EARNEST MERCANTILE PVT. LTD. ,MUMBAI vs. INCOME TAX OFFICER - WARD 1(1)(3) , MUMBAI

At the very outset, we noticed that the assessee has filed revised/concise grounds of appeal and the same are reproduced herein below:

Ground No. 1 of the revised grounds raised by the assessee relates to challenging the action of the AO in issuing notice under section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, dated 15.03.2022, without appreciating that the said notice was barred by limitation as per the CBDT Guidelines.

In this regard, we have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities. From the records, we noticed that the proceedings under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 were initiated by the ACIT, Central Range-5, against the assessee by issuing notice under section 10(1) of the BM Act dated 15.03.2022 for AY 2022-23. On perusal of the order passed under section 10(3) of the BM Act, it can be seen that the AO has stated as under:

It was further observed that notice under section 133(6) of the Act was issued to the assessee on 30.04.2019 by the DDIT, Mumbai, stating that the assessee had entered into a financial transaction by way of investment in real estate in Dubai and, in that connection, the assessee was asked to submit certain details. A copy of the notice was reviewed by the Bench at the time of hearing, and the Department was directed to place the same on record. A copy thereof is reproduced herein below:

Furthermore, on the very same set of facts, it was noticed that the AO had formed the basis for reopening the assessments for AYs 2014-15 to 2016-17 under section 147 of the Act, wherein the AO, vide reasons recorded on 31.03.2021, categorically stated that the assessee had made undisclosed investment in foreign property and had not disclosed the same in the return of income. The AO thus formed a "reason to believe" that income had escaped assessment on account of such non-disclosure. The relevant extract of the reasons recorded for reopening for AY 2014-15 is reproduced as under:

Moreover, the said position stands explicitly affirmed in the order passed under section 10(1) of the BM Act for AY 2022-23, wherein the AO himself has recorded that such disclosure was made only in the revised returns filed on 31.03.2021 in response to notices issued under section 148. The relevant portion of the order passed under section 10(1) of the BM Act for AY 2022-23, wherein, in para 3.2.2, the AO has held as under:

Thus, in our view, a combined reading of the reasons recorded for reopening dated 31.03.2021 and the findings recorded in the BM Act proceedings unequivocally establishes that the fact of non-disclosure of foreign assets was already within the knowledge of the Department as on 30.04.2019, i.e., the date of issuance of notice under section 133(6), and of the AO as on 31.03.2021.

In this regard, our attention was also drawn to the CBDT Guidelines for handling cases under the BM Act issued vide F. No. 414/134/2015- IT(Inv.I) (Pt.) dated 23.01.2018, which were made effective from 01.02.2018 with the approval of the Member (Investigation), CBDT. These Guidelines, read with Notification No. 39/2017 dated 16.05.2017, lay down a structured procedural framework and timelines for initiation of proceedings under the BM Act. Specifically, para 8 of the said Guidelines provides that:

We further noticed that, as stated in the Guidelines, in order to achieve the intended objectives and to streamline action under the Black Money Act, the CBDT had issued the aforesaid Guidelines prescribing the processes and timelines with effect from 01.02.2018. The relevant portion thereof is reproduced herein below:

Thus, in our view, applying the aforesaid binding administrative Guidelines to the facts of the present case, the relevant information regarding non-disclosure of foreign assets was admittedly available with the Department as on 30.04.2019, i.e., the date of issuance of notice under section 133(6), and with the AO as on 31.03.2021. Consequently, the notice under section 10(1) ought to have been issued within 30 days from the end of the previous year in which such information came to the notice of the Department/AO, i.e., either by 30.04.2020 or by 30.04.2021.

However, the notice was issued only on 15.03.2022, i.e., after an inordinate and unexplained delay of nearly one year.

Thus, in the absence of any recorded reasons for such delay or any material evidencing the requisite approval of the competent authority, the impugned notice is clearly in violation of the CBDT's binding Guidelines, thereby rendering the entire proceedings procedurally flawed and legally untenable.

In view of the aforesaid discussion, we are of the considered view that the initiation of proceedings under section 10(1) of the BM Act is vitiated, being contrary to the binding administrative instructions, and is liable to be quashed. Reliance in this regard is being placed upon the decision of the Coordinate Bench of ITAT in the case of Sadanand B. Sule (BMA No. 4/Mum/2023), wherein the Bench took cognizance of the aforesaid Guidelines and held that the same are binding on the Revenue and that non- compliance therewith vitiates the entire proceedings. A similar issue also came up before the Hon'ble Delhi High Court in the case of Harvansh Chawla (WP(C) 5559/2021), wherein the Hon'ble High Court took note of the said Guidelines and observed that the notice under section 10(1) had not been issued within 30 days from the end of the previous year in which the information was received by the Revenue, and granted ad interim relief to the petitioner.

Thus, considering the totality of the facts and circumstances of the present case, and keeping in view the judicial precedents of the Coordinate Benches of the Tribunal as well as the Hon'ble Delhi High Court, we hold that the notice issued by the AO under section 10(1) of the BM Act was barred by limitation, thereby, rendering the consequential proceedings null and void.

Therefore, Ground No. 1 of the revised grounds of appeal stands allowed.

Since we have already held that the notice issued under section 10(1) of the BM Act is barred by limitation and that the consequential proceedings are null and void, therefore, the other grounds raised by the assessee have become infructuous in view of our finding on Ground No.1 and, therefore, do not require adjudication.

In the result, appeal filed by the Assessee stands partly allowed.