A resident of DLF Mangolias, Gurugram, successfully challenged a ₹1.84 crore penalty imposed under the Black Money Act through a crucial procedural error. According to The Economic Times, the case involved Bhowmick, who invested $300,000 in a Bermuda-focused global investment fund while working in Singapore on May 19, 2015. He cashed out the investment on March 16, 2016, receiving $3.14 lakh upon redemption. The Income Tax Department classified this as black money, taxing the fair market value at 30% and imposing the substantial penalty for AY 2019-20. Despite Bhowmick's best efforts to explain that the investment came entirely from his Singapore salary and relied on the India-Singapore tax treaty, the tax officer was not convinced and dismissed his arguments.
The turning point came when Bhowmick's legal team discovered a crucial procedural error in the tax notice. As reported by The Economic Times, the Section 10(1) tax notice dated November 1, 2018 only mentioned AY 2016-17 and AY 2017-18, not AY 2019-20. Bhowmick's lawyers argued that this omission meant the Income Tax Department lacked jurisdiction to frame assessments for AY 2019-20, as no valid notice was issued for that assessment year. The Assessing Officer classified Bhowmick's investment as unexplained and taxed its fair market value of ₹2.04 crore at 30% under Section 3(1) of Black Money Act for AY 2019-20. The Commissioner of Appeals also turned down Bhowmick's appeal, forcing him to file an appeal in ITAT Delhi to challenge the black money tax demand and penalty.
On August 11, 2026, the Income Tax Appellate Tribunal (ITAT) Delhi delivered its judgment in favor of Bhowmick. According to The Economic Times, judicial member Satbeer Singh Godara and accountant member Reenu Jauhri specifically noted that the Income Tax Department failed to produce any valid Section 10(1) notice for AY 2019-20. The expert explained that Section 81 cannot cure the absence of a valid jurisdictional notice itself, as the foundation of the assessment proceedings failed. As per ET Wealth, the ITAT Delhi quashed the proceedings under Section 10, the assessment order, and the consequential penalty order, allowing both appeals of Bhowmick. The tribunal's decision reinforces the distinction between curable defects in valid notices and the absence of valid jurisdictional notices themselves, ensuring that assessment proceedings cannot survive independently when their foundation fails.
The case establishes important precedent for tax compliance requirements. As reported by The Economic Times, the expert emphasized that compliance with jurisdictional requirements cannot be substituted by general provisions intended to cure procedural mistakes. According to ET Wealth, the case reinforces that Section 81 can protect proceedings from certain mistakes, defects or omissions where the notice or proceeding is otherwise in substance and effect consistent with the law. However, it cannot be relied upon to supply the absence of a valid jurisdictional notice itself. The expert noted that Bhowmick's participation in subsequent proceedings and knowledge of the foreign investment under investigation did not overcome the Income Tax Department's failure to establish a valid Section 10(1) notice for AY 2019-20. The case demonstrates that when assessment proceedings are found to be invalid at their inception, the consequential assessment and penalty cannot survive independently.
