ITAT Mumbai Quashes Black Money Act Assessment: Invalidity of Section 10(1) Notice Voids Subsequent Proceedings
In a significant ruling concerning the procedural sanctity of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has reinforced the principle that a jurisdictional defect at the inception of proceedings renders the final assessment null and void.
The case of ACIT Vs Yashovardhan Birla serves as a critical precedent, establishing that if the foundational notice issued under Section 10(1) of the Black Money Act is declared invalid, the consequential assessment order framed under Section 10(3) cannot survive independently.
Factual Matrix and Background
The controversy originated from a search and seizure operation conducted on the assessee and associated group companies on January 7, 2014. During this enforcement action, the Revenue authorities allegedly unearthed incriminating material suggesting that the assessee held undisclosed foreign assets. These allegations pointed towards beneficial ownership in offshore entities and foreign bank accounts held in the names of such entities.
Based on the seized documents, the Department of Income Tax (Investigation), Mumbai, initiated inquiries through the Foreign Tax and Tax Research (FT & TR) division. References were made to foreign tax authorities under the Double Taxation Avoidance Agreement (DTAA) and Mutual Legal Assistance Treaty (MLAT). The Revenue contended that the responses received confirmed the assessee’s beneficial interest in foreign entities and properties located in Singapore and London. Crucially, the Revenue observed that these assets and financial interests had not been disclosed in Schedule FA of the Income Tax Returns, a mandatory requirement effective from Assessment Year 2012-13.
Consequently, the Assessing Officer (AO) issued a notice under Section 10(1) of the Black Money Act on November 22, 2017. This notice serves as the initiation of proceedings under the Act. The assessee challenged the jurisdiction and validity of this notice. Despite objections, the AO proceeded to finalize the assessment under Section 10(3) of the Black Money Act on March 31, 2021, determining the total undisclosed foreign income and assets at a staggering figure of Rs. 8071,86,73,000.