BMA s.72(c)

BMA s.72(c) — the law in short

What the courts have decided on section BMA s.72(c), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Union of India v Gautam Khaitan Supreme CourtHelps departmentNo later treatment found
  The department says the Black Money Act applies to my foreign account from July 2015. Is that retrospective?
  No. Notifying 1 July 2015 as the commencement date of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 did not make the Act retrospective. The date was advanced only so the one-time compliance window in s.59 could operate, and tax under s.3 is still charged only from assessment year 2016-17 onwards.
• 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.
• Satish Gopal Rao v DDIT / ADIT (Inv.) ITATHelps taxpayerNo later treatment found
  The officer has used s.72(c) to bring my foreign bank interest and dividends into a later year. Does the deeming provision reach income as well as the asset?
  No. The Mumbai Bench held that s.72(c) is a deeming provision applicable only to assets and cannot be extended to income components such as bank interest, dividends, redemption gains or consultancy receipts, because a deeming fiction cannot be expanded beyond the purpose for which it was enacted. On the facts it also accepted the assessee's explanations of two credits, supported by affidavits and documents, and deleted additions of Rs 3,17,53,800.
• 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.
• 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.
• 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.
• 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.
• 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.

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.