The officer has charged interest under s.40 of the Black Money Act on top of the tax. Is there any machinery for it, and can I still fight the quantum in the appeal against the rectification order?
Interest under s.40(2) was held unworkable, because the advance-tax machinery on which ss.234B and 234C of the Income-tax Act operate is absent from the Black Money Act, so there is no statutory liability to pay advance tax on which the interest can bite. Interest under s.40(1) was held not to arise where the foreign source itself was disclosed, the expression 'not disclosed' meaning complete suppression of the source and not a difference in the quantum assessed. On the procedural point, where an assessment order under s.10 is altered by a rectification order under s.12, the two are read together as one composite order, so the appeal against the rectified order carries the underlying quantum with it.
Decided by the ITAT (Aby T. Varkey, Judicial Member and Padmavathy S., Accountant Member) on 2026-06-12, reported as BMA Nos. 13 & 14/CHNY/2025. It bears on section BMA s.40, section BMA s.40(1), section BMA s.40(2), section BMA s.12, section BMA s.10, section BMA s.10(3), section BMA s.84, section 234A, section 234B, section 234C, section 139(1) of the Income Tax Act 1961, in Appeals, Assessment & Scrutiny, Demand, Recovery & Stay and How Tax Law Is Read matters.
Two things a practitioner needs. First, the only reasoned attack located on the s.40 interest charge, and it succeeds on the ground that the Black Money Act borrows the interest sections without borrowing the advance-tax obligation they depend on - which is the same gap that runs through s.84. Second, an answer to the Department's standard objection that an appeal from a s.12 rectification order cannot reopen the quantum settled by the original assessment.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee held four bank accounts with Milleis Banque, Biarritz, one with BNP Paribas, France, shares in SCI Soum Immo which holds a house in France, and a residential apartment in Paris. For assessment year 2023-24 he filed his return on 30 July 2023 disclosing all the foreign assets in Schedule FA and offering foreign interest income of Rs 3,88,090. The Assessing Officer passed an order under s.10 of the Black Money Act on 23 January 2024 bringing to tax interest income of Rs 1,16,55,811 for the period 2012 to 2022 and an estimated Rs 3,49,67,333 for 1982 to 2012. By a rectification order dated 24 March 2025 passed under s.10 read with s.12 the officer levied interest under s.40 of Rs 11,66,09,386. The Commissioner (Appeals) disposed of the appeals by orders dated 31 July 2025. Two appeals came to the Tribunal, BMA Nos. 13 and 14/CHNY/2025.
The appeal in BMA No. 14/Chny/2025 was allowed for statistical purposes and BMA No. 13/Chny/2025 was dismissed as infructuous (para 22). The levy of interest under s.40 was held unsustainable and deleted. The quantum additions were remitted to the Commissioner (Appeals) to be considered on merits, the Tribunal holding that the assessee is entitled to challenge not only the levy of interest but also the underlying quantum addition forming its basis, to the extent arising from the rectification proceedings.
On s.40(1), the Tribunal read the expression 'not disclosed' in the context of complete suppression of the foreign source and not a mere difference in the quantum of income assessed, so that once the source stood disclosed the consequence of interest could not be invoked on account of a reassessment or re-computation; and as the return had been filed within the due date under s.139(1) no interest could be computed under clause (a) of s.234A(1). On s.40(2), the Tribunal held that the foundational machinery on which ss.234B and 234C operate is conspicuously absent from the Black Money Act (para 16), that in the absence of any statutory liability to pay advance tax under the incorporated provisions the very foundation for the levy fails, and that the provision is on that footing unworkable and otiose; it noted also that the assessee was a senior citizen with no income under the head profits and gains of business or profession. On the appellate point, the Tribunal held that once the original order stands altered by a rectification order the two must be read conjointly as one composite order and the final liability crystallises only on the rectified order (para 18), so that the quantum forming the basis of the interest is open in the appeal against it (para 19).
