The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“Black Money Act”) is one of the most stringent tax laws in India. Consequently, any notice issued under the Act often causes considerable anxiety among taxpayers.
Over the years, information exchange agreements between countries have enabled Indian tax authorities to obtain extensive information on foreign bank accounts, investments, and remittances held by Indian residents. Consequently, many taxpayers have received notices merely because a foreign asset or remittance came to the authorities’ attention.
This often raises an important question: Does every foreign asset automatically become a “black asset”? Can every inward foreign remittance attract a penalty under the Black Money Act?
Two recent decisions of the Jaipur Tribunal, Arpit Gupta v. DDIT/ADIT (Inv.) BMA NO. 03 (JPR) OF 2025 [AY 2019-20] and Shiva Shankar Mathur v. DDIT/ADIT (Inv.) BMA NO. 02 (JPR) OF 2025 [AY: 2019-20] dated 26 May 2026 provides valuable guidance on these issues.
The rulings reaffirm that the Act targets undisclosed foreign wealth and not genuine foreign assets or remittances whose source is identifiable and explained.
Disclosure of Foreign Assets in the Income-tax Return: Before discussing the Tribunal rulings, it is important to understand the disclosure requirements under the Income-tax Act.
A Resident and Ordinarily Resident (ROR) taxpayer is generally required to disclose specified foreign assets and foreign income in the Income-tax Return through Schedule FA. The disclosure requirement covers various categories of foreign assets, such as: Foreign bank accounts, financial interests in foreign entities, Foreign immovable properties, Custodial accounts, Foreign trusts and Other foreign investments and assets
The objective is to ensure transparency and enable tax authorities to verify foreign assets and income. However, it is equally important to appreciate that not every foreign remittance is necessarily taxable income.
For example, a remittance may represent: the transfer of one’s own funds from abroad; the sale proceeds of an already disclosed foreign asset; retirement benefits received from a foreign employer; inheritance; gifts from specified relatives; or Other explained receipts.
Therefore, the mere receipt of funds from abroad does not automatically establish the existence of undisclosed foreign income or assets.
Relevant Provisions of the Black Money Act: The Black Money Act contains separate provisions dealing with disclosure requirements and penalties:-
Section 6 requires a resident taxpayer to furnish details of specified foreign assets in the return of income.
Section 42 provides for a penalty in certain cases where a resident taxpayer fails to furnish a return despite holding foreign assets or foreign income.
Section 43 provides for a penalty where information relating to a foreign asset is not disclosed or inaccurate particulars are furnished in the return of income.
The existence of these provisions often leads to a common assumption that every foreign asset or foreign remittance automatically attracts penal consequences.
Does Every Reporting Lapse Amount to Black Money? The answer is not always “Yes”.
While the law requires disclosure of foreign assets and prescribes penalties for certain failures, the nature of the asset, the source of funds and the surrounding circumstances remain equally important.
The following two recent decisions of the Jaipur Tribunal illustrate how the courts have distinguished genuine and explainable foreign assets from cases involving undisclosed foreign wealth.
Case 1: Arpit Gupta v. DDIT (2026)
Brief Facts: The assessee worked in Dubai from 2016 to April 2018. During his employment, certain amounts were deducted from his salary towards a severance and retirement plan maintained by the employer.
After leaving employment and returning to India, approximately Rs. 7.87 lakh was remitted to his Indian bank account during FY 2018-19 upon the retirement plan’s maturity.
The assessee did not file a return of income for the relevant year as he was under the bona fide belief that he had not earned any income during that year.
The tax authorities treated the foreign remittance as a reportable foreign asset and levied a penalty of Rs. 10 lakhs under Section 42 of the Black Money Act. (Section 42 provides for a penalty in certain cases where a resident taxpayer fails to furnish a return despite holding foreign assets or foreign income.)
Tribunal’s Decision: The Tribunal deleted the penalty. It was observed that the remittance represented maturity proceeds of a retirement/severance plan funded from earlier salary deductions during overseas employment. It was not income earned during the relevant year.
