BMA s.10(1)

BMA s.10(1) — the law in short

What the courts have decided on section BMA s.10(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Arvind Balkrishna Gogte v Income Tax Department High CourtHelps taxpayerNo later treatment found
  My foreign company was struck off and the bank account closed years before the Black Money Act commenced. Can they still prosecute me for it?
  Not on this authority. The Karnataka High Court quashed eight complaints under ss.50 and 52 of the Black Money Act where the foreign company had been struck off and the Singapore account closed in 2010, holding that the deeming fiction in s.72(c) cannot be stretched to found criminal liability for conduct that preceded the Act. Article 20(1) bars conviction under a law not actually in force when the act was done, and a statutory deeming that the asset was acquired in the year of the s.10 notice does not supply that.
• Prateek Chitkara v Union of India High CourtCuts both waysNo later treatment found
  There is a look-out circular against me while my Black Money Act appeal is pending. Can I get it lifted, and does the appeal need money deposited first?
  The look-out circular was not quashed but was converted into an intimation of arrival and departure under clause 6(I) of the Office Memorandum dated 22 February 2021, on conditions including security over property, the Court holding that this was not a case detrimental to the economic interest of the country as there was no allegation of siphoning of public funds and no criminal proceedings had been initiated despite the demand. On the appeal, the Court recorded that no amount had been deposited under Rule 6(4) of the Black Money Rules, which requires the tax with penalty and interest on the liability not objected to by the assessee to be paid before an appeal under s.15(1) is admitted.
• Anila Rasiklal Mehta v Union of India High CourtCuts both waysNo later treatment found
  The department got my foreign account details under an exchange-of-information agreement, so s.71(d)(iii) shut me out of the s.59 declaration window. Does Gautam Khaitan still answer me?
  The Bombay High Court said that point was not decided in Gautam Khaitan and left it open. On the notice of motion it refused a stay of the s.10(1) notices, but directed that no coercive measures be taken while the department proceeds, and kept the Article 14 and Article 20 challenge for the hearing of the writ petition itself. Nothing was decided on the merits.
• Shantanu Bhowmick v DDIT (Inv) ITATHelps taxpayerNo later treatment found
  The department cannot produce the s.10(1) notice for the year it assessed. Is that cured by s.81?
  No. Where the Revenue could not produce any notice under s.10(1) for the assessment year in question, the Tribunal held that the absence of a valid notice for the relevant year is not a curable defect under s.81 of the Black Money Act. Both the assessment under s.10 and the consequent penalty order of Rs 1,84,11,360 were quashed.
• Bindu Todi v DDIT ITATHelps taxpayerNo later treatment found
  My Black Money Act assessment was passed more than two years after the s.10 notice. The Department says the covid relaxation law extended the time. Did it?
  Not for the Black Money Act. Section 11(1) gives two years from the end of the financial year in which the s.10(1) notice was issued, and the Delhi Bench quashed an assessment passed outside that period. Notification No. 113/2021 dated 17 September 2021 issued under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020 extended time only for the Income-tax Act and the Prohibition of Benami Property Transactions Act, not for every specified Act, and did not extend the time for completing an assessment under the Black Money Act.
• Atanu Banerjee v DDIT (Investigation) ITATCuts both waysNo later treatment found
  I bought a house abroad years ago while I was a non-resident. Now that I have been resident in India, can it be taxed under the Black Money Act?
  The argument that acquisition while non-resident puts the asset outside the Act did not succeed before the Delhi Bench. The Tribunal proceeded on the basis that the assessee, being resident in India from assessment year 2016-17, was required to declare the foreign asset and explain its source, and that s.72(c) deems a pre-commencement asset in respect of which no declaration was made under Chapter VI to have been acquired in the year the s.10 notice was issued. It did not decide the appeal: it restored the matter to the Commissioner (Appeals) for fresh adjudication so that the assessee could produce evidence of the source of the investment and of his residential status.
• Sunil Kumar Alagh v DDIT (Inv) ITATHelps taxpayerNo later treatment found
  The officer excluded the whole period he spent chasing a foreign tax authority. Does the exclusion start before the s.10(1) notice was served?
  No. The time excluded under Explanation 1(iii) to s.11 of the Black Money Act cannot include a period before the s.10(1) notice was served, because exclusion presupposes that the period was inside the limitation to begin with. On the facts the excludable period ran from service of the notice on 25 November 2020 to receipt of the last reply on 25 May 2021, being 182 days and not 195, which moved the last date for the assessment to 29 September 2023. The order passed on 30 September 2023 was one day late and was quashed.
• Ajay Kumar Patel v Addl. CIT ITATHelps taxpayerNo later treatment found
  The s.10 notice does not say which year it relates to, and my foreign account was inherited and already put in a revised return. Can the assessment stand?
