ITAT Rejects Revenue’s TOLA Extension Claim in Black Money Case

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that an assessment framed under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 beyond the statutory limitation period is invalid and liable to be quashed. A Bench comprising Judicial Member Sudhir Kumar and Accountant Member Ramit Kochar set aside the assessment made against Smt. Bindu Todi for AY 2018-19 as being time-barred.

The case arose after information was received regarding the assessee’s association with M/s Woodstock Universal Ltd., a company incorporated in the British Virgin Islands. The assessee was allotted one share in the company and, based on information obtained through foreign tax authorities, the department alleged that certain payments received from the foreign entity had not been disclosed in the return of income. Consequently, proceedings were initiated under Section 10(1) of the Black Money Act, resulting in an addition of Rs.15.66 lakh.

The assessee challenged the assessment on the ground that it had been completed beyond the limitation period prescribed under Section 11 of the Black Money Act. It was contended that the notice under Section 10(1) was issued on 10 April 2018 and, therefore, the assessment ought to have been completed by 31 March 2021. However, the assessment order was passed only on 17 February 2022.

The Revenue argued that the limitation period stood extended by virtue of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA) and various notifications issued by the Ministry of Finance during the pandemic period.

The Tribunal examined the provisions of TOLA and the notifications relied upon by the department. It observed that while the initial extensions applied to all specified Acts covered under TOLA, the later notifications extending timelines up to 31 March 2022 were confined to the Income-tax Act and the Prohibition of Benami Property Transactions Act, 1988.

“The time limit for completion of the assessment under Black Money Act was not extended by this notification.”

The Bench further noted that the foreign tax and treaty references relied upon by the department had been made and the relevant information had been received before initiation of proceedings under Section 10(1) of the Black Money Act. Therefore, the benefit of exclusion available under the limitation provisions of Section 11 could not assist the Revenue.

“The notice under section 10(1) of the Act was issued on 10-04-2018 and assessment should be made by 31-03-2021 but order was passed on 17-02-2022, which is time barred.”

Holding that the assessment was completed after expiry of the prescribed limitation period, the Tribunal quashed the assessment proceedings. Since the appeal was allowed on the legal issue itself, the Tribunal treated the remaining grounds as academic and left them open.

Thus, the appeal filed by the assessee was allowed.

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