Understanding The Provisions of Black Money

by Ram Dutt Sharma

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CONTENTS

Preface	iii
About the Author	vii
Chapter 1
Introduction	1
Definitions of Black Money	1
Objectives and Features of The Black Money Act	3
Impact of black money on Indian economy	4
[1] Mass Poverty:	4
[2] Uncontrollable Inflation:	4
[3] Loss of Revenue to the State Exchequer:	4
[4] Inflated Real Estate:	4
[5] Underestimation of GDP	5
Administering Authority	5
Amount of Black money deposited in foreign banks by Indians is unknown	5
Estimates of Black Money in India by various organizations	5
Estimates of Black Money [As per Black Money Committee Report, 2012]	5
Major difference between Black Money Act and Income Tax Act, 1961	6
Chapter 2
Evolution of Strategies to Control Black Money in India	7
Role of tax havens	8
Prevention of Money Laundering Act, 2002	8
Prohibition of Benami Property Transactions Act, 1988	9
Direct Payment into Bank Accounts of Payees	9
Unique Identity (UID)-Aadhaar	9
May 26, 2012 : The ‘White Paper on Black Money’	10
The Union Budget, 2015	10
MoS Finance speaks extensively on measures taken by Government under Black Money Act	11
Systemic measures by Government under Black Money Act yields results; detects undisclosed income of several crores	12
Chapter 3
Factors Leading to Generation of Black Money in India	14
1. Generating Black Money by Manipulation of Accounts	14
(i) Out of Book Transactions	14
(ii) Parallel Books of Accounts	14
(iii) Manipulation of Books of Account	15
(iv) Manipulation of Sales/Receipts	15
(v) Under-reporting of Production	15
(vi) Manipulation of Expenses	15
(vii) Other Manipulations of Accounts	16
(viii) Manipulation by Way of International Transactions through Associate Enterprises	16
(ix) Manipulation of Capital	16
(x) Manipulation of Closing Stock	16
(xi) Manipulation of Capital Expenses	16
2. Characteristics of Tax havens	16
3. Generation of Black money in Some Vulnerable Sections of the Economy	17
(i) Land and Real Estate Transactions:	17
(ii) Bullion and Jewellery Transactions:	17
(iii) Financial Market Transactions:	17
(iv) Public Procurement:	18
(v) Non-profit Sector:	18
(vi) Informal Sector and Cash Economy:	18
(vii) External trade and Transfer Pricing:	18
Chapter 4
Indian legislations for prevention of Black Money	19
1. Black Money (Undisclosed Foreign Income and Assets or the UFIA)and Imposition of Tax Act, 2015	19
2. Prevention of Money Laundering Act, 2002 (PMLA)	19
3. Foreign Exchange Management Act, 1999 (FEMA)	20
4. The Prohibition of Benami Property Transactions Act, 1988	20
5. Income Tax Act, 1961	21
Chapter 5
Institutions to deal with Black Money in India	22
1. Central Board of Direct Taxes [CBDT]	22
2. Enforcement Directorate [ED]	22
3. Financial Intelligence Unit [FIU-IND]	23
4. The Central Board of Indirect Taxes & Customs (CBIC) and DRI	23
5. Central Economic Intelligence Bureau[CEIB]	24
6. Other Central Agencies	24
Chapter 6
One - time Compliance Window under Black Money Act	29
Income and assets that qualify the disclosure	29
CBDT PRESS RELEASE for compliance window under Black Money Act	30
Computation of tax on UFIA	31
Manner for Computation of total UFIA (Section 4)	31
Chapter 7
Person on whom Black Money Act, 2015 applies	33
Applicability to Foreign Undisclosed Income and Assets	34
Beneficial Owner	34
Undisclosed Income and Assets	35
Undisclosed foreign assets	35
Undisclosed foreign income	35
Chapter 8
Short title, Extent and Commencement	36
Short title, extent and commencement	36
Chapter 9
Definitions	38
Memorandum to Finance (No. 2) Bill, 2019	40
Chapter 10
Charge of Tax	42
Meaning of Value of Undisclosed Asset [Section 3(2)]	43
Chapter 11
Scope of Total Undisclosed Foreign Income and Asset	17
What is total undisclosed foreign income or asset [Section 4(1)]	17
Any income already taxed in assessment or reassessment under the Income Tax Act shall not be included in the total undisclosed foreign assets [Section 4(2)]	45
Income which is included in the total foreign income or asset under this Act shall not form part of the total income under Income Tax Act[Section 4(3)]	45
Source of investment in any asset	46
In case source of investment in foreign asset is established out of untaxed domestic income	47
In case of source of investment in foreign asset is established by the assessee to be from the untaxed foreign income	47
Cases where source of investment in foreign asset is not out of taxed or untaxed income but is out of capital receipts	47
Chapter 12
Computation of Total Undisclosed Foreign Income and Asset	48
