March 2013 have also been on record of AO and CIT(A). Therefore, the said investment was effectively in Provartis. The affidavit of Mr. Zoltan Ceross including the fact that the funds have come from Provartis establishes the link between the investment of funds in March 2013 and partial return thereof in December 2014. In view thereof, it is submitted the said amount also stand duly explained by the assessee. 10. In light of the decision of Hon'ble bench 'E' of Mumbai ITAT in case of Nirmal Jethalal Modi v. DDIT/ADIT (Inv.)-2(1) (2025] 173 taxmann.com 400 wherein the Tribunal held that "The object of BMA Act was to assess the income that was not subjected to tax in India and which has been stashed away abroad. If an assessee is holding any asset abroad out of the income already subjected to tax in India, then the BMA would not be applicable. Similarly, if the asset held abroad has been acquired out of the income earned there, which is not liable to taxed in India, then also the BMA Act will not apply". B....
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..... The appellant also relied on the definition of 'Undisclosed asset located outside India' and 'Scope of total undisclosed foreign income and assets' as given in section 2 to section 5 of the BMA 10.3 It is claimed that on a harmonious reading of the aforesaid provisions, it follows that: - the Act seeks to tax two items, viz "undisclosed foreign income" and "undisclosed foreign asset: LINCON - Undisclosed foreign income is an income which has not been declared in the return of income filed or to be filed as per the provisions of section 139 of the Income-tax Act, 1961 ('the Tax Act); - Undisclosed foreign asset is an asset located outside India and is held by the assessee, for which there is no explanation for the source of acquisition. 10.4 It is submitted that the definition of "undisclosed asset located outside India" uses the phrases "held by the assessee" and "assessee is the beneficial owner of such asset. This implies that the asset must continue to be held by the assessee. The word "is" also implies continuous holding of an asset by the assessee. According to the assessee, if the asset is not held by the asse....
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....at the asset should have been held by him in the previous year. It merely mandates that the asset should have been held by the assessee either in his own name or he should have been the beneficial owner of these undisclosed assets. 10.9 That the ownership of the asset during the previous year is not essential or necessary, is also clear from the charging section 3(1) which has been vehemently relied on by the assessee. The section is reproduced below: 3. (1) There shall be charged on every assessee for every assessment year commencing on or after the 1st day of April, 2016, subject to the provisions of this Act, a tax in respect of his total undisclosed foreign income and asset of the previous year at the rate of thirty per cent of such undisclosed income and asset: Provided that an undisclosed asset located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer. (2) For the purposes of this section, "value of an undisclosed asset" means the fair market value of an asset (including financial interest in any entity) determined in such manner as may be prescribed. 10.....
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....ection. 10.12 In this regard, section 72(c) provides further guidance. As per section 72(c) of the Act, 72. Removal of doubts. For the removal of doubts, it is hereby declared that- (c) where any asset has been acquired or made prior to commencement of this Act, and no declaration in respect of such asset is made under this Chapter, such asset shall be deemed to have been acquired or made in the year in which a notice under section 10 is issued by the Assessing Officer and the provisions of this Act shall apply accordingly. 10.13 The above section makes the provisions abundantly clear. Even if an asset has been acquired prior to the commencement of Act, the same would be deemed to have been acquired in the year in which it comes to the notice of the Assessing Officer. 10.14 The intention of the legislature is also evident from the examples provided with respect to valuation of assets. Rule 3 which lays down methodology of valuation of different type of assets states that: 3. Fair market value. - (1) For the purposes of sub-section (2) of section 3 of the Act, the fair market value of the assets shall be determined in the followi....
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....ested in H2) = Rs. 40 lakh FMV of H2: (Higher of Rs. 30 lakh and 50 lakh) = Rs. 50 lakh It is clear that the assessee has to compute the FMV of all the assets, whether these have been alienated prior to the previous year or not. 10.17 The scope of assets contemplated under BMA is clear from the Board's Cecular No. 13 of 2015. Some of the questions and answers indicating such scope are reproduced below: Question No.19: A person has a foreign bank account in which undisclosed income has been deposited over several years. He has spent the money in the account over these years and now it has a balance of only $500. Does he need to pay tax on this $500 under the declaration? Answer: Section 59 of the Act provides for declaration of an undisclosed asset and not income. In this case the Bank account is an undisclosed asset which may be declared. Tax on undisclosed asset is required to be paid on its fair market value. In case of a bank account the fair market value is the sum of all the deposits made in the account computed in accordance with Rule 3(1)(e). Therefore, tax and penalty needs to be paid on such fair market value and not on the ....
