A resident of DLF Mangolias, Gurugram, Haryana, received $3.14 lakh ($314,000) as the redemption of a Bermuda-focused global investment fund. He maintained that the $300,000 that he had initially invested in this Bermuda fund came entirely from his Singapore salary. But this did not stop Income Tax officials from charging him under the Black Money Act. Things took a dramatic turn when a crucial mistake led to the Gurugram resident winning the case before the Income Tax Appellate Tribunal (ITAT).
Here’s all you need to know about the case:
What’s the case?
The case concerns Bhowmick, a resident ofwho works in Singapore.
According to The Economic Times, Bhowmick invested about $300,000 in a Bermuda-focused global investment fund while in Singapore on May 19, 2015.
He cashed it out on March 16, 2016 and received $ 3.14 lakh (3,14,608.15) upon redemption.
This Bermuda investment fund redemption created troubles for him back in India. The considered this to be black money.
What went wrong for Bhowmick?
Bhowmick reportedly explained to the Income Tax Department that the $300,000 money he initially invested in this Bermuda fund came entirely from his Singapore salary and that no Indian funds were involved. But the tax officer wasn’t convinced.
Bhowmick also tried to use the revised India-Singapore Double Tax Avoidance Treaty (DTAA) to support his case. But the tax officer dismissed this argument too, Economic Times reported.
Tax officers reportedly claimed that Bhowmick’s case does not come under the India-Singapore DTAA as the Bermuda-focused fund’s company was registered as a public limited company in India, and for FY 2015-16, Bhowmick was not a resident of Singapore.
After this set-back, Bhowmick stopped responding to the show-cause notices sent by the tax officer, the report added.
The officer waited for a while and later classified Bhowmick’s investment as unexplained. They taxed its fair market value of over ₹2 crore at 30 percent under Section 3(1) of Black Money Act for AY 2019-20.
A penalty of ₹1.84 crore was also imposed under the same Act, the report added.
The Commissioner of Appeals also turned down Bhowmick’s appeal. Following this, Bhowmick filed an appeal before the Income Tax Appellate Tribunal (ITAT) Delhi to challenge the black money tax demand and penalty on his income .
What happened next?
Bhowmick won the case in ITAT Delhi.
Judicial member Satbeer Singh Godara and Accountant member Reenu Jauhri of ITAT Delhi heard Bhowmick’s case and gave their judgement on August 11, 2026.
An expert explained to ET Wealth Online that the principal issue in this case before ITAT Delhi was whether an assessment for AY 2019-20 could be sustained when no valid notice under Section 10(1) of the had been issued for that assessment year.
As mentioned earlier, this black money dispute case started from an offshore investment in a Bermuda-focussed global investment fund Bhowmick who explained that the investment had been made out of funds earned from his job in Singapore and also relied upon the to support his position.
The crucial mistake
Before the ITAT Delhi, Bhowmick raised a fundamental jurisdictional objection.
Bhowmick’s lawyers and CA said that the Section 10(1) tax notice was sent on November 1, 2018 which effectively started the assessment proceedings against him.
However, this Section 10(1) tax notice mentioned only AY 2016-17 and AY 2017-18 and did not give any reference to AY 2019-2020.
Bhowmick’s lawyers and chartered accountant (CA) said this was a crucial mistake as the black money assessments were made by the tax officer against Bhowmick for AY 2019-2020 only, but the November 2018 tax notice did not mention AY 2019-2020.
Therefore, Bhowmick’s lawyer and CA argued before ITAT Delhi that since the Section 10(1) tax notice did not mention AY 2019-2020, the income tax assessing officer (AO) lacked jurisdiction to frame an assessment for that year (AY 2019-2020).
The Income Tax Department countered Bhowmick’s lawyer and CA’s argument by saying that this lack of reference to AY 2019-2020 in the Section 10(1) tax notice was just an error in mentioning and was protected by Section 81.
The Income Tax Department also said the original notice had been issued by the competent officer to the correct taxpayer and concerned the same foreign asset that was eventually assessed.
Bhowmick participated in subsequent proceedings and was aware of the precise foreign investment being examined.
Therefore, in the Income Tax Department’s view, the incorrect reference to the assessment years was a procedural defect rather than a jurisdictional failure.
The ITAT Delhi did not accept this contention of the Income Tax Department.
On examining the record, the expert told Economic Times Wealth that the ITAT Delhi specifically noted that the Income Tax Department failed to produce any notice under Section 10(1) issued to Bhowmick for AY 2019-20.
He added that ITAT Delhi treated this as an absence of a valid jurisdictional notice for the relevant assessment year rather than a minor mistake or omission in an otherwise valid notice.
“ITAT Delhi, therefore, held that the defect could not be cured by invoking Section 81 of the Black Money Act,” the expert was quoted as saying.
Why did Bhowmick win the case?
The expert told Economic Times Wealth that Bhowmick succeeded because a valid notice under Section 10(1) was regarded as a necessary foundation for the assessment proceedings.
The expert said, “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.”
In the present case, however, ITAT Delhi considered that there was no valid notice for the assessment year actually assessed.
In effect, Section 81 could cure a defect in an existing valid proceeding, but could not be relied upon to supply the absence of the jurisdictional notice itself.
Since the assessment proceedings were found to be invalid at their inception, the consequential assessment and penalty could not survive independently. The penalty was directly connected to the tax determined under the assessment proceedings.
Accordingly, the ITAT Delhi quashed the proceedings under Section 10, the assessment order, as well as the consequential penalty order, and allowed both appeals of Bhowmick.
Lesson for taxpayers
The expert said that the key rationale of the decision is that compliance with a jurisdictional requirement cannot be substituted by a general provision intended to cure procedural mistakes.
According to the expert, the fact that Bhowmick knew about the foreign investment under investigation or participated in subsequent proceedings did not overcome the Income Tax Department’s failure to establish that a valid Section 10(1) notice had been issued for AY 2019-20.
“The case accordingly reinforces the distinction between a curable defect in a valid notice and the absence of a valid jurisdictional notice itself. In the latter situation, the foundation of the assessment fails and the consequential assessment and penalty proceedings cannot be sustained,” the expert added.
(With inputs from Economic Times)