9911796707
TMI Blog2025 (2) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and if no declaration has been made under Chapter VI, such asset shall be deemed to have been acquired or made in the year in which a notice under sec.10 is issued by the assessing officer. This deeming fiction would show that it is mandatory to issue notice u/s 10(1) of the Act in respect of undisclosed assets acquired prior to the commencement of the Act and which was not voluntarily declared, since the date of acquisition of that asset shall be deemed to be the year in which notice u/s 10 was issued. Deeming provisions mentioned in sec.72(c) of BMIT Act - 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 proviso to sec.3(1) of the BMIT Act stated that the undisclosed asset located outside India shall be ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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.
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.
Since we have quashed the orders on the legal issue relating to jurisdiction, there is no necessity to adjudicate other grounds urged by the assessee and accordingly, they are left open. X X X X Extracts X X X X X X X X Extracts X X X X ..... a Group Limited has shown retained profit of USD 2,20,274/- as on 31.3.2017. He further noticed that both the assessee's herein did not disclose the investment of USD 9,514,676 and the retained profit income of USD 2,20,274 in Schedule FA of the Income tax returns filed by them in any of the assessment years. 3.3. Accordingly, the AO initiated proceedings u/s BMIT Act. After hearing the assessee, the AO held that the entire amount of USD 9,735,050 (9,514,676 (+) 2,20,274) is assessable under BMA Act in the hands of both the assessee's herein. Adopting the conversion rate of Rs. 64.8386, the AO determined the value of undisclosed foreign income and asset at Rs. 63,12,00,520/-. The AO assessed 50% of the above said amount on substantive basis and remaining 50% on protective basis in the hands of both the assessee's in AY 2018-19. 3.4 As noticed earlier, the assessee has raised a legal issue mentioned above contending that the assessment order has been passed without a valid notice. We notice that the assessing officer has issued more than one notice u/s 10(1) of the Act. Hence, in order to appreciate the legal contention urged by the assessee, it is necessary to list out the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have noticed earlier that the assessing officer has issued more than one notice u/s 10(1) of the Act. The contention of the assessee is that the AO has not issued a valid notice for initiating assessment proceedings for assessment for AY 2018-19 and hence the assessment order passed by him for that year is not valid. 5.1. Before proceeding to discuss about the facts relating to the above said legal issue, we shall extract the relevant provisions of BMIT Act, which governs the issue of notices. Charge of tax. 3. (1) There shall be charged on every assessee for every assessment year commencing on or after the 1st day of April, 2016, subject to the provisions of this Act, a tax in respect of his total undisclosed foreign income and asset of the previous year at the rate of thirty per cent of such undisclosed income and asset: Provided that an undisclosed asset located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer. (2) For the purposes of this section "value of an undisclosed asset" means the fair market value of an asset (including financial interest in any entity) determined in such m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 apply accordingly. The terms "Previous year" is defined under sec.2(9) of the BMIT Act and the terms "assessment year" is defined in sec.2(4) of the Act. Sec. 2(15) states that „all other words and expressions used herein but not defined and defined in the Income tax Act shall have the meanings respectively assigned to them in that Act.‟ 5.2. It is pertinent to note that the BMIT Act, 2015 initially came into force w.e.f 1.4.2016, vide section 1(3) of the Act. However, the date 1.4.2016 was substituted with"01-04-2015" by the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act (Removal of Difficulties) order, 2015.The BMIT Act contained a provision to voluntarily disclose the foreign assets, Hence, the objective of advancing the implementation of the Act was to enable the assessee's to voluntary disclose the foreign assets as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated outside India shall be charged to tax on "its value in the previous year in which such asset comes to the notice of the Assessing Officer." As per Sec.3(2), the "value of an undisclosed asset" means the fair market value of an asset (including financial interest in any entity) determined in such manner as may be prescribed. Hence what is assessable in respect of the undisclosed asset is the fair market value determined in the manner prescribed under the BMIT Act and Rules. It appears that the actual cost incurred by the assessee may not be relevant for the purpose of assessment u/s 3(1) of the BMIT Act. (b) As per sec. 3(1) of BMIT Act, the tax shall be levied on every assessee in every assessment year. Hence, the assessment under BMIT Act is also assessment year specific, as in the case of Income tax Act. (c) As per the provisions of