In a recent case, the Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) held that any addition made as undisclosed foreign income and assets under the Black Money Act (BMA), shall not be repeated under the Income Tax Act, 1961.
Based on the information received from the Singapore Tax Authorities, Captain Vilas Waman Katre, the assessee had beneficial interest in an offshore entity, having a corporate bank account with Deutsche Bank, Singapore, having total credits of approximately 200 crores. Hence, treating the assessee as owner of the assets of the said bank account in Deutsche Bank, the assessee was charged under BMA.
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The Accountant Member observed that the additions made under the Income Tax Act and BMA, are almost the same and the information relied upon by the AO for initiating the proceedings under the BMA are similar to the Income Tax Act proceedings. On the other hand, the Judicial Member opined that though the Tribunal has discharged the assessee from its liability in the Income Tax proceedings, the same will not have a binding effect on the BMA proceedings.
Subsequent to examination of statement and object of the BMA, the Third Member Bench observed that the title and preamble form part of the context of the enactment of the BMA, and plays pivotal role in the interpretation of the provisions given in the said statute.
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It was viewed that preamble and statement of objects and reasons clearly outline their intention of targeting undisclosed foreign income/assets acquired from undisclosed foreign income and penalizing such individuals engaged in illegitimate means of generating money.
The Bench found that the entire BMA revolves around taxing of undisclosed asset located outside India and undisclosed foreign income/asset, whereas under the Income Tax Act, all income are taxable, unless specifically exempt or excluded from taxable income. It was noted that Section 59 of BMA grants opportunity to declare undisclosed foreign asset, and pursuant to declaration the said amount is not included in the total income, subject to declarant making requisite tax payment.
A Third Member Bench comprising Narendra Kumar Billaiya (Accountant Member) observed that the entire BMA revolves around taxing only ‘undisclosed asset located outside India’ and ‘undisclosed foreign income and asset’, whereas under the Income Tax Act, all income are taxable unless specifically exempt from tax or not included in taxable income.Since there is no corresponding provision under the Income tax Act, the ITAT clarified that additions made under the Income tax Act have no bearing under the BMA.
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The bench observed that the Accountant Member should ought to have contested the issue within the four walls of BMA and has failed to render any findings on other issues, which stands decided by the Judicial Member, which shall prevail. Hence, the ITAT allowed assessee’s appeal and directed the assessee to submit requisite declaration pertaining to undeclared foreign assets.
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