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TMI Blog2022 (8) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments and issuing commissions. These purposes are mentioned in Section 8[1] of the BM Act. The scheme of notice, further notices, enquiry and assessment under Section 10 of the BM Act is comprehensive and the AO must examine the entire gamut of circumstances and decide on the jurisdictional fact as a condition precedent for assessment. In this Court s considered opinion this scheme does not admit of any ambiguity to employ an interpretative tool, especially the reading of a definition clause which would not be a positive enactment, to construe a segregated enquiry. It is also argued that the provisions of Section 8 of the BM Act would indicate a distinct and separate enquiry on the jurisdictional fact from an enquiry that is contemplated under Section 10 of the BM Act. But in the light of the scheme under Section 10 and the express provisions of Section 8[2], such reading would be a contrived reading. As observed by the Hon'ble Supreme Court in Commissioner of Central Excise, Haldia v. M/s Krishna Wax [P] Ltd., [ 2019 (11) TMI 673 - SUPREME COURT] the significance of the date of issuance of notices will also have to be borne in mind when admittedly, the date of iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner (By Sri. Shashi Kiran Shetty, Senior Advocate For Sri. A. Mahesh Chowdhary, Advocate) Respondents (By Sri K V Aravind, Advocate A/W. Sri. M. Dilip, Advocate) O R D E R The Joint Commissioner of Income Tax, Central Circle, Central Range-I, Bengaluru [the first respondent] has initiated proceedings under the provisions of Section 10[1] of the Black Money [Undisclosed Foreign Income and Assets] and Imposition of Tax Act, 2015 [for short, 'the BM Act'] against the petitioner with the issuance of Notice dated 11.08.2021 for the Assessment Year 2022-23 [Annexure-E and hereafter referred to as the Impugned Notice ]. The petitioner has impugned the initiation of the proceedings and the Impugned Notice dated 11.08.2021, which is detailed. The relevant part reads as follows: 9. In the above backdrop, it is evident that you hold beneficial ownership in the abovementioned foreign entities and have undisclosed foreign assets that are not disclosed in India. Hence, there is reason to believe that income in relation to any assets (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment in your hands. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of receipt of information of the alleged Undisclosed Foreign Assets held by the petitioner. If the Impugned Notice is issued beyond the said thirty days, should it be quashed because the first respondent has not obtained necessary permission from the Principal Commissioner of Income Tax/Chief Commissioner of Income Tax? [c] Whether the Impugned Notice dated 11.08.2021 is impermissible in law because it has not considered the decision by the Income Tax Appellate Tribunal [ITAT] on 30.07.2021 in ITA Nos.1211-1217/BANG/2019. 3. The Income Tax Authorities have conducted a search on the petitioner's premises on 07.01.2015 and have initiated proceedings under Section 153A of the Income Tax Act, 1961 [for short, 'IT Act'] for the Assessment Years 2009-10 to 2015-16. The petitioner's statement is recorded under Section 132[4] of the IT Act as regards certain transactions amongst different entities 2 . The Assessing Officer s order is dated 30.12.2016, and this order is after necessary approval from the concerned Joint Commissioner under Section 153-D of the IT Act. 4. The Assessing Officer has concluded that the petitioner had availed loan from M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: AND WHEREAS I have a reason to believe that the information in my possession is sufficient to exercise the power conferred under the BM Act, 2015. A reference regarding Black Money transactions involving undisclosed foreign income and assets was received from the Joint Commissioner of Income Tax (OSD), Central Circle 1(3), Bangalore vide letter dated 06.08.2021 in you case. The relevant facts have been verified from the reference and the material available on record and are reproduced as under: Rival submission on Question No.1: 7. Sri. Shashi Kiran Shetty submits that it is settled that for assumption of jurisdiction by a Court or a Tribunal, or even by an Authority, the existence of jurisdictional fact is a condition precedent and only if the jurisdictional fact is found to exist, the Court or the Tribunal or the Authority can assume jurisdiction to decide adjudicatory facts or facts in Issue. He relies upon the decision of the Hon'ble Supreme Court in 'Arun Kumar and Others v. Union of India' [2007] 1 SCC 732 in support of his submissions in this regard, and he draws the attention of this Court to Paragraph 84 which reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings under BM Act can be initiated only if an enquiry regarding investment in an Undisclosed Asset outside India and beneficial ownership of such asset is held to adjudicate on the jurisdictional fact that an assessee is a Beneficial Owner. 8.4 The enquiry and adjudication of such jurisdictional fact is imperative for commencement of the proceedings under Section 10 of the BM Act and hence, Section 2[11] of the BM Act defines Undisclosed Asset located outside India [including financial interest in any entity] as an asset held by an assessee as the owner or the Beneficial Owner thereof if the assessee either fails to explain the source of investment or offers an explanation which is unsatisfactory in the Assessing Officer's opinion. 8.5 Unless the Assessing Officer calls for explanation on the investment in such assets, and the explanation offered is found to be unsatisfactory, or if no explanation is offered, an individual cannot be called a Beneficial Owner . The Assessing Officer s opinion, after an opportunity to offer explanation, is a sine qua non for the determination of the jurisdictional fact . 