Taxing same amount under Black Money Act which was already disclosed in I-T return and taxes stood paid, amounts to double taxation

Hearing a matter under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, (in short, Black Money Act, 2015) the Kolkata ITAT observed that additions framed against the Assessee herein were not sustainable, since the necessary condition to treat a particular foreign asset, as undisclosed foreign asset located outside India, as per provisions of Section 2(11) of the Black Money Act, was not satisfied.

A Division Bench of Dr. Manish Borad, Accountant Member, and Mr. Sonjoy Sarma, Judicial Member, observed in respect of the amount in question, that the assessee had duly disclosed the same in Income Tax Return filed for the relevant Assessment Year, and had also paid tax of about Rs 39 Lakhs on such amount. Therefore, the Bench observed that taxing the same amount under the Black Money Act would amount to double taxation, which is not permissible in law.

The Appellant-Assessee was represented by Mr. Soumitra Choudhury, Advocate, whereas the Respondent-Revenue was represented by Mr. PP Barman, Additional Commissioner of Income Tax.

The Assessee had been a non-resident Indian during the relevant Assessment Years and while staying in UAE, he took two insurance policies. However, after paying two premiums during his stay in UAE using his income earned in UAE, the Assessee returned to India and the premiums on the two insurance policies were paid by Assessee’s father (also a non-resident) from his individual sources.

Later, the premiums were discontinued after 2010 and subsequently during 2018, the Assessee received information that he could still claim the surrender value. Accordingly, during AY 2019-20 Assessee’s father (being the assignee) received the surrender value and remitted it to the Assessee in India, which was offered to tax and Rs 39 lakh was paid as tax thereon.

Based on such information in the Income Tax Return, the Revenue carried out proceedings under the Black Money Act holding that Assessee failed to declare the alleged foreign assets i.e. investment in life insurance policies in his income tax return and since the information was received during Financial Year 2019-20, reference rate of USD as on Apr 1, 2019 was applied to compute undisclosed foreign income and asset u/s 10(3) at Rs. 1.08 Crores.

On appeal, these findings were sustained by the Commissioner of Income Tax (Appeals).

On hearing the contentions of both parties, the Bench examined the provisions of Section 2(11) of the Black Money Act 2015 and observed that two conditions, had to be satisfied by the Revenue to tax a foreign asset under the category of undisclosed asset located outside India held by the assessee in his name or in respect of which he is a beneficial owner.

One condition was that such asset had not been disclosed by the Assessee in return of income or any other place of disclosure provided under the Black Money Act 2015. The other condition was that the Assessee would be unable to explain the source of investment in the asset, or the explanation tendered must be deemed to be non-satisfactory.

Considering the factual matrix, the Bench observed that the Assessee was able to satisfactorily explain the source of the investment.

The Bench noted – “…the assessee has successfully explained the source of investment which is undoubtedly from the income earned outside India, part of which was paid by the assessee in the capacity of a non-resident Indian and the remaining part being paid by assessee’s father who is also a non-resident Indian from his sources of income/asset located outside India. There is no iota of evidence bring forth by the Revenue authorities which could indicate that any element of the alleged investment in foreign asset is from so-called black money earned in India. Complete details of the bank account along with date of payment of the premium of the insurance policy supports this fact that the assessee has successfully explained the source of investment in the alleged foreign asset in the form of investment in insurance policy…”.

The Bench further noted that it was subsequently in Financial Year 2018-19 that the Assessee realised he was eligible for refund of surrender value, underwent the process for the same and received the amount in his bank account.

Moreover, as the assessee duly disclosed the amount received in his Income Tax Return and paid tax thereon, taxing the same amount under the Black Money Act amounted to double taxation, the Bench observed.

Thus, the Bench concluded that the twin conditions of Section 2(11) of the Black Money Act had not been satisfied by the Revenue and the additions framed were directed to be set aside.

Cause Title: Sri Srinjoy Bose Vs Additional Director of Income Tax [BMA No. 3/Kol/2022 / 2023-Enterslice-11-ITAT-Mum]

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