Income assessed to tax under Black Money Act is not subject to assessment under Income Tax Act

While granting relief to the Taxpayer from offences of wilful tax evasion under Section 276C(1) as well as producing false statement under Section 277 of the Income Tax Act, the Tis Hazari Courts, New Delhi highlighted that Section 4(3) of Black Money Act (BMA) provides that the income included in the total undisclosed foreign income and asset under BMA shall not form part of the total income under Income Tax Act, 1961.

While stating that an income assessed to tax under the Black Money Act (BMA) cannot be the subject matter of assessment under the Income Tax Act, the Additional Chief Metropolitan Magistrate Shri Anurag Thakur observed that no prosecution can be made regarding such income under Income Tax Act, once there is no question of evasion of income tax.

Advocate Ramaditya Tiwari appeared for the Assessee whereas the Revenue was represented by Advocate Anish Dhingra.

Briefly, upon receiving information from Republic of Singapore tax authority that the Assessee was the beneficial owner of two bank accounts opened by a company called Ismax International, the Ao filed a criminal complaint against the Assessee under Section 276C(1) and 277 of 1961 Act alleging non-disclosure of her interests in foreign entities and her beneficial interest in foreign bank accounts in the return filed for the Assessment Year 2011-12. This was clearly opposed by the Assessee in her statement recorded under Section 131(1A) of 1961 Act.

After considering the evidences and submissions, the ACMM observed that the deeming fiction under Section 72(c) of BMA provides that where the asset is acquired prior to commencement of BMA, such asset shall be deemed to have been acquired in the year when the notice under Section 10 of the BMA is issued.

Hence, the ACMM stated that as per Section 72(c) of BMA, since the asset was presumed to be acquired in Assessment year 2019-20, the same cannot be assessed under 1961 Act for Assessment year 2011-12.

The ACMM clarified that since assessment procedure under Section 147/148 of the 1961 Act for the relevant Assessment year was dropped pertaining to initiation of proceedings under BMA on the same set of facts, the quantum of tax sought to be evaded by the Assessee cannot be ascertained.

Accordingly, the Tis Hazari Court discharged the Assessee from the punishment under the 1961 Act and listed the matter for further hearing on Sep 21, 2023.

Cause Title: ITO vs. Ritu Khaitan [Ct. Cases 823/2018 / 2023-Enterslice-1-MISC-DEL]

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ITO-verses-Ritu-Khaitan