Black Money Act-ITAT Himanshu Gupta Case 2023
Revenue vs. Himanshu Gupta [Black Money Appeal No. 15 of 2023]
Background of the Case
The appellant, Mr. Himanshu Gupta, who was subject to a search and seizure operation by the Income Tax Department on 28 November 2017, targeting the Vrindawan Group entities and individuals connected to it. During the search, it was found that Mr. Gupta held a 5% shareholding in a Hong Kong-based company called Innovation Worldwide Ltd. (IWL), an investment allegedly made many years ago. The Department noted that this investment was not disclosed in the Income Tax Return (ITR) for Assessment Year (AY) 2016–17, leading to the claim that it was an undisclosed foreign asset under the Black Money Act (BMA).
Additionally, the Assessing Officer discovered a debit note issued by IWL for USD 200,000 to a third party, which was also treated as an undisclosed foreign asset and added as income for AY 2019–20. The appellant contested these findings, arguing that the investment was disclosed in earlier years and that the debit note did not represent an asset owned by him.
Arguments by the Appellant
The appellant submitted that the investment in IWL was made much earlier, specifically during AY 2007–08, and the funds used for this investment were remitted abroad under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), which was a legitimate method of transferring funds outside India. At that time, the appellant had disclosed the investment in the ITR filed for AY 2007–08, including a note mentioning this foreign investment. Furthermore, the appellant contended that subsequent ITRs filed, even after notices under Section 153A of the Income Tax Act, also contained disclosures about this foreign company. Regarding the debit note of USD 200,000, the appellant argued that this did not represent any claim of ownership or a receivable from any party and therefore could not be classified as an undisclosed asset.
The appellant emphasized that mere issuance of a debit note without corresponding evidence of entitlement or control did not amount to undisclosed income or assets.
Respondent’s Response
The Income Tax Department rejected the appellant’s contentions by asserting that since the shareholding in IWL was not reflected in the ITR filed for AY 2016–17, it constituted an undisclosed foreign asset subject to taxation under the BMA. The Department pointed out that the appellant failed to correctly report the foreign asset in the relevant schedules of the later years’ returns, which was deemed to be concealment. On the matter of the debit note for USD 200,000, the Revenue considered it as a foreign asset that should have been disclosed and taxed accordingly.
The department relied on the technical non-reporting of the foreign shareholding and the alleged existence of the debit note as clear evidence of concealment and suppression of material facts, thus warranting additions to the appellant’s taxable income.
Court Findings and Decision
The ITAT New Delhi accepted the appellant’s submissions, noting that the investment in IWL was disclosed in AY 2007–08 through appropriate notes in the ITR, even though the Schedule FA (Foreign Assets) was not applicable then. The CIT(A) observed that since the appellant had made the disclosure in the earliest year when the investment was made, it could not be considered as concealed. Furthermore, the prosecution complaint filed under the BMA was dismissed by the Tis Hazari Court due to lack of evidence for willful concealment or suppression, which strengthened the appellant’s case. The ITAT upheld the CIT(A)’s decision, emphasizing that mere non-filing of schedules in subsequent years, when the schedule did not exist or was not mandatory, did not amount to concealment.
The Tribunal also ruled that the Revenue had failed to establish any ownership or claim on the debit note of USD 200,000, so it could not be taxed as undisclosed income. Thus, the ITAT dismissed the Revenue’s appeal, effectively confirming that the appellant was not liable for the additions made under the Black Money Act or the Income Tax Act on these grounds.
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Black Money Act-ITAT Himanshu Gupta Case 2023
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