VIJENDRA KEDIA,BANGALORE SOUTH V. ACIT, CENTRAL RANGE - 1, KOLKATA

BMA 6/KOL/2025

AI Insights

The case involves Vijendra Kedia, an NRI, who was the beneficiary of shares in an offshore company, Arvis Trading Co. Ltd., and was accused of not disclosing these assets in his Income Tax Return (ITR) for the Assessment Year 2018-19 under the Black Money Act. The Assessing Officer (AO) made an addition of Rs. 21,63,645 to the assessee's income, treating it as undisclosed foreign asset credit. The Commissioner of Income-tax (Appeals) upheld this addition, leading to the filing of appeals by Kedia before the Income Tax Appellate Tribunal. The Tribunal found that the AO's actions were based on incorrect assumptions and misapplications of the law, particularly regarding the assessee's residential status and the legal framework governing the disclosure of foreign assets.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 829309 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Black Money Appeal
• Pronouncement Date: 12-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Kolkata
• Assessment Year: misc
• Appeal Filed On: 25-08-2025
• Laws Referred To: Black Money (Un-disclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: S. K. TULSIYAN; LATA GOYAL; ARS
• Keywords: Fair market value; Assessment record; Share purchase agreement; Residential status
• Section: 139

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM BMA No.5 & 6/KOL/2025 (Assessment Year: 2018-19) Vijendra Kedia Flat No.B-1242, Tower-B, 77, Place Yemalur Road, Bangaore South, Bengaluru-560037 Vs. DDIT (Inv.) Unit-3(4) & ACIT, CC Range-1, Aaykar Bhawan Poorva, 110, Shanti Pally, E.M. Bypass Kolkata-700107, West Bengal (Appellant) (Respondent) PAN No. AEWPK6117Q Assessee by : Shri S.K. Tulsiyan & Ms. Lata Goyal, ARs Revenue by : Shri Guru Bhashyam, DR Date of hearing: 28.10.2025 Date of pronouncement: 12.01.2026 O R D E R Per Rajesh Kumar, AM: These are the appeals preferred by the assessee against the orders of the Commissioner of Income-tax (Appeals), Kolkata-20 (hereinafter referred to as the “Ld. CIT(A)”] dated 26.06.2025 for the AY 2018-19 which in turn arising from the orders passed by the Assessing Officer under the Black Money (Un-disclose Foreign Income and Assets) and Imposition of Tax Act, 2015(hereinafter referred to as the Act) . BMA No. 5/KOL/2025 : 2. The assessee has raised following grounds of appeal in BMA No. 5/KOL/2025 for A.Y. 2018-19:- Printed from counselvise.com Page | 2 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 “(1) That, the Ld. CIT(A), Kolkata-20 alleging non-response to notices and thereby supposing appellant's reluctance to pursue the case erred in having dismissed the appeal vide ex parte order dated 26.06.2025 in spite of the fact that during the assessment proceeding u/s 10(3) of the Black Money Act, 2015 as well proceeding u/s 50 of the said Act before the Ld. PDIT (Inv), Kolkata the assessee had filed all the required information, supporting details, documents etc. substantiating that be being a NRI at the relevant time was not required to file ITR and the same formed part of the assessment records (2) That, even on merits of the case the Ld. CIT(A) erred in law in having confirmed the addition of Rs 21,63,645/- made by the A.O. on the allegation that although the assessee as a beneficial ow received 33,333 shares of an offshore company M/s Arvis Trading Ltd. in the years 2005 & 2008 on payment equivalent to INR of Rs.21,63,645/- but the same were not disclosed in Schedule-FA of his ITR for the relevant assessment years in spite of the fact that payment against 16,667 subscribed shares had been made on 12/05/2012 (AY 2013-14) from his foreign bank account when the assessee was a NRI and hence outside the purview of Black Money Act. (3) That, the Ld. CIT(A) while upholding the addition of Rs.21,63,645/- made u/s 10(3) of the Black Money Act further erred in ignoring the fact that payment against balance 16,666 shares (33,333-16,667) of M/s Arvis Trading Ltd. purchased from Mr. Dipankar Saha on 28/02/2008 and directly payable to the said offshore company has not been made till date and hence there was no acquirement of any foreign asset so as to disclose the same in the ROI and also to treat the same for taxation as undisclosed credit in foreign bank account.. (4) That, without any prejudice to the above, the Ld. CIT(A) erred in not having considered that the concept of \"beneficial owner has been inserted vide Explanations 4 and 5 below sec. 139 of the L.T. Act, 1961 by the Finance Act, 2015 w.e.f. 01/04/2016, relevant to A.Y. 2016-17, and hence there was hardly any scope to provide such details of beneficial owner either during the years 2005 and 2008 when the shares were allotted or in the ROI filed for the A.Y. 2012-13 and hence the addition of Rs.21,63,645/- under the Black Money Act made for the A.Y. 2018-19 is totally