I am named as one of several beneficiaries of an offshore discretionary trust my uncle settled. Does that make the trust's assets my undisclosed foreign assets?
No, on this line of orders. The Mumbai Bench dismissed the Revenue's appeal and upheld the setting aside of an assessment under s.10(3), following the coordinate Bench in the assessee's own case which had held the s.10(1) notice invalid. A discretionary trust gives a beneficiary no right to any part of the income but vests a discretionary power in the trustees, and where the trust was irrevocable, settled by another, and the assessee was one of several beneficiaries without control, ownership of the assets could not be thrust on him.
Decided by the ITAT (Om Prakash Kant AM and Sandeep Singh Karhail JM, order authored by Sandeep Singh Karhail JM) on 2026-01-09, reported as BMA No. 35/Mum/2025, assessment year 2016-17 (ITAT, Mumbai Bench); no reporter citation printed on the page read. It bears on section BMA s.2(11), section BMA s.10(1), section BMA s.10(3), section BMA s.3 of the Income Tax Act 1961, in Assessment & Scrutiny, Charitable Trusts & Exemption and Evidence & Burden of Proof matters.
It answers the offshore discretionary trust case, and it makes a second point of general use: a jurisdictional challenge to a s.10(1) notice is tested against the material the officer had when he issued it, not against what the completed assessment order later says.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a resident, was covered by a search on 7 January 2014. The Department's case was that he had undisclosed foreign assets - beneficial ownership in offshore entities, foreign bank accounts standing in the names of those entities, and property in Singapore and London - none of which had been declared in Schedule FA. The Assessing Officer issued a notice under s.10(1) of the Black Money Act on 22 November 2017 and completed the assessment under s.10(3) on 31 March 2021, assessing undisclosed foreign income and assets at Rs 8,071,86,73,000. The structure at the centre of the case was an offshore irrevocable discretionary trust settled in 1989 by the assessee's non-resident maternal uncle, Pratap Malpani; the assessee was nominated as one of several beneficiaries and was not the settlor. The Commissioner (Appeals) allowed the assessee's appeal, following an earlier order of a coordinate Bench of the Tribunal in the assessee's own case for the same assessment year, BMA No. 1/Mum/2021 dated 3 September 2021. The Revenue appealed on six grounds, including that the Commissioner (Appeals) had relied on that earlier order mechanically, that its validity was sub judice before the Bombay High Court, that the s.10(1) notice was an independent cause of action, that the foreign assets had never been assessed under the Income-tax Act so no question of double taxation arose, that incriminating material had not been considered, and that reliance on wealth-tax findings about the discretionary trust was unsustainable.
The Revenue's appeal was dismissed. The Bench found no infirmity in the order of the Commissioner (Appeals) allowing the assessee's appeal, and dismissed all the grounds raised by the Revenue, following the coordinate Bench decision in the assessee's own case. On the Revenue's point that the earlier order was pending before the High Court, the Bench recorded the settled proposition that the mere pendency of an appeal before a higher forum does not affect the finality of a Tribunal decision unless it is overruled. The substance of what was followed is that the very first notice issued by the Assessing Officer for making the assessment under the Act, the notice under s.10(1), had been held invalid.
The reasoning adopted is that of the coordinate Bench order of 3 September 2021, set out at length in this order and followed. On jurisdiction, the Commissioner (Appeals) had dismissed the jurisdictional challenge by recourse to the final assessment order; that was held not sustainable in law, because a jurisdictional issue must be decided by reference to the material on which the Assessing Officer relied when he issued the notice, and the original documents underlying the notice had not been examined. Lifting material out of the Assessing Officer's final order without confronting the assessee with it was described as a palpable violation of natural justice. On the trust, a discretionary trust was held to give a beneficiary no right to any part of the income, vesting instead a discretionary power in the trustees, so that the beneficiary has no more than a hope that the discretion will be exercised in his favour; the trust being irrevocable, settled by the uncle and not by the assessee, with the assessee one of several beneficiaries and without control or substantial ownership, the assets could not be thrust upon him. Where the same assets had already been assessed in income-tax proceedings up to the earlier assessment year, they could not again be made the subject of Black Money Act proceedings, which would amount to a double prejudice, the definition of undisclosed asset excluding assets created out of income already assessed under the Income-tax Act. Declarations of beneficial owner status in Form A under Swiss anti-money-laundering law were held to have no tax application, by reference to a letter of the Swiss Federal Tax Administration of 30 June 2015. The Revenue was also held to the position it had taken on the validity of the trust deed in Settlement Commission proceedings, on the principle that a party cannot approbate and reprobate.
