Synopsis

Indian man working in Singapore gets $3.14 lakh from redemption of units of Bermuda focussed investment fund; Tax dept deems it black money and imposes Rs 1.8 crore penalty and tax; he wins case in ITAT Delhi. Read the article.

Mr Bhowmick, a resident of DLF Magnolias on Golf Course Road, in Gurgaon, Haryana made an investment of about USD 3 lakh in a Bermuda-focussed global investment fund while he was in Singapore. He invested this sum on May 19, 2015, and cashed it out on March 16, 2016 and got USD 3.14 lakh (3,14,608.15) upon redemption.



However, this Bermuda investment fund redemption created troubles for him back in India as the Indian Income Tax Department considered it black money and used the full force of Indian law to tax it and slapped him with a black money penalty.



Despite Bhowmick’s best efforts to explain to the Income Tax Department that the $3 lakh money he initially invested in this Bermuda fund came entirely from his Singapore salary and that no Indian funds were involved, the tax officer wasn’t convinced.

Bhowmick also tried to use the revised India-Singapore Double Tax Avoidance Treaty (DTAA) to support his case, but the tax officer dismissed this argument too. The officer said that Bhowmick’s case does not come under the India-Singapore DTAA as the Bermuda focussed fund’s company was registered as a public limited company in India and for FY 2015-16, Bhowmick was not a resident of Singapore.



After this set-back, Bhowmick stopped responding to the show-cause notices sent by the tax officer. The AO waited for a bit and then classified Bhowmick’s investment as unexplained and taxed its fair market value of Rs 2.04 crore at 30% under Section 3(1) of Black Money Act for AY 2019-20. A penalty of Rs 1.84 crore was also imposed under the same Act.



The Commissioner of Appeals also turned down Bhowmick’s appeal. So Bhowmick filed an appeal in ITAT Delhi to challenge the black money tax demand and penalty on his income .



Judicial member Satbeer Singh Godara and Accountant member Reenu Jauhri of ITAT Delhi heard his case and gave their judgement on August 11, 2026. Bhowmick won the case in ITAT Delhi.



Chartered Accountant Pramod Jain, Chartered Accountant Subhash Acharya, Advocate Mukul Gupta and Advocate Mayank Sharma represented Bhowmick in ITAT Delhi.



Also read: Rs 2.25-crore notice under Black Money Act to Delhi couple over Singapore, British Virgin Islands assets: ITAT Delhi gave full relief to taxpayer, know why

Summary of the judgement

As Suresh Surana explained to ET Wealth Online, in this case, the principal issue before ITAT Delhi was whether an assessment for AY 2019-20 could be sustained when no valid notice under Section 10(1) of the Black Money Act had been issued for that assessment year.



As mentioned earlier, this black money dispute case started from an offshore investment in a Bermuda-focussed global investment fund by Mr Bhowmick who explained that the investment had been made out of funds earned from his job in Singapore and also relied upon the India-Singapore tax treaty to support his position.



The Assessing Officer (AO), however, was not satisfied with the supporting evidence and treated the foreign investment as unexplained.



Before the ITAT Delhi, Bhowmick raised a fundamental jurisdictional objection.



Bhowmick’s lawyers and CA said that the Section 10(1) tax notice was sent on November 1, 2018 which effectively started the assessment proceedings against him. However, this Section 10(1) tax notice mentioned only AY 2016-17 and AY 2017-18 and did not give any reference to AY 2019-2020.



According to Bhowmick’s lawyers and CA, this was a crucial mistake as the black money assessments were made by the tax officer against Bhowmick for AY 2019-2020 only but the November 2018 tax notice did not mention AY 2019-2020.



Therefore, Bhowmick’s lawyer and CA argued before ITAT Delhi that since the Section 10(1) tax notice did not mention AY 2019-2020, the income tax assessing officer (AO) lacked jurisdiction to frame an assessment for that year (AY 2019-2020).



The Income Tax Department countered Bhowmick’s lawyer and chartered accountant’s (CA) argument by saying that this lack of reference to AY 2019-2020 in the Section 10(1) tax notice was just an error in mentioning and was protected by Section 81.



According to the Income Tax Department, the original notice had been issued by the competent officer to the correct taxpayer and concerned the same foreign asset that was eventually assessed.



Moreover, Bhowmick had also participated in subsequent proceedings and was aware of the precise foreign investment being examined. Therefore, in the Income Tax Department's view, the incorrect reference to the assessment years was a procedural defect rather than a jurisdictional failure.



The ITAT Delhi did not accept this contention of the Income Tax Department.



On examining the record, Surana says that the ITAT Delhi specifically noted that the Income Tax Department failed to produce any notice under Section 10(1) issued to Bhowmick for AY 2019-20.



Surana says that ITAT Delhi treated this as an absence of a valid jurisdictional notice for the relevant assessment year rather than a minor mistake or omission in an otherwise valid notice.



Surana says: “ITAT Delhi therefore held that the defect could not be cured by invoking Section 81 of the Black Money Act.”



Also read: Karol Bagh man had foreign bank accounts, FD in Singapore, no ITR disclosure; income tax dept sent black money notice, but ITAT Delhi cancelled the notice for this reason

Why did Bhowmick win the case?

Surana says that Bhowmick succeeded because a valid notice under Section 10(1) was regarded as a necessary foundation for the assessment proceedings.



Surana says: “Section 81 can protect proceedings from certain mistakes, defects or omissions where the notice or proceeding is otherwise in substance and effect consistent with the law.”



In the present case, however, ITAT Delhi considered that there was no valid notice for the assessment year actually assessed. In effect, Section 81 could cure a defect in an existing valid proceeding, but could not be relied upon to supply the absence of the jurisdictional notice itself.



Since the assessment proceedings were found to be invalid at their inception, the consequential assessment and penalty could not survive independently. The penalty was directly connected to the tax determined under the assessment proceedings.



Accordingly, the ITAT Delhi quashed the proceedings under Section 10, the assessment order as well as the consequential penalty order, and allowed both appeals of Bhowmick.

What is the importance of Bhowmick’s case for other taxpayers?

Surana says that the key rationale of the decision is therefore that compliance with a jurisdictional requirement cannot be substituted by a general provision intended to cure procedural mistakes.



According to Surana, the fact that Bhowmick knew about the foreign investment under investigation or participated in subsequent proceedings did not overcome the Income Tax Department's failure to establish that a valid Section 10(1) notice had been issued for AY 2019-20.



Surana says: "The case accordingly reinforces the distinction between a curable defect in a valid notice and the absence of a valid jurisdictional notice itself. In the latter situation, the foundation of the assessment fails and the consequential assessment and penalty proceedings cannot be sustained."

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