uncalled for, bad in law and hence deserves to be deleted. (5) That, therefore, as the addition of Rs.21,63,645/- under the Black Money Act in the A.Y. 2018-19 is out rightly beyond the facts on record and sanction of law applicable at the appropriate time, the order of the Ld. CIT(A) dated 26/06/2025 upholding such an unlawful addition deserves to be quashed and the appellant prays accordingly. (6) That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds.” 3. The only issue raised in the various grounds of appeal is against the order of ld. CIT (A) confirming the addition of ₹21,63,645/- as made by the ld. AO in respect of 33,333 shares of offshore company M/s Arvis Trading Co. Ltd., for the reason that these were not disclosed Printed from counselvise.com Page | 3 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 in the Schedule FA of Income Tax Return for the relevant assessment year. 4. The facts in brief are that the Shri Vijendra Kedia is the beneficiary owner of 33333 shares of Arvis Trading Co. Ltd. (earlier known as “Universis Resources SA) a offshore company incorporated in British Virgin Islands (BVI). The appellant is as Non-Resident in India during F.Y. 2007-08 and FY 2008-09 and from FY 2010-11 to F.Y. 2016-17. During F.Y. 2017-18, the residential status of the appellant was Not Ordinarily Resident. A company namely \"Universis Resources SA\" was incorporated in British Virgin Islands (BVI) on 18th October 2004 as per The International Business Companies Act (CAP.291) and the appellant was one of the director in company since incorporation. Copy of certificate of Incorporation along with the details of directors is enclosed at page 1-3 of the Paper Book. The company was incorporated with share capital of USD 1000 i.e. 1000 Nos of shares of $1 each wherein the shareholder was K&K Exports. Copy of share certificate is enclosed at page 4 of the Paper Book. As per section 5(1) of the International Business Companies Act, a company registered as International Business Company was not allowed to carry on business with person's resident in the British Virgin Islands. The International Business Companies Act (CAP.291) was replaced by BV1 Business Companies Act (No 16 of 2004) from 1 January 2005. On 1st September, 2005, Universis Resources SA issued 16,667 ordinary shares to the assessee, 16,667 ordinary shares to Mr. Sanjiv Jain and 16,666 shares to Mr.Dipankar Saha. Copy of Minutes of Meeting dated 1\" September 2005 is available at page 5 of the Paper Book. The shares were issued by the company under debt obligation without having received any amount for issue of shares as Printed from counselvise.com Page | 4 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 per provisions contained in Division -3, Capital, Redemptions and Dividends under Transitional Provisions applying to IBCS [Part IV] of the BVI Business Companies Act. Pursuant to introduction of BVI Business Companies Act, the company was automatically re- registered in the BVI as a Business Company on 1st January, 2007 as per section 6(1)(a) of BV1 Business Companies Act. On 21 August 2007, the name of company was changed from \"Universe Resources SA\" to \"Arvis Trading Co. Ltd\" Copy of Board Resolution is enclosed at page 6 of the Paper book. 4.1. On 10 September 2007, the shareholding in Arvis Trading Co. Ltd was comprised of Shri Dipankar Saha 16,666 shares, Shri Vijendra Kedia 16,667 shares and Sanjiv Jain 16,667 shares. Copy of certificate of Incumbency is enclosed at page 7 of the Paper Book. On 28 February 2008, the appellant bought 16,666 number of shares from Dipankar Saha for consideration of US$10,000. Copy of share transfer form is enclosed at page 8-9 of the Paper Book. On 4th June 2009, the shareholding in Arvis Trading Co. Ltd stood and comprised Shri Vijendra Kedia 33,333 shares and Shri Sanjiv Jain 16,667 shares. Copy of certificate of Incumbency is enclosed at page 10 of the Paper Book. 4.2. The appellant had made payment for subscription of 16,667 shares to Arvis Trading Co. Ltd only on 12th May, 2012 and the same was acknowledged by the Company vide letter dated 11.01.2015. Copy of confirmation for the receipt of payment is enclosed at page 11 of the Paper Book. The company had neither undertaken any business nor had opened any bank account since its incorporation. The company and its shares were only on papers. Due to criteria of the International Business Companies Act that the company cannot Printed from counselvise.com Page | 5 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 do business with residents of BVIs, there was no business transaction in the company. The Annual fee of Arvis Trading Co. Ltd was not paid since 2015 and therefore the company was struck off as per provisions of section 213 of BVI Business Companies Act. The appellant was in Singapore during F.Y. 2007-08 and F.Y. 2008-09, Copy of Employment pass issued by Ministry