Black Money Act Applies in Year AO First Detects Foreign Asset, Not When Transaction Occurred: ITAT Pune
Pranav B Prem
The Pune Bench of the Income Tax Appellate Tribunal has held that the Black Money (Undisclosed Foreign Income and Assets) Act, 2015 is attracted only in the year in which a foreign asset first comes to the notice of the Assessing Officer and not in the year in which the transaction was undertaken. The Bench comprising Vinay Bhamore (Judicial Member) and Dr. Manish Borad (Accountant Member) delivered the ruling while partly allowing the appeal of Shaista Suhel Patanwala, deleting the addition of ₹86,80,289 relating to an alleged undisclosed foreign bank account in Fiji while upholding taxability of ₹6,99,010 as foreign income arising out of Bitcoin transactions.
The assessee was alleged to have received credits into a Fiji-based Westpac Bank account between 13 January 2017 and 31 January 2017. Although the transactions were traceable to the financial year 2016–17 corresponding to Assessment Year 2017–18, the Assessing Officer came to know of the foreign bank account only on 24 October 2017, which fell in Assessment Year 2018–19. The Assessing Officer nevertheless proceeded to make an addition of ₹86,80,289 under the Black Money Act in Assessment Year 2017–18. After considering the factual matrix, the Tribunal examined the proviso to Section 3(1) of the Black Money Act which provides that “an undisclosed foreign asset shall be taxed in the previous year in which it comes to the notice of the Assessing Officer.” On the basis of this statutory mandate, the Tribunal held that the Assessing Officer lacked jurisdiction to assess the Fiji account in Assessment Year 2017–18 because the foreign asset came to his notice only in the subsequent assessment year.
The Tribunal noted from the material available on record that the revenue authorities did not dispute the timeline of discovery of the foreign bank account. It therefore concluded that the addition relating to the Westpac Bank balance was made for the wrong assessment year and could not be sustained. The Bench further observed that the Assessing Officer had not initiated proceedings for the relevant year in which the foreign asset came to his notice and instead proceeded to tax the account in a year in which the Act did not apply. Taking the view that the statutory framework leaves no scope for alternative interpretation, the Tribunal directed that the addition of ₹86,80,289 be deleted in full.
With regard to the Bitcoin-related income, the Tribunal found that the assessee failed to disclose ₹6,99,010 earned from cryptocurrency transactions undertaken on foreign platforms. The Bench held that this amount constituted undisclosed foreign income and that the assessee had not discharged the burden of compliance under the Black Money Act. The Tribunal therefore confirmed the addition of ₹6,99,010. It also upheld the imposition of penalty of ₹10 lakh after noting that the foreign bank account balance exceeded ₹20 lakh and the assessee did not disclose the account or the associated income in the income-tax return, in violation of the statutory reporting obligation.
In the result, the Tribunal held that the Assessing Officer erred in invoking the Black Money Act for Assessment Year 2017–18 insofar as the foreign asset addition was concerned and directed its deletion, while sustaining the addition relating to foreign income from Bitcoin transactions and the consequential penalty.
Appearance
Counsel For Petitioner: Kishor B Phadke
Counsel For Respondent: Manish Kumar Sinha
Cause Title: Shaista Suhel Patanwala Versus ADIT
Case No: BMA Nos.1 to 3/PUN/2024
Coram: Vinay Bhamore (Judicial Member), Dr. Manish Borad (Accountant Member)
