Deepak Jain v. ACIT

Case snapshot

Sections / provisions: Black Money Act 10(3)

Questions before the Court / Tribunal

• Foreign assets ceased before commencement of Black Money Act: The reported order considers assets said to have ceased before 1 July 2015 and the interaction between an Income-tax Act assessment route and later Black Money Act action. Primary text is essential because jurisdiction and valuation dates are central.

Material facts and background

Alhammadi and at the time of closure of bank accounts funds were transferred / utilized at behest of Mr. Alhammadi without any benefit accruing to the appellant. 11. That Ld. CIT(A) erred in law and on facts in holding that the appellant was not able to conclusively establish the source of investment for acquiring that I share" withoutappreciating that in the facts of the case, it is well established thati) the appellant did not provide any consideration/investment into the company, ii) the appellant was only a nominal and negligible shareholder in the company, iii) the appellant was never in position to avail any benefit from the company, and iv) in the entire life cycle of the company, the appellant did not benefit from the aforesaid BVI entities, which is also not disputed the Ld CIT(A). Each of the above grounds is independent and 12. without prejudice to one another. The appellant craves leave to add, alter, amend or withdraw any ground or grounds of appeal at any time before or during the course of hearing of the appeal.” BMA No.07/D/2024, AY 2018-19 (Assessee Appeal): Assessee in its appeal raised the following grounds: 1. “That the Ld. CIT(A) erred in facts and in law in...

3. That the Ld. CIT(A) erred in law and on facts in confirming the addition of undisclosed asset to the extent of Rs.3,14,855/- and not deleting the entire addition made by the AO holding that the “appellant was not able to conclusively establish the source of investment for acquiring that I share”. 4. The Ld. CIT(A) erred in law and on facts in not appreciating that the finding of the CIT(A) in the order dated 18.10.2021, passed adjudicating the quantum appeal that “the appellant was not able to conclusively establish the source of investment for acquiring that I share” is contrary to the facts on record as also the own finding of the CIT(A), thus the proceedings u/s 41 being consequential is also based on erroneous finding of fact. 5. The Ld. CIT(A) erred in law and on facts in not appreciating that use of the word “may” in Section 41 clearly indicates that the imposition of such a penalty is not mandatory. The Assessing Officer would need to independent apply mind as to the addition made in the quantum order, justifying the imposition of penalty. 6. The Ld. CIT(A) erred in law and on facts in not appreciating that the underlying addition in the quantum order u/s 10(3) as also...

Brief facts are that the aforesaid appeals have been filed in

connection with assessment order dated 01.08.2019 passed under section 10(3) of the Black Money (Undisclosed and Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter referred to as “the BMA”) assessing undisclosed foreign income/assets of the assessee at Rs.31,48,55,300/- and imposing penalties on that basis 8

vide order dated 22.10.2024 and 23.10.2024 passed under section 41 and 43 of the BMA, respectively. 3. The facts containing list of dates and various events pertaining to these appeals are tabulated as under:Date 2005

Appellant / assessee submissions

24. Since the entire addition has been deleted on merits in the hands of the assessee, the other legal arguments advanced by the Learned Counsel for the assessee challenging the applicability of provisions of BMA and defended by the Learned Departmental Representative need not be gone into and they are left open. 25. In the result, the appeal of the assessee in BMA No. 6/Del/2024 is partly allowed in the abovementioned terms and appeal of the revenue in BMA No. 1/Del/2025 is dismissed. 26. Since the quantum proceedings are decided in favour of the assessee, the appeals against Penalty levied under section 41 of BMA would have no legs to stand and hence is hereby directed to be deleted. The appeal of the assessee in BMA No. 7/Del/2024 is allowed and appeal of the revenue in BMA No. 3/Del/2025 is dismissed. 27. With regard to the appeal of the revenue in BMA No. 2/Del/2025 for non-reporting of the alleged asset, we find that the CIT(A) has rightly deleted the addition since the reporting requirement came in for the first time from Assessment Year 201213 and onwards, and since the asset had already ceased to exist

Revenue / respondent submissions

In the course of hearing, the Ld DR mainly relied upon the

Further the Ld. DR submitted that based on the allegation that

It may be pertinent to point out, while the Ld. DR did not refer to any case laws on the controversy of the retrospective applicability or definition of undisclosed foreign asset contained in section 2(11), however, in all fairness it may be pertinent to refer to the following decisions, which may have some applicability on the present controversy, but are not applicable for the reasons mentioned herein below: (i)Union of India vs Gautam Khaitan., [2020] 420 ITR 140 (SC) The Black Money Act was originally stated to come into force on 1st April 2016, but this was preponed to 1st July 2015 via a "Removal of Difficulties" Order (Notification No. 56/2015). This was done to align the law's applicability with the one-time compliance window (under Section 59) for disclosing undisclosed foreign assets acquired before AY 2016-17 and taxed under Section 60, for which the date of declaration was fixed on 30.09.2015. This anti-dating was challenged in Hon’ble High Court of Delhi Gautam Khaitan v. Union of India., [2019] 415 ITR 99 (Delhi) on the ground that the CBDT could not change the commencement date fixed by Parliament without its approval. The Delhi High Court granted an interim stay,...