we do not find any infirmity in the impugned order passed by the learned CIT(A) in allowing the appeal of the assessee
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Handle my notice → Ask a CA on WhatsAppNo, on this line of orders. The Mumbai Bench dismissed the Revenue's appeal and upheld the setting aside of an assessment under s.10(3), following the coordinate Bench in the assessee's own case which had held the s.10(1) notice invalid. A discretionary trust gives a beneficiary no right to any part of the income but vests a discretionary power in the trustees, and where the trust was irrevocable, settled by another, and the assessee was one of several beneficiaries without control, ownership of the assets could not be thrust on him. This was decided by the ITAT (Om Prakash Kant AM and Sandeep Singh Karhail JM, order authored by Sandeep Singh Karhail JM) and bears on section BMA s.2(11), section BMA s.10(1), section BMA s.10(3), section BMA s.3 of the Income Tax Act 1961. It is reported as BMA No. 35/Mum/2025, assessment year 2016-17 (ITAT, Mumbai Bench); no reporter citation printed on the page read. It answers the offshore discretionary trust case, and it makes a second point of general use: a jurisdictional challenge to a s.10(1) notice is tested against the material the officer had when he issued it, not against what the completed assessment order later says. If it applies to you, the first step is this: Ask for the material on which the s.10(1) notice was issued and take the jurisdictional ground on that material alone; do not let the appellate authority answer it out of the assessment order.
The assessee, a resident, was covered by a search on 7 January 2014. The Department's case was that he had undisclosed foreign assets - beneficial ownership in offshore entities, foreign bank accounts standing in the names of those entities, and property in Singapore and London - none of which had been declared in Schedule FA. The Assessing Officer issued a notice under s.10(1) of the Black Money Act on 22 November 2017 and completed the assessment under s.10(3) on 31 March 2021, assessing undisclosed foreign income and assets at Rs 8,071,86,73,000. The structure at the centre of the case was an offshore irrevocable discretionary trust settled in 1989 by the assessee's non-resident maternal uncle, Pratap Malpani; the assessee was nominated as one of several beneficiaries and was not the settlor. The Commissioner (Appeals) allowed the assessee's appeal, following an earlier order of a coordinate Bench of the Tribunal in the assessee's own case for the same assessment year, BMA No. 1/Mum/2021 dated 3 September 2021. The Revenue appealed on six grounds, including that the Commissioner (Appeals) had relied on that earlier order mechanically, that its validity was sub judice before the Bombay High Court, that the s.10(1) notice was an independent cause of action, that the foreign assets had never been assessed under the Income-tax Act so no question of double taxation arose, that incriminating material had not been considered, and that reliance on wealth-tax findings about the discretionary trust was unsustainable. The matter was decided on 2026-01-09 by the ITAT (Om Prakash Kant AM and Sandeep Singh Karhail JM, order authored by Sandeep Singh Karhail JM). On those facts the ITAT held as follows. The Revenue's appeal was dismissed. The Bench found no infirmity in the order of the Commissioner (Appeals) allowing the assessee's appeal, and dismissed all the grounds raised by the Revenue, following the coordinate Bench decision in the assessee's own case. On the Revenue's point that the earlier order was pending before the High Court, the Bench recorded the settled proposition that the mere pendency of an appeal before a higher forum does not affect the finality of a Tribunal decision unless it is overruled. The substance of what was followed is that the very first notice issued by the Assessing Officer for making the assessment under the Act, the notice under s.10(1), had been held invalid.
The reasoning adopted is that of the coordinate Bench order of 3 September 2021, set out at length in this order and followed. On jurisdiction, the Commissioner (Appeals) had dismissed the jurisdictional challenge by recourse to the final assessment order; that was held not sustainable in law, because a jurisdictional issue must be decided by reference to the material on which the Assessing Officer relied when he issued the notice, and the original documents underlying the notice had not been examined. Lifting material out of the Assessing Officer's final order without confronting the assessee with it was described as a palpable violation of natural justice. On the trust, a discretionary trust was held to give a beneficiary no right to any part of the income, vesting instead a discretionary power in the trustees, so that the beneficiary has no more than a hope that the discretion will be exercised in his favour; the trust being irrevocable, settled by the uncle and not by the assessee, with the assessee one of several beneficiaries and without control or substantial ownership, the assets could not be thrust upon him. Where the same assets had already been assessed in income-tax proceedings up to the earlier assessment year, they could not again be made the subject of Black Money Act proceedings, which would amount to a double prejudice, the definition of undisclosed asset excluding assets created out of income already assessed under the Income-tax Act. Declarations of beneficial owner status in Form A under Swiss anti-money-laundering law were held to have no tax application, by reference to a letter of the Swiss Federal Tax Administration of 30 June 2015. The Revenue was also held to the position it had taken on the validity of the trust deed in Settlement Commission proceedings, on the principle that a party cannot approbate and reprobate. In the words reproduced by the source cited on this page: "we do not find any infirmity in the impugned order passed by the learned CIT(A) in allowing the appeal of the assessee" The decision followed or applied Coordinate Bench of the Mumbai Tribunal in the assessee's own case, BMA No. 1/Mum/2021 dated 3 September 2021 - followed.
