The officer valued my foreign shareholding under the rule meant for bank accounts. Does that stand, and was I even an 'assessee' under the Act as a not ordinarily resident?
Neither stands. Rule 3(1)(e) of the Black Money Rules determines the value of a bank account and cannot be applied to shares, which fall under Rule 3(1)(c). Separately, the definition of 'assessee' in s.2(2) as it stood when the s.10(1) notice was issued in February 2018 covered only a resident, and the assessee being not ordinarily resident in the relevant financial year, the notice and the assessment were held to be without jurisdiction and were quashed.
Decided by the ITAT (Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member) on 2026-01-12, reported as BMA Nos. 5 and 6/KOL/2025, assessment year 2018-19. It bears on section BMA s.2(2), section BMA s.10(1), section BMA s.10(3), section BMA Rule 3(1)(c), section BMA Rule 3(1)(e), section BMA s.59, section BMA s.72(c) of the Income Tax Act 1961, in Assessment & Scrutiny, Residence & Treaty Benefit, Penalty and How Tax Law Is Read matters.
It is the only located decision applying the sub-rules of Rule 3 against each other, and it gives a practitioner the argument that a valuation made under the wrong sub-rule is not merely a computation error but an invalid exercise. It also fixes the pre-2019 reach of s.2(2), which matters for every notice issued before the Finance (No. 2) Act 2019 widened the definition.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, of Bangalore South, held 33,333 shares in Arvis Trading Co. Ltd., a company incorporated in the British Virgin Islands, as beneficial owner. Notice under s.10(1) was issued on 5 February 2018 for assessment year 2018-19. The Assessing Officer valued the shareholding at Rs 21,63,645 by applying an exchange rate of Rs 64.9103 per USD to the holding as on 1 April 2017, and did so under Rule 3(1)(e) of the Black Money Rules. The assessee's residential status for financial year 2017-18 was not ordinarily resident. The assessee contended before the Tribunal that Rule 3(1)(e) could not apply because there was no evidence of any bank account on record (para 6.6). Two appeals were filed, against the assessment and against the penalty.
Both appeals were allowed and the assessment and penalty orders were quashed. On jurisdiction, the Tribunal held that the notice issued under s.10(1) dated 5 February 2018 and the assessment framed under s.10(3) were without jurisdiction, invalid, and were quashed (para 8.4). On valuation, having perused Rule 3(1)(e), which deals with the determination of the value of a bank account (para 8.9), the Tribunal held that the rule is not applicable in the case of shares and holds good only in the case of a bank account (para 8.10). The appeal was allowed (para 8.11) and both appeals were allowed (para 10).
On jurisdiction, the Tribunal read the definition of 'assessee' in s.2(2) as it stood at the date of the notice and found that it covered only a resident. The assessee's status for financial year 2017-18 being not ordinarily resident, he was not covered by the definition, and the notice issued in February 2018 therefore had no statutory foundation. The Tribunal recorded that the definition was later widened to take in a non-resident and a not ordinarily resident, but that this did not assist a notice already issued (paras 8.2 to 8.4). On valuation, the Tribunal went to the text of Rule 3(1)(e), found that it is addressed to the value of a bank account, and held that its application to the value of shares was itself wrong and invalid; the appropriate route for unquoted shares lay in Rule 3(1)(c) (paras 8.9 and 8.10).
the aforesaid rule is not applicable in case of shares and holds goods in case of bank account only
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Handle my notice → Ask a CA on WhatsAppNeither stands. Rule 3(1)(e) of the Black Money Rules determines the value of a bank account and cannot be applied to shares, which fall under Rule 3(1)(c). Separately, the definition of 'assessee' in s.2(2) as it stood when the s.10(1) notice was issued in February 2018 covered only a resident, and the assessee being not ordinarily resident in the relevant financial year, the notice and the assessment were held to be without jurisdiction and were quashed. This was decided by the ITAT (Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member) and bears on section BMA s.2(2), section BMA s.10(1), section BMA s.10(3), section BMA Rule 3(1)(c), section BMA Rule 3(1)(e), section BMA s.59, section BMA s.72(c) of the Income Tax Act 1961. It is reported as BMA Nos. 5 and 6/KOL/2025, assessment year 2018-19. It is the only located decision applying the sub-rules of Rule 3 against each other, and it gives a practitioner the argument that a valuation made under the wrong sub-rule is not merely a computation error but an invalid exercise. It also fixes the pre-2019 reach of s.2(2), which matters for every notice issued before the Finance (No. 2) Act 2019 widened the definition. If it applies to you, the first step is this: Identify the class the asset falls in and match it to the sub-rule: Rule 3(1)(c) for shares, Rule 3(1)(e) for a bank account, and so on.
