A taxpayer who invested nearly $3 lakh in a Bermuda-focused global investment fund while working in Singapore has won major relief from the Income Tax Appellate Tribunal (ITAT), Delhi, after the tribunal quashed both a ₹2.04 crore tax action under the Black Money Act and a related ₹1.84 crore penalty, ruling that the proceedings had been initiated without a valid statutory notice for the actual assessment year in question.
How the Investment and Dispute Began
The case involves Bhowmick, a resident of DLF Magnolias in Gurugram. According to records, he invested approximately $3 lakh in a Bermuda-focused global investment fund on May 19, 2015, while living and working in Singapore. He redeemed the investment on March 16, 2016, receiving $314,608.15. Bhowmick maintained throughout that the entire investment had come from his Singapore salary, with no funds originating from India.
The Income Tax Department saw it differently, treating the investment as an unexplained foreign asset and initiating proceedings under the Black Money Act. The Assessing Officer valued the alleged fair market value at ₹2.04 crore, taxable at 30%, and additionally imposed a ₹1.84 crore penalty under the Act.
Bhowmick's Defence, and Where It Initially Fell Short
Bhowmick argued the investment came entirely from his Singapore employment income, also relying on the India-Singapore Double Taxation Avoidance Agreement (DTAA) to support his case. The Assessing Officer didn't accept these arguments, and Bhowmick reportedly stopped responding to certain show-cause notices as the proceedings continued. He also failed to secure relief at the first appellate stage, prompting him to take the matter to ITAT Delhi.
A Jurisdictional Argument, Not Just a Factual One
Before the tribunal, Bhowmick's legal team took a different approach, raising a fundamental jurisdictional question rather than relying purely on explaining the source of funds. The core issue: could the department make an assessment for Assessment Year (AY) 2019-20 under the Black Money Act without ever issuing a valid notice under Section 10(1) specifically for that year?
During proceedings, it emerged that the Section 10(1) notice issued by the department on November 1, 2018 referred only to AY 2016-17 and AY 2017-18, with no mention of AY 2019-20 anywhere in it. Yet the actual black money assessment against Bhowmick was ultimately made for AY 2019-20, a year the original notice never covered.
Bhowmick's representatives argued that a valid notice for the relevant assessment year is a basic legal requirement for the department to even assume jurisdiction in the first place. Since the assessment was made for AY 2019-20 without a notice referencing that year, they contended the Assessing Officer simply lacked the jurisdiction to initiate proceedings for it.
The Department's Counter-Argument
The Income Tax Department pushed back, arguing the incorrect assessment-year reference was merely a procedural or clerical error, curable under Section 81 of the Black Money Act. It also pointed out that Bhowmick was clearly aware his foreign investment was under examination and had participated in subsequent proceedings, suggesting he wasn't genuinely prejudiced by the notice discrepancy.
What ITAT Delhi Decided
The tribunal rejected the department's argument outright. It found that no valid Section 10(1) notice had ever actually been issued for AY 2019-20, and treated this not as a minor technical defect within an otherwise valid notice, but as a fundamental jurisdictional failure.
Crucially, the tribunal clarified that Section 81 can protect proceedings from certain mistakes or omissions where a valid proceeding already exists, but it cannot be used to cure the complete absence of the statutory notice that forms the very foundation for assuming jurisdiction in the first place. On that basis, ITAT Delhi held the assessment proceedings were invalid from the outset, quashing the Section 10 proceedings, the assessment order itself, and the consequential penalty, since the penalty was directly tied to the assessment, it couldn't survive independently once the underlying assessment was struck down.
Why This Ruling Matters
The judgment draws an important distinction for taxpayers between a curable procedural defect and a genuinely missing jurisdictional requirement. Tax experts have noted that a taxpayer's awareness of an ongoing investigation, or their participation in subsequent proceedings, doesn't automatically fix the department's failure to establish that a valid statutory notice was actually issued for the specific assessment year being assessed.
ITAT Delhi ultimately allowed both of Bhowmick's appeals, granting him relief. The judgment was delivered on August 11, 2026, by Judicial Member Satbeer Singh Godara and Accountant Member Reenu Jauhri.
FAQs
Q1. Why did ITAT Delhi quash the Black Money Act proceedings against Bhowmick?
Because the Income Tax Department never issued a valid Section 10(1) notice specifically for AY 2019-20, the year the assessment was actually made for, making the entire proceeding jurisdictionally invalid.
Q2. What was Bhowmick's original defence regarding the foreign investment?
He argued the entire investment came from his salary earned while working in Singapore, with no funds from India involved, and relied on the India-Singapore DTAA.
Q3. Why did the department's "clerical error" argument fail?
The tribunal held that Section 81 of the Black Money Act can only cure minor defects in an otherwise valid proceeding, it cannot be used to cure the complete absence of a required jurisdictional notice.
Q4. What was the total relief granted to Bhowmick?
The ₹2.04 crore tax assessment under the Black Money Act and the associated ₹1.84 crore penalty were both quashed.