Once the original order itself stands altered by a rectification order, both the orders are required to be read conjointly as one composite order
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Handle my notice → Ask a CA on WhatsAppInterest under s.40(2) was held unworkable, because the advance-tax machinery on which ss.234B and 234C of the Income-tax Act operate is absent from the Black Money Act, so there is no statutory liability to pay advance tax on which the interest can bite. Interest under s.40(1) was held not to arise where the foreign source itself was disclosed, the expression 'not disclosed' meaning complete suppression of the source and not a difference in the quantum assessed. On the procedural point, where an assessment order under s.10 is altered by a rectification order under s.12, the two are read together as one composite order, so the appeal against the rectified order carries the underlying quantum with it. This was decided by the ITAT (Aby T. Varkey, Judicial Member and Padmavathy S., Accountant Member) and bears on section BMA s.40, section BMA s.40(1), section BMA s.40(2), section BMA s.12, section BMA s.10, section BMA s.10(3), section BMA s.84, section 234A, section 234B, section 234C, section 139(1) of the Income Tax Act 1961. It is reported as BMA Nos. 13 & 14/CHNY/2025. Two things a practitioner needs. First, the only reasoned attack located on the s.40 interest charge, and it succeeds on the ground that the Black Money Act borrows the interest sections without borrowing the advance-tax obligation they depend on - which is the same gap that runs through s.84. Second, an answer to the Department's standard objection that an appeal from a s.12 rectification order cannot reopen the quantum settled by the original assessment. If it applies to you, the first step is this: Check whether the interest is charged under s.40(1) or s.40(2); the arguments are different and the order separates them.
The assessee held four bank accounts with Milleis Banque, Biarritz, one with BNP Paribas, France, shares in SCI Soum Immo which holds a house in France, and a residential apartment in Paris. For assessment year 2023-24 he filed his return on 30 July 2023 disclosing all the foreign assets in Schedule FA and offering foreign interest income of Rs 3,88,090. The Assessing Officer passed an order under s.10 of the Black Money Act on 23 January 2024 bringing to tax interest income of Rs 1,16,55,811 for the period 2012 to 2022 and an estimated Rs 3,49,67,333 for 1982 to 2012. By a rectification order dated 24 March 2025 passed under s.10 read with s.12 the officer levied interest under s.40 of Rs 11,66,09,386. The Commissioner (Appeals) disposed of the appeals by orders dated 31 July 2025. Two appeals came to the Tribunal, BMA Nos. 13 and 14/CHNY/2025. The matter was decided on 2026-06-12 by the ITAT (Aby T. Varkey, Judicial Member and Padmavathy S., Accountant Member). On those facts the ITAT held as follows. The appeal in BMA No. 14/Chny/2025 was allowed for statistical purposes and BMA No. 13/Chny/2025 was dismissed as infructuous (para 22). The levy of interest under s.40 was held unsustainable and deleted. The quantum additions were remitted to the Commissioner (Appeals) to be considered on merits, the Tribunal holding that the assessee is entitled to challenge not only the levy of interest but also the underlying quantum addition forming its basis, to the extent arising from the rectification proceedings.
