Tax Department May Use Black Money Act to Trace Closed Foreign Accounts

Money Act to Trace Closed Foreign Accounts

The Income tax department may use the Black Money Act to investigate secret foreign bank accounts which were closed well before the new law came into existence, according to a tax tribunal ruling last week.

As per the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act, the year in which the tax department gets hold of any information is the year for which income is deemed to have been earned by the person in question.

However, as per Income Tax Appellate Tribunal (ITAT), under the black money law that date is relevant on which the tax assessing officer notices the acquisition by an assessee of undisclosed assets located outside India.

Thus, “it is immaterial as to whether it existed at the point of time of taxation, or, for that purpose, even at the point of time when the provisions of the BMA came into existence,” said the ITAT Mumbai bench comprising Pramod Kumar (vice-president) and Ravish Sood (judicial member), in its ruling on 2nd November, 2021. ITAT upheld the tax department’s stand.

According to sections in the legal circle, this provision of the law again could come under legal scrutiny in future as Article 20 of the Constitution states that one cannot be punished under a law which did not exist at the time the offence was committed. The Black Money law was passed to overcome the limitations in existing statutes like the Income Tax Act, and tax undisclosed funds parked in foreign bank accounts and often held through discretionary trusts.

Accordingly, summons issued by the I-T department has asked many who have been named in the Pandora papers to share details of bank accounts which no longer exist and firms that were dissolved.


Knowledge Update

Income Tax Refund of Around Rs 3500 Crore Issued in First Week of November

Leave a Reply

Your email address will not be published. Required fields are marked *