High Court quashes proceedings for non/incomplete disclosure of foreign assets

In a 2 November 2018 ruling, the Madras High Court in India quashed prosecution proceedings initiated by the tax authorities against three taxpayers under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 (BMA) for nondisclosure or incomplete disclosure of foreign assets in the return of income (ROI).

Facts of the case

The taxpayers were three family members against whom notices of assessment were issued under the BMA for undisclosed foreign income and assets for the assessment years 2015-16 and 2016-17. The tax authorities  initiated prosecution proceedings under the BMA for nondisclosure/incomplete disclosure of foreign assets in the ROI before completing the assessment under the BMA.

The foreign asset (a UK property) was jointly acquired by the taxpayers out of income that had been disclosed and taxed. The funds for the purchase were remitted via authorized dealers. Although the taxpayers did not report the asset in the foreign assets schedule on their original individual returns, the asset was reported in different schedules on the ROI but the disclosure was either incorrect or incomplete.

The tax authorities initiated criminal prosecution proceedings against each of the taxpayers on the grounds that the taxpayers either did not disclose or disclosed incomplete information in the schedule for disclosing foreign assets in the original ROIs filed and that the ROIs were revised to make complete/correct disclosures only after the notices under the BMA had been issued.

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