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TMI Blog2025 (1) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... rce in the appeals of the revenue relating to action of the Ld. CIT(A) in deleting the tax imposed u/s. 10 of the Black Money Act, 2015 and penalty levied u/s. 41 43 of the Black Money Act, 2015 for AYs 2014-15 and 2015- 16. Non-Retirement Fund (NRF) held by the assessee - dividend income reinvested in the NRF - AY: 2016-17 - AO calculated the equivalent currency in Indian value of the undisclosed foreign income at Rs. 1,95,537/- and imposed tax @ 30% - HELD THAT:- Undisclosed foreign income and asset are to be assessed by the AO under the Black Money Act, 2015 in the year in which it has come to the knowledge of the AO. Admittedly, there was no undisclosed asset of the assessee in the foreign country. Regarding the dividend income earned on the NRF fund, the plea of the Ld. AR of the assessee is that the same would not fall in the definition of income as the assessee had invested in a fund, wherein, the dividend, if any, earned on such fund would automatically form part of the fund and was not separately taxable. The assessment year 2016-17 was the first year when the Black Money Act, 2015 came into force. The foreign income earned by the assessee was taxable, otherwise, in that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payable by the assessee on such assets in India and further that the provisions of Black Money Act, 2015 were new and it was very difficult even for tax Practitioners, what to say of the ordinary assessees, who are not conversant with such complicated provisions to differentiate between the assets and undisclosed assets. Hence, the procedural lapse occurred on the part of the assessee was not intentional rather the assessee has been caught unawares of such lapse. Under the circumstances, in our view, the Ld. CIT(A), considering the overall facts and circumstances of the case was justified in deleting the impugned penalty. Appeals of the revenue are hereby dismissed. - Sri Sanjay Garg, Judicial Member And Sri Sanjay Awasthi, Accountant Member For the Appellant : Shri Prakash Nath Barnwal, CIT, DR For the Respondent : Shri P. K. Himmatsinghka, FCA ORDER PER BENCH: The captioned appeals have been preferred by the revenue against the separate orders of the Ld. Commissioner of Income Tax (Appeals), Kolkata-20 [hereinafter referred to as Ld. 'CIT(A)'] relating to the imposition of tax and penalty under Black Money (Undisclosed Foreign Income and Assets) and imposition of Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (31-12-2013), treating the difference of $63,693 as undisclosed assets, along with the dividend of $2,750 aggregate $ 66,443, and brought in tax net as per sec. 3(1). Assessment Year 2015-16: The AO found that there is a decrease in NRF value, concluding only the reinvested dividend of $2,249 should be taxed u/s 3(1). Assessment Year 2016-17: Similarly, the AO found that there is a decrease in NRF value and taxed only reinvested dividend of $2,933. 6.2. The Ld. CIT(A), however, deleted the impugned made by the AO observing as under: I have carefully considered the facts of the case and submission of the appellant. A.O. has passed a very cryptic assessment order without explaining the reasons for arriving at the conclusion that assessee had undisclosed foreign assets/income in the relevant assessment year. However, without going into the merits of the issue involved, I would like to discuss the technical/legal issue vehemently raised by the appellant that notice u/s. 1 0(1) for A.Y. 2014-15 is not valid. It is a fact that SMA Act was initially notified to come into existence w.e.f. 01-04-2016. However, for removing certain difficulties for the' purpose of declaration u/s. 59 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal undisclosed foreign income and assets from the previous year, at a rate of 30%. Specifically, any undisclosed asset located outside India will be taxed at its value in the previous year in which it comes to the notice of the Assessing Officer. Trigger Points for Tax Assessment: To initiate tax proceedings, it is crucial to identify the trigger points, which include: (i) Existence of an undisclosed asset located outside India. (ii) Presence of undisclosed foreign income and assets. Upon receiving relevant information, the assessing officer (AO) must evaluate these trigger points and issue a notice under section 10(1). This should be done in the year the information is received or within a reasonable timeframe, typically 30 days, in accordance with Board guidelines. Consequently, the AO can charge the undisclosed foreign assets or income for the previous year in which the information was obtained. (4) Submission on Non retirement Fund falls outside scope of BMA The Non retirement fund acquired by the respondent assessee cannot be treated as undisclosed foreign assets under Section 2(11) of the Black Money Act (BMA) 2015. As clarified in FAQ 24 of Circular 13 dated July 6, 2015 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment years 2014-15, 2015-16 and 2016-17. However, the subsequent orders issued under Section 10(3) for these assessment years are contrary to the provisions of Section 3(1) in conjunction with Sections 2(12) and 4 of the Black Money Act (BMA). It is important to highlight that the BMA was enacted in 2015 but only became operational on April 1, 2016. Although the Act was preponed to July 1, 2015, through Notification No. 1790(E) to facilitate voluntary disclosures under specific provisions, it does not retroactively apply for any other purposes. The deadline for voluntary declarations was September 30, 2015, with tax payments due by December 31 2015. This suggests that the government recognized the need to clarify the application of the BMA for compliance purposes for submission of voluntary disclosure U/s 59 for the A.Y. 2016-17. If April 1, 2016, is considered the commencement date of the assessment year, the relevant previous year would be 2015-16. In that scenario, it would have been unnecessary to issue the removal of difficulties order in 2015 if the intention was to cover voluntary declarations from earlier periods. Moreover, the Hon'ble Jaipur ITAT in Krishna D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions does not extend to substantive issues or fundamental flaws in the proceedings. In this context, the department's reliance on Section 81 as a protective measure is misplaced, as the issues at hand involve substantive legal determinations rather than mere clerical errors. In view of the above, the respondent assessee case do not fall under Black Money Act 2015 and all the notices issued for A Y 2014-15, A Y 2015-16 and A Y 2016-17 are liable to be quashed consequently assessment order passed U/S 10(3) along with the penalty order passed U/s 41 43 are also liable to be quashed. 