of Manpower, Singapore is enclosed at page 114 of the Paper book. The appellant thereafter shifted to Thailand from 2009 under Work Permit Visa which was time and again renewed. Copy of the Work Permit Visas are enclosed at page 117-121 of Paper book. 4.3. That the appellant returned India on 21 December 2016. The period of stay in India after 21\" December 2016 is 80 days and in F.Y. 2017-18 is 275 days. His residential status as per section 6 of the Income Tax 1961 was as Not Ordinarily Resident in F.Y. 2017-18 and in F.Y. 2018-19 and thereafter resident from F.Y. 2019-20 till date. 4.4. Immediately after his returning to India, the proceedings under Black Money Act, was initiated vide notice u/s 10(1) of the Act dated 05.02.2018 on the basis of information that Vijendra Kedia was associated with BVI entity Arvis Trading Co. Limited. The AO on the basis of income tax return filed by the assessee for the assessment year noted that the assessee has not disclosed the foreign assets (shares in Arvis trading Co Limited) in Schedule FA in ITR filed. Accordingly, the assessee has failed to furnish the information relating to financial interest in entities located outside India which are held by the assessee as beneficiary owner. The ld. AO also referred to Government of India Scheme providing opportunity to the assessee to come clean in respect of undisclosed foreign assets and Printed from counselvise.com Page | 6 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 income in the form of compliance window under Black Money (Undisclosed Foreign Income and Assets) and Imposition of “Black Act 2015”. But the assessee had failed to disclose his undisclosed foreign assets and income under the said scheme. Consequently, the ld. AO was authorized to exercise the powers and perform functions as the ld. AO in the assessee’s case under provision of the Act by Pr. DIT (investigation, Kolkata) on 11.01.2018. Accordingly, on the basis of facts available, a notice u/s 10(1) of the Act along with questionnaire was issued to the assessee on 05.02.2018, thereby initiating the proceedings under the Act. The said notice was replied by the assessee by furnishing all the evidences before the ld. AO. The ld. AO also provided all the documents, which were received from foreign jurisdiction to the assessee on 03.08.2018, through order sheet notings dated 03.08.2018. Finally, the ld. AO observed that ultimately the ld. AO applied the exchange rate to the number of shares beneficially held by the assessee in Arvis Trading Co Limited and made addition of ₹21,63,645/- on account of undisclosed foreign asset while the same was stated in the computation as undisclosed credit in the foreign bank account. The order u/s 10(3) of the Act was passed on 09.03.2020 making the assessment at Rs.21,63,645/- in the hands of the appellant by taking FMV as on 1 April 2017 of USD at ₹64.9103 by treating the same as total credit in Foreign Undisclosed Bank Account. 5. In the appellate proceedings, ld. CIT (A) dismissed the appeal of the assessee when the assessee failed to respond to various opportunities given by the ld. CIT (A) thereby confirming the order passed u/s 10(3) of the Act by the ld. AO. Printed from counselvise.com Page | 7 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 6. AR vehemently submitted before us that the status of the assessee during the impugned year was that of Not Ordinarily Resident as has been noted by the ld. AO in para no.4 of the assessment order passed u/s 10(3) of the Act. The ld. AR also submitted that the assessee has not disclosed foreign asset in ITR under Schedule FA as observed by the ld. AO in Para no.5 of the assessment order passed u/s 10(3) of the Act. The ld. AR further referred to the observations of the ld. AO that the assessee has failed to come clean in the form of compliance window under black money law by referring to Para no.6 of the assessment order. The ld. AR also referred to the AO’s observation that the assessee has failed to produce the foreign bank statement and also failed to report the foreign assets and therefore, undisclosed foreign asset as per provision of Rule 3(1)(e) of the Act, applicable for determining the value of the bank. It was also observed by the ld. AO that Section 72(c) of the Act applied for determination of previous year i.e. year in which the notice u/s 10(1) of the Act is issued and thereafter, value was determined by applying section 5 of Black Money Act Rule 3 and 4 of Black Money Rules. The ld. AR submitted that the ld. AO has made the entire assessment without proper application of mind to the facts of the case. The ld. AR submitted that though the ld. AO had information about the assessee being beneficiary of Arvis Trading Co. Ltd. an entity incorporated in British Virgin Islands (BVI) and also referred to consent letter for acting as Director and share allotment certificates but there