Computation of Total UFIA and tax thereon	49
Chapter 13
Tax Authorities	51
CBDT Circular F. No. 225/24/2021/ITA-II, Dated 23.02.2021	52
Chapter 14
Change of incumben	54
Change of incumbent [Section 7]	54
Chapter 15
Powers Regarding Discovery and Production of Evidence	55
Powers of Tax Authorities	56
Power to Impound	56
Code of Civil Procedure, 1908	56
Chapter 16
Proceedings before Tax Authorities to be Judicial Proceedings	57
Punishment for false evidence [Section 193 of IPC, 1860]	57
Giving or fabricating false evidence with intent to procure conviction of offence punishable with imprisonment for life or imprisonment [Section 195 of IPC, 1860]	58
Using evidence known to be false [Section 196 of IPC, 1860]	58
Intentional insult or interruption to public servant sitting in judicial proceeding [Section 228 of IPC, 1860]	58
Chapter 17
Assessment Proceedings under Black Money Ac	59
Conditions to be fulfilled to taxability of undisclosed assets under Black Money Act	61
Assessing Officer is permitted to issue notice for the assessment or reassessment without any time limit	61
Required to issue 2 assessment orders against the single Income Tax Return	61
Not required to file a separate return under the Black Money Act, 2015	61
Specimen of Assessing Officer’s Order under section 10(3) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015	62
Absent failure in disclosure & explanation, foreign life insurance policy not taxable under Black Money Act	63
Holds Black Money proceedings against Yashovardhan Birla jurisdictionally defective—There cannot be simultaneous proceedings under Black Money Act and Income-tax Act	65
NRI’s Swiss bank deposits, non-taxable sans Assessing Officer establishing nexus with India sourced income	67
Chapter 18
Time Limit for Completion of Assessment and Reassessment	70
Time limit for completion of assessment and reassessment[Section 11 of BMA, 2015	70
Agreement with foreign countries or specified territories[Section 90 of IT Act	71
Adoption by Central Government of agreement between specified associations for double taxation relief [Section 90A of IT Act]	72
Chapter 19
Rectification of Mistake	75
Rectification of mistake [Section 12 of BMA, 2015]	75
Chapter 20
Notice of Demand	76
Notice of demand [Section 13 of BMA, 2015]	76
Notice of demand [Rule 5]	76
APPENDIX - FORM 1	76
Chapter 21
Direct Assessment or Recovery not Barred	78
Direct assessment or recovery not barred [Section 14 of BMA, 2015	78
Chapter 22
Appeals to the Commissioner (Appeals)	79
Appeals to the Commissioner (Appeals)	79
Procedure to be followed in appeal	80
Powers of Commissioner (Appeals)	81
Chapter 23
Appeals to Appellate Tribunal	87
Appeals to Appellate Tribunal [Section 253 of IT Act, 1961]	87
Chapter 24
Appeal to High Court	90
Case before High Court to be heard by not less than two Judges	91
Chapter 25
Appeal to Supreme Court	92
Appeal to Supreme Court	92
Hearing before Supreme Court	92
Chapter 26
Revision of Orders Prejudicial to Revenue by Principal Commissioner or the Commissioner	93
Revision of orders prejudicial to revenue	93
Chapter 27
Revision of other orders by the Principal Commissioner or the Commissioner	95
Revision of other orders	95
Chapter 28
Tax to be Paid Pending Appeal, etc.	97
Tax to be paid pending appeal	97
Execution of order for costs awarded by Supreme Court	97
Amendment of assessment on appeal	97
Exclusion of time taken for obtaining copy	97
Filing of appeal by tax authority	97
Chapter 29
Recovery of Tax dues by Assessing Officer	99
Recovery of tax dues by Assessing Officer	99
Chapter 30
Recovery of Tax due by Tax Recovery Officer	101
Recovery of tax due by Tax Recovery Officer	101
Chapter 31
Modes of recovery of Tax Dues	102
Modes of recovery of tax dues	102
Chapter 32
Tax Recovery Officer by whom recovery of tax dues is to be effected	105
Tax Recovery Officer by whom recovery of tax dues is to be effected	105
Chapter 33
Recovery of Tax Dues in Case of a Company in Liquidation	106
Recovery of tax dues in case of a company in liquidation	106
Chapter 34
Liability of Manager of a Company	109
Liability of manager of a company	109
Chapter 35
Joint and Several Liability of Participants	110
Joint and several liability of participants	110
Chapter 36
Recovery through State Government	111
Recovery through State Government	111
Chapter 37
Recovery of Tax Dues in Pursuance of Agreements with Foreign Countries or Specified Territory	112
Recovery of tax dues in pursuance of agreements with foreign countries or specified territory	112
Chapter 38
Recovery by Suit or under other Law not Affected	113