  No, on both counts. A notice under s.10(1) that omits the relevant financial year, coupled with delay in initiating the proceedings, goes to the root of jurisdiction, and s.81 of the Black Money Act, being in pari materia with s.292B of the Income-tax Act, protects only clerical or technical mistakes and not jurisdictional infirmities. Separately, an inherited foreign deposit whose source is explained and which was disclosed in revised returns and by a letter to the jurisdictional officer before the s.10(1) notice is not an undisclosed asset within s.2(11), and historic interest of earlier years cannot be charged under the Black Money Act at all.
• Vijendra Kedia v DDIT (Inv) ITATHelps taxpayerNo later treatment found
  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.
• Addl. CIT v Yashovardhan Birla ITATHelps taxpayerUnder appeal
  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.
• Elangovan Malarmangai v JCIT ITATCuts both waysNo later treatment found
  The assessment under the Black Money Act has been quashed. Does the s.41 penalty go with it, and does the s.43 penalty go too?
  The s.41 penalty goes; the s.43 penalty does not. Because s.41 is a penalty on undisclosed foreign income and assets assessed under s.10, once the Tribunal deleted the additions on a legal ground the s.41 penalty of Rs 18,09,74,151 became infructuous and was directed to be deleted. The Rs 10,00,000 penalty under s.43 was separately upheld in the same order, because it turns on what was or was not put in the return and not on the assessment.
• Pachamuthu Kumar v ADIT (Investigation) ITATHelps taxpayerNo later treatment found
  The officer issued a fresh s.10 notice two years after the first one and then assessed. Does the clock run from the second notice?
  No, where the second notice is in substance the same as the first. The Chennai Bench held that a successor officer ought to have continued the proceedings begun by his predecessor under s.7(1), so limitation under s.11(1) ran from the first notice of 7 January 2019, the assessment had to be made by 31 March 2021, and the order passed on 25 March 2023 was hopelessly time-barred.
• Anandi Kaushik Laijawala v DDIT (Inv.) ITATHelps taxpayerNo later treatment found
  The officer issued several s.10 notices over two years and assessed one of the years. Does it matter which year the notice falls in?
  It is decisive. Where the asset was acquired before the Act commenced and no declaration was made under s.59, s.72(c) deems it to have been acquired in the year in which the s.10 notice is issued, so the assessment can only be for the assessment year that follows that year. A notice issued in April 2018 could therefore support an assessment only for assessment year 2019-20, and the Mumbai Bench quashed assessments made for assessment year 2018-19. A defective first notice could not be saved by a corrigendum or by s.81.
• JCIT v Vikash Marda ITATHelps taxpayerNo later treatment found
  They have issued notices under the Black Money Act for 2014-15 and 2015-16. Can the Act reach those years at all?
  No. The Kolkata Bench held that the first previous year under the Act is financial year 2015-16, so the first assessment year it can reach is 2016-17, and assessments framed for 2014-15 and 2015-16 were without jurisdiction. The batch is nine Revenue appeals covering both the assessments made under s.10(3) and the deletion of penalties levied under ss.41 and 43, and all nine were dismissed. On the asset, a fund in the United States built out of salary earned there while the assessee was a tax resident of the United States, and taxed there, was held not to fall within the definition of undisclosed asset under the Act.
• Statutory position — ss.10 and 11 of the Black Money Act: the s.10(1) notice, the enquiry, the s.10(3) assessment and the s.10(4) best judgment assessment, and the two-year limit in s.11 with the exclusions in Explanation 1 and the one-year cap on the exchange-of-information exclusion CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  I have an assessment order under s.10(3) of the Black Money Act. The department says the limitation was extended because a request for exchange of information was pending. How long is the period, and how much can that request add to it?
  Two years, and the exchange-of-information exclusion is capped. Section 11(1) provides that no order of assessment or reassessment shall be made under s.10 after the expiry of two years from the end of the financial year in which the notice under s.10(1) was issued by the Assessing Officer. Explanation 1 to s.11 excludes, in computing that period, (i) the time taken in reopening the whole or any part of the proceeding, (ii) the period during which the assessment proceeding is stayed by an order or injunction of any court, and (iii) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in s.90 or s.90A of the Income-tax Act or under s.73 of this Act and ending with the date on which the Principal Commissioner or the Commissioner last receives the information so requested "or a period of one year, whichever is less". The exclusion in clause (iii) therefore cannot add more than one year however long the request remains outstanding. A proviso to the Explanation extends the remaining period to sixty days where, after the exclusion, less than sixty days are left. On the machinery itself: s.10(1) empowers the Assessing Officer, on receipt of information from an income-tax authority or any other authority or on information coming to his notice, to serve a notice requiring production of accounts, documents or evidence on a date to be specified, and to serve further notices; s.10(2) allows him to make such enquiry as he considers necessary; s.10(3) requires him, after considering what he has obtained under s.10(1), what he has gathered under s.10(2) and any other evidence produced by the assessee, to assess or reassess by an order in writing and determine the sum payable; and s.10(4) provides that on a failure to comply with all the terms of the s.10(1) notice he shall, after taking into account all relevant material gathered and after giving the assessee an opportunity of being heard, make the assessment or reassessment to the best of his judgment and determine the sum payable.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.