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Learn about the Black Money (Undisclosed Foreign Income and Assets) & Imposition of Tax Act 2015 in India, including its scope, applicability, and compliance requirements. Discover how this new legislation aims to bring back undisclosed foreign income and assets into India and imposes taxation and penalties for non-compliance.
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CA NAVEEN ND GUPTA naveen@dassgupta.com 9810689998 Black Money (Undisclosed Foreign Income and Assets ) & Imposition of Tax Act’2015 & Reassessment of Income & TDS/Reporting on “IMPORTS”
Jurisprudence of Black Money (Undisclosed Foreign Income & Assets ) & Imposition of Tax Act’2015 • India contribute 10% of billions illegally moved out of developing & emerging nations. USD 991.2 billion was moved out of developing & emerging nations for "crime, corruption, and tax evasion", and we shipped out 1/10th of that. • India ranks 3rd in line-up of countries with money hidden abroad. USD 94.76 billion (or Rs 6 lakh crore) was hidden abroad in 2012. So assume a bit more than that for 2015. (2014 Global Financial Integrity (GFI) research report) • India is going through a revolutionary decade where there has been strong moves to bring black money into India • The Finance Minister, in this pursuit, announced in his 2015 Budget Speech that a new comprehensive law will be introduced to deal with the black money abroad. • The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act’2015 was assented by President on 26 May 2015, Black Money Law to be now effective from 01-July 2015.. • The new legislation provides for separate taxation of any undisclosed income in relation to foreign assets under the Income Tax, guided by this new legislation
Scope & Applicability It extends to whole of India (i.e. covers J&K etc.) It applies to all person resident in India (other than not ordinary resident in India) u/s 6(6) of Income Tax Act, 1961 (including legal heirs) This bill covers ALL RESIDENTS, therefore also covers COMPANIES (and other entities) In case of companies, if it is proved that the offence has been committed with the consent or connivance or is attributable to any neglect on the part of the manager, secretary or other officer of the company, such person will also be held guilty and liable There are specific provisions for making managers ( defined to include the managing director in certain instances) of a company jointly, and severally liable for payment of any amount due if the amount cannot be recovered from the company Intends to tax “undisclosed foreign income” and “undisclosed foreign assets(including financial interest in an entity)” Hence such income will not be taxed under Income Tax Act, 1961 Income taxable @ 30% (flat) without deduction/exemption. No time limit for foreign income/assets escaping assessment
Scope and Definitions Stayed in India for 182 days or more in the relevant year? OR Stayed for 60 days or more in the relevant year AND 365 days or more in the preceding 4 previous years Non Resident Have you been a non-resident in 9 out of the 10 preceding previous years? OR Have you during the preceding 7 years been in India for 729 days or less? This Bill is applicable only to Residents who are Ordinarily Resident and not the others Resident and Not Ordinarily Resident Resident and Ordinarily Resident How to determine if you are Resident and Ordinarily Resident(check your passports) Yes No Yes No
Undisclosed Foreign Income & Assets : Definitions Undisclosed Foreign Income:- Means total amount of undisclosed income of an assessee from a source located outside India Undisclosed Assets located outside India:- Means an asset (including financial interest in an entity) located outside India, held by the assessee in his own name or of which he is beneficial owner and he has no explanation about the source of investment or explanation given is unsatisfactory.
Total Undisclosed Foreign Income and Asset of Previous Year The income from a source located outside India, which has not been disclosed in the return of income filed within time specified u/s. 139 (1) or 139 (4) or 139(5) Income Tax Act; The income, from a source located outside India, in respect of which a return is required to be furnished under section 139 (1) but no return of income has been furnished. The value of an undisclosed asset located outside India. Valuation for Taxation:- Undisclosed foreign asset shall be charged to tax at “fair market value” in the previous year in which asset comes to the notice of assessing officer. Computation:No deduction of expenditure; allowance; or set off of any loss allowed(it may be allowable under IT Act). Rate of Taxation of Foreign Income and Foreign Assets: Undisclosed Foreign Income & Fair Market Value of Undisclosed Foreign Assets will be taxed at a flat rate of 30% followed by penalties (100% to 300%) as may be decided by the Assessing Officer.
Compliance Scheme In Compliance Scheme assessee has to pay 30% tax & 30% penalty
Declaration not eligible in certain cases As per Sec 71 no declaration under Compliance window which has been acquired from income chargeable to tax for A.Y 2015-16 or any earlier assessment year in following cases:
Circumstances where Declaration shall be invalid • Consequences Of Invalid Declaration
Source of Information & Power to make enquiry (Sec 10). The AO may: On receipt of information from income tax authority under Income Tax Act’1961 Any other authority under any law for the time being in force On coming of any information to his notice Serve on any person a notice requiring him to produce such : accounts or documents or evidence as the AO may require for the purpose of this Act.
Penalty and Prosecution (2/2) But Asset, being one or more bank accounts having aggregate balance not exceeding Rs. 5 lacs at any time during previous year; then EXEMPTION from Above Penalties.
