Understanding The Provisions of Black Money

Description

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

Charge of Tax 42

Meaning of Value of Undisclosed Asset [Section 3(2)] 43

Chapter 11 — Scope of Total Undisclosed Foreign Income and Asset 44

What is total undisclosed foreign income or asset [Section 4(1)] 44

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 incumbent 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 Act 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] 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

[12] Designated Special Courts in the State of Kerala 184

[13] Designated Special Courts in the State of Goa 185

[14] Designated Special Courts in the State of Manipur 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

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