Foreign Assets Income Tax Notice: Schedule FA, Sections 131, 148 & Black Money Act

Received Income Tax Notice for Foreign Assets? Schedule FA, Sections 131, 246, 148, 280 & Black Money Act

Summary: The article focuses on the enforcement side of foreign-asset reporting following the foreign-asset verification exercise involving CRS, FATCA and AEOI information. It discusses reported verification of overseas investments and properties, the visibility of foreign-asset information in AIS from July 2026, and the statutory routes through which the Income-tax Department may seek information or initiate proceedings. It explains the distinction between investigation and information-gathering powers under sections 131/131(1A) and 133(6) of the Income-tax Act, 1961 and sections 246/246(2) and 252 of the Income-tax Act, 2025, including the transition framework under section 536. It further covers normal scrutiny under section 143(2)/143(3), reassessment under sections 148A, 148 and 147 subject to section 149, the corresponding provisions stated for the Income-tax Act, 2025, revision under section 263/377, and substantive proceedings under section 10(1) of the Black Money Act. The article also distinguishes Schedule FA reporting omissions from unexplained foreign assets, discusses Black Money Act penalty and prosecution provisions, and addresses the interaction stated in the article between pending proceedings and FAST-DS 2026, including the 31 December 2026 declaration deadline. The article repeatedly emphasises that receipt of foreign-asset information or omission from Schedule FA does not by itself establish undisclosed income or black money and that ownership, residential status, source of acquisition, actual foreign income, taxability, limitation and the nature of the reporting default require separate examination.

Introduction

In my previous article, I discussed in detail the scope and practical application of FAST-DS 2026, including Category A and Category B, Schedule FA reporting, valuation, monetary limits and the disclosure mechanism. The present article is intentionally focused on the enforcement side—the recent foreign-asset verification drive, the types of notices or summons that may be issued by the Income-tax Department, and the statutory provisions under which such proceedings can be initiated.

For a detailed discussion on FAST-DS 2026 and foreign-asset disclosure requirements, click the link below to read my previous article: FAST-DS 2026: Foreign Income & Foreign Asset Disclosure, Taxability & Schedule FA

In this article, I have briefly discussed the recent notices and verification proceedings relating to foreign assets and foreign income, including CRS/FATCA-based information, Investigation Wing summons, reassessment provisions and possible proceedings under the Black Money Act. For any query or further discussion, you may contact me at the details mentioned at the end of this article.

1. Why this new article is important

The practical focus has now shifted from merely understanding the foreign-asset reporting obligation to understanding the Department’s enforcement architecture. The Income-tax Department is receiving information through the Common Reporting Standard (CRS), FATCA and Automatic Exchange of Information (AEOI), integrating such information into AIS and using it for verification of overseas accounts, investments and properties.

The central question for taxpayers and professionals is therefore no longer only whether Schedule FA was correctly filled. The immediate question is: if the Department has foreign-asset information, what communication, summons, notice, assessment or penalty proceeding can follow, and under which provision?

2. Has the Department started issuing foreign-asset notices and summons?

Yes. Public reporting in August 2026 confirms that the Income-tax Department has widened scrutiny of taxpayers having overseas investments and properties. Taxpayers have reportedly been asked to furnish the date and cost of acquisition of foreign assets, mode of payment, source of funds, domestic and overseas bank statements, details of family members, other foreign investments and income generated from such assets. The exercise is linked, among other information sources, with AEOI/CRS and FATCA data.

CBDT also made foreign-asset information received through CRS/FATCA visible in AIS from July 2026. The fact that information is visible in AIS does not itself mean that an assessment has commenced; however, it shows that the underlying foreign information is already available to the Department for reconciliation with the taxpayer’s return and Schedule FA.

There is evidence of an expanding data-driven foreign-asset verification exercise and formal summons being issued. At the same time, no official CBDT announcement has been located stating that a specified nationwide number of section 246 or section 10(1) notices has been issued as one mass batch solely because FAST-DS commenced. The more accurate description is an active and widening verification drive.

3. CBDT itself specifically recognises CRS/FATCA investigations

CBDT Office Memorandum F. No. 370149/107/2026-TPL dated 6 July 2026, dealing with transition under section 536 of the Income-tax Act, 2025, expressly refers to matters arising from TEP, STR, CRS and FATCA. The FAQs clarify which statutory summons provision should be used after 1 April 2026. This is important because it confirms that CRS/FATCA information is not merely an AIS display item; CBDT’s own procedural guidance contemplates investigation and summons arising from such information.

4. Which notices can be issued in a foreign-asset case?

Not every provision in the above table reopens an assessment. Sections 131/246, 133(6)/252 and section 8 of the Black Money Act are primarily investigation or information-gathering powers. The provisions that can actually bring income or an asset into assessment/reassessment are principally sections 143, 147/148, 263 and section 10 of the Black Money Act, depending upon the facts.