The assessee, of Bangalore South, held 33,333 shares in Arvis Trading Co. Ltd., a company incorporated in the British Virgin Islands, as beneficial owner. Notice under s.10(1) was issued on 5 February 2018 for assessment year 2018-19. The Assessing Officer valued the shareholding at Rs 21,63,645 by applying an exchange rate of Rs 64.9103 per USD to the holding as on 1 April 2017, and did so under Rule 3(1)(e) of the Black Money Rules. The assessee's residential status for financial year 2017-18 was not ordinarily resident. The assessee contended before the Tribunal that Rule 3(1)(e) could not apply because there was no evidence of any bank account on record (para 6.6). Two appeals were filed, against the assessment and against the penalty. The matter was decided on 2026-01-12 by the ITAT (Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member). On those facts the ITAT held as follows. Both appeals were allowed and the assessment and penalty orders were quashed. On jurisdiction, the Tribunal held that the notice issued under s.10(1) dated 5 February 2018 and the assessment framed under s.10(3) were without jurisdiction, invalid, and were quashed (para 8.4). On valuation, having perused Rule 3(1)(e), which deals with the determination of the value of a bank account (para 8.9), the Tribunal held that the rule is not applicable in the case of shares and holds good only in the case of a bank account (para 8.10). The appeal was allowed (para 8.11) and both appeals were allowed (para 10).
On jurisdiction, the Tribunal read the definition of 'assessee' in s.2(2) as it stood at the date of the notice and found that it covered only a resident. The assessee's status for financial year 2017-18 being not ordinarily resident, he was not covered by the definition, and the notice issued in February 2018 therefore had no statutory foundation. The Tribunal recorded that the definition was later widened to take in a non-resident and a not ordinarily resident, but that this did not assist a notice already issued (paras 8.2 to 8.4). On valuation, the Tribunal went to the text of Rule 3(1)(e), found that it is addressed to the value of a bank account, and held that its application to the value of shares was itself wrong and invalid; the appropriate route for unquoted shares lay in Rule 3(1)(c) (paras 8.9 and 8.10). In the words reproduced by the source cited on this page: "the aforesaid rule is not applicable in case of shares and holds goods in case of bank account only"
It was decided by the ITAT on 2026-01-12 and is reported as BMA Nos. 5 and 6/KOL/2025, assessment year 2018-19. 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(2), section BMA s.10(1), section BMA s.10(3), section BMA Rule 3(1)(c), section BMA Rule 3(1)(e), section BMA s.59, section BMA s.72(c), 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. Both appeals were allowed and the assessment and penalty orders were quashed. On jurisdiction, the Tribunal held that the notice issued under s.10(1) dated 5 February 2018 and the assessment framed under s.10(3) were without jurisdiction, invalid, and were quashed (para 8.4). On valuation, having perused Rule 3(1)(e), which deals with the determination of the value of a bank account (para 8.9), the Tribunal held that the rule is not applicable in the case of shares and holds good only in the case of a bank account (para 8.10). The appeal was allowed (para 8.11) and both appeals were allowed (para 10). It arises in Assessment & Scrutiny, Residence & Treaty Benefit, Penalty and How Tax Law Is Read matters, on section BMA s.2(2), section BMA s.10(1), section BMA s.10(3), section BMA Rule 3(1)(c), section BMA Rule 3(1)(e), section BMA s.59, section BMA s.72(c) of the Income Tax Act 1961, and was decided by Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial 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. If the officer has valued under the wrong sub-rule, say so in terms and ask for the valuation to be set aside rather than merely recomputed. For any s.10(1) notice issued before the 2019 amendment, check the residential status for the relevant financial year; a not ordinarily resident was outside s.2(2). Put the residential status on record with the return and the computation, because this ground goes to jurisdiction and disposes of the assessment.
Searched for later treatment; none was found. That is not the same as a source affirming it. No later decision applying or doubting this order was located, and no appeal against it to the Calcutta High Court was found. The order is of January 2026. 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 quotation at para 8.10 reads 'holds goods' in the document; it is reproduced as printed and appears to be a slip for 'holds good'. The Tribunal's statement of the effect of the amendment to s.2(2) is compressed - it records the widening of the definition as taking effect from 1 July 2015 and yet treats it as not saving a notice issued in February 2018. The order does not spell out how those two propositions sit together, and a practitioner relying on the s.2(2) point should read the amending provision for himself. The Rule 3 holding is free of that difficulty and stands on the text of the rule. The section under which the penalty in the companion appeal was levied is not identified in the portions of the order reached. 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.
Both appeals were allowed and the assessment and penalty orders were quashed. On jurisdiction, the Tribunal held that the notice issued under s.10(1) dated 5 February 2018 and the assessment framed under s.10(3) were without jurisdiction, invalid, and were quashed (para 8.4). On valuation, having perused Rule 3(1)(e), which deals with the determination of the value of a bank account (para 8.9), the Tribunal held that the rule is not applicable in the case of shares and holds good only in the case of a bank account (para 8.10). The appeal was allowed (para 8.11) and both appeals were allowed (para 10).
TaxSphere, “Vijendra Kedia v DDIT (Inv)”, https://taxnotice.vittsphere.com/caselaw/case/vijendra-kedia-v-ddit-bma-rule-3-1-e-bank-accounts-only/ (validity last checked 2026-09-16)
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