Re-Assessment of Income • If the Assessing Officer has reason to believethat any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of section 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) • Scope of reassessment • Can assess or reassess any income which has escaped assessment • Can recompute the loss or depreciation allowance • Can assess or reassess any other income (which is not the subject matter of any appeal or revision) which has escaped assessment • Cannot reduce the income below what has already been assessed in the original assessment
Procedure For Re-assessment Proceedings (GKN Drive Shafts (I) Ltd. 259 ITR 19 (SC)) Issue of Notice - Check limitation File the Return of Income Application for certified copy of “Reason to Believe” File the objections for deficiencies in “Reason” AO to dispose off “Objections” by speaking order Proceedings – Issue of notice u/s 143(2) / 142(1)
Maintainability of Writ Petition challenging Reassessment Proceedings ? CALCUTTA DISCOUNT CO. LTD. 41 ITR 191 (SC) : A Writ Petition is maintainable to challenge invocation of reassessment even though it is open to assessee to challenge same before AO during assessment and also before appellate authority. Samsung India Electronics P. Ltd. 362 ITR 460 (DEL): In view of procedure laid down by SC in GKN Driveshaft India Ltd.; the Assessee directed to file objections before AO and in case objections are rejected, it would be open to assessee to approach the High Court.
MATTERS REGARDING ISSUE OF NOTICE • Issue of notice & recording of reason to believe by same AO • HYNOUP FOOD AND OIL INDUSTRIES LTD. 307 ITR 115 (Guj.) : Assessing Officer recording reasons under section 148(2) and Assessing Officer issuing notice under section 148(1) has to be same person; successor Assessing Officer cannot issue notice under section 148 on basis of satisfaction recorded by predecessor Assessing Officer, because reason to believe that income liable to tax for assessment year has escaped assessment within meaning of section 147 has to be of Assessing Officer concerned, viz., Assessing Officer issuing notice under section 148 • Issue : Where reopening made by AO not having jurisdiction over assessee (i.e notice by non-jurisdictional AO) and final assessment by non-jurisdictional AO as proceedings are transferred mid way is valid? • No • Paramjeet Singh 220 ITR 446 (P&H) : Assessee's original assessment was completed at Pune - Thereafter he shifted to Jalandhar - His assessment records had not been transferred to Assessing Officer at Jalandhar by passing an order under section 127 - On basis of complaints received from assessee's relative Assessing Officer at Jalandhar initiated reassessment proceedings by issuing notice under section 148 - Whether Assessing Officer at Jalandhar had no jurisdiction to re-open assessment and, therefore, notice issued under section 148 was liable to be quashed • AnjaliDua 219 CTR 183 (Del) • Ranjit Singh 120 TTJ 517 (Del)
Issue of Notice for re-assessment • Issue in 147 Vs. Serve in 143(2) • Sec 149 - No notice U/s 148 shall be issued for re-assessment • Sec 148 – Before making assessment/reassessment U/s 147 AO shall serve on assessee a notice requiring him to furnish Return of Income. Time limit is for ‘issue’ & not ‘service’ of notice U/s 148 (within 6 years from end of AY) Section 149 (Mayawati vs. CIT (2010) 321 ITR 349 (Del.)) Where petitioner-assessee declined to accept notice under section 148 three times at three addresses which belonged to assessee at relevant time, service of notice was to be presumed under section 27 of General Clauses Act, 1897
CONNECTED ISSUES TO NOTICE Sec. 282 Service of notice generally. 282.(1) The service of a notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as “communication”) may be made by delivering or transmitting a copy thereof, to the person therein named,— • by post or by such courier services as may be approved by the Board; or • in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or • in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000); or • by any other means of transmission of documents as provided by rules made by the Board in this behalf.
CONNECTED ISSUES TO NOTICE Sec 292B Return of income, etc., not to be invalid on certain grounds. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.] Sec 292BB Notice deemed to be valid in certain circumstances. Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was— (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objections before the completion of such assessment or reassessment.
SECTION 282 SERVICE OF NOTICE GENERALLY • RAJESH KUMAR SHARMA 165 TAXMANN 488 (DEL) : (282): Where revenue not been able to show that envelope containing notice under section 148 was correctly addressed, revenue’s case that envelope did not return with any remark to effect that it was undelivered and so it must be presumed that it was actually served upon assessee was unsustainable. Assessee entered into appearance, after receiving notices under sections 142(1) and 143(2) and categorically denied receipt of notice under section 148, argument of revenue that his appearance was in response to notice under section 148 did not advance case of revenue that notice under section 148 was actually served upon assessee. • HOTLINE INTERNATIONAL 161 TAXMANN 104 (DEL) : 282 :As per order V, rule 12 of the Code of Civil Procedure that wherever it is practicable, the service has to be effected on defendant in person or on his agent. Admittedly, in the instant case, notice under section 148 was not tendered to the assessee nor the same was refused at all by the assessee. It was an admitted case of the revenue that when the officials of the Department went to serve the notice under section 148 for the relevant assessment year, the security guard informed them that the company was closed for the Holi festival holidays. The security guard by no stretch of imagination could be said to be the agent of the assessee and, admittedly, no notice was tendered either to the assessee or his agent nor the same was refused either by the assessee or his agent. • Under order V, rule 17 of the Code of Civil Procedure, the affixation can be done only when the assessee or his agent refused to sign the acknowledgement or could not be found. In the instant case, no effort was made by the Income-tax Department to serve the notice upon the assessee, since the company of the assessee was closed due to Holi festival holidays, and, admittedly, no effort was made by the serving officer to locate the assessee.
