Taxman may use black money act to trace closed foreign accounts

The taxman can use the Black Cash Act to go after even these secret international financial institution accounts which have been closed effectively earlier than the brand new regulation got here into existence, in keeping with a tax tribunal ruling final week. Beneath the Black Cash (Undisclosed Overseas Revenue & Belongings) and Imposition of Tax Act, which got here into drive on July 1, 2015, the yr through which the tax division will get maintain of any data is the yr for which revenue is deemed to have been earned by the particular person in query.

The holder of an outdated, undisclosed offshore checking account that continues to exist after 2015 would understandably discover himself on the mistaken aspect of regulation for having did not report it and are available clear by paying tax. However what about accounts which have been closed and ceased to exist earlier than 2015? Can cash that was mendacity in such an account be introduced underneath tax?

The purpose was raised by senior advocate Percy J Pardiwalla whereas representing one Rashesh Manhar Bhansali who, in keeping with intelligence inputs obtained by the I-T division, had operated two undisclosed financial institution accounts which have been closed in October 2008 and Could 2011. Bhansali had appealed earlier than the Revenue tax Appellate Tribunal difficult the order of the Commissioner of IT (Appeals). When requested whether or not he or his members of the family personal any offshore firms or financial institution accounts, Bhansali had denied.

Nevertheless, in keeping with ITAT, underneath the black cash regulation what’s related is the date on which the tax assessing officer notices the acquisition by an assessee of undisclosed property situated outdoors India. Thus, “it’s immaterial as as to if it existed on the level of time of taxation, or, for that objective, even on the level of time when the provisions of the BMA got here into existence,” mentioned the ITAT Mumbai bench comprising Pramod Kumar (vice-president) and Ravish Sood (judicial member), in its ruling on November 2, 2021. ITAT upheld the tax division’s stand.

Based on sections within the authorized circle, this provision of the regulation once more may come underneath authorized scrutiny in future as Article 20 of the Structure states that one can’t be punished underneath a regulation which didn’t exist on the time the offence was dedicated. The Black Cash regulation was handed to beat the constraints in present statutes just like the Revenue tax Act, and tax undisclosed funds parked in international financial institution accounts and sometimes held by way of discretionary trusts.

Considerably, summons issued by the investigation wing of the I-T division has requested many who’ve been named within the Pandora papers to share particulars of financial institution accounts which not exist and companies that have been dissolved. Based on tax practitioners, within the run as much as the passage of the Black Cash Act and negotiations with varied tax haven jurisdictions for getting into into information-sharing pacts, many had closed their international financial institution accounts.