sec.10(1) of BMIT Act, the AO „may‟ serve a notice under that section to the assessee, requiring him to produce or cause to be produced such accounts or documents or evidence as the AO may require for the purposes of this Act and may, from to time, serve further notices requiring the production of such other accounts or documents or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We notice that the legal effect of provisions of sec.72(c) of the BMIT has been explained by the CBDT in Circular No.13 of 2015 dated 6th July, 2015 and the said Circular was issued in the context of Chapter VI of BMIT Act with regard to the tax compliance scheme by Central Board of Direct Taxes (CBDT). Following question and answer thereto clarifies the legal position:- Question No.14: What are the consequences if no declaration under Chapter VI of the Act is made in respect of undisclosed foreign assets acquired prior to the commencement of the Act? Answer: As per section 72(c), where any asset has been acquired prior to the commencement of the Act and no declaration under Chapter VI of the Act is made then such asset shall be deemed to have been acquired in the year in which it comes to the notice of the Assessing Officer and the provisions of the Act shall apply accordingly. India is expected to start receiving information through Automatic Exchange of Information (AEOI) route under FATCA from USA later in the year 2015. Further, under the multilateral agreement India will start receiving information from other countries under AEOI route from 2017 onwards. As at 18th March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be determined on the basis of its value prevailing in the previous year in which such asset comes to the notice of the assessing officer, the same will be assessed in the hands of the assessee only in the assessment year, which is determined in terms of sec.72(c) of the Act. 7. With the above said understanding of legal provisions of BMIT Act, we shall now turn to the facts of the present case with regard to the various notices issued by the AO. 8. The first notice was issued by the AO u/s 10(1) of the Act on 07-08-2017 for Assessment year 2017-18. The initial portion of the said notice reads as under:- "WHEREAS information has come to my notice during the previous year 2016-17 relevant to the assessment year 2017-18, that you have "Undisclosed asset located outside India", this notice is issued to you under subsection (1) of section 10 of the The Black Money (Undisclosed income and Assets) and Imposition of Tax Act, 2015 (hereinafter referred to as The BM(UFI&A) & IT Act) by me as Assessing Officer in exercise of powers conferred under section 6 of the BM(UFI&A) & IT Act." It can be noticed that the AO has initiated proceedings for assessment year 2017-18 only under this noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier notice dated 07-08-2017 has been withdrawn by the AO. Accordingly, we are of the view that the revenue cannot rely upon the notice dated 07-08-2017 in order to contend that the assessing officer has acquired jurisdiction for assessing the undisclosed asset for assessment year 2018-19. 9. Before considering the other notices issued by the AO u/s 10(1) of the Act, we may now refer to the corrigendum dated 31-07-2018 issued by the AO, which is apparently with reference to the notice issued on 07-08-2017. A perusal of the said notice would show that the assessing officer has wrongly mentioned the date of notice as 07th August 2018 instead of 07th August 2017. In the corrigendum, it is stated as under:- "2. Please note that in Paragraph 1 of the said notice, the previous year reads as 2016-17 and assessment year reads as 2017-18. You are informed that in respect of the said notice, the previous year shall be read instead as 2017-18 while the assessment year shall be read instead as 2018-19." There should not be any dispute that a notice u/s 10(1) of the Act is issued in order to acquire jurisdiction for making assessment in the hands of the assessee u/s 10(3). In the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as invalid and as such the ITO had no jurisdiction to revise the assessment for year 1949-50. (iv) In the case of SSS Projects Ltd vs. DCIT (129 Taxmann.com 378)(kar), the Hon'ble Karnataka High Court has clarified that only clerical errors or accidental omissions can be protected under Section 292B. It can be noticed that all these case laws lay down the law that the protection afforded by sec. 81 of BMIT Act/ 292B of Income tax Act does not extend to substantive issues or fundamental flaws in the proceedings. Accordingly, the above said contentions of Ld DR are liable to be rejected. Accordingly, the corrigendum issued by the AO cannot be recognized. Even otherwise, we noticed earlier that the Ld CIT(A) has clearly held that the notice issued on 07-08-2017 has been rightly and effectively withdrawn by the AO. In that case, the AO could not have issued a corrigendum on a notice, which has already been withdrawn by him. 10. The next notice issued by the AO u/s 10(1) of the Act is the notice dated 27-04-2018 issued for AY 2018-19. The Ld CIT(A) has also held that this is the notice, which has given jurisdiction to the AO to assess the undisclosed assets for AY 2018-19. In this n ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
