Black Money Act applies in year in which such asset comes to notice of AO: ITAT

The assessee, a resident individual maintaining a Fiji bank account that was never disclosed in her return for AY 2017-18, faced additions under the Black Money Act after authorities received information in October 2017 that substantial credits linked to Bitcoin-related dealings had appeared in her foreign account. During proceedings, she admitted that her husband conducted Bitcoin transactions through a blockchain wallet, with resultant receipts moving through the Fiji account.

The Assessing Officer treated the entire bank credits as undisclosed foreign assets and separately computed undisclosed foreign income from Bitcoin trading, leading to additions and penalties under sections 10, 41 and 43 of the BMA. The CIT(A) upheld these actions, prompting three connected appeals before the Tribunal.

Core Issue: Whether the additions and penalties relating to (i) undisclosed foreign assets, (ii) undisclosed foreign income from Bitcoin transactions, and (iii) penalties for non-disclosure under sections 41 and 43 of the BMA, were valid in law and correctly imposed.

Decision by ITAT: The Tribunal held that the AO had wrongly taxed the alleged undisclosed foreign asset in AY 2017-18. Since section 3(1) of the BMA charges a foreign asset in the year it “comes to the notice of the AO,” and the information about the Fiji bank account was received only on 24.10.2017, the addition of Rs. 86,80,289 could not be sustained for AY 2017-18. Thus, the asset-based addition was deleted, and the related penalty under section 41 attributable to this portion was also struck down. However, the Tribunal upheld the addition of Rs. 6,99,010 as undisclosed foreign income, noting that Bitcoin transactions were carried out through the undisclosed foreign account and generated income abroad.

The Tribunal partly allowed the appeal under section 41 by deleting the component relatable to the foreign-asset addition but confirming the penalty on the sustained undisclosed foreign income. It observed that the assessee had not disclosed the foreign account or foreign income in her return, and the statutory threshold exemption did not apply. The Tribunal upheld the penalty of Rs. 10 lakh. In essence, the quantum appeal was partly allowed, the penalty under section 41 was partly allowed, and the penalty under section 43 was dismissed.

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