9. Sri. Shashi Kiran Shetty canvasses that an Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the BM Act confer jurisdiction in an Assessing Officer, on receipt of information from the Income tax Authority under the IT Act 4 , to serve a notice on any person requiring him to produce or to cause production of documents or accounts or evidence as may be required for the purposes of the BM Act with jurisdiction to issue further notices. The provisions of Section 10[2] of the BM Act confers jurisdiction in the Assessing Officer to make such enquiry, as he considers necessary, for the purposes of obtaining full information in respect of Undisclosed foreign income and asset of the concerned for the relevant financial year. The Assessing Officer, on receipt of the material and upon conclusion of enquiry, if circumstances warrant, will decide on the Undisclosed Foreign Income and Asset and determine the liability payable of such person under Section 10[3] of the BM Act. 13. Sri. K.V. Aravind is unequivocal that, as part of enquiry under Section 10[2] of the BM Act, the Assessing Officer will examine the jurisdictional fact of whether the person to whom notice is issued (and if necessary, after further notices are issued as provided for under Section 10[1]) would be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t responding to the Impugned Notice, and the petitioner will have a cause only if the Assessing Officer commits any error in deciding on whether the petitioner is a Beneficial Owner while concluding the assessment. 15. It is obvious from the rival submissions that the respondents do not contest the fulcrum of the petitioner s case that an authority, as in the case of a Court or a Tribunal, can assume jurisdiction to decide an adjudicatory fact or facts in Issue only if it is conferred with the jurisdiction to adjudicate on such questions and therefore, the existence of a jurisdictional fact is a condition precedent for assumption of jurisdiction. The respondents also do not contest that there can be an assessment under the BM Act only if it is found, as a jurisdictional fact, that a person [an assessee] owns or holds Undisclosed Asset located outside India and is acquired utilizing income which is not offered to tax, or which has escaped tax, under the provisions of the IT Act. 16. The respondents also do not dispute that a person must be extended an opportunity to offer explanation before there is adjudication of the aforesaid jurisdictional fact . However, they contend t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng relation to the context only. This proposition is also emphasized by the Patna High Court in Shankar Prasad Sahi v. State of Bihar 1993 SCC OnLine Pat 161. This Court must also record its opinion that this proposition must apply with greater vigour when there is a positive enactment in the other Chapter or Parts of the Act. 20. The provisions of Section 10 of the BM Act read as under: 10. Assessment - (1) For the purposes of making an assessment or reassessment under this Act, the Assessing Officer may, on receipt of an information from an income-tax authority under the Income-tax Act or any other authority under any law for the time being in force or on coming of any information to his notice, serve on any person, a notice requiring him on a date to be specified to produce or cause to be produced such accounts or documents or evidence as the Assessing Officer may require for the purposes of this Act and may, from time to time, serve further notices requiring the production of such other accounts or documents or evidence as he may require. (2) The Assessing Officer may make such inquiry, as he considers necessary, for the purpose of obtaining full infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact as a condition precedent for assessment. In this Court s considered opinion this scheme does not admit of any ambiguity to employ an interpretative tool, especially the reading of a definition clause which would not be a positive enactment, to construe a segregated enquiry. It is also argued that the provisions of Section 8 of the BM Act would indicate a distinct and separate enquiry on the jurisdictional fact from an enquiry that is contemplated under Section 10 of the BM Act. But in the light of the scheme under Section 10 and the express provisions of Section 8[2], such reading would be a contrived reading. 24. Further, as observed by the Hon'ble Supreme Court in Commissioner of Central Excise, Haldia v. M/s Krishna Wax [P] Ltd., supra, the significance of the date of issuance of notices will also have to be borne in mind when admittedly, the date of issuance of show-cause notice becomes vital for the purpose of limitation under the BM Act. If as contended on behalf of the petitioner, enquiry on the jurisdictional fact and assessment are segregated, despite the scheme under section 10, there would be serious ramifications but without the necessary redressal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of the previous year in which the Assessing Officer receives such information but where conditions of Guideline No.6[a] to [c] are satisfied. Therefore, the provisions of Guideline No.6[a] to [c] will be important and these read as under: 6. When a proceeding under section 10 of the BM Act could be initiated: Combined reading of the provisions of section 3 (Charge of tax) and section 10(Assessment) of the BM Act suggest that AO could initiate the proceedings under section 10 of the BM Act on receipt of information of prima facie undisclosed foreign income/asset. In this connection, the following points are clarified: a. AO is to issue notice under section 10(1) of the BM Act on receipt of 'information' and not on receipt of 'intelligence'. b. Taking into consideration the scheme of the BM Act, the term 'information' used in section 10 of the BM Act should be construed to imply the following. {1} The information is of prima facie undisclosed foreign asset/income [such as information of foreign bank account, property, investment, financial interest in an offshore entity, beneficial ownership of foreign asset/income etc]. Few Illustrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need for approval from the concerned as mentioned the CBDT Guidelines, will have to be necessarily decided on the basis of Para No.6 of the Guidelines which makes a distinction between information and intelligence. Insofar as Information, the Guideline is categorical that it could be information received from other law enforcing agency [which would include the Income Tax Authorities] unearthed during search/survey/other investigation. The Impugned Notice is categorical that information in the petitioner's case is received on a reference by the Joint Commissioner of Income Tax [OSD], Central Circle-1[3], Bengaluru on 06.08.2021. 31. The contention that the Assessing Officer should be presumed to have had Information of the alleged transaction is very presumptuous, and no such presumption can be drawn at this stage to truncate the enquiry. Therefore, this Court cannot opine that the Impugned Notice is issued beyond thirty days from the date of Information and therefore prior approval had to be obtained. 32. As stated at the very outset, the Impugned Notice is very detailed and there are multiple references to different transactions between and amongst M/s. RAL and other ent ..... 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