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2023 (6) TMI 22 - AT - Income TaxAddition towards undisclosed foreign assets under the provisions of Black Money (UFIA) And Imposition of Tax Act, 2015 for the alleged investment in life insurance policies in the name of the assessee - whether the alleged investment in insurance policies comes under the category of undisclosed foreign income and assets as per Section 2(11) 2(12) of the Black Money Act, 2015? - HELD THAT - Provision of Section 2(11) of the Black Money Act, 2015 provides for the definition of undisclosed asset located outside India and following two conditions need to be fulfilled by the Revenue authorities to bring a particular foreign asset under the category of undisclosed asset located outside India held by the assessee in his name or in respect of which he is a beneficial owner. First condition is that such asset is not disclosed by the assessee in the return of income or any other place of disclosure as provided under the Black Money Act, 2015 and secondly, the assessee is unable to offer any explanation about the source of investment in such asset or the explanation given by him is unsatisfactory in the opinion of ld. AO. So far as explanation about the source of alleged investment, in the case under consideration is concerned, we find that the assessee has successfully explained the source of investment which is undoubtedly from the income earned outside India, part of which was paid by the assessee in the capacity of a non-resident Indian and the remaining part being paid by assessee s father who is also a non-resident Indian from his sources of income/asset located outside India. There is no iota of evidence bring forth by the Revenue authorities which could indicate that any element of the alleged investment in foreign asset is from so-called black money earned in India. Complete details of the bank account along with date of payment of the premium of the insurance policy supports this fact that the assessee has successfully explained the source of investment in the alleged foreign asset in the form of investment in insurance policy. For the other limb of Section 2(11) of Black Money Act, 2015 is concerned about the disclosure of the said asset, we find that the premium payment to the two life insurance policies was discontinued from 2010 onwards. These policies commenced in the year 2000 and they were for a period of 21 years. In the middle of the term of the policy, the premium payment was discontinued. As stated by ld. Counsel for the assessee, the assessee was of bona fide belief that the policies have been discontinued and the amount so invested have been forfeited. It was only during the FY 2018-19 that the assessee came across the information of being eligible to lodge the claim for refund of surrender value which was followed by the necessary process and the surrender value was finally received in the bank account of the assessee held in India. Assessee duly disclosed the amount so received in his income tax return and paid the taxes to the tune of Rs. 39,00,000/- thereon and based on such disclosure by the assessee, the alleged proceedings were carried out under Black Money Act, 2015. So, this fact also remains uncontroverted that the value of the alleged investments received by the assessee in India has already been subjected to Income tax and taxing the same amount under the Black Money Act, 2015 will tantamount to double taxation. We are of the considered view that since the necessary condition to hold a particular foreign asset as undisclosed foreign asset located outside India as provided u/s 2(11) of Black Money Act, 2015 remained to be fulfilled, ld. AO was not justified in invoking the provisions of Black Money (UFIA) And Imposition of Tax Act, 2015 to make an addition in the hands of the assessee - reverse the finding of ld. CIT(A) and delete the addition made in the hands of the assessee
Issues Involved:
1. Legality and justification of the order passed by the CIT(A). 2. Classification of the assessment as a mere change of opinion. 3. Confirmation of the amount computed as undisclosed foreign asset. 4. Consideration of the assessee's discharge of onus regarding the insurance premium paid. 5. Classification of the insurance premium payment as an asset or investment. 6. Entitlement of the assessee to deduction under Section 10(10D) of the Income Tax Act. 7. Legality of the interest charged under various sections of the Income Tax Act. Detailed Analysis: 1. Legality and Justification of the Order Passed by the CIT(A): The appellant challenged the order passed by the CIT(A) as arbitrary, unjustified, and illegal. The CIT(A) confirmed the assessment of Rs. 1,08,01,726/- as undisclosed foreign assets under the Black Money Act, 2015. The CIT(A) held that the appellant was aware of the investments made in foreign insurance policies but failed to disclose these assets in the income tax return or during the one-time compliance window provided under Chapter VI of the Black Money Act, 2015. 2. Classification of the Assessment as a Mere Change of Opinion: The appellant contended that the assessment was a mere change of opinion and thus should be quashed. However, the CIT(A) and AO maintained that the appellant was aware of the investments and failed to disclose them, thus justifying the assessment under the Black Money Act, 2015. 3. Confirmation of the Amount Computed as Undisclosed Foreign Asset: The AO computed the amount of Rs. 1,08,01,726/- as undisclosed foreign assets based on the investment in two foreign insurance policies. The AO noted that the appellant failed to declare these assets in the income tax return and did not avail the opportunity to declare them under the one-time compliance window provided by the Black Money Act, 2015. 4. Consideration of the Assessee's Discharge of Onus Regarding the Insurance Premium Paid: The appellant argued that he had discharged his onus by providing all relevant documents related to the insurance premium paid and proving his non-resident status during his stay in Dubai. The CIT(A) and AO, however, found the appellant's explanation unsatisfactory, noting that the appellant was aware of the investments and should have disclosed them in the income tax return or during the compliance window. 5. Classification of the Insurance Premium Payment as an Asset or Investment: The appellant contended that the payment made as insurance premium for a term insurance is neither an asset nor an investment. The CIT(A) disagreed, stating that the policies were essentially investment plans with life insurance cover and thus qualified as assets. The CIT(A) emphasized that the appellant was aware of the investment nature of the policies and should have disclosed them. 6. Entitlement of the Assessee to Deduction Under Section 10(10D) of the Income Tax Act: The appellant argued that he was entitled to deduction under Section 10(10D) of the Income Tax Act on the maturity of insurance policies. The AO and CIT(A) rejected this argument, stating that the issue at hand was the failure to disclose the foreign assets, not the tax liability on the surrendered value of the insurance policies. 7. Legality of the Interest Charged Under Various Sections of the Income Tax Act: The appellant contended that the interest charged under Sections 40, 234A, 234B, and 234C of the Income Tax Act was mechanically wrong and illegal. The AO and CIT(A) upheld the interest charges, citing the appellant's failure to disclose the foreign assets and the resulting tax liability. Conclusion: The Tribunal found that the assessee successfully explained the source of investment, which was from income earned outside India, and there was no evidence of black money earned in India. The Tribunal also noted that the assessee disclosed the amount received in his income tax return and paid taxes thereon. Consequently, the Tribunal held that the conditions to classify the foreign asset as undisclosed under Section 2(11) of the Black Money Act, 2015, were not fulfilled. The Tribunal reversed the findings of the CIT(A) and deleted the addition of Rs. 1,08,01,726/- made under the Black Money Act, 2015. Ground no. 6 was dismissed as not pressed, and other grounds were deemed general and required no adjudication. The appeal was partly allowed.
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