On s.40(1), the Tribunal read the expression 'not disclosed' in the context of complete suppression of the foreign source and not a mere difference in the quantum of income assessed, so that once the source stood disclosed the consequence of interest could not be invoked on account of a reassessment or re-computation; and as the return had been filed within the due date under s.139(1) no interest could be computed under clause (a) of s.234A(1). On s.40(2), the Tribunal held that the foundational machinery on which ss.234B and 234C operate is conspicuously absent from the Black Money Act (para 16), that in the absence of any statutory liability to pay advance tax under the incorporated provisions the very foundation for the levy fails, and that the provision is on that footing unworkable and otiose; it noted also that the assessee was a senior citizen with no income under the head profits and gains of business or profession. On the appellate point, the Tribunal held that once the original order stands altered by a rectification order the two must be read conjointly as one composite order and the final liability crystallises only on the rectified order (para 18), so that the quantum forming the basis of the interest is open in the appeal against it (para 19). In the words reproduced by the source cited on this page: "Once the original order itself stands altered by a rectification order, both the orders are required to be read conjointly as one composite order"
It was decided by the ITAT on 2026-06-12 and is reported as BMA Nos. 13 & 14/CHNY/2025. 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.40, section BMA s.40(1), section BMA s.40(2), section BMA s.12, section BMA s.10, section BMA s.10(3), section BMA s.84, section 234A, section 234B, section 234C, section 139(1), 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 appeal in BMA No. 14/Chny/2025 was allowed for statistical purposes and BMA No. 13/Chny/2025 was dismissed as infructuous (para 22). The levy of interest under s.40 was held unsustainable and deleted. The quantum additions were remitted to the Commissioner (Appeals) to be considered on merits, the Tribunal holding that the assessee is entitled to challenge not only the levy of interest but also the underlying quantum addition forming its basis, to the extent arising from the rectification proceedings. It arises in Appeals, Assessment & Scrutiny, Demand, Recovery & Stay and How Tax Law Is Read matters, on section BMA s.40, section BMA s.40(1), section BMA s.40(2), section BMA s.12, section BMA s.10, section BMA s.10(3), section BMA s.84, section 234A, section 234B, section 234C, section 139(1) of the Income Tax Act 1961, and was decided by Aby T. Varkey, Judicial Member and Padmavathy S., Accountant Member. 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. For s.40(2), take the point that the Black Money Act contains no provision requiring payment of advance tax, so the foundation for interest computed on the analogy of ss.234B and 234C is missing. For s.40(1), show that the foreign source was disclosed - here the assets were in Schedule FA and the foreign interest income was offered - so the charge cannot follow from a mere re-computation of quantum. Where a rectification order under s.12 has varied the assessment, appeal the rectified order and raise the quantum grounds in that appeal, relying on the composite-order reasoning at para 18. File the return within the due date under s.139(1) where you can; the Tribunal used that to knock out the computation under clause (a) of s.234A(1).
Searched for later treatment; none was found. That is not the same as a source affirming it. Decided 12 June 2026. Searches for later decisions on s.40 of the Black Money Act and on s.12 rectification returned nothing applying or doubting it. Whether the Revenue has appealed under s.19 is not known. The holding that s.40(2) is unworkable is a finding that a charging machinery in a central Act does not operate, and a practitioner should expect it to be contested. 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.
The paragraph numbers for the s.40(2) discussion (para 16) and the composite-order holding (para 18) were confirmed on a second reading of the print view; the s.40(1) discussion and the remand direction were not separately numbered in what came back, and the numbering of the reasoning above beyond paras 16, 18, 19 and 22 should be checked against the original. The order was heard on 29 April 2026 and pronounced on 12 June 2026; the date given is the date of pronouncement. The record does not show which of the two appeals (BMA 13 or 14) was against which order of the Commissioner (Appeals); the order records only that 13 was dismissed as infructuous. No reporter citation is printed on the page read. 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 appeal in BMA No. 14/Chny/2025 was allowed for statistical purposes and BMA No. 13/Chny/2025 was dismissed as infructuous (para 22). The levy of interest under s.40 was held unsustainable and deleted. The quantum additions were remitted to the Commissioner (Appeals) to be considered on merits, the Tribunal holding that the assessee is entitled to challenge not only the levy of interest but also the underlying quantum addition forming its basis, to the extent arising from the rectification proceedings.
TaxSphere, “Pascal Postel v DDIT (Inv.)”, https://taxnotice.vittsphere.com/caselaw/case/pascal-postel-v-ddit-bma-40-interest-and-12-rectification/ (validity last checked 2026-09-16)
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