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2025 (2) TMI 704 - AT - Income TaxBlack Money - notice issued under section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 (BMIT Act) - Adopting the conversion rate AO determined the value of undisclosed foreign income and asset accordingly - AO assessed 50% of the above said amount on substantive basis and remaining 50% on protective basis in the hands of both the assessee s in AY 2018-19 - assessee contending that the assessment order has been passed without a valid notice - HELD THAT - We have noticed earlier that the assessing officer has issued more than one notice u/s 10(1) of the Act. The contention of the assessee is that the AO has not issued a valid notice for initiating assessment proceedings for assessment for AY 2018-19 and hence the assessment order passed by him for that year is not valid. In respect of undisclosed foreign assets acquired or made prior to the commencement of the Act and if no declaration has been made under Chapter VI such asset shall be deemed to have been acquired or made in the year in which a notice under sec.10 is issued by the assessing officer. This deeming fiction would show that it is mandatory to issue notice u/s 10(1) of the Act in respect of undisclosed assets acquired prior to the commencement of the Act and which was not voluntarily declared since the date of acquisition of that asset shall be deemed to be the year in which notice u/s 10 was issued. Deeming provisions mentioned in sec.72(c) of BMIT Act - In the instant cases the impugned foreign assets have been acquired by both the assessee s prior to the commencement of the BMIT Act and further they have also not filed any declaration u/s 59 of the Act voluntarily. Hence the deeming provisions mentioned in sec.72(c) of BMIT Act shall apply to the facts of the present cases. Accordingly the assessment year for assessing those foreign assets would have to be determined on the basis of date of notice issued by the AO u/s 10(1) of the Act. We noticed earlier that the proviso to sec.3(1) of the BMIT Act stated that the undisclosed asset located outside India shall be charged to tax on its value in the previous year in which asset comes to the notice of the Assessing officer . There should not be any dispute that a notice u/s 10(1) of the Act is issued in order to acquire jurisdiction for making assessment in the hands of the assessee u/s 10(3). In the instant case we have held that the provisions of sec.10(1) have to be read along with of sec.72(c) also. Accordingly we have held that in the facts of the present cases issuing of notice u/s 10(1) is mandatory. Hence the AO has to acquire jurisdiction to assess the undisclosed asset by issuing a valid notice. Accordingly without acquiring proper jurisdiction the AO cannot acquire jurisdiction and pass any assessment order. The question that arises is whether the AO can modify the assessment year in the notice issued u/s 10(1) in order to acquire jurisdiction. It was contended by the Ld DR that the provisions of sec.81 of BMIT Act which is akin to sec.292B of the Income tax Act will protect the validity of notice since mentioning of wrong previous year and assessment year was a mistake defect or omission in the notice which could be. The next notice issued by the AO u/s 10(1) of the Act is the notice dated 27-04-2018 issued for AY 2018-19. The Ld CIT(A) has also held that this is the notice which has given jurisdiction to the AO to assess the undisclosed assets for AY 2018-19. In this notice the AO has clearly stated that the earlier notice dated 07-08-2017 was issued incorrectly for AY 2017-18 and hence he is issuing the fresh notice dated 27-04-2018 for AY 2018-19. We notice that the notice dated 27-04-2018 is issued for AY 2018-19 and the same is contrary to the provisions of sec.72(c) of the BMIT Act. We noticed that section 72(c) is a deeming provision as per which the undisclosed assets are deemed to have been acquired during the previous year in which such notice is issued. Since the second notice is issued on 27-04-2019 the impugned undisclosed assets are deemed to have been acquired during the previous year 2018-19 and accordingly they have to be assessed in assessment year AY 2019-20 only. Hence the AO could not have passed the assessment order for AY 2018-19 on the strength of notice dated 27-04-2018. Accordingly the said notice would not also validate the assessment order passed for AY 2018-19. AO has also issued two more notices u/s 10(1) of the Act viz. on 10-07-2018 and 09-11-2018. On the strength of those notices the AO could have framed assessment order for AY 2019-20 only in view of the deeming fiction enshrined in sec.72(c) of the Act and not for AY 2018-19. The foregoing discussions would show that the assessing officer did not acquire jurisdiction in accordance with law for assessing the undisclosed assets and income in Assessment year 2018-19 by issuing a valid notice. In the absence of a valid notice issued for the impugned assessment year we have to quash the orders passed by the tax authorities in the hands of both the assessee s herein. We order accordingly. Since we have quashed the orders on the legal issue relating to jurisdiction there is no necessity to adjudicate other grounds urged by the assessee and accordingly they are left open.
ISSUES PRESENTED and CONSIDERED
The core legal issue considered in this judgment is whether the assessment order for the Assessment Year (AY) 2018-19 is valid, given that it was based on a notice issued under section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMIT Act) for a different assessment year (AY 2017-18). The question is whether a valid notice was issued for AY 2018-19, which is necessary to confer jurisdiction on the Assessing Officer (AO) to make the assessment. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The BMIT Act provides the legal framework for assessing undisclosed foreign income and assets. Section 10(1) allows the AO to issue a notice to an assessee to produce documents or evidence for assessment purposes. Section 72(c) deems assets acquired before the Act's commencement as acquired in the year a notice under section 10 is issued. The validity of a notice is crucial as it confers jurisdiction on the AO to assess the undisclosed assets. Court's Interpretation and Reasoning The Tribunal examined the sequence of notices issued by the AO. The first notice dated 07-08-2017 was for AY 2017-18 and was later deemed withdrawn by the AO, as confirmed by the CIT(A). The subsequent notice dated 27-04-2018 for AY 2018-19 was considered by the CIT(A) as the valid notice. However, the Tribunal found this notice invalid for AY 2018-19 because, under section 72(c), the assessment should be for AY 2019-20, as the notice was issued in the previous year 2018-19. Key Evidence and Findings The AO issued multiple notices under section 10(1), with the first notice for AY 2017-18 being effectively withdrawn. The notice dated 27-04-2018 was for AY 2018-19, but the Tribunal found it invalid due to the deeming provision of section 72(c), which requires the assessment to be for the year following the notice issuance. Application of Law to Facts The Tribunal applied section 72(c) to determine that the undisclosed assets should be assessed in AY 2019-20, as the notice dated 27-04-2018 was issued in the previous year 2018-19. Therefore, the assessment order for AY 2018-19 lacked jurisdiction. Treatment of Competing Arguments The Tribunal rejected the Revenue's argument that section 81 of the BMIT Act (akin to section 292B of the Income Tax Act) could cure defects in the notice. Citing precedents, the Tribunal held that section 81 cannot cure substantive jurisdictional defects, such as issuing a notice for the wrong assessment year. Conclusions The Tribunal concluded that the AO did not have jurisdiction to assess the undisclosed assets for AY 2018-19 due to the lack of a valid notice. Consequently, the assessment orders for AY 2018-19 were quashed. SIGNIFICANT HOLDINGS The Tribunal established that:
The appeals were allowed, and the orders of the tax authorities were quashed.
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