Recovery by suit or under other law not affected	113
Recovery of Tax from other person than the taxpayer under the Black Money Act, 2015	113
Recovery of tax under the Black Money Act, 2015 from the Indian assets	113
Chapter 39
Interest Payable by Assessee	114
Interest for default in furnishing return and payment or deferment of advance tax	114
Rules on applicability & expanse of Black Money Act, 2015; Explicates on jurisprudence & underlying policy	114
Chapter 40
Penalty in Relation to Undisclosed Foreign Income and Asset	116
Penalty in relation to undisclosed foreign income and asset	116
Chapter 41
Penalty for Failure to Furnish Return in Relation to Foreign Income and Asset	117
Penalty for failure to furnish return in relation to foreign income and asset	117
Return of income [section 139(1) of I.T. Act, 1961]	117
Chapter 42
Penalty for Failure to Furnish in Return of Income, an Information or Furnish Inaccurate Particulars About an Asset (including financial interest in any entity)Located Outside India	121
Powers of Assessing Officer to levy penalty	121
Chapter 43
Penalty for Default in Payment of Tax Arrear	124
Penalty for default in payment of tax arrear	124
Chapter 44
Penalty for other defaults	125
Penalty for other defaults	125
Chapter 45 — Procedure	126
Denies stay on penalty proceedings under Black Money Act, basis Revenue’s limitation plea	126
Chapter 46 — Bar of Limitation for Imposing Penalty	128
Bar of limitation for imposing penalty	128
Chapter 47
Chapter not in Derogation of any other Law or any other Provision of this Act	129
Chapter not in derogation of any other law or any other provision of this Act	129
Chapter 48
Punishment for Failure to Furnish Return in Relation to Foreign Income and Asset	131
Punishment for failure to furnish return in relation to foreign income and asset	131
Chapter 49
Punishment for Failure to Furnish in Return of Income,any Information about an Asset (including financial interest in any entity)Located outside India	135
Mandatory requirement to attract the provisions of section 50 of Black Money Act	136
No offence under section 50 of Black Money Act when foreign assets disclosed in revised return; Quashes criminal complaint	137
Chapter 50
Punishment for wilful Attempt to Evade Tax	141
Punishment for wilful attempt to evade tax	141
Chapter 51 — Punishment for false statement in verification	142
Punishment for false statement in verification	142
Chapter 52
Punishment for abetment	143
Punishment for abetment	143
Chapter 53
Presumption as to culpable mental state	144
Presumption as to culpable mental state	144
Chapter 54
Prosecution to be at instance of principal chief commissioner or principal director general or chief commissioner or director general or principal commissioner or commissioner	145
Prosecution to be at instance of Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General or Principal Commissioner or Commissioner	145
Chapter 55
Offences by Companies	146
Offences by companies	146
Chapter 56
Proof of Entries in Records or Documents	147
Proof of entries in records or documents	147
Chapter 57
Punishment for Second and Subsequent Offences	148
No provisions for compounding	148
Chapter 58
Tax compliance for Undisclosed Foreign Income and Assets (one time compliance window)	149
Declaration of undisclosed foreign asset [Section 59 of BMA, 2015]	149
Charge of tax [Section 60 of BMA, 2015]	151
Penalty [Section 61 of BMA, 2015]	151
Manner of declaration [Section 62 of BMA, 2015]	151
Time for payment of tax [Section 63 of BMA, 2015]	152
Undisclosed foreign asset declared not to be included in total income[Section 64 of BMA, 2015]	153
Undisclosed foreign asset declared not to affect finality of completed assessments [Section 65 of BMA, 2015]	153
Tax in respect of voluntarily disclosed asset not refundable[Section 66 of BMA, 2015]	153
Declaration not admissible in evidence against declarant[Section 67 of BMA, 2015]	153
Declaration by misrepresentation of facts to be void[Section 68 of BMA, 2015]	153
Exemption from wealth-tax in respect of assets specified in declaration [Section 69 of BMA, 2015]	154
Applicability of certain provisions of Income-tax Act and of Chapter V of Wealth-tax Act [Section 70 of BMA, 2015]	154
Chapter 59
Chapter not to apply to Certain Persons	156
Chapter not to apply to certain persons [Section 71 of BMA, 2015]	156
Analyses of provisions of Section 71(d) of the Black Money Act	157
Chapter 60
Removal of Doubts	159
Removal of doubts [Section 72 of BMA, 2015]	159
Chapter 61
Treaties : Agreement with Foreign Countries or Specified Territories	161
