No Assessment Without Proper Notice: ITAT Clarifies the Procedural Backbone of Assessments under the Black Money Act

Introduction

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (‘BMA’), was introduced as a stringent regime to combat tax evasion through undisclosed offshore income and assets. With sweeping provisions, including retrospective taxation, stiff penalties, and prosecution, the BMA places significant procedural responsibilities on taxpayers and tax administrators. Among these, the issuance of notice under s. 10(1) of the BMA serves as the statutory gateway through which the Assessing Officer (‘AO’) assumes jurisdiction to assess undisclosed foreign income and assets.

In this backdrop, the Income-tax Appellate Tribunal, Mumbai Bench (‘ITAT’), in the case of Smt. Anandi Kaushik Laijawala[i] was called upon to decide whether a BMA assessment order could survive when the initiating notice under s. 10(1) was either incorrectly framed, subsequently withdrawn, or misaligned with the relevant assessment year (‘AY’). The ruling also examined whether the deeming provision under s. 72(c) of the BMA—which links the year of acquisition of undisclosed foreign assets to the year in which the notice under s. 10(1) is issued—affects the validity and timing of assessments under the BMA.

Brief Facts

• The appellants, Smt. Anandi Kaushik Laijawala and Shri Kaushik Gokaldas Laijawala were Indian residents and spouses. The Assessing Officer (‘AO’) received information that both appellants were beneficiaries and settlers of an offshore trust named Vanaka Trust, based in Guernsey, and of a related company, Vanaka Group Limited, based in the British Virgin Islands.

• While the Vanaka Trust was settled on 31.05.2012, with M/s Standard Chartered Trust (Guernsey) Ltd appointed as trustee, the trust held 100% of the shareholding in Vanaka Group Ltd., meaning thereby that the Vanaka Trust wholly owned the company and thus controlled its underlying assets.

• As on 31.03.2016, the Trust held assets worth USD 9,514,676, which included 100 shares of Vanaka Group Ltd. The company also held retained earnings of USD 220,274 as on 31.03.2017. The appellants had not disclosed these offshore assets or the associated income in Schedule FA of their income tax returns (ITR) for any AYs.

• The AO initiated proceedings under the BMA. The first notice, dated 07.08.2017, was issued under s. 10(1) for AY 2017-18. A second notice dated 27.04.2018 was issued under s. 10(1) by the same AO for AY 2018-19. Additional notices under s. 10(1) of the BMA were issued by the successor AO on 10.07.2018 and 09.11.2018; however, the latter notice did not specify any AY. Further, a corrigendum dated 31.07.2018 issued by the successor AO attempted to rectify the first notice by stating that it should be read as pertaining to AY 2018-19.

• Passing an assessment order thereto, the AO held that the entire amount of USD 9,735,050 was chargeable to tax under the BMA. Using a conversion rate of Rs. 64.8386, the taxable amount was determined to be Rs. 63.12 crores. 50% of this was assessed substantively, and the remaining 50% was assessed protectively in the hands of both assessees for AY 2018–19.

• On challenge, the Commissioner of Income-tax (Appeals) [‘CIT(A)’] upheld the assessments on merits but held that the notice dated 07.08.2017 issued for AY 2017-18 had been effectively withdrawn by the AO. It held that the valid notice for AY 2018-19 was the one dated 27.04.2018. This finding was not contested by the Revenue and thus had attained finality.

• The assessees raised the contention that the assessment order for AY 2018-19 was void, as it was not based on a valid notice issued under s. 10(1) of the BMA for that AY. Hence, the key legal issue considered by the ITAT in this case was whether the assessment order for AY 2018-19 was valid in the absence of a valid and effective notice under s. 10(1) of the BMA.

Held

• The ITAT held that the assessment order for AY 2018-19 was void ab initio, as it was not preceded by a valid and effective notice under s. 10(1) of the BMA, which is a jurisdictional requirement for making an assessment under the BMA. Accordingly, the ITAT allowed the assessees’ legal ground and quashed the assessment order as being without jurisdiction and invalid in law.

• It noted that the first notice dated 07.08.2017 was issued for AY 2017-18, not AY 2018–19. Though a corrigendum dated 31.07.2018 stated that the notice should be read as pertaining to AY 2018-19, the ITAT found this to be legally unsustainable, particularly since the AO had himself issued a fresh notice dated 27.04.2018 for AY 2018-19. The Tribunal also noted CIT(A)’s ruling in this regard that the earlier notice had effectively been withdrawn by the AO. This decision had attained finality since it was not contested further by the Revenue.

• The Tribunal observed that once the AO had consciously issued a new notice dated 27.04.2018 for AY 2018-19, the earlier notice (and its corrigendum) could not be relied upon to establish jurisdiction. Further, the subsequent notices, especially the one dated 09.11.2018, did not mention any AY, making them vague and insufficient to confer jurisdiction.

• Crucially, the ITAT held that under s. 72(c) of the BMA, an undisclosed asset acquired prior to the commencement of the Act shall be deemed to have been acquired in the year in which a valid notice under s. 10 is issued. Hence, the notice dated 27.04.2018, having been issued in FY 2018–19, could only trigger assessment for AY 2019–20, not AY 2018–19. Thus, the assessment for AY 2018–19 could not be sustained in law based on the deemed acquisition year resulting from the April 2018 notice.

• The ITAT relied on the Circular[ii] issued by the Central Board of Direct Taxes (‘CBDT’) and the FAQs appended to it to interpret the procedural safeguards under the BMA. It emphasized that the Circular clarified the intention behind s. 10(1) of the BMA, which was to ensure that an adequate opportunity and notice were given to the taxpayer.

• The Tribunal observed that s. 10(1) of the BMA, although worded in permissive language – ‘may’, was mandatory in nature because it triggered the assessment process. It held that the issuance of such a notice was not a procedural formality but a substantive safeguard, especially in view of the BMA’s stringent civil and penal consequences, and its ability to apply retrospectively to foreign assets extinguished before the BMA came into force.

• The ITAT rejected the Revenue’s argument that the defect in the notice could be cured under s. 292B of the Income-tax Act, 1961 (‘IT Act’), which is made applicable to the BMA under s. 84 of the BMA. Relying on various High Court decisions, the Tribunal held that s. 292B of the IT Act applies only to technical or clerical errors and cannot cure a jurisdictional defect, such as changing the AY for a previous notice issued under s. 10(1) of the BMA. Thus, it held that a jurisdictional error like the absence of a valid notice goes to the root of the matter and cannot be treated as a mere irregularity.

Our Analysis

The ITAT’s decision is a timely reaffirmation of the rule of law under the BMA – a statute often criticized for its draconian effect and expansive scope. The Tribunal’s strict construction of procedural safeguards under s. 10(1) is consistent with the jurisprudential understanding that the power to tax must be exercised strictly within the bounds of law, especially when severe civil liabilities (e.g., 30% tax on the fair market value (‘FMV’) and steep penalties) are imposed. Though s. 10(1) uses permissive language (‘may’), its connection with the due process requirement under s. 10(3), read with the natural justice principles, makes such notice a jurisdictional precondition. The absence of a valid notice for the relevant AY, especially in a penal taxing regime like the BMA, cannot be cured by vague or misdirected communication.

Having said that, this decision brings into sharp focus a long-standing tension under the BMA: how far into the past can the law reach to tax foreign assets that are no longer in existence or were extinguished before the BMA came into effect?

The CBDT’s own Circular[iii], through Q&A nos. 20, 23, and 29, makes clear that the BMA applies to undisclosed foreign assets acquired from untaxed income – even if those assets ceased to exist before BMA commenced. For example, Q&A no. 20 provides that a foreign bank account closed in 1997-98, if unexplained, should still be declared. Q&A no. 29 confirms that a declaration may be made under Ch. VI even if the asset is not held at the time of declaration. This interpretive stance renders the scope of the BMA extraordinarily wide – arguably to the point of absurdity.

These positions, read together with s. 72(c) of the BMA, which deems such assets to have been acquired in the year in which the notice under s. 10 is issued – create a legal fiction that not only undermines the principle of non-retrospectivity, but also exposes taxpayers to disproportionate liabilities. A person who no longer holds an asset, and in some cases may have disposed of it decades ago, can still be subjected to tax, penalty, and even prosecution based on retrospective inferences. This raises constitutional questions around due process, proportionality, and fairness, especially where the individual had no continuing interest in the asset at the time the BMA was enacted.

Seen in this light, the ITAT’s insistence on procedural compliance is not a mere technicality, but a vital safeguard against arbitrary exercise of power under an already harsh statutory framework. Since the BMA manufactures fictional taxable events and imposes significant retrospective burdens, at the very least, it must guarantee strict adherence to procedural fairness, especially the issuance of valid, jurisdictionally sound notices. The Tribunal rightly invalidated the assessment not on substantive grounds, but on this jurisdictional defect, thus keeping the gate firmly shut against arbitrary invocation of taxing powers.

Finally, although the ruling cites the CBDT Circular[iv], it misses an opportunity to interrogate the deeper structural issue raised by it: namely, whether it is constitutionally permissible to tax and penalize individuals for foreign assets that no longer exist and were extinguished prior to the BMA’s commencement. Until such tensions are resolved either legislatively or judicially, the scope and application of the BMA will remain charged with uncertainty and potential overreach.

End Notes

[i] Smt. Anandi Kaushik Laijawala v. Deputy Director of Income-tax (Inv.), [2025] 172 taxmann.com 121 (Mumbai – Trib.), dated 14.02.2025.

[ii] CBDT Circular No. 13/2015, dated 06.07.2015.

[iii] Supra, Note ii.

[iv] Supra, Note ii.

Authored by Srishty Jaura, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.