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Assessment of foreign income and assets – Section 10

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June 8, 2021

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10 mins read

ASSESSMENT OF FOREIGN INCOME AND ASSETS – SECTION 10

The process of assessment of foreign income and asset shall comprise of the following steps : –

  • Notice to produce documents OR EVIDENCE – Section 10(1)
  • Inquiry in respect of undisclosed foreign income and assets – Section 10(2)
  • Assessment of undisclosed foreign income and assets – Section 10(3)
  • Best judgement assessment- Section 10(4)

NOTICE TO PRODUCE DOCUMENTS OR EVIDENCE – SECTION 10(1)

The Assessing Officer may serve a notice to any person to produce any books of accounts or documents or evidence , by such assessee himself , or through any other person. Such notice will be issued only when the Assessing Officer has received some information about Black Money from income-tax authority or any other authority , and he wants to make assessment of such income under the Black Money Act. Such notice can also be issued when any information of black money comes to notice of the Assessing Officer himself. Assessee is required to produce such books or documents or evidence on a date specified in such notice. The Assessing Officer may serve further notices requiring the production of such other accounts or documents or evidence as he may require.

INQUIRY IN RESPECT OF UNDISCLOSED FOREIGN INCOME AND ASSETS – SECTION 10(2)

After getting the requisite information or documents from the assessee, the Assessing Officer may make inquiry for the purpose of obtaining full information in respect of undisclosed foreign income and undisclosed foreign asset of any person .

ASSESSMENT OF UNDISCLOSED FOREIGN INCOME AND ASSETS – SECTION 10(3) 

After getting the requisite information and after making an inquiry in respect of undisclosed foreign income and undisclosed foreign asset, the Assessing Officer shall pass an order in writing assessing the undisclosed foreign income and undisclosed foreign asset. He shall determine the sum payable by the assessee after considering the accounts, documents or evidence produced by the assessee, and any relevant material gathered by him .

BEST JUDGEMENT ASSESSMENT- SECTION 10(4)

Where any person fails to produce documents or evidence, etc., as required by Assessing Officer, or he otherwise fails to satisfy the terms of the Notice, the Assessing Officer may make the assessment of undisclosed foreign income and undisclosed foreign asset to the best of his judgment.

The Assessing Officer will determine the sum payable by the assessee, after giving him an opportunity of being heard and after taking into consideration all the relevant material which he has gathered.

TIME LIMIT FOR COMPLETION OF ASSESSMENT AND REASSESSMENT – SECTION 11(1)/(2) 

An order of assessment or reassessment u/s 10 of the Black Money Act shall be passed by the Assessing Officer within 2 years from the end of the financial year in which notice u/s 10(1) is issued by the Assessing Officer. [Section 11(1)]

It may be noted here that date of receipt of notice by the assessee is not relevant. Let’s understand this point with the help of an example.

Suppose, the Assessing Officer has issued notice to Mr. Manish to produce books of account and other documents on March 25, 2017 under the Black Money Act. However, such notice is received by Mr. Manish  on April 5, 2017. In this case, two years shall be counted from the end of PY 2016-17 and not from end of PY 2017-18. Thus, such assessment order shall be passed till March 31, 2019.

However, an  order of fresh assessment , which is passed pursuant to setting-aside or cancellation of original order,   shall be passed by the Assessing Officer at any time before the expiry of 2 years from the end of the financial year,  in which the aforesaid order of cancellation or setting aside is received by the Principal Commissioner or Commissioner [Section 11(2)].

Let’s understand this scenario with the help of an illustration.

Suppose, the order of Assessing Officer under the Black Money Act is set-aside by the ITAT  on January 1, 2018 and such order is received by Assessing Officer in same month. The Assessing Officer , in such a case, can pass fresh order till March 31, 2020.

NON-APPLICABILITY OF THE 2-YEAR TIME LIMIT FOR COMPLETION OF ASSESSMENT- SECTION 11(3)

Where the assessment or reassessment order is passed to give effect to   any finding or direction contained in the order of appellate authority or Court ,  the time-limit of 2 years u/s 11(1) shall not apply.

Such assessment may be completed at any time before the expiry of two years from the end of the financial year,  in which such order is received by the Principal Commissioner or Commissioner.

EXCLUSIONS IN COMPUTING LIMITATION PERIOD OF ASSESSMENT/REASSESSMENT – EXPLANATION 1 TO SECTION 11

While calculating the limitation period for assessment under the Black Money Act, the following time-period shall be excluded for computation of limitation period of assessment or reassessment  : –

a) The time taken in reopening the whole or any part of the proceeding :-

The time taken in reopening the proceedings under the Black Money Act would be excluded and the limitation   period would   increase  by the period or time taken in reopening the proceedings.

b) The period during which the assessment proceeding is stayed by an order or injunction of any court :-

Where the assessee has taken a stay on assessment proceedings, then such period of stay shall be excluded while calculating the limitation period of assessment.

c) The period taken to receive information from the tax authorities of foreign country under “exchange of information “agreement :-

Where the Indian tax authorities requested for certain information of taxpayer from a foreign tax authority, the period taken to receive such information shall be excluded from the limitation period. However, such period  should not exceed one year. Let’s understand this point with the help of an illustration :-

Suppose, the Indian tax authorities requested for certain information from foreign tax authority in respect of foreign property of taxpayer. Such information is received after  10 months. Then such period of 10 months shall be excluded from the limitation period of 2 years.

However, where such information is received in 15 months,   the period of exclusion would be one year.

Point to consider :-

If after exclusion of such time period, the period of limitation available with the Assessing Officer for making an assessment order,  is less than 60 days, the period of limitation shall be deemed to be extended to 60 days.

For any queries, please write them in the Comment Section or Talk to our tax expert

Arinjay Jain

Bio of author

Arinjay is a Chartered Accountant with more than 20 years of post-qualification experience. He worked as Director, in the M&A Tax Division at KPMG in India. Presently, he is advising several MNCs in UAE on Economic Substance Regulations and impact of the UAE Corporate Tax Law on their business and clients across globe on International Tax issues . He is a well recognised Trainer of International Tax and UAE Corporate Tax. The areas of service include the following : - Advise and Compliance relating to International Tax Issues; Advise relating to UAE Corporate Tax Issues; Advise and Compliance relating to UAE Economic Substance Regulations; Advise and Compliance relating to Indian Income Tax Issues; Other connected matters from a Regulatory perspective.

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