Section 72(c) requires pre-Act undisclosed assets without declaration to be assessed in the AY following Section 10 notice.

The petitioner, a Moroccan citizen, had acquired two immovable properties in Morocco under registered sale deeds dated 26 August 2015 and 28 February 2016, before the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“Black Money Act”) came into force on 1 April 2016.

Following a search and seizure operation conducted at her husband’s premises on 25 January 2017, the respondents issued a notice under Section 8 of the Black Money Act, pursuant to which the petitioner filed returns for AY 2017–18.

The respondents subsequently issued seven notices under Section 10 concerning AY 2018–19, the first of which was dated 4 December 2018; the petitioner furnished replies, but the respondents passed an order dated 31 March 2021 and initiated penalty proceedings under Section 45.

The petitioner challenged the assessment order and consequential proceedings under Articles 226 and 227 of the Constitution, contending that the proceedings were initiated for the wrong assessment year and without jurisdiction.

Whether, where foreign assets were acquired before the commencement of the Black Money Act and no declaration was made under Section 59, Section 72(c) required the assets to be deemed acquired in the year in which the first notice under Section 10 was issued.

Whether the first Section 10 notice dated 4 December 2018 caused the assets to be assessable in AY 2019–20, rather than AY 2018–19.

Whether the impugned assessment order dated 31 March 2021 and the consequential proceedings were without jurisdiction and liable to be quashed.

The Court applied Section 72(b) of the Black Money Act, which concerns assets declared under Section 59 but in respect of which tax and penalty remain unpaid within the prescribed time; in such cases, the asset is chargeable in the previous year in which the declaration was made.

It applied Section 72(c), which provides that where an asset was acquired before commencement of the Act and no declaration was made under Chapter VI, the asset is deemed to have been acquired in the year in which the Assessing Officer issues a notice under Section 10.

The Court also relied on the statutory distinction between “previous year” under Section 2(9) and “assessment year” under Section 2(4), holding that assessment follows in the assessment year immediately succeeding the relevant previous year.

The statutory deeming fiction under Section 72(c) was held to be conclusive and required to be given its full legal effect.

The petitioner’s assets were admittedly acquired before 1 April 2016, and she had made no declaration under Section 59.

Accordingly, Section 72(b) was inapplicable, while the two conditions for applying Section 72(c)—pre-commencement acquisition and absence of a Chapter VI declaration—were satisfied.

Since the first notice under Section 10 was issued on 4 December 2018, the assets were statutorily deemed to have been acquired during FY/PY 2018–19. Applying the statutory relationship between the previous year and the succeeding assessment year, the corresponding assessment year was AY 2019–20, not AY 2018–19.

The Court therefore held that the respondents could not initiate proceedings for AY 2018–19.

It considered it unnecessary to decide the additional arguments concerning Section 3 and its proviso because the proceedings were liable to be quashed on the Section 72(c) ground alone.

The assessment proceedings initiated for AY 2018–19 were therefore illegal, without jurisdiction, and contrary to the statutory scheme.

The impugned order dated 31 March 2021 and all further proceedings consequential thereto were quashed.