was no reference to any other document like financial statements of the company, bank account of the company or any business transactions undertaken by the company after its incorporation. The ld. AR further submitted that the ld. AO was not having any bank account on record either of the company or of the assessee to establish that there was Printed from counselvise.com Page | 8 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 any credit in the bank account which is chargeable to tax in India. The ld. AR submitted that the ld. AO presumed on the basis of share certificates in respect of 33,333 shares in Arvis Trading Co. Ltd. that assessee had made payment for acquisition of shares in Arvis Trading Co. Ltd. upon wrong assumption of facts and without referring to the company law in BVI. 6.1. The ld. AR submitted that the company incorporated as international business company in the British Virgin Islands (BVI) is not allowed to do business with residents of BVI as per the Provisions of Section 5(1)(a) of International Business Companies Act. The ld. AR submitted that the Arvis Trading Co. Ltd. had neither done any business nor did open any bank account in its name. Since, there was no business, no financial records maintained, therefore the information/ documents received from BVI authorities as discussed by the ld. AO did not contain any bank account or business undertaken by the company or any financial records which showed that there was any real business/transactions in the company. Therefore, the ld. AO has failed to bring on record any such document to prove that the said company had actually done any business or having any bank account. 6.2. The ld. AR further submitted that the company law in British Virgin Islands (BVI) permits the issue of shares under debt obligation and the company Arvis Trading Co. Ltd. issued 16667 number of shares to the assessee under debt obligation to be paid in future. The ld. AR submitted that though there was no evidence of debt obligation on record but acknowledgement of sheet of payments which is available at page no.11 of the Paper Book, showed that the payment for issuance of shares on 01.09.2005 was made on Printed from counselvise.com Page | 9 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 12.05.2012, i.e. in F.Y. 2012-13. The ld. AR submitted that there after the assessee acquired 16,666 number of shares from Mr. Dipankar Saha for consideration of USD $10,000 on 20.02.2008, vide written share transfer form dated 28.02.2008, which is available at page no.8 of the Paper Book. The ld. AR submitted that though the consideration of USD $10,000 was agreed but vide share transfer Form but no payment was actually made for that acquisition. The ld. AR submitted that even Mr. Dipankar Saha did not make the payment at the time of issuance of share as the same was issued under debt obligation. The ld. AR submitted that the assessee also acquired the share from Mr. Dipankar Saha for USD $10,000 with the obligation to pay the said amount to the company directly but no payment was made for acquisition of these shares. The ld. AR also made without prejudice submission that even if it is presumed that the appellant had made payment of USD $10,000 to Mr. Dipankar Saha for acquisition shares then the payment could only be made from the income earned in Singapore not chargeable to tax in India. The ld. AR submitted that F.Y. 2007-08 and 2008-09, the assessee was working in Singapore by referring to employment pass to Singapore which are available at page no.114 to 116 of the Paper Book. The ld. AR submitted that the assessee’s only income was from source in Singapore which was not taxable in India and therefore, even if it is presumed that assessee had made payment on 28.02.2008, the payment was made for acquisition of shares from the income earned in Singapore which was not taxable in India. Further, the ld. AR submitted that the assessee was non-resident in F.Y. 2007-08, 2008-09 and from F.Y. 2010-11 to F.Y. 2016-17 and not ordinarily resident in F.Y. 2017-18 (A.Y. 2018-19). Since, the assessee is a not ordinarily resident in India as per provisions of Printed from counselvise.com Page | 10 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 Section 6(6) of the Income-tax Act, 1961 (the Act) and he was not required to disclose his foreign assets in Schedule FA in ITR filed in India in respect of income in India. 