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TMI Blog2025 (2) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing legal ground only:- "The assessment order for the A.Y 2018-19 is based on a notice issued u/s 10(1) for the A Y 2017-18. Thus the assessment order for the A.Y 2018-19 is bad in law as the same is passed without a valid notice being issued for the A Y 2018-19." 3. The common facts relating to the case are discussed in brief. Smt Anandi Kaushik Laijawala is the wife of Shri Kaushik Gokaldas Laijawala. The assessing officer received information that both the assessee's herein, viz., Smt Anandi Kaushik Laijawala and Shri Kaushik Gokaldas Laijawala are beneficial owners and beneficiaries in an arrangement consisting of an off-shore private trust named "Vanaka Trust" and also an off-shore Company named "Vanaka Group Limited". The Vanaka Trust is a Guernsey based entity while the company Vanaka Group Limited is a British Virgin Islands based entity. It was noticed that both the assessee's herein are settlers of the above said trust. The beneficiaries of the trust are both the assessee's herein, their son Shri Aditya Kaushik Laijawala (born on 24 July 1998) and their daughter Ms Vipsasha Kaushik Laijawala (bron on 20 March 1994). All of them are residents of India except for Ms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the requirement of sec.7 of BMIT Act. (d) The new incumbent officer again issued another notice u/s 10(1) of the Act on 09-11-2018 and did not mention any assessment year in that notice. (e) The new incumbent officer also issued a corrigendum dated 31.07.2018, wherein it is mentioned that the notice issued u/s 10(1) of the Act issued on 7th August 2018 refers to the previous year 2016-17 and the assessment year as 2017-18, but they should be read as previous year 2017-18 and assessment year 2018-19. The assessing officer has finally passed the assessment order for assessment year 2018-19. 4. The assessee raised before Ld CIT(A) the above said legal issue contending that the AO did not issue any valid notice for AY 2018-19. However, the Ld CIT(A) held that the notice dated 27-04-2018 is the valid notice and accordingly held that the assessment order was rightly passed for AY 2018-19. The decision so rendered by Ld CIT(A) are extracted below:- "5.28 On this issue, the action of the Assessing Officer in moving to issue a new notice under section 10(1) of the Act on 27-04-2018 for AY 2018-19 is found to be correct as he came in possession of the information only in previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 information in respect of undisclosed foreign income and asset of any person for the relevant financial year or years. (3) The Assessing Officer, after considering such accounts, documents or evidence, as he has obtained under sub-section (1), and after taking into account any relevant material which he has gathered under sub-section (2) and any other evidence produced by the assessee, shall by an order in writing, assess 3[or reassess] the undisclosed foreign income and asset and determine the sum payable by the assessee. (4) If any person fails to comply with all the terms of the notice under sub-section (1), the Assessing Officer shall, after taking into account all the relevant material which he has gathered and after giving the assessee an opportunity of being heard, make the assessment 3[or reassessment] of undisclosed foreign income and asset to the best of his judgment and determine the sum payable by the assessee. Removal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act has been issued to a person for an assessment year will he be ineligible from voluntary declaration under section 59 of the Act? Answer: The person will only be ineligible from declaration of those foreign assets which have been acquired during the year for which a notice under section 142/ 143(2)/ 148/ 153A/ 153C is issued and the proceeding is pending before the Assessing Officer. He is free to declare other foreign assets which have been acquired during other years for which no notice under above referred sections have been issued. Question No.12: Whether a person is barred from voluntary declaration under Chapter VI of the Act if any information has been received by the Government under DTAA? Answer: As per section 71(d)(iii), the person cannot make a declaration of an undisclosed foreign asset where the Central Government has received an information in respect of such asset under the DTAA. The person is entitled for voluntary declaration in respect of other undisclosed foreign assets for which no information has been received. Question No.15: If a declaration of undisclosed foreign asset is made under Chapter VI of the Act and the same was found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mple reason that the AO cannot raise a tax liability upon any assessee, unless he is given opportunity of being heard as per the mandatory requirements of the Doctrine of Audi Alteram Partem under Principles of Natural Justice. (e) The above said view of ours would also get support from the provisions of sec.72(c) of the BMIT Act. We noticed that, for voluntary disclosure of the undisclosed foreign assets acquired prior to the commencement of the BMIT Act, separate provisions have been incorporated under Chapter VI of the Act titled as "Tax compliance for undisclosed foreign income and assets". However, if any assessee fails to disclose the same under the scheme prescribed in chapter VI of the Act, then those assets are assessable under the BMIT Act. In this regard, a deeming fiction has been introduced under sec.72(c) of the Act, which reads as under:- "(c) where any asset has been acquired or made prior to commencement of this Act, and no declaration in respect of such asset is made under this Chapter, such asset shall be deemed to have been acquired or made in the year in which a notice under section 10 is issued by the Assessing Officer and the provisions of this Act shall a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed if any utility bills/property tax or even gardener's/ caretaker's salary has been paid through an existing or closed bank account. Therefore, if any information of an undisclosed foreign asset acquired earlier, say in the year 1975, for $ 100,000 comes to the notice of an Assessing Officer later, say in the year 2020, when its value becomes, say, $ 5 Million, the liability under the Act amounting to 120 percent of the fair market value of the asset on the valuation date may arise in the year 2020, besides prosecution and other consequences. In this case if the valuation date is in the year 2020 the amount of tax and penalty under the Act will be $ 6 Million." 6. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act on 27-04-2018 for AY 2018-19 is found to be correct as he came in possession of the information only in previous year 2017-18. The para 19 of the new notice effectively withdraws the earlier notice issued on 07-08-2017 and rightly so. The notice under section 10(1) under BMIT Act for AY 2017-18 was infructuous as no information had come to the notice of the Assessing Officer in PY 2016-17." It can be noticed that the Ld CIT(A) has also expressed the view that the notice dated 07-08-2017 has been effectively and rightly withdrawn by the AO. This decision of Ld CIT(A) has attained finality, since the revenue has not challenged the above said decision of Ld CIT(A). At this stage, it is pertinent to note that the AO has observed as under in Page 86 of the assessment order:- "The value of undisclosed asset located outside India has been determined as on 01 April 2017 as this office has assumed the jurisdiction under The BM(UFI&A)&IT Act on 12 July 2017 and the first notice u/s 10(1) has been issued on 07 August 2017, i.e during FY 2017-18." The above said observation of the AO is contrary to the observations made in the notice issued on 07th August 2017, which we had extracted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction. 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. However, the above said contention of the Ld DR is contrary to the decision rendered by Hon'ble High Courts in the following cases:- (i) CIT vs. Norton Motors (2005)(146 Taxman 701)(P & H). In this case, it was held that the provisions of sec.292B of Income tax Act can be relied upon for resisting a challenge to notice etc., only if there is a technical defect or omission in it. If the notice etc., issued by an authority suffers from an inherent lacuna affecting his/its jurisdiction, same cannot be cured by having resort to section 292B of the Income tax Act. (ii) Infineon Technologies AG vs. DCIT (2022)(141 taxmann.com 288)(Kar). In this case, the AO issued notice for AY 2015-16. Subsequently, by a corrigendum dated 11.4.2017, he modified the assessment year as 2010-11. The Hon'ble Karnataka High Court held that the said corrigendum could not be said to have cured a procedural irregularity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11. We noticed that the 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. 12. 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. 13. Since we have quashed the orders on the legal issue relating to jurisdiction, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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