Court / Tribunal analysis and reasoning

In view of the above, it is respectfully submitted that, considering the facts of the present case, where the Revenue chose to proceed against the assessee under the I.T. Act, even after promulgation of BMA on 01.07.2015, despite being vested with substantial powers for investigation and inquiries in terms of section 8 of BMA, and having conducted the extraordinary measure available to the Revenue by way of search under section 132 of the IT Act. the Revenue, in our respectful submission, could not have subsequently changed the original choice/stand of proceedings and assessing the assessee under I.T. Act, to thereafter initiate and complete proceedings under BMA, probably for the reason that assessment meet BMA was either preferential to the Revenue or more draconian for the assessee. Thus, the aforesaid change in stand, in our respectful submission, was in teeth of the aforesaid doctrine ofelection or theory of approbate and reprobate. Therefore, the initiation of such proceedings under BMA was beyond jurisdiction and non-est and deserves to be quashed on the said ground itself, at the threshold. II. Without Prejudice BMA not applicable in case of assessee by virtue of the bar...

In facts of the present case, it can be seen that the Revenue Authorities were in possession of information relating to assessee’s financial interest in the disputed foreign companies way-back in 2013, since repeated summons were issued commencing from 29.07.2013. 36. In view of the above, the assessee was under the bona-fide impression that the Revenue had received information pursuant to FT & TR reference and was not therefore eligible for aforementioned Amnesty Scheme and had even requested to be provided with information received, as can be gathered from the following extracts of reply dated 26.03.2018, filed during the course of assessment proceedings, which is reproduced hereunder: ………………………………….. Therefore, it is requested that the following details may kindly be supplied to me, to enable me to furnish further information/documents in this matter and to make it possible for me to respond to the Notice in a proper and complete manner: 1) When was the information regarding the alleged interest in the foreign companies received by the Authorities and the source thereof. 2) When were the documents pertaining to the alleged interest of the foreign companies, AAL and MOL along...

…………………………….. The Clarifications on Tax Compliance for Undisclosed Foreign Income and Assets issued dated 06/07/2015, succinctly clarify in replies to questions 12 to 16 that person shall be debarred from making a declaration of an undisclosed foreign asset or income where the Central Government had received information in respect of such asset or income prior to the coming into force of the Act. This implies that information in possession of the Central Government prior to the coming into force of the Act has to be dealt as per the normal provisions of the Income Tax Act, 1961. Thus, all such cases where information was already available with the Central Government prior to coming into force of the Act. Therefore, as a corollary, any information with respect to undisclosed foreign income or asset, if it came to the possession of the Central Government prior to 01/07/2015, cannot be utilized either for relief through a voluntary declaration or for punitive action by framing an assessment under section 10(2) of the Act.

……………………………” In view of the above, it can be seen that the Revenue had obtained information relating to foreign entities pursuant to FT & TR reference, and if the information was not received pursuant to such reference, then the information would have, otherwise, become illegal to be acted upon. In view of the above, the bar contained in section 71(d)(iii) was applicable upon the assessee, which brings the assessee outside the ambit of BMA and Revenue ought to have proceeded against assessee under the I.T. Act. In this connection, the view of the CBDT in replies to query no. 15 and 16 of Circular No 13 of 2015 reproduced supra is reiterated, which clearly opines that, in case of a situation covered by section 71(d), the Department ought to proceed under I.T. Act and not under BMA. In view of the above, for the aforesaid additional reason, the impugned order and proceedings initiated under BMA deserves to be quashed for want of valid jurisdiction. III. BMA not applicable to assets ceasing to exist before promulgation of BMA on 01.07.2015:

Operative decision and relief

24. Since the entire addition has been deleted on merits in the hands of the assessee, the other legal arguments advanced by the Learned Counsel for the assessee challenging the applicability of provisions of BMA and defended by the Learned Departmental Representative need not be gone into and they are left open. 25. In the result, the appeal of the assessee in BMA No. 6/Del/2024 is partly allowed in the abovementioned terms and appeal of the revenue in BMA No. 1/Del/2025 is dismissed. 26. Since the quantum proceedings are decided in favour of the assessee, the appeals against Penalty levied under section 41 of BMA would have no legs to stand and hence is hereby directed to be deleted. The appeal of the assessee in BMA No. 7/Del/2024 is allowed and appeal of the revenue in BMA No. 3/Del/2025 is dismissed. 27. With regard to the appeal of the revenue in BMA No. 2/Del/2025 for non-reporting of the alleged asset, we find that the CIT(A) has rightly deleted the addition since the reporting requirement came in for the first time from Assessment Year 201213 and onwards, and since the asset had already ceased to exist

Partly Allowed Allowed Dismissed Dismissed Dismissed

Authorities and precedents appearing in the judgment

• The Delhi High Court in the case of Ramaswamy PalIedar vs Secretary to Government of NCT of Delhi and Anr
• The Supreme Court in the case of Bank of India vs Lekhimoni Das and Others
• Dalip Singh vs Lal Singh and Ors
• Hasan Ali Khan vs. DCIT
• New Delhi v. M/s Nestle SA
• F.S. Gandhi vs. CWT
• Commissioner of Income tax v. Taj Mahal Hotel
• St. Johns Teachers Training Institute vs Regional Director
• Kerala State Electricity Board vs Thomas Joseph Alias
• Chennia v. ChemplastSanmar
• Union of India vs Gautam Khaitan
• Court of Delhi Gautam Khaitan v. Union of India

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Foreign assets ceased before commencement of Black Money Act. The operative result is classified as Partly Allowed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Foreign assets ceased before commencement of Black Money Act. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Use the judgment as a fact-specific precedent: match the statutory version, assessment period, procedural stage and evidentiary record before relying on the result.
• Check whether a later High Court/Supreme Court order has affirmed, reversed, distinguished or rendered the decision academic.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

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