New Delhi: A taxpayer who invested nearly $3 lakh in a Bermuda-focused global investment fund while working in Singapore has received major relief from the Income Tax Appellate Tribunal (ITAT), Delhi. The tribunal quashed the tax action involving ₹2.04 crore under the Black Money Act as well as a ₹1.84 crore penalty, holding that proceedings initiated without a valid statutory notice for the relevant assessment year could not be sustained.
The case concerns Bhowmick, a resident of DLF Magnolias in Gurugram. According to the records, he invested approximately $3 lakh in a Bermuda-focused global investment fund on May 19, 2015, while he was living and working in Singapore. He redeemed the investment on March 16, 2016, receiving $314,608.15. Bhowmick maintained that the entire amount used for the original investment had come from his salary earned in Singapore and that no funds from India had been used.
The Income Tax Department, however, took a different view of the foreign investment. The department treated the investment as unexplained foreign assets and initiated proceedings under the Black Money Act. The Assessing Officer treated the alleged fair market value of ₹2.04 crore as taxable at 30% and also imposed a penalty of ₹1.84 crore under the Act.
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Bhowmick argued before the tax authorities that the investment had been made entirely from income earned through his employment in Singapore. He also relied on the India-Singapore Double Taxation Avoidance Agreement (DTAA). The Assessing Officer did not accept these arguments. Bhowmick subsequently stopped responding to certain show-cause notices issued by the department, and the proceedings continued.
He also failed to secure relief at the first appellate stage and subsequently approached ITAT Delhi. Before the tribunal, his legal team raised a fundamental jurisdictional issue rather than relying only on the factual explanation regarding the source of funds. The key question was whether the department could make an assessment for Assessment Year (AY) 2019-20 under the Black Money Act without issuing a valid notice under Section 10(1) for that particular assessment year.
During the proceedings, it emerged that the notice issued by the Income Tax Department under Section 10(1) on November 1, 2018, referred to AY 2016-17 and AY 2017-18. It did not mention AY 2019-20. However, the subsequent black money assessment against Bhowmick was made for AY 2019-20.
Bhowmick’s representatives argued that issuance of a valid notice for the relevant assessment year was a basic legal requirement for assuming jurisdiction. Since the assessment was ultimately made for AY 2019-20, the absence of a notice referring to that year meant that the Assessing Officer lacked jurisdiction to initiate the assessment proceedings for that year.
The Income Tax Department opposed the argument, contending that the incorrect reference to the assessment year was merely a procedural or clerical error. The department relied on Section 81 of the Black Money Act, arguing that such mistakes could be protected or cured. It also submitted that Bhowmick was aware of the foreign investment being examined and had participated in subsequent proceedings.
ITAT Delhi rejected the department’s contention. The tribunal found that the department had failed to produce any valid Section 10(1) notice issued specifically for AY 2019-20. It treated the issue not as a minor technical defect in an otherwise valid notice, but as a fundamental jurisdictional failure.
The tribunal observed that Section 81 may protect proceedings from certain mistakes, defects or omissions where a valid proceeding already exists. However, it cannot be used to cure the complete absence of a statutory notice that forms the foundation for assuming jurisdiction. The tribunal therefore held that the assessment proceedings themselves were invalid from the outset.
On this basis, ITAT Delhi quashed the proceedings under Section 10, the assessment order and the consequential penalty. Since the penalty was directly linked to the assessment, it could not survive independently once the underlying assessment was set aside.
The ruling is significant for taxpayers because it highlights the distinction between a curable procedural defect and the absence of a jurisdictional requirement. Tax experts noted that a taxpayer’s knowledge of an investigation or participation in subsequent proceedings does not necessarily cure the department’s failure to establish that a valid statutory notice was issued for the assessment year actually assessed.
ITAT Delhi accordingly allowed both of Bhowmick’s appeals and granted him relief. The judgment was delivered on August 11, 2026, by Judicial Member Satbeer Singh Godara and Accountant Member Reenu Jauhri.