6.3. The ld. AR vehemently argued that the notice issued u/s 10(1) of the Act dated 05.02.2018, is without jurisdiction as at the relevant point of time when the notice u/s 10(1) of the Act was issued, the provisions of the ‘black money Act were not applicable to the assessee as he was Not Ordinarily Resident in India. The ld. AR referred to the provisions of Section 2(2) of the Act, defining the term assessee and submitted that the notice was without jurisdiction. The ld. AR further referred to the definition of assessee as amended by Finance (No.2) Act, 2019, with effect from 01.07.2015 to include the non-resident and not ordinarily resident in India within the meaning of Section 6(6) of the Income Tax Act for the purpose of ‘Black Money Act’. The ld. AR also referred to the proviso which was also inserted to the said amendment, wherein it was provided that in case of acquisition of asset outside India, previous year shall be determined without giving effect to provisions of Section 72(c) of the Act, which means that provisions of section 72(c) of the Act shall not apply in the case of non-resident or not ordinarily resident in India. Therefore, the ld. AR argued that at the time of issuance of notice u/s 10(1) of the Act dated 05.02.2018 , there was no authority under the Act to issue notice u/s 10(1) of the Act to the assessee and hence, the very notice issued u/s 10(1) of the Act dated 05.02.2018, is invalid and so is the consequential assessment framed by the ld. AO. The ld. AR further submitted that the ld. AO did not discuss the definition of assessee u/s 2(2) of the Act post amendment by Finance (No.2) Act, 2019 nor did issue any fresh notice or concluded the Printed from counselvise.com Page | 11 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 assessment by taking into account the appellant as resident as discussed in para no.9 below and thus, the entire assessment is bad in law and may be quashed 6.4. The ld. AR also argued that the ld. AO in Para no.5 of the order passed under the Act has mentioned that he has examined the ITR filed by the appellant and it was noted that Shri Vijendra Kedia has not disclosed the said foreign assets in the return of income for the year in Schedule FA for the relevant assessment years and accordingly, the assessee has failed to furnish the information relating to financial interest in entities located outside India held by the assessee as beneficial owner. The ld. AR submitted that a non- resident assessee is not required to file any return of income in India if he did not have any income from sources in India. The ld. AR submitted that the assessee filed the return of income in India disclosing those incomes that were received from Indian sources. The ld. AR submitted that the assessee being a non-resident was not required to disclose foreign assets held outside India because Schedule FA in ITR was not applicable to the assessee as prior to the amendment by Finance (No.2) Act 2019 in the definition of assessee in section 2(2) of the Act which was effective retrospectively from 1.7.2015, the same was applicable to residents only. The ld. AR submitted that right from F.Y. 2010-11 to 2016-17, the assessee was non-resident. Similarly, the assessee was non-resident in F.Y. 2007- 08 and 2008-09. The ld. AR submitted that the assessee was resident in A.Y. 2009-10 only. 6.5. The ld. AR further submitted that the assessee was not required to make any declaration under the Act under one time compliance window in 2015. The ld. AR submitted that the transitional Printed from counselvise.com Page | 12 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 compliance mechanism under Chapter VI (sections 59-72) was brought to allow one opportunity to declare previously undisclosed foreign assets and pay tax and penalty and is entitled to grant immunity from future action. The ld. AR submitted that since the foreign asset was acquired from the income which was not chargeable to tax in India, no declaration is required u/s 59 of the Act. Moreover, the assessee was non-resident in F.Y. 2015-16. Further, it is not the case of the AO that appellant had purchased any foreign assets out of the income chargeable to tax in India. 6.6. The ld. AR further submitted that the provisions of Rule 3(1)(e) of the Black Money Rules cannot be applied in the case of the assessee as there is no evidence of any bank account on record. The ld. AR submitted Rule 3(1)(e) of Black Money Rules, applies only in order to determine the value of the bank account and not in the case of the shares. Therefore, it is a case of non-application of money by the ld. AO and thus, the proceedings under the Act were initiated invalidly. The learned AR submitted that these were unquoted shares and hence the valuation should have been done as per Rule 3(1)(c)(II) of Black Money Rules which provides for the methodology for determination of the fair market value of unquoted shares but that was not done. 6.7. The ld. AR further submitted that the Arvis Trading Co. Ltd. was struck off from the Register of Companies in accordance with Provisions of Section 2(13) BVI, Business Companies Act for non- payment of annual fee since, 2015. The assessee under work permit Visa moved to Thailand since 22.03.2009 and work permit Visa with Thailand was renewed from time to time that was valid till 2013 and then till 2015 and then till 2017, which