In a notable decision involving alleged offshore assets, the Mumbai bench of the income-tax appellate tribunal (ITAT) has quashed a reassessment order against Kalpana Dilip Mehta, legal heir of the late Dilip Dalpatlal Mehta. The case centred around a Rs19.48 crore addition based on a purported foreign bank account in HSBC Geneva, allegedly held by Mr Mehta. This verdict is expected to have significant implications for legacy black money cases where treaty-based evidence is either procedurally flawed or unsupported by corroboration.
ITAT, comprising accountant member Om Prakash Kant and judicial member Raj Kumar Chauhan, ruled in favour of Ms Mehta, holding that the reassessment carried out by the income-tax (I-T) department was time-barred and founded on unreliable evidence.
The case relates to the assessment year 2007–08, during which Mr Mehta had filed a nil income return. The case was reopened years later based on information received from French authorities, which included a document known as the 'base note'. This document listed certain personal details of Mr Mehta and a balance of US$4.3mn (million) in an HSBC account in Geneva, but was neither authenticated nor directly linked to him through any corroborative material.
Following this, the department issued a notice under section 148 of the Income-tax Act on 30 March 2012. However, the tribunal found that the reassessment order, passed on 18 March 2014, exceeded the time limit prescribed by section 153.
According to the law, the assessment should have been completed within one year from the end of the financial year in which the notice was served, i.e., by 31 March 2013.
The tax department argued that the time limit had been extended due to a reference made to Swiss authorities under the India–Switzerland double taxation avoidance treaty (DTAA). However, the tribunal rejected this claim, observing that the relevant protocol for exchange of information only came into effect from 1 April 2011 and, therefore, was not applicable to the 2007–08 assessment year.
The tribunal relied on prior rulings, including in the case of Praveen Sawhney vs ACIT, which held that such references made under an inapplicable treaty could not extend the statutory limitation period.
The tribunal was also critical of the manner in which the reassessment was conducted. It found that the assessing officer (AO) failed to issue a valid notice under Section 143(2) within the prescribed time after the assessee (Mr Mehta) responded to the Section 148 notice, thereby making the entire reassessment process void ab initio. Moreover, the tribunal observed that the notice was based solely on a photocopy of the so-called 'base note', which lacked certification and authenticity. No independent verification was conducted and there was no confirmation from Swiss authorities regarding the alleged account, it added.
Further, the tribunal rejected the inference drawn from Ms Mehta’s refusal to sign a consent waiver for sharing information with Swiss authorities. It held that this refusal, in itself, could not be treated as an admission or construed adversely, especially when the ownership of the account had not been established.
Ms Mehta also raised the issue of procedural lapses, including the absence of a speaking order addressing her objections and the department’s failure to provide authenticated copies of the alleged foreign documents. The tribunal agreed that these omissions violated principles of natural justice and contributed to an arbitrary reassessment.
In conclusion, ITAT found that on both legal and factual grounds, the addition of Rs19.48 crore to the income of the late Mr Mehta could not be sustained. It declared the reassessment order invalid and allowed the appeal filed by his legal heir, Ms Mehta.
(ITA No679/MUM/2025 Date: 15 April 2025)