5. Section 131 or section 246 – which summons should be issued?

This distinction became important after commencement of the Income-tax Act, 2025 on 1 April 2026. CBDT’s transition FAQs clarify that where a matter arising from CRS/FATCA, TEP or STR relates only to a period before 1 April 2026, powers under section 131/131(1A) of the Income-tax Act, 1961 may be exercised by virtue of section 536(2)(c) of the Income-tax Act, 2025.

Where the information cannot specifically be assigned to a pre-1-April-2026 period, or relates to a subsequent period, section 246 of the Income-tax Act, 2025 may be used for issuing summons. Even where section 246 is used at the information-gathering stage because the period is initially uncertain, consequential substantive proceedings relating to Tax Year 2025-26 or earlier continue under the 1961 Act.

Accordingly, a foreign-asset summons received in 2026 should be checked for (i) the issuing authority, (ii) section 131/131(1A) or section 246/246(2), (iii) the period covered, and (iv) the transition rule under section 536(2)(c). A technical issue regarding the section invoked should be preserved where appropriate, but the summons should not be ignored.

6. What can be asked in a section 131/246 summons?

A section 131/246 summons is principally a fact-finding and evidence-gathering exercise. In a foreign-asset matter, the Department may seek documents such as:

• foreign bank and brokerage statements;
• purchase documents and date/cost of acquisition of overseas assets;
• mode of payment and remittance trail;
• source of investment and source of repayment of overseas loans;
• details of gifts, loans or contributions from family members;
• foreign salary, rent, interest, dividend or capital-gain records;
• Indian income-tax returns, Schedule FA/FSI and foreign tax credit records; and
• explanation and reconciliation of CRS/FATCA/AIS entries.

Receipt of such a summons does not itself establish that the foreign asset is black money or an undisclosed foreign asset. It normally means that the Department is verifying ownership, source, disclosure and taxability.

7. Section 133(6) / section 252 – notice calling for information

The Department need not always require personal attendance. Information may also be called for under section 133(6) of the Income-tax Act, 1961 or section 252 of the Income-tax Act, 2025. CBDT’s transition guidance applies the same old-Act/new-Act period principles to these information-gathering powers. Such notices can be used to obtain information from the taxpayer, banks or other relevant persons.

8. Section 143(2) – foreign asset may lead to normal scrutiny

Where the return is still within the normal scrutiny-selection period, the Department does not need section 148 merely because CRS/FATCA information does not reconcile with Schedule FA. It can select the return for scrutiny under section 143(2) and examine the matter in assessment under section 143(3). For Tax Year 2026-27 onwards, the corresponding provisions under the Income-tax Act, 2025 are sections 270(8) and 270(10).

Thus, for a recent return, foreign-asset information can be examined as part of the original scrutiny assessment rather than through reassessment.

9. Section 148 – where foreign income has escaped assessment

For historical years, the principal Income-tax Act reopening route is section 148A followed by section 148 and reassessment under section 147, subject to section 149 limitation. CRS/FATCA information can constitute relevant statutory information because the reassessment framework recognises information received through international agreements.

However, the legal condition is not merely that a foreign asset exists or was omitted from Schedule FA. The condition for reassessment is that income chargeable to tax has escaped assessment. Therefore, a foreign bank account with omitted interest, a foreign property with omitted rent, foreign securities with unreported dividend/capital gains, or an unexplained investment presents a materially stronger reassessment case than a fully explained foreign asset whose only default is non-reporting in Schedule FA.

The value of the foreign asset also should not automatically be equated with escaped income. For example, if a foreign property is worth Rs. 1.50 crore but was acquired entirely from explained funds and only Rs. 5 lakh of taxable rent was omitted in a year, the property value does not mechanically become Rs. 1.50 crore of escaped income merely for applying section 149 limitation. The actual escaped income and the source of investment require separate examination.

For Tax Year 2026-27 onwards, the corresponding new-Act route is section 281 (pre-notice procedure), section 280 (reopening notice) and section 279 (reassessment), subject to section 282.

10. Section 263 / section 377 – revision of an already assessed case

Where an assessment has already been completed but the Assessing Officer failed to examine foreign-asset information that ought to have been investigated, the PCIT/CIT may, in an appropriate case, invoke section 263 of the Income-tax Act, 1961 if the order is both erroneous and prejudicial to the interests of Revenue. The provision permits enhancement or modification of the assessment, or cancellation with a direction for fresh assessment. The corresponding provision under the Income-tax Act, 2025 is section 377.

This is not a general substitute for section 148. It operates only where an assessment or other order capable of revision already exists and the statutory conditions for revision are satisfied.

