Court holds undisclosed foreign assets acquired before the 2015 Act are deemed to be acquired in the year notice is issued under Section 10, making assessment for the earlier year without jurisdiction.
The Karnataka High Court has set aside an assessment order passed under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, holding that the Revenue had no jurisdiction to proceed against a Moroccan citizen for Assessment Year 2018-19 when the statute itself deemed the foreign assets to have been acquired only in the year a notice under Section 10 was issued.
Justice S.R. Krishna Kumar allowed the writ petition filed by Mrs. Hind Sennoun and quashed the assessment order dated 31 March 2021, along with all consequential proceedings. The Court found that the petitioner had purchased two immovable properties in Morocco on 26 August 2015 and 28 February 2016, both before the Black Money Act came into force on 1 April 2016.
According to the Court, the petitioner had not made any declaration under Section 59 of the Act. In such a situation, Section 72(c) of the statute applied. That provision creates a legal fiction that where an asset was acquired before the commencement of the Act and no declaration was made, the asset shall be deemed to have been acquired in the year in which the Assessing Officer issues notice under Section 10.
The Court noted that the first notice under Section 10 was issued only on 4 December 2018. Therefore, by operation of Section 72(c), the foreign assets had to be treated as deemed acquired in Financial Year 2018-19, corresponding to Assessment Year 2019-20. Since the Revenue had initiated proceedings for Assessment Year 2018-19, the entire action was held to be illegal, arbitrary, and without authority of law.
The Court explained that Section 72(b) was inapplicable because it deals with cases where a declaration has been made under Section 59 but tax and penalty were not paid within time. Here, no declaration had been made at all. The judgment also emphasized that the statutory fiction under Section 72(c) is self-executing and conclusive, and the actual date of acquisition need not be separately examined.
While the petitioner had also argued that the proviso to Section 3(1) applied, the Court found it unnecessary to decide that issue after concluding that the assessment itself was unsustainable under Section 72(c). Those other contentions were left open.
The Court’s ruling reinforces that under the Black Money Act, foreign assets acquired before the Act’s commencement and not declared under Chapter VI cannot be assessed in the wrong year. The assessment must be made only in the assessment year immediately following the year in which notice under Section 10 is issued.
Bottom Line :
Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - Where foreign assets were acquired prior to commencement of the Act and no declaration under Section 59 was made, Section 72(c) applies - Such assets are deemed to have been acquired in the year in which notice under Section 10 is issued and assessment can be made only in the immediately succeeding assessment year - Proceedings initiated for an earlier assessment year are without jurisdiction and liable to be quashed.
Statutory provision(s): Section 2(4), Section 2(9), Section 3(1), Section 8, Section 10, Section 41, Section 45, Section 46, Section 59, Section 60, Section 61, Section 72(b), Section 72(c) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
Mrs. Hind Sennoun v. Union of India, (Karnataka) : Law Finder Doc id # 2987679