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.... the house property shall be nil as full amount was deposited in the bank account. The fair market value of the bank account shall be as determined under Rule 3(1)(e) and tax and penalty shall be paid on this amount. (Please also refer to the illustration under Rule 3(3) for computation of fair market value.) Further, it is advisable to declare all the undisclosed foreign assets even if the fair market value as computed in accordance with Rule 3 comes to nil. This may avoid initiation of any inquiry under the Act in the future in case such asset comes to the notice of the Assessing Officer 10.18 The above question answers clarify the scope of assets and income covered by the BMA and include assets acquired from undisclosed sources whether they are still retained by an assessee or not. It also includes assets which have been acquired from unaccounted sources by others and have been inherited by an assessee. The appellant cannot wash his hands off the foreign asset merely by saying that the foreign asset has been alienated/ceased to exist prior to coming into force of BMA. 10.19 In the case of Gautam Khaitan [2019] 110 taxmann.com 272 (SC), the Hon'ble Court was....
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....s would be ascertained in a previous year ending on 31.03.2016. Α perusal of Section 3 of the Black Money Act, would further reveal, that what is relevant is the date on which the Assessing Officer notices the acquisition by an assessee of undisclosed asset located outside India. However, for the purposes of taxation, the value of such asset has to be ascertained as is in the immediate previous year. 10.20 In the above decision, the Hon'ble Court has stressed that for purpose of taxation, the relevant date is the date on which the AO notices the acquisition of the asset by an assessee. Hence, it is clear that the year in which the asset is acquired by an assessee or the issue as to whether the asset is still held by the assessee during that year is not relevant and does not prohibit the AO from assuming jurisdiction under the BM IT Act. 10.21 The Hon'ble jurisdictional Mumbai ITAT in the case of Rashesh Manhar Bhansali v Addl CIT [2021] 132 taxmann.com 20 (Mumbai - Trib.) has also held that the relevant point of taxation under BMA of an undisclosed foreign asset is the point of time when such asset comes to the notice of the AO. It is immaterial as t....
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....een" as well- a situation where the extended definition of "is", as the orised by the Black's Law Dictionary and as implicitly approved by Hon'ble Supreme Court in F S Gandhi's case (supra), will come into play. 87. Be that as it may, we have noted that Hon'ble Supreme Court's judgment has observed that... a "bare reading of the provisions of section 3, read with section 2(9)(d), of the Black Money Act, would unambiguously show, that the legislative intent in so far as the charging tax on an undisclosed asset located outside India is concerned, is to charge the tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer and that " (b)y virtue of these provisions, if such asset comes to the notice of Assessing Officer on 1-4- 2016, he could charge such asset(s) on the basis of its value as would be ascertained in a previous year ending on 31-3-2016. A perusal of section 3 of the Black Money Act, would further reveal, that what is relevant is the date on which the Assessing Officer notices the acquisition by an assessee of undisclosed asset located outside India". Once Their Lordships categorically appre....
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.... decision of the Hon'ble Supreme Court in Gautam Khaitan (supra), and the decision of the Mumbai Bench of the Tribunal in Rashesh Manhar Bhansali (supra) to contend that even assets acquired prior to 01.07.2015 and no longer in existence can be subjected to tax when they come to the notice of the Ld. AO. However, on a holistic consideration of the facts and circumstances of the present case, we find that the impugned additions cannot be sustained. The assessee has furnished plausible explanations, supported by affidavits and corroborative documentary evidence, regarding the source of the major credits, namely EURO 1,40,000 and USD 1,79,795.57. The revenue authorities have neither conducted any meaningful investigation nor subjected the deponents to cross-examination. In view of the ratio laid down by the Hon'ble Supreme Court in Mehta Parikh & Co. (supra) and the judgment of the Hon'ble Madras High Court in T. Perumal (supra), an affidavit cannot be disregarded merely on suspicion in the absence of rebuttal evidence. Further, the decision of the Mumbai Tribunal in Nirmal Jethalal Modi (supra) supports the proposition that where the source of a foreign asset is reasonably explained ....