The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in a high-profile case involving alleged undisclosed foreign assets worth Rs. 31.48 crore, linked to businessman Deepak Jain, held that Black Money Act is inapplicable to non-existent foreign assets.
The central issue before the bench of Shrichalla Nagendra Prasad (Judicial Member) and Shrim Balaganesh (Accountant Member) was whether the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA) could be applied to foreign companies and bank accounts that had ceased to exist years before the law came into force.
The controversy stemmed from information received by the Income Tax Department through the International Consortium of Investigative Journalists (ICIJ), indicating that Jain had financial interests in companies incorporated in the British Virgin Islands (BVI). Based on these disclosures, the Assessing Officer (AO) initiated proceedings under the BMA and assessed Jain’s undisclosed foreign income/assets at ₹31.48 crore, imposing penalties under Sections 41 and 43 of the Act
The income tax department argued that Jain was the beneficial owner of the deposits held in foreign bank accounts operated through entities such as Alabama Assets Ltd. and Meadow Offshore Ltd. Despite being allotted only one share in each company, the AO held that the entire investment was effectively Jain’s, as the foreign partner, Mr. Alhammadi (UAE), was allegedly a “cover face.”
The department further pointed out that Jain did not avail of the 2015 voluntary disclosure scheme under the BMA despite being aware of his offshore holdings. It challenged the CIT(A)’s decision to restrict additions proportionately to Jain’s shareholding (1/1000) and delete penalties on technical grounds.
On the other hand, the assessee argued that the foreign entities and their bank accounts had ceased to exist by 2010–11, well before the BMA came into effect in 2015. He stressed that he was merely a nominal shareholder in a joint venture with Alhammadi, with no beneficial interest or control over the funds.
The assessee contended that Black Money Act cannot be applied retrospectively to assets that no longer existed before its enactment. The AO lacked jurisdiction since proceedings were already initiated under the Income Tax Act in 2013. The findings of the CIT(A) were inconsistent, as the appellate authority simultaneously acknowledged that Alhammadi funded the companies but still sustained additions of ₹3.14 lakh (proportionate share).
The CIT(A) had earlier reduced the addition from ₹31.48 crore to ₹3.14 lakh, holding Jain liable only to the extent of his shareholding (1 out of 1000 shares). The appellate authority also deleted penalties under Section 43, noting that the assets had ceased to exist before the disclosure requirements became applicable (AY 2012–13 onwards).
At the ITAT hearing, the Departmental Representative reiterated that Jain’s explanations lacked supporting evidence, especially since he failed to produce documents such as the Memorandum of Understanding (MOU) with Alhammadi or its termination papers.
Jain’s counsel, however, invoked legal doctrines such as the “Doctrine of Election”, arguing that since the Revenue had already pursued investigations under the Income Tax Act, it could not later shift to proceedings under the BMA for the same assets. Reliance was placed on CBDT Circulars and judicial precedents to argue that BMA was inapplicable.
The ITAT held that the credits in the bank accounts of foreign entities cannot be the subject matter of any addition in the hands of the assessee in the assessment framed under section 10(3) of the BMA and more so in view of the fact that the foreign entities are distinct and separate from its shareholders.
Case Details
Case Title: Addl. Commissioner Of Income Tax Versus Deepak Jain
Case No.: BMA Nos.01 to 03/Del/2025
Date: 24.09.2025
Counsel For Assessee: Advocates Gaurav Jain, Shubham Gupta
Counsel For Department: CIT DR S.K. Jadhav
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