is available at page no.117 to Printed from counselvise.com Page | 13 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 121. The ld. AR submitted that the assessee returned to India in December, 2016, and his period of stay in India post December, 2016, was 180 days till March, 2017 and in F.Y. 2017-18, 275 days. The ld. AR submitted that since the company ceased to exist and the shares were also extinguished, hence, the value of these shares held by the assessee were nil post 2015 and therefore, no addition was called for under the Black Money Act and therefore, the proceedings as well as the assessment is bad in law and may be quashed on this score also. 7. The ld. DR on the other hand relied heavily on the order of the authorities below by submitting that though the assessee was Not Ordinarily Resident during the instant financial year, which is acknowledged by the ld. AO but the fact remains that the foreign assets were not disclosed by the assessee in the ITR and therefore the proceedings were rightly initiated. The ld. DR submitted that the assessee was not even cooperative and compliant before the ld. CIT (A) and therefore, the issue could not be decided as the assessee had not furnished any evidences or materials in respect of his case therefore, the issue may be restored to the file of the ld. CIT (A) for adjudication on merit. 8. We have heard the rival contentions and perused the materials available on record. We note that the residential status of the assessee on the basis of copies of Passport was of Not Ordinarily Resident during F.Y. 2017-18, whereas it was non-resident from F.Y. 2007-08 to 2008-09 and from F.Y. 2010-11 to F.Y. 2017-18 while it is resident in F.Y. 2009-10. For ready reference the details of period of stay and the residential status in India are extracted below:- Printed from counselvise.com Page | 14 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 Sl. No. F.Y. Period of stay in India Residential status Remarks 1. 2007-08 Not Available Non Resident Passport lost. New passport Issued in India in April 2008. Singapore employment pass enclosed at page 114-116. 2. 2008-09 141 Non Resident 3. 2009-10 266 Resident 4. 2010-11 136 Non Resident 5. 2011-12 25 Non Resident 6. 2012-13 9 Non Resident 7. 2013-14 24 Non Resident 8. 2014-15 17 Non Resident 9. 2015-16 24 Non Resident 10. 2016-17 113 Non Resident 11. 2017-18 275 Not Ordinarily Resident 8.1. The copies of the passport are available at page no.12 to 105. We note that the assessee had filed the return of income for all these years disclosing the income which were received from Indian sources and did not disclose any income earned out of foreign resources as assessee was non-resident. 8.2. We have also perused the Provisions of Section 10(1) of the Act. We have also perused the provisions of section 2(2) of the Act, which defines the term assessee under the Act. After a careful perusal of the section, we observe that the assessee is not covered in the said definition of the assessee in section 2(2) of the Act because his status was Not Ordinarily Resident in India during the F.Y. 2017-18 whereas the definition covers only resident assessee in the impugned year . For the sake of ready reference, the provisions of Section 2(2) of the Act are extracted below:- “2) \"assessee\" means a person, (a) being a resident in India within the meaning of section 6 of the Income-tax Act, 1961 (43 of 1961) in the previous year; or (b) being a non-resident or not ordinarily resident in India within the meaning of clause (6) of section 6 of the Income-tax Act, 1961 in the previous year, who was resident in Printed from counselvise.com Page | 15 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 India either in the previous year to which the income referred to in section 4 relates, or in the previous year in which the undisclosed asset located outside India was acquired Provided that the previous year, in case of acquisition of undisclosed asset outside India. shall be determined without giving effect to the provisions of clause (c) of section 72.]” 8.3. We further note that later the aforesaid definition of the assessee was amended by Finance (No.2) Act, 2019, w.e.f. 01.07.2015. The amended definition of the assessee u/s 2(2) of the Black Money Act, reads as under: (2) “assessee” means a person- (a) being a resident in India within the meaning of section 6 of the Income- tax Act, 1961 (43 of 1961) I the previous year; or (b) being a non-resident or not ordinarily resident I India within the meaning of clause (6) of section 6 of the Income-tax Act, 1961 in the previous year, who was resident in India either in the previous year to which the income referred to in section 4 relates; or in the previous year I which the undisclosed asset located outside India was acquired; Provided that the previous year, in case of acquisition of undisclosed asset outside India, shall be determined without giving effect to the provisions of clause (c) of section 72. 