ITAT Rules Bank Balances from HSBC Geneva Leak Can’t Be Retroactively Taxed as Income
By: AdminApril 22, 2024
Categories: Income Tax|Income Tax News
4 Min Read
A recent ruling by the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has significant implications for cases involving undisclosed overseas accounts, particularly those related to the HSBC data leak from 14 years ago. The tribunal decided that the Income-Tax (I-T) department cannot reopen cases older than 16 years to tax the “peak balance” in such accounts since a bank balance is considered an “asset” and not “income”; under the law, only income can be taxed.Historically, the I-T department pursued tax claims based on the maximum amounts in these accounts, using a law that allowed them to look back up to six years for local income and up to 16 years for overseas income that evaded tax. However, this law has changed; currently, assessments can only be reopened up to 10 years back for untaxed income exceeding ₹50 lakh, and the 16-year provision for offshore income no longer exists. The Black Money Act of 2015 is now primarily used for handling unreported overseas wealth and income, but it’s challenging to apply this act to cases opened under the old law.This recent case pertains to the assessment year 2006-07, with the notice issued in March 2014. The ITAT also questioned the authenticity of the “base note” document the I-T department used, which lacked proper financial denomination (using “lakhs” instead of “thousands”), the stamp, bank name, and letterhead, which raised doubts about its credibility in stating the amount in an offshore bank should be taxed in India.The ITAT’s ruling emphasizes that income from the bank account in Geneva has not been received or deemed received in India, nor has it accrued or arisen in India. Therefore, the tax department couldn’t prove that any income from the HSBC Geneva account should be taxed in India based merely on the peak balance. This decision sets a precedent that may affect how similar cases, especially those involving complex foreign account structures involving offshore trusts and companies in tax havens, are handled in the future.