8. We have heard the rival contentions and gone through the records. Admittedly, initially the Black Money Act, 2015 vide section 1(3) had come into force on 01.04.2016. However, its implementation was preponed w.e.f. 01.07.2015, through Notification No. 1970(E) to facilitate voluntary disclosures so that a reasonable opportunity may be given to the concerned persons to voluntarily disclose their undisclosed assets and pay due taxes to avoid the tax penalty and prosecution on coming into force the Black Money Act, 2015. Under such a position, the first previous year under the provisions of Black Money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding for AY 2016-17 when no order under the Act was there to implement the provisions of the Act. He, therefore, held that the assumption of jurisdiction by the AO u/s. 10 of the Black Money Act, 2015 was defective and that the jurisdiction assumed for AY 2016-17 was illegal. He, therefore, quashed the assessment order passed u/s. 10(3) of the Black Money Act, 2015 dated 31.03.2021. 12. Being aggrieved by the said order of the Ld. CIT(A), revenue has come in appeal before us. 13. We have heard the rival contentions and gone through the records. Section 2(11) of the Black Money Act, 2015 defines the undisclosed asset as under: 2(11) undisclosed asset located outside India means an asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the Assessing Officer unsatisfactory. 14. Undisclosed foreign income and asset has been defined u/s. 2(12) of the Black Money Act, 2015 as under: undisclosed foreign income and asset means the total amount of undisclosed inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said Act shall not be included in the total undisclosed foreign income. (3) The income included in the total undisclosed foreign income and asset under this Act shall not form part of the total income under the Income-tax Act. 17. The aforesaid provisions of the Black Money Act, 2015 when applied to the facts of the case, it would show that the NRF fund of the assessee would not fall in the definition of undisclosed asset as the assessee had earned the income during his employment at USA and the aforesaid investment was made out of the disclosed funds of the assessee, that were being taxed in the USA as per the provisions of USA Tax Laws. Section 2(12) of the Black Money Act, 2015 defines undisclosed foreign income and asset , as per which it will be the total amount of undisclosed income of assessee from a source located outside India and the value of undisclosed asset located outside India as referred to in section 4. It is to be noted that undisclosed foreign income has not been singularly defined in the Black Money Act, 2015. Either as per the definition u/s. 2(12) of the Act or as per the provisions of section 4 of the Black Money Act, 2015, the undisclosed foreign incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is accordingly, dismissed. BMA No. 10/Kol/2024, AY : 2016-17: 18. The revenue vide this appeal has contested the action of the Ld. CIT(A) in deleting the penalty imposed u/s. 41 of the Black Money Act, 2015 on the addition made u/s. 10(3) of the Black Money Act, 2015 on account of foreign income assessed. As per section 41 of the Black Money Act, 2015, the AO may direct that in case where tax has been computed u/s. 10 in respect of undisclosed foreign incomed and asset, the assessee shall pay by way of penalty in addition to tax, if any, payable by him a sum equal to 3 times the tax computed in that section. 19. As per our observation made above while adjudicating BMA Nos. 12/Kol/2024, we have upheld the order of the Ld. CIT(A) in quashing the assessment and, therefore, by deleting the addition made by the AO u/s. 10 of the Black Money Act, 2015. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) in deleting the impugned penalty as the very basis upon the impugned penalty was levied has ceased to exist. This appeal of the revenue is accordingly, dismissed. BMA NO. 11/KOL/2024, AY : 2016-17: 20. The revenue in this appeal has contested the action of the Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd undisclosed income of a person, which has been stashed away by him avoid taxes in India. However, in this case, the assessee was a tax resident of USA for the period from 1998 to 2007. The income earned by the assessee was salary income upon which the assessee had paid due taxes as per USA tax laws. He invested the income earned during the period in a non-retirement fund. The said fund of the assessee would not fall in the definition of undisclosed asset as defined under the Act. As observed above, the assessee was not a person who had stashed away his black money to avoid due taxes in India. Even the assessee duly disclosed its foreign assets and income in the return filed for the subsequent AY 2017-18. This was the first year of the implementation of the Black Money Act and the time period was very short as the Act had come into force on 01.04.2016, itself, though the implementation was preponed from 01.07.2015 to give opportunity to certain assessees to avail voluntary disclosure scheme. However, in the case of the assessee, the assets of the assessee did not constitute as undisclosed assets and there was no question for the assessee to avail any such voluntary disclosure sch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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