8.4. A perusal of the above amended Section makes it abundantly clear that in the amended definition of assessee, the Non-Resident and Not Ordinarily Resident in India within the meaning of Section 6(6) of the Income Tax Act, were included in the definition of assessee for the purpose of ‘black money Act’. We further note that a proviso was also inserted in the said amendment wherein it was provided that in case of acquisition of assets outside India, previous year shall be determined without giving effect to Provisions of Section 72(c) of the Act which means that Provisions of Section 72(c) of the Act shall not apply to any case of non-resident or not ordinarily in India. Therefore, in view of the above facts, we are inclined to hold Printed from counselvise.com Page | 16 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 that the notice issued u/s 10(1) of the Act dated 05.02.2018 as well as the assessment framed u/s 10(3) of the Act are without jurisdiction, invalid and are quashed. 8.5. We also note that in this case the shares numbering 16667 of Arvis Trading Co. Ltd. were acquired by the assessee under debt obligation meaning thereby the payments thereby made in future which is permitted under the Provisions of international business Companies Act 1984 and BVI business companies Act. The relevant provisions are extracted below:- “Section 18 and section 19 of the International Business Companies Act, 1984 reads as under 18. No share in a company incorporated under this Act may be issued until the consideration in respect of the share is fully paid, and when issued the share is for all purposes fully paid and non-assessable save that a share issued for a promissory note or other written obligation for payment of a debt may be issued subject to forfeiture in the manner prescribed in section 194. 19. Subject to any limitations or provisions to the contrary in the Memorandum or Articles. each share in a company incorporated under this Act shall be issued for money, services rendered, personal property (including other shares, debt obligations or other securities in the company), an estate in real property, a promissory note or other binding obligation to contribute money or property, or any combination thereof.\" A clear reading of provision of section 18 and 19 of the International Business Companies Act, 1984 provides that the companies incorporated in the British Virgin Islands can issue sharesunder debt obligation to contribute money or property or any combination thereof subject to forfeiture in the manner prescribed in section 19A. Further, as per BVI Business Companies Act, there is a TRANSITIONAL PROVISIONS APPLYING TO IBCS THAT ARE AUTOMATICALLY RE-REGISTERED UNDER PART III wherein under \"Division 3- Capital, Redemptions and Dividends\", amount of consideration for shares has been provided which reads as under: \"Division 3 Capital, Redemptions and Dividends Amount of consideration for shares Printed from counselvise.com Page | 17 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 (2) A share issued by a company upon conversion of, or in exchange for, another share or a debt obligation or other security in the company, shall be treated for all purposes as having been issued for money equal to the consideration received or deemed to have been received by the company in respect of the other share, debt obligation or security As per aforesaid section, a shares issued by a company upon a debt obligation shall be treated as having been issued for money equal to the consideration deemed to have been received by the company in respect of debt obligation. Thus, in the British Virgin Island, shares are allowed to be issued under a debt obligation considering the shares as fully paid with liability realizable in future. The assessee before the Ld.AO duly submitted that the money for acquisition of shares was not paid at the time of issuance. It was only paid in 2012-13 which is evident from confirmation of receipt as well. Since the company had no bank account opene In 2012-13, the appellant was in India for only 9 days and therefore he was non- resident as already discussed above. Hence the payment made in 2012-13 was out of income earned outside India which is not chargeable to tax in India.” 