Agreement with foreign countries or specified territories[Section 73 of BMA, 2015]	161
Chapter 62
General Provisions	162
Service of notice generally [Section 74 of BMA, 2015]	162
Authentication of notices and other documents[Section 75 of BMA, 2015]	162
Notice deemed to be valid in certain circumstances[Section 76 of BMA, 2015]	162
Appearance by approved valuer in certain matters[Section 77 of BMA, 2015]	163
Appearance by authorised representative[Section 78 of BMA, 2015]	163
Rounding off of income value of asset and tax[Section 79 of BMA, 2015]	164
Cognizance of offence [Section 80 of BMA, 2015] 1	164
Assessment not to be invalid on certain grounds [Section 81 of BMA, 2015]	164
Bar of suits in civil courts [Section 82 of BMA, 2015]	164
Income-tax papers to be available for purposes of this Act[Section 83 of BMA, 2015]	165
Power to make rules [Section 85 of BMA, 2015]	165
Power to remove difficulties [Section 86 of BMA, 2015]	166
Amendment of section 2 of Act 54 of 1963 [Section 87 of BMA, 2015]	166
Amendment of Act 15 of 2003 [Section 88 of BMA, 2015]	166
Chapter 63
Application of Provisions of Income-tax Act	167
Application of provisions of Income-tax Act [Section 84 of BMA, 2015]	167
CBDT’s Instruction on exceptions to prosecution under Black Money Act,dated 15.03.2022]	167
Chapter 64
Valuation of Undisclosed Assets	168
Fair market value [Rule 3 of BMA, 2015]	168
Fair Market Value (FMV) of quoted shares and securities	172
Fair Market Value (FMV) of unquoted equity shares	172
Fair Market Value (FMV) of unquoted shares and securities other than equity shares	173
Fair Market Value (FMV) bank accounts	173
Fair Market Value (FMV) of bullion, jewellery, precious stone and artistic work	173
Fair Market Value (FMV) of immovable property	173
Interest in partnership firm, AOP, LLP	173
Other assets	173
Chapter 65
Beneficial Owner under Black Money Act	175
Text of FAQ No. 31 of Circular No. 13 : Question No. 31: A person is a beneficiary in a foreign asset. Is he eligible for declaration under section 59 of the Act?	175
Beneficial Interest [Section 89(10) of the Companies Act, 2013]	176
Beneficial owner under the Prevention of Money-laundering Act, 2002	176
Chapter 66
Designated Special Court for Specified State	178
[1] Designated Special Courts in the State of Odisha	178
[2] Designated Special Courts in the State of Himachal Pradesh	178
[3] Designated Special Courts in the State of Chhattisgarh	179
[4] Designated Special Courts in the State of Uttarakhand	179
[5] Designated Special Courts in the State of Andhra Pradesh	180
[6] Designated Special Courts in the State of Madhya Pradesh	181
[7] Designated Special Courts in the State of Tamil Nadu	181
[8] Designated Special Courts in Delhi	182
[9] Designated Special Courts in the State of Rajasthan	182
[10] Designated Special Courts in the State of Bihar	183
[11] Designated Special Courts in the State of Uttar Pradesh	183
[13] Designated Special Courts in the State of Goa	185
[15] Designated Special Courts in the State of Karnataka	186
[16] Designated Special Courts in the State of Telangana	188
[17] Designated Special Courts in the State of Meghalaya	188
[18] Designated Special Courts in the State of Gujarat	188
[19] Designated Special Courts in the State of Assam,Nagaland, Mizoram and Arunachal Pradesh	190
[20] Designated Special Courts in the State of Tripura	191
[21] Designated Special Courts in the State of Maharashtra	191
[22] Designated Special Courts in the Union Territory of Chandigarh	191
[23] Designated Special Courts in Union Territory of Jammu and Kashmir	192
Chapter 67
Income Tax Informants Rewards Scheme, 2018	193
CBDT Letter F. No. 292/62/2012-IT (Inv.III) /26, Dated, 23.04.2018	193
INCOME TAX INFORMANTS REWARD SCHEME, 2018	193
Ready Reckoner to the Scheme	193
Chapter 68
Important CBDT’s Circulars/Instructions/ FAQS	213
[1] CBDT’s Circular No. 15 of 2015, Dated 03.09.2015 :	213
Subject : Clarifications on Tax Compliance for Black Money(Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015	213
[2] CBDT Circular No. 13 of 2015, Dated 06.07.2015	223
CBDT issues 32 FAQs on Black-money law amnesty scheme	223
CBDT Circular No. 13 of 2015, Dated 06.07.2015	224
[3] CBDT Circular No. 12 of 2015, Dated 02.07.2015:	234
Subject : Explanatory notes on provisions relating to tax compliance for undisclosed foreign income and assets as provided in Chapter VI of the Black Money (Undisclosed Foreign Income And Assets)and Imposition of Tax Act, 2015	234
Chapter 69
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015	238
Chapter 70
Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015	276

