BMA s.3(1)

BMA s.3(1) — the law in short

What the courts have decided on section BMA s.3(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• 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.
• Rashesh Manhar Bhansali v Addl CIT ITATHelps departmentPartly overruled — read this first
  My foreign bank account was closed years before 2015. Can it still be taxed under the Black Money Act?
  Yes. Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 the charge is fixed by the year in which the undisclosed asset comes to the notice of the Assessing Officer, so it does not matter that the accounts had been closed before the Act commenced. A bank account balance is an 'asset' for this purpose and nothing is deductible against it.
• Statutory position — ss.41 and 43 of the Black Money Act and s.72(c): the penalty of three times the tax computed under s.10, the Rs 10 lakh penalty for not reporting a foreign asset in the return with its twenty lakh rupee proviso from 1 October 2024, and the deemed year of acquisition for an asset acquired before commencement CBDT Circulars & InstructionsCuts both ways
  My client's Black Money assessment covers a foreign account opened in 2009 and not declared under the one-time compliance window. The department has charged tax and a penalty of three times the tax, and says the year is fixed by s.72(c). What do those provisions actually say?
  Section 41 provides that the Assessing Officer may direct that, in a case where tax has been computed under s.10 in respect of undisclosed foreign income and asset, the assessee shall pay by way of penalty, in addition to tax if any payable by him, "a sum equal to three times the tax computed under that section". It is therefore a multiple of the tax computed under s.10, and it follows the s.10 computation — if the computation goes, the base of the penalty goes with it. Section 43 is a different and smaller penalty: where a resident other than not ordinarily resident within s.6(6) of the Income-tax Act has furnished a return under s.139(1), (4) or (5) of that Act and fails to furnish any information, or furnishes inaccurate particulars, in that return relating to any asset (including financial interest in any entity) located outside India held by him as beneficial owner or otherwise, or in respect of which he was a beneficiary, or relating to any income from a source located outside India, the Assessing Officer "may direct that such person shall pay, by way of penalty, a sum of ten lakh rupees". Its proviso, as substituted by the Finance (No. 2) Act, 2024 with effect from 1 October 2024, reads: "Provided that this section shall not apply in respect of an asset or assets (other than immovable property), where the aggregate value of such asset or assets does not exceed twenty lakh rupees." The footnote on the departmental page records that before that substitution the proviso excluded only "an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to five hundred thousand rupees at any time during the previous year". Section 72(c), in the removal-of-doubts provision at the end of the declaration chapter, is the hinge of the retrospectivity argument and reads: "where any asset has been acquired or made prior to commencement of this Act, and no declaration in respect of such asset is made under this Chapter, such asset shall be deemed to have been acquired or made in the year in which a notice under section 10 is issued by the Assessing Officer and the provisions of this Act shall apply accordingly".
• Statutory position — s.3 of the Black Money Act: the charge at thirty per cent, the proviso to s.3(1) that fixes the year of charge for an undisclosed foreign asset, and what ss.4 and 5 bring in and refuse to take out CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  The department has issued a Black Money Act notice for a foreign bank account opened in 2007. The Act only came into force in 2015. On what does the charge on that asset actually rest, and in which year is it charged?
  On s.3(1) and its proviso. The Act came into force on 1 July 2015 (s.1(3): "Save as otherwise provided in this Act, it shall come into force on the 1st day of July, 2015"). Section 3(1) charges tax "on every assessee for every assessment year commencing on or after the 1st day of April, 2016 ... in respect of his total undisclosed foreign income and asset of the previous year at the rate of thirty per cent of such undisclosed income and asset". The proviso to s.3(1) is the provision that matters for an old asset: "Provided that an undisclosed asset located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer." So the year of charge for an asset is not the year of acquisition but the year of coming to notice, and s.3(2) defines the "value of an undisclosed asset" as its fair market value determined in the prescribed manner. Section 4(1) puts three things into the total: (a) undisclosed income from a source outside India, (b) income from a source outside India where a return was required under s.139 of the Income-tax Act and none was furnished in time, and (c) the value of an undisclosed asset located outside India. Section 4(2) keeps out of the total any variation made under ss.29 to 43C, ss.57 to 59 or s.92C of the Income-tax Act, and s.4(3) keeps what is charged here out of total income under that Act. Section 5(1)(i) forbids any deduction for expenditure or allowance and any set off of loss, "whether or not it is allowable in accordance with the provisions of the Income-tax Act"; s.5(1)(ii) allows one reduction only — income already assessed or assessable under the Income-tax Act or under this Act is reduced from the value of the undisclosed asset if the assessee furnishes evidence to the Assessing Officer's satisfaction that the asset was acquired from that income — and s.5(2) prorates that reduction for immovable property.
• 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.