The Tribunal further noted that (a) there was no concealment of foreign income or foreign assets, (b) the assessee was under a bona fide belief that no return was required since no income had been earned during the year, and(c ) the case did not involve any attempt to hide foreign wealth.
Case 2: Shiva Shankar Mathur v. DDIT (2026)
Brief Facts: The assessee, aged around 80 years, had worked in the United Kingdom from 1966 to 1994 and maintained deposits with banks in the UK and Germany from income earned during his overseas employment.
After returning to India, he regularly disclosed the interest income earned from these deposits and paid taxes thereon.
However, while filing ITR-1 for AY 2019-20, he did not disclose the foreign bank accounts.
The tax authorities levied a penalty under Section 43 of the Black Money Act for non-disclosure of foreign assets. (Section 43 provides for a penalty where information relating to a foreign asset is not disclosed or inaccurate particulars are furnished in the return of income.)
Tribunal’s Decision: The Tribunal deleted the penalty. A significant observation made by the Tribunal was that the foreign deposits were not created from black money transferred from India nor from any concealed foreign income.
The assessee had consistently disclosed the interest income arising from these deposits and paid taxes in India.
The Tribunal also noted that(a) the assessee was an elderly taxpayer, (b)he was under a bona fide belief that filing ITR-1 was sufficient, (c ) the ITR-1 applicable for the relevant year did not specifically indicate that persons holding foreign assets were ineligible to use that form; and (d) there was no deliberate attempt to conceal foreign assets. Considering the peculiar facts of the case, the penalty was deleted.
Although the facts of the two cases differed, both decisions ultimately reached a common conclusion regarding the scope and purpose of the Black Money Act.
Key Principles Emerging from Both Decisions: Though the facts of the two cases differ, both rulings highlight important principles.
1. Every Foreign Asset Is Not an Undisclosed Foreign Asset: The existence of a foreign bank account or foreign investment does not automatically mean that the asset is undisclosed. The source of the asset must be examined.
2. Every Foreign Remittance Is Not Foreign Income: Funds received from abroad may represent retirement benefits, maturity proceeds, inheritance, gifts or transfer of one’s own funds. The true nature of the remittance is more important than its foreign origin.
3. Source and Explanation Matter: Where the taxpayer can satisfactorily explain the source of the foreign asset or remittance, the basis for treating it as an undisclosed foreign asset becomes considerably weaker.
4. Bona Fide Mistakes Cannot Be Equated with Deliberate Concealment: Both cases involved taxpayers who could explain the source of funds and whose conduct did not indicate any intention to evade taxes. The Tribunal distinguished such situations from cases involving deliberate concealment of offshore wealth.
5. Legislative Intent Cannot Be Ignored: The Black Money Act was enacted to combat undisclosed foreign income and assets. Its purpose is not to penalize every reporting lapse irrespective of the surrounding facts and circumstances.
Practical Takeaways for Taxpayers: Taxpayers holding foreign assets or receiving foreign remittances should:
- Maintain documentary evidence regarding the source of foreign funds;
- Preserve overseas employment records, retirement benefit statements and bank records;
- Review Schedule FA disclosure requirements carefully;
- Choose the correct ITR form;
- Respond promptly to notices relating to foreign assets; and
- Seek professional advice where disclosure obligations are unclear.
Conclusion: The recent Tribunal rulings offer welcome relief to genuine taxpayers. They reaffirm an important principle that is often lost amid the anxiety surrounding foreign asset reporting:
The Black Money Act is aimed at undisclosed foreign wealth, not at penalizing every taxpayer who holds a foreign asset or receives a foreign remittance.
The true test lies not in the mere existence of a foreign asset or inward remittance, but in whether the asset is unexplained, undisclosed and intended to be concealed from the tax authorities. Where the source is known, disclosed and verifiable, the mere foreign character of the asset or remittance should not, by itself, trigger penal consequences under the Black Money Act.
The recent Tribunal rulings remind us that the Black Money Act is a weapon against undisclosed foreign wealth and not against every taxpayer who happens to own a foreign asset or receive money from abroad.
Disclaimer: The article is for educational purposes only.
The author can be approached at caanitabhadra@gmail.com
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