It was decided by the ITAT on 2026-01-09 and is reported as BMA No. 35/Mum/2025, assessment year 2016-17 (ITAT, Mumbai Bench); no reporter citation printed on the page read. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section BMA s.2(11), section BMA s.10(1), section BMA s.10(3), section BMA s.3, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Revenue's appeal was dismissed. The Bench found no infirmity in the order of the Commissioner (Appeals) allowing the assessee's appeal, and dismissed all the grounds raised by the Revenue, following the coordinate Bench decision in the assessee's own case. On the Revenue's point that the earlier order was pending before the High Court, the Bench recorded the settled proposition that the mere pendency of an appeal before a higher forum does not affect the finality of a Tribunal decision unless it is overruled. The substance of what was followed is that the very first notice issued by the Assessing Officer for making the assessment under the Act, the notice under s.10(1), had been held invalid. It arises in Assessment & Scrutiny, Charitable Trusts & Exemption and Evidence & Burden of Proof matters, on section BMA s.2(11), section BMA s.10(1), section BMA s.10(3), section BMA s.3 of the Income Tax Act 1961, and was decided by Om Prakash Kant AM and Sandeep Singh Karhail JM, order authored by Sandeep Singh Karhail JM. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Produce the trust deed and show who settled the trust, when, whether it is irrevocable and discretionary, and how many beneficiaries there are. Where the trustees hold a discretion, plead that a beneficiary has no more than a hope that the discretion will be exercised in his favour, and therefore holds nothing. Check whether the same assets have already been assessed under the Income-tax Act for earlier years; if so, take the point that they fall outside 'undisclosed asset' and that taxing them again works a double prejudice. If the Department has accepted the trust structure in other proceedings, for instance before the Settlement Commission, hold it to that position.
Under appeal, and the appeal has not been decided. The Revenue's own second ground in this appeal records that the earlier coordinate Bench order of 3 September 2021 in BMA No. 1/Mum/2021, which is the whole foundation of this order, is sub judice before the Bombay High Court. No order of the High Court on that appeal was located, and nothing was found to show whether this January 2026 order has itself been carried further. The Bench answered the pendency point by saying that the mere pendency of an appeal does not affect the finality of a Tribunal decision unless overruled, which is correct but does not remove the risk. Use the order, and tell the client the High Court has not yet spoken. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This order is in substance a following order. Almost all of the reasoning set out above - on the s.10(1) notice, on the discretionary trust, on double prejudice, on the Swiss Form A declarations and on approbation and reprobation - is that of the coordinate Bench in the assessee's own case in BMA No. 1/Mum/2021 dated 3 September 2021, reproduced in this order and adopted. The passages a practitioner will want to cite therefore belong to the 2021 order, and that order should be read before it is relied on; it was not opened here. The key quote given is the present Bench's own operative sentence for that reason. The assessed figure of Rs 8,071,86,73,000 is as recorded in the order. The date of the search is recorded in the order as 7 January 2014, which precedes the Act; the order does not turn on that. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeal was dismissed. The Bench found no infirmity in the order of the Commissioner (Appeals) allowing the assessee's appeal, and dismissed all the grounds raised by the Revenue, following the coordinate Bench decision in the assessee's own case. On the Revenue's point that the earlier order was pending before the High Court, the Bench recorded the settled proposition that the mere pendency of an appeal before a higher forum does not affect the finality of a Tribunal decision unless it is overruled. The substance of what was followed is that the very first notice issued by the Assessing Officer for making the assessment under the Act, the notice under s.10(1), had been held invalid.
TaxSphere, “Addl. CIT v Yashovardhan Birla”, https://taxnotice.vittsphere.com/caselaw/case/addl-cit-v-yashovardhan-birla-bma-discretionary-trust/ (validity last checked 2026-09-16)
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