11. Section 10 of the Black Money Act – the most serious foreign-asset notice

For an actual undisclosed foreign asset or undisclosed foreign income, the principal substantive proceeding is under section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. CBDT’s Search and Seizure Manual, 2025 specifically addresses investigation of undisclosed foreign assets/income, including foreign bank accounts, overseas properties, investments, offshore financial interests and beneficial ownership.

CBDT makes an important qualification: information received from FIU, CRS/FATCA, informants, TEP, public-domain information or third-party investigations is initially intelligence and may not, by itself, form the sole basis for a section 10(1) notice. Further enquiry can first be conducted under the Income-tax Act or section 8 of the Black Money Act to collect supporting evidence.

This explains why a taxpayer may first receive a section 131/246 summons and only later, if the evidence establishes a prima facie case, receive a section 10(1) Black Money Act notice. CBDT also records the existence of a dedicated CRS/FATCA SOP contemplating proceedings under the Income-tax Act and/or the Black Money Act.

12. Likely Departmental sequence in a foreign-asset case

13. Pure Schedule FA omission is different from an unexplained foreign asset

Even in an enforcement-focused article, one distinction cannot be omitted. A foreign asset may be fully explained but not reported, or it may genuinely represent an unexplained investment. Section 2(11) of the Black Money Act requires examination of whether the taxpayer has a satisfactory explanation regarding the source of investment.

Accordingly, leaving Schedule FA blank should not automatically convert the entire value of an explained foreign asset into black money. For a pure reporting default, section 43 of the Black Money Act is specifically relevant. Where a required return itself was not furnished, section 42 may apply. Where the asset itself qualifies as an undisclosed foreign asset, substantive assessment under section 10 and penalty under section 41 become relevant.

The detailed distinction between an explained asset, an unexplained asset and omitted foreign income, together with FAST-DS Category A and Category B treatment, has already been discussed in the earlier FAST-DS article and is therefore not repeated here.

14. Penalty and prosecution notices under the Black Money Act

After assessment or identification of a reporting default, penalty proceedings may be initiated under section 46 of the Black Money Act read with the applicable substantive penalty provision. The principal provisions are section 41 for an undisclosed foreign asset/income assessed under the BMA, section 42 for specified failure to furnish a return, section 43 for failure to furnish or inaccurate furnishing of foreign-asset/income information, and section 45 for specified other defaults.

For wilful and serious defaults, prosecution provisions including sections 49, 50 and 51 may also become relevant. These are separate and more serious stages and should not be equated with an inadvertent Schedule FA reporting error.

15. Does receiving a notice prevent FAST-DS?

Not necessarily. Receipt of an enquiry, summons or even the existence of pending proceedings does not automatically make FAST-DS unavailable. Section 141 of the Finance Act, 2026 specifically addresses pending assessment proceedings, while section 140 contains the statutory exclusions. A completed Black Money Act assessment is materially different from a pending enquiry or assessment.

Accordingly, a taxpayer who has already received a foreign-asset summons should examine FAST-DS eligibility immediately rather than assuming either that the notice prevents a declaration or that there is unlimited time. The FAST-DS declaration window closes on 31 December 2026. Detailed eligibility, categories and filing mechanics are covered in the earlier article.

Conclusion

The important development in August 2026 is that the enforcement side of foreign-asset reporting has become visible. The Income-tax Department has substantial overseas financial information through CRS, FATCA and AEOI, such information is being integrated into AIS, and taxpayers are receiving formal summons seeking explanation of overseas investments and their funding trails.

CBDT’s own 2026 transition FAQs expressly contemplate CRS/FATCA-based summons under section 131 of the Income-tax Act, 1961 or section 246 of the Income-tax Act, 2025 depending upon the period involved. CBDT’s Search and Seizure Manual further confirms that foreign-asset intelligence can ultimately lead to proceedings under the Income-tax Act and/or the Black Money Act.

Accordingly, a foreign-asset case may move through different statutory stages: investigation under section 131/246; information gathering under section 133(6)/252; scrutiny under section 143/270; reassessment under section 148/147 or sections 280/279; revision under section 263/377; and substantive foreign-asset assessment under section 10 of the Black Money Act.

At the same time, receipt of foreign-asset information or omission of Schedule FA does not automatically establish undisclosed income or black money. Residential status, ownership, source of acquisition, actual foreign income, taxability, limitation and the precise nature of the reporting default must be separately determined. With FAST-DS open until 31 December 2026, taxpayers having historical foreign-asset omissions should review their position promptly before the verification process advances further.

******

For any query, clarification, or detailed professional consultation in relation to Income Tax or GST matters — particularly notices, assessments, litigation, legal proceedings or tax demands — you may get in touch with us at the following details: Mobile: +91-9818640458 | Email: [email protected]