Man did not disclose UAE bank account and foreign shares in ITR