2 weeks ago
ITAT upholds Black Money Act demand over undisclosed Dubai assets
An Indian man named Ashok Shankar had a bank account in Dubai, which is in a country called the United Arab Emirates.
He also owned a small part of a company there.
In India, people have to tell the tax department about money and things they own in other countries.
Mr. Shankar did not tell them about his Dubai bank account or his share of the company.
A search of another business group and information from UAE officials helped tax officers find out about it.
The officers asked him to pay tax on the foreign money and property.
Mr. Shankar said the money in Dubai was his friend's and that he never paid for his company shares.
A special court called the Income Tax Appellate Tribunal did not agree with him.
The court said the law is clear about reporting things you own abroad.
So he must pay the tax.
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) upheld a tax demand and penalty against Indian resident Ashok Shankar under the Black Money Act, 2015.
Shankar failed to disclose a Dubai bank account at Emirates BND Bank, credited with AED 5,000, and a 10% stake in UAE company Santech International FZE.
He held AED 3,000 in share capital of Santech International FZE, where he was also a director.
The Income Tax Department learned of the foreign assets through a search of the Sanjay Bhandari Group and information from UAE authorities under a tax treaty.
The tribunal ruled the assets were validly taxed for Assessment Year 2020-21, as information reached the Assessing Officer on April 25, 2019.
The tribunal rejected Shankar's arguments that the deposit belonged to a friend and that he made no payment for the shares.
- Who
- Ashok Shankar, an Indian resident taxpayer, and the Delhi Bench of the Income Tax Appellate Tribunal (ITAT).
- What
- The ITAT upheld a tax demand and penalty under the Black Money Act, 2015 for Shankar's undisclosed Dubai bank account and stake in UAE company Santech International FZE.
- Where
- India (Delhi Bench of the ITAT); the undeclared assets were located in Dubai, United Arab Emirates.
- When
- The ruling concerns Assessment Year 2020-21; information about the foreign assets was forwarded to the Assessing Officer on April 25, 2019. The exact date of the tribunal order is not stated in the article.
- Why
- Shankar did not report the foreign bank account and shareholding in Schedule FA of his income tax return or under the Black Money Act, and Section 3 of the Act requires undisclosed foreign assets to be taxed in the year they come to the officer's notice.
Assessee's position
Revenue's position
Ownership of the Dubai bank deposit
Assessee's position
Shankar claimed the AED 5,000 belonged to a friend, was meant for a Dubai business that never started, and the account was closed in April 2017 with a nil balance.
Revenue's position
The Income Tax Department treated the account as Shankar's undisclosed foreign asset, relying on the bank statement, KYC documents, customer information forms and account-opening form bearing his signature.
Santech International FZE shareholding
Assessee's position
Shankar said he made no payment towards the share capital; the company was established by Sanjay Bhandari for oil and gas opportunities, and the 10% stake was allotted when he was appointed director.
Revenue's position
The department and tribunal treated the shareholding as an undisclosed foreign asset that should have been reported, bringing the AED 3,000 share capital to tax.
Assessment year for taxing the assets
Assessee's position
Shankar argued that because the department obtained information during a 2016 search, the assets should not be brought to tax for Assessment Year 2020-21.
Revenue's position
The ITAT held that under Section 3 of the Black Money Act the asset is taxed in the year it comes to the Assessing Officer's notice, which was April 25, 2019, making Assessment Year 2020-21 appropriate.
Key facts
- Tribunal
- Delhi Bench, Income Tax Appellate Tribunal (ITAT)
- Assessee
- Ashok Shankar, Indian resident
- Undisclosed assets
- Emirates BND Bank account in Dubai (AED 5,000) and 10% stake in Santech International FZE (AED 3,000 share capital)
- Tax brought to assessment
- Rs. 94,525 (bank balance) and Rs. 56,175 (share investment)
- Assessment Year
- 2020-21
- Statute
- Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
- Key date
- April 25, 2019 - information forwarded to the Assessing Officer
- Bench members
- C.N. Prasad (Judicial Member) and G. Manjunatha (Accountant Member)
Sources
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