ITAT Mumbai Quashes ₹19.48 Crore Tax Demand: A Landmark Ruling on Procedural Fairness

⚖️ ITAT Mumbai Quashes ₹19.48 Crore Tax Demand: A Landmark Ruling on Procedural Fairness

In a significant development, the Income Tax Appellate Tribunal (ITAT) Mumbai has nullified the Income Tax Department’s decision to add ₹19.48 crore to a taxpayer’s income, citing procedural lapses and insufficient evidence.

🕵️‍♂️ Background: The Case of the Undisclosed Foreign Account

The case revolved around the late D Mehta, with proceedings continuing against his legal heir, K Mehta. The tax authorities initiated reassessment for the financial year 2006-07 based on information from the French government, which included data from a whistleblower at HSBC Geneva. This data, part of the ‘base note’ dataset, alleged that Mehta held undisclosed foreign bank accounts.​

⏳ Procedural Lapses: Time-Barred Reassessment

The ITAT observed that the notice under Section 148 for reassessment was issued in March 2012, requiring the reassessment order to be passed by March 2013. However, the order was issued only on March 18, 2014. The tax department’s claim of a one-year extension, based on a reference to Swiss authorities, was rejected by the ITAT, noting that the exchange-of-information protocol came into force later and did not cover the year in question.​

📄 Evidence Insufficiency: Photocopies and Unverified Data

The ITAT highlighted that the addition was based solely on a photocopy of the ‘base note’ and that the existence of the account had never been independently confirmed by HSBC Geneva. This lack of concrete evidence led the tribunal to deem the reassessment proceedings invalid.​

🧠 Dhan Tax Insights: Navigating Complex Tax Landscapes

This case underscores the importance of:

• Timely Compliance: Adhering to statutory timelines is crucial to uphold the validity of tax proceedings.​

• Robust Evidence: Tax assessments must be backed by verifiable and concrete evidence.​

• Understanding International Protocols: Awareness of the applicability and timelines of international information exchange agreements is essential.​

At Dhan Tax, we specialize in guiding clients through complex tax scenarios, ensuring compliance and safeguarding their interests.​

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