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2025 (3) TMI 802 - AT - Income TaxUndisclosed foreign income and asset u/s.10(3) of the Black Money Act - deposits in the foreign bank accounts - as per AO assessee could not furnish any document to prove that the deposits were initially made by his father and later managed by his mother - HELD THAT - Tax authorities have asked the assessee to explain the sources of deposits which are claimed to have been made by the parents of the assessee when they were alive. Hence it is seen that the assessee was not involved in the banking transactions when her mother was alive. Assessee s mother was active and was travelling to various countries which shows that she was independently managing the affairs herself. In this kind of situation it is quite natural that the assessee may not be having all details relating to sources of deposits and hence it would be difficult for anyone to furnish the complete details to the satisfaction of the tax authorities since the banking affairs were managed by the parents of the assessee. Hence the assessee could furnish only the information which were available with him. Hence the explanations of the assessee in our view have to be appreciated duly keeping in mind the constraints that would be faced by the assessee in this kind of situation. Accordingly this issue requires to be examined on the basis of best possible/available evidences. The object of BMA Act was to assess the income that was not subjected to tax in India and which has been stashed away abroad. If an assessee is holding any asset abroad out of the income already subjected to tax in India then the BMA would not be applicable. Similarly if the asset held abroad has been acquired out of the income earned there which is not liable to taxed in India then also the BMA Act will not apply. In the instant case the sequence of events that have been narrated by the assessee would show that the bank accounts have been opened by the parents of the assessee and they were only operating the bank accounts during their life time. Deposits which is sought to be taxed in the hands of the assessee have been made earlier to the year 2010. It included transfers from other bank accounts and in those bank accounts the deposits would have been made even earlier. The assessee has stated that his father was doing business in Sudan and before bank authorities also the assessee has stated that the trade name of business was BABU . The fact the parents of the assessee had resided in Sudan is proved by the passport of the mother and also by the fact that his brother has born in Sudan. The entries in the passport of the mother also show that she was managing her affairs independently including the bank accounts. Thus impugned deposits have been made by the parents of the assessee out of their income earned abroad. Accordingly we are of the view that the AO was not right in assessing the impugned deposits in the hands of the assessee. Accordingly we set aside the order passed by the Ld.CIT(A) and direct the AO to delete the additions made by him. Appeal filed by the assessee is allowed.
1. ISSUES PRESENTED and CONSIDERED
The primary legal issue considered in this judgment is whether the deposits in the foreign bank accounts, held by the assessee and his family members, should be assessed as undisclosed foreign income and assets under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA Act). Specifically, the court examined:
2. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The BMA Act is designed to tax undisclosed foreign income and assets. Under Section 10(3) of the BMA Act, any undisclosed foreign income or asset is subject to assessment. The Act does not apply if the foreign assets were acquired from income already taxed in India or from income earned abroad that is not taxable in India. Court's interpretation and reasoning: The Tribunal focused on whether the deposits in question were indeed undisclosed foreign income or assets under the BMA Act. It considered the sequence of events and the explanations provided by the assessee, concluding that the deposits were made by the assessee's parents from income earned abroad, which was not taxable in India. Key evidence and findings:
Application of law to facts: The Tribunal applied the provisions of the BMA Act, considering the evidence that the funds were inherited and the deposits were made from income earned abroad. The court found that the deposits were not undisclosed foreign income or assets as defined by the BMA Act. Treatment of competing arguments: The tax authorities argued that the assessee failed to provide sufficient documentation to prove the origin of the deposits. The Tribunal, however, considered the constraints faced by the assessee in providing historical documents and accepted the available evidence as sufficient under the circumstances. Conclusions: The Tribunal concluded that the deposits were inherited by the assessee from his parents, who earned the income abroad. Therefore, the BMA Act did not apply, and the assessment of the deposits as undisclosed foreign income was incorrect. 3. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "The object of BMA Act was to assess the income that was not subjected to tax in India and which has been stashed away abroad. If an assessee is holding any asset abroad out of the income already subjected to tax in India, then the BMA would not be applicable." Core principles established:
Final determinations on each issue: The Tribunal set aside the order of the Ld.CIT(A) and directed the Assessing Officer to delete the additions made under the BMA Act, as the deposits were not considered undisclosed foreign income or assets.
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