Mansvi Singh & CA Akshay Jain
Ketan Ramesh Dhamanaskar Vs ACIT (ITAT Mumbai)
In a significant decision that provides critical clarity on the application of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA), the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled in favour of the taxpayer, Mr. Ketan Ramesh Dhamanaskar. The ruling, delivered on 20 January 2026, quashes the tax demand and proceedings initiated by the Assessing Officer (AO), reinforcing that a foreign asset cannot be deemed “undisclosed” when its source is clearly explained and known to the tax authorities. This judgment serves as a vital precedent, delineating the boundaries of the BMA’s stringent provisions and emphasizing the distinction between an inadvertent omission and deliberate tax evasion.
Factual Background
The case revolves around Mr. Ketan Dhamanaskar, a salaried individual who, during his employment with Baxter India Private Limited, was transferred to its Zurich office in Switzerland from 2010 to 2012. Through the company’s Employee Stock Purchase Plan (ESPP), he was allotted shares of the parent company, “Baxter International Inc.”. The dividends generated from these shares were automatically reinvested into more stock under a Dividend Re-investment Plan (DRIP). ,
The central issue arose when Mr. Dhamanaskar, having returned to India and regained his “resident” status for tax purposes in Assessment Year (AY) 2016-17, did not initially declare the dividend income earned in AY 2014-15 and AY 2015-16 in his Indian tax returns. , His rationale was a bona fide belief that since these dividends were already subjected to withholding tax in the USA and were directly reinvested without ever being credited to his bank account, no further tax liability or disclosure was required in India. It is pertinent to note that he did disclose these foreign assets in Schedule FA of his Income Tax Returns (ITR) from AY 2017-18 onwards.
The Tax Department’s Stance
The matter came to the forefront when the AO received information regarding the dividend income received by Mr. Dhamanaskar. The department contended that this undeclared dividend income was used to acquire further shares, rendering those shares an “undisclosed foreign asset.” Consequently, the AO initiated proceedings under Section 10(3) of the BMA.