8.6. Thereafter, note that assessee acquired 16666 number of shares from Mr. Dipankar Saha for consideration of USD $10,000 on 28.02.2008 vide written share transfer form dated 28.02.2008, which is available at page no.8 of the Paper Book and no consideration was paid as these were also purchased under the debt obligation to be paid to the said company in future directly. Therefore, on this score also, we do not find any merit in the contention of the Revenue as no material controverting this argument of the assessee brought before us. We also find merit in the without prejudice plea of the assessee that even if the assessee made payment of USD $10,000 to Mr. Dipankar Saha for acquisition of share, the same was made out of income earned in Singapore which was not chargeable to tax in India. The employment pass of the Singapore is available at page No.114 to 116 of the Paper Book for F.Y. 2007-08 and 2008-09. So far as the observation of the ld. AO is concerned that the assessee has not disclosed the foreign assets in Schedule FA in ITR, we note that since, the assessee was non-resident and therefore he was not Printed from counselvise.com Page | 18 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 required to disclose the foreign assets held outside India as schedule FA in ITR is applicable to residents only at the relevant point of time. 8.7. We have also perused the Provisions of Section 59 to 72 of the Black Money Act and the Transitional Compliance Mechanism provided under the Act as one time opportunity to declare the provisional undisclosed foreign assets and to pay tax and penalty thereon in order to avail immunity from future action. We note that the shares were acquired by the assessee as per details below:- No of Shares Date of acquisition Date of payment Residential status Source 16667 01.09.2005 12.05.2012 Non-resident only 9 days stay in India Income earned outside India and not taxable in India 16666 28.02.2008 28.02.2008 Non resident Was in Singapore under employment pass. Passport lost in Singapore and issued on 15.06.2007 in Singapore Dateo f issuance of new passport:30.04.2008 Even otherwise the income was earned in Singapore which was not taxable in India. 8.8. We observe from the above that the foreign assets, if at all ,were acquired from the income which were not chargeable to tax in India and therefore, the assessee was not required to make any declaration u/s 59 of the Act. We note that there are two conditions involved in Section 59 (i) that there must exists undisclosed foreign assets within the meaning of section 2(11) of the Act and (ii) such assets must have been acquired from income chargeable to tax under Indian Income Tax Act in any year prior to A.Y. 2016-17. As is apparent from the above table that these shares were acquired in 2005 and 2008 when the assessee was non-resident and income earned outside India was not taxable under the Indian Income Tax Act. Therefore, even on this count the ld. AO observations are wrong and cannot be sustained. Printed from counselvise.com Page | 19 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 8.9. We have also perused Rule 3(1)(e) of the black money rules which deals with the determination of value of bank account. For the sake of ready reference, the said rule is extracted below:- “Rule 3(1)(e) of Black Money Rules applies only in the case of determining value of bank account. The provision of Rule 3(1)(e) reads as under: (e) value of an account with a bank shall be. (I) the sum of all the deposits made in the account with the bank since the date of opening of the account; or (II) where a declaration of such account has been made under Chapter VI and the value of the account as computed under sub-clause (1) has been charged to tax and penalty under that Chapter, the sum of all the deposits made in the account with the bank since the date of such declaration: Provided that where any deposit is made from the proceeds of any withdrawal from the account, such deposit shall not be taken into consideration while computing the value of the account.\" 8.10. Therefore, it is abundantly clear from the perusal of the above that the aforesaid rule is not applicable in case of shares and holds goods in case of bank account only. We note that for unquoted shares, the valuation should have been done as per Rule 3(1)(c)(II) of Black Money Rules which provides for the methodology for determination of the fair market value of unquoted shares but that was not done. Therefore, the application of Rule to determination of value of shares held by the assessee is itself wrong and invalid. In view of these facts also, we are inclined to quash the notice issued u/s 10(1) of the Act as well as the consequent assessment framed by the ld. AO u/s 10(3) of the Act. 8.11. In the result, the appeal of the assessee is allowed. Printed from counselvise.com Page | 20 BMA No. 5 & 6/KOL/2025 Vijendra Kedia; 2018-19 BMA No. 6/KOL/2025 9. Since, we have already quashed the assessment order passed u/s 10(3) of the Act in the quantum appeal( supra) ,the very basis for the levy of penalty is gone, demolished and no more survives. Consequently, the penalty as levied by the AO in the order passed u/s 41 r.w.s. 46 of the Act stands deleted. The appeal of assessee is allowed. 10. In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 12.01.2026. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 12.01.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "