TaxTMI 
TaxTMI 
2026 (7) TMI 1480
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....tizen of India. The assessee was born to Late Mr. Michel Postel, a French national, and Mrs. Myrtle Postel, an Indian national on 18.09.1961. The assessee had stayed in India till the age of six years and thereafter moved to France along with his parents in the year 1968. Subsequently, the assessee returned to India in the year 1979 after completion of schooling and has since been residing in India. Over a period of time, the assessee received various assets in India and abroad by way of gifts from his father, who was a tax resident of France. As on 01.07.2015, the assessee held the following foreign assets i. 4 bank accounts in Milleis Banque, Biarritz ii. 1 bank account in BNP Paribas, France iii. Shares held in SCI Soum Immo which holds a house in France. iv. Residential apartment in Paris, France 3. These assets were not disclosed by the assessee till AY 2021-22 in the return of income. Subsequently, summons dated 21.06.2022, 22.06.2022 and 04.07.2022 were issued under section 131 of the Income-tax Act by the DDIT (Inv.), Chennai, pursuant to information received through the CRS portal regarding balances maintained in foreign bank accounts....
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.... the period from 1982 to 2012 at Rs. 3,49,67,333 and passed an order under section 10 of the BMA on 23.01.2024 raising a tax demand. The assessee paid the entire demand on 16.02.2024. 28. On 30.09.2024, the AO issued a notice u/s 12 of the Act, stating that the interest chargeable u/s 40 of the Act had not been charged in the order dated 23.01.2024 passed u/s 10 of the Act, which was a mistake apparent on record. The assessee objected to the rectification. However, the AO dismissed the objections of the assessee and vide order dated 24.03.2025, passed u/s 10 r.w.s. 12 of the BMA, to levy interest of Rs. 11,66,09,386 u/s. 40 of the BMA. The assessee filed an appeal before the CIT(A) and made detailed submissions during the course of the hearing. The CIT(A), vide his order dated 31.07.2025, passed u/s 15 of the BMA, partially allowed the appeal filed by the Appellant by holding as under: - 8.5 The Assessing Officer had not assessed the undisclosed income from foreign source separately for each assessment year but has charged interest under section 40 for all the years. If the Assessing Officer had assessed the undisclosed income separately for each relevant year, then chargi....
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....g of return of income for the Asst. Year 2023-24 to the date of passing of order u/s 10 of BMA i.e., 23.01.2024 on the quantum of tax levied therein. Accordingly, ground nos. 7 & 8 are treated as partly allowed. 10. In ground nos. 9, 10, 11 & 12, the appellant contended that the provisions of section 207(2) of the IT Act are applicable since he has no business income and has crossed age of 60 years and not liable to pay advance tax; that since neither 234B nor section 40 of the BMA makes any reference to the date of assessment u/s 10, по interest can be computed u/s 40(2). It was also contended that interest u/s 234C was calculated on the short fall of total tax against the chargeability of default in short fall of tax for the respective quarters. From the information available on file, for the year under consideration i.e., Asst. Year 2023-24, the appellant has crossed the age of 60 years and has no business income. Therefore, the provisions of section 207(2) are prima-facie applicable to the appellant and the appellant is not liable to pay any advance tax as per Income Tax Act, 1961. However, the position under the BMA is different and it provides no such exc....
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....following grounds of appeal - 1. In the facts and circumstances of the case and as per law, the Ld. CIT(A) and Ld. DDIT erred in levying interest u/s 40 of the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act, 2015 ("the BMA"). 2. In the facts and circumstances of the case and as per law, the Impugned Order of the Ld. CIT(A) is vitiated due to non-consideration of the documents and submissions filed by the Appellant in relation to the foreign assets held and income earned thereon by the Appellant. 3. In the facts and circumstances of the case and as per law, the Ld. CIT(A) erred in passing the Impugned Order to charge interest u/s 40 read with section 12 of the BMA, when the chargeability of interest is not a mistake apparent on record, but a disputed question of law. 4. In the facts and circumstances of the case and as per law, Section 40 of BMA is an example of still born legislation and hence it cannot be applied in case of assessment made under Section 10 of the BMA. 5. In the facts and circumstances of the case and as per law, the Ld. CIT(A) failed to appreciate that in terms of Section 207(2) of the Incom....
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.... and in law. The ld AR further submitted that section 40 of the BMA can be invoked only where the assessee has undisclosed foreign income which was not disclosed in the return of income furnished under section 139(1) of the Income-tax Act. The Ld. AR also submitted that the assessee, for AY 2023-24, had already been disclosed all foreign assets in Schedule FA of the return filed on 30.07.2023 and the interest income relating to the relevant previous year was also duly offered to tax. The ld AR drew our attention to the fact that the return filed for AY 2023-24 was selected for scrutiny and the returned income was accepted under section 143(3) without any addition. The ld AR therefore argued that no undisclosed foreign income pertaining to AY 2023-24 survived and consequently the foundational requirement for invoking section 40 itself was absent. The assessee further pointed out that even in the computation made by the AO under section 10 of the BMA, only interest income up to 31.03.2022 had been considered and no income pertaining to FY 2022-23 was brought to tax. On this basis, it was submitted that interest under section 40 could not at all be levied for AY 2023-24. 8. The ld ....
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....of any separate return of income, payment of advance tax, determination of assessed tax in the manner contemplated under the Income-tax Act, or any mechanism to determine the commencement and terminal dates for levy of interest. The ld AR therefore characterized section 40 of BMA as a "still born legislation" incapable of proper enforcement in assessments framed under section 10 of the BMA. 11. Without prejudice to the above submissions, the ld AR contended that the non-levy of interest in the original assessment order dated 23.01.2024 could not be treated as a "mistake apparent from the record" so as to justify rectification under section 12 of the BMA. It was argued that the question whether section 40 was at all applicable in the facts of the present case was itself highly debatable, particularly when the assessee had already disclosed the foreign assets and corresponding income in the return filed under section 139(1). According to the Ld. AR, the Assessing Officer, at the time of passing the original order under section 10, had consciously not levied interest considering that the statutory conditions for invoking section 40 were absent. Reliance was placed on the decision o....
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....closed income' are two different concepts altogether. For the purposes of BMA, the trigger for levy of interest under Section 40(1) is where the source of income which is located outside India has not been disclosed in the return of income and not on undisclosed income. In the present case, it is an admitted position that the assessee had disclosed the foreign source in the return furnished under the Act and the AO himself has given a specific finding that the assessee has furnished the source for undisclosed assets (refer para 7.3 from page 10 of AO's order u/s. 10 of BMA). Therefore the dispute here pertains only to the quantification of income arising from such disclosed source. In our considered view therefore, mere variation in computation or enhancement of income by the Assessing Officer cannot automatically be equated with non-disclosure of the foreign source itself. Further in our considered view, the expression "not disclosed" employed under section 40(1) has to be construed in the context of complete suppression of the foreign source and not a mere difference in the quantum of income assessed. The legislative intent behind the BMA is to bring to tax undisclosed foreig....
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....Act. Interest for defaults in furnishing return of income. 234A. (1) Where the return of income for any assessment year under subsection (1) or sub-section (4) or sub-section (8A) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,- (a) where the return is furnished after the due date, ending on the date of furnishing of the return; or (b) where no return has been furnished, ending on the date of completion of the assessment under section 144, on the amount of the tax on the total income as determined under sub-section (1) of section 143, and where a regular assessment is made, on the amount of the tax on the total income determined under regular assessment, as reduced by the amount of,- ****** 15. In the present case, from the records we notice that the assessee has filed the return of income under section 139(1) on 30.07.2023 i.e. within the due date. Therefore....
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....the Income Tax Act, 1961, however, we find that charge of interest purported in Section 40(2) is rendered unworkable and otiose as because the foundational machinery upon which Sections 234B and 234C operates viz., obligation to pay advance tax, the requirement of quarterly instalments, the specification of due dates for such payments, and the due date for filing of return etc., are all conspicuously absent under the BMA. Sections 234B and 234C of the Income Tax Act are essentially machinery provisions that can only be operationalized through the broader framework of advance tax obligations under Chapter XVII-C of the Income Tax Act. The interest chargeable under Section 234B is computed with reference to the assessed tax and the advance tax paid or payable, while the interest under Section 234C is computed by reference to the instalment due dates prescribed under Section 211 of the Income Tax Act. Under the BMA, there is no corresponding provision requiring payment of advance tax, no prescription of quarterly instalments, no specification of instalment due dates, and no due date for filing of return analogous to the framework obtaining under the Income Tax Act. In the complete abs....
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....ly the procedural machinery, but also the statutory exclusions contained therein. Accordingly, in the absence of any statutory liability upon the assessee to pay advance tax under the incorporated provisions of the Act, the very foundation for levy of interest under section 40(2) of the BMA fails. We are unable to agree with the findings of the CIT(A) in the present case that the assessee is liable to interest under section 40(2) for failure to pay advance tax on the undisclosed income assessee without considering that as per the fundamental condition which is to be imported from the Act into BMA the assessee is not liable to pay advance tax. Therefore we hold that interest levied under section 40(2) in the facts of the present case is unsustainable and liable to be deleted. 17. We would like to mention here that, our decision to decide the issue of levy of interest under section 40 of BMA in the present case is based on the peculiar facts of the case. Our findings as given above is to lay down the basic principles to be applied while considering the levy of interest under section 40 of BMA and the revenue while deciding the quantum is expected to keep these principles in mind f....
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....comes the effective and operative order for the purpose of appellate proceedings. In such circumstances, the assessee, being an aggrieved party against the enhanced demand, cannot be restricted merely to challenging the levy of interest alone. The decisions relied upon by the assessee in Income Tax Officer v. Margarine & Refined Oil Co. Ltd. 1982 (133) ITR (Kar.) and Syed Alavi v. State of Kerala (1981) 48 STC 150 (Ker) support the proposition that once the subsequent order modifies the earlier order, the earlier order loses its independent finality to the extent modified and the entire amended order becomes amenable to appellate scrutiny. Therefore, in our considered view the assessee is entitled to challenge the quantum addition which constitutes the very foundation for levy of interest u/s. 40, in the appeal arising against the rectification order relating to levy of interest. The doctrine of merger would operate to that limited extent, namely, in respect of matters which directly has a direct nexus with the rectification carried out under section 12 of BMA. 20. Accordingly, considering that the levy of interest u/s. 40 of the BMA is linked to the determination of undisclosed....