About the Author

Ram Dutt Sharma

Ram Dutt Sharma was born on 27th June, 1958 in Narnaul, Haryana. He got his post-graduation from M.D. University, Rohtak in 1980. He joined the Income-tax Department in the year 1983 and retired as Income Tax Officer on 30.06.2018. He worked at various stations of North-West Region of Income-tax Department. He has wide experience of all wings of Income-tax Department such as Assessment Unit, Special Range, TDS Wing, Investigation Wing, etc. He has been Contributing articles and addressing on topics relating to Income Tax at NADT Regional Campus, Chandigarh & Bhopal. He has also addressed number of seminars organized by the Income-tax Department, Chartered Accountants, Advocates and various Trade Associations.

He is recipient of first-ever Finance Minister's Award 2017, the Income Tax Departments highest honour for sustained devotion, commitment to duty & promoting excellence in the field of Direct Taxation at National Level. The Hon'ble Union Finance Minister, Shri ArunJaitley conferred this Finance Ministers Award for Excellence for his meritorious services at VigyanBhawan, New Delhi on 24.07.2017.

Awarded by Hon'ble Member (Revenue& TPS), CBT, Special Secretary to the Government of India Certificate of Appreciation for his contribution recognized and included in the chapter Miscellaneous Orders in Let Us Share A compilation of Best Practices & Orders Vol. VIII released on 31stOctober, 2016.

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