The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has upheld a penalty of ₹1.86 lakh under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 against taxpayer Ashok Shankar in connection with the non-disclosure of a bank account in the UAE and his interest in a UAE-based company in his income tax return.
The matter traces back to a search conducted by the Income Tax Department on 27 April 2016 in connection with the Sanjay Bhandari group.
During subsequent proceedings, the Income Tax Department received information from the UAE authorities under the exchange-of-information mechanism of the India-UAE Double Taxation Avoidance Agreement (DTAA). The information, received by the Assessing Officer on 25 April 2019, indicated that Shankar maintained an account with Emirates NBD Bank in Dubai.
As per the information received from the UAE authorities, the bank account had been opened on 18 January 2010, with Shankar stated to be the authorised signatory. The information also reflected cash deposits aggregating AED 5,025 in the account.
The information received from the UAE further indicated that Shankar was a director and shareholder of Santech International FZE, a UAE-based company incorporated in February 2006. His paid-up share capital in the company was reported at AED 3,000.
According to the tax authorities, neither the foreign bank account nor Shankar's interest in the UAE company had been disclosed in the foreign asset particulars furnished with his Indian income tax returns.
Based on the information, proceedings under the Black Money Act, 2015 were initiated, and a notice was issued on 30 July 2019 for Assessment Year 2020-21.
During the proceedings, Shankar submitted that he had forgotten about the Dubai bank account and stated that the account had subsequently been closed on 6 April 2017.
With regard to the deposit of approximately AED 5,000, the taxpayer contended that the amount had been deposited by a friend in connection with a proposed business venture in Dubai. According to him, the proposed business did not ultimately materialise and the amount remained with the bank.
However, the tax authorities did not accept the explanation for the non-disclosure of the overseas assets. The matter eventually reached the ITAT, where the taxpayer challenged the action taken under the Black Money Act and the consequential penalty.
The Delhi Bench examined the information received from the UAE authorities as well as the taxpayer's explanations regarding the bank account and his shareholding/directorship in the foreign company.
The Tribunal ultimately upheld the ₹1.86 lakh penalty, rejecting the taxpayer's defence concerning the failure to report the foreign assets.
The ruling reinforces the importance of correctly reporting overseas bank accounts, shares, financial interests and other foreign assets in the applicable Foreign Assets (FA) Schedule of the income tax return, wherever disclosure is required.
For resident taxpayers holding overseas assets, the decision also serves as a reminder that information relating to foreign bank accounts and investments may be available to Indian tax authorities through international exchange-of-information arrangements. Failure to make the required disclosures can consequently result in proceedings under the Black Money Act, subject to the facts and applicable provisions of each case. CA Sansaar