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 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 Characteristics of Tax havens 16 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 Black Money (Undisclosed Foreign Income and Assets or the UFIA) and Imposition of Tax Act, 2015 19 Prevention of Money Laundering Act, 2002 (PMLA) 19 Foreign Exchange Management Act, 1999 (FEMA) 20 The Prohibition of Benami Property Transactions Act, 1988 20 Income Tax Act, 1961 21 Chapter 5 — Institutions to deal with Black Money in India 22 Central Board of Direct Taxes [CBDT] 22 Enforcement Directorate [ED] 22 Financial Intelligence Unit [FIU-IND] 23 The Central Board of Indirect Taxes & Customs (CBIC) and DRI 23 Central Economic Intelligence Bureau[CEIB] 24 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