ITAT Delhi: Black Money Assessment Annulled as Time-Barred Despite TOLA Extensions

Background of the Dispute

The Delhi Bench of the Income Tax Appellate Tribunal in Smt. Bindu Todi Vs DDIT (Inv) examined the validity of an assessment framed under Section 10(3) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“Black Money Act”) for Assessment Year 2018-19. The core question was whether the assessment order dated 17.02.2022 was within the statutory time limit prescribed in Section 11 of the Black Money Act, particularly in light of the time extensions notified under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“TOLA”).

The assessee, an individual and proprietor of M/s Jade Knits, residing in Gurgaon, was alleged to have held a directorship in M/s Woodstock Universal Ltd. (WUL), a company incorporated in the British Virgin Islands on 10.04.2007 and struck off on 01.11.2014. The company was authorised to issue 50,000 shares; one share of face value USD 1 was stated to have been allotted to the assessee on 03.08.2007.

The Assessing Officer (AO) alleged that the assessee received two payments from WUL in 2008:

  • USD 11,020 on 28.05.2008 (estimated at Rs. 4,79,370); and
  • USD 25,000 on 31.07.2008 (estimated at Rs. 10,87,500),

aggregating to Rs. 15,66,870, which were not disclosed in the assessee’s return of income. On this basis, proceedings under the Black Money Act were initiated and addition of Rs. 15,66,870 was made as undisclosed foreign income.

The assessee contested the assessment, primarily on the ground that it was barred by limitation as per Section 11 of the Black Money Act, and therefore void.

Key Chronology of Events

To appreciate the limitation issue, the Tribunal considered the following timeline (as appearing from the assessment records and submissions):

  1. 10.04.2007

    • Incorporation of M/s Woodstock Universal Ltd. in the British Virgin Islands.
    • The company was subsequently struck off on 01.11.2014, which was prior to the enactment of the Black Money Act in 2015.

  2. 02.09.2014

    • FT & TR reference to British Virgin Islands (BVI) authorities seeking information regarding WUL (recorded in AO’s order, para 4.1).

  3. CBDT Notification No. 73/2015 dated 24.08.2015

    • Jurisdiction under the Black Money Act was conferred on the relevant ACIT/DCIT/JCIT having jurisdiction over the assessee under the Income Tax Act, 1961.

  4. 23.09.2015

    • FT & TR reference to Singapore authorities seeking information related to WUL (AO’s order, para 4.1).

  5. Notification dated 16.05.2017

    • CBDT authorised DGIT (Inv.) / Pr. DIT (Inv.) to confer concurrent jurisdiction and assign functions of AO under the Black Money Act to ADIT/DDIT.

  6. 08.09.2017

    • PDIT (Inv.), Chandigarh issued office order assigning concurrent jurisdiction in Black Money matters to DDIT (Inv.)/ADIT (Inv.)-1, Gurgaon, who later acted as AO in this case (AO’s order, para 2.2).

  7. 29.11.2017

    • Statement of the assessee recorded; information received from the BVI and Singapore references was confronted to the assessee.

  8. 27.03.2018

    • DDIT (Inv.)-II, Gurugram completed investigation and sent a report to DDIT (Inv.)/ADIT (Inv.)-1, who was the AO for the Black Money proceedings (AO’s order, para 2.3).

  9. 10.04.2018

    • Notice issued under Section 10(1) of the Black Money Act initiating assessment proceedings.

  10. 31.03.2021

    • Normal limitation expiry for completing assessment under Section 10(3), in terms of Section 11(1) (two years from the end of the financial year 2018-19 in which notice under Section 10(1) was issued).

  11. 17.02.2022

    • Assessment order passed under Section 10(3) of the Black Money Act, making addition of Rs. 15,66,870.

The dispute turned on whether the limitation that ended on 31.03.2021 stood validly extended up to 31.03.2022 under TOLA and associated notifications, thereby validating the order dated 17.02.2022.

Statutory Framework: Section 11 of the Black Money Act

The Tribunal reproduced and relied upon Section 11 of the Black Money Act, which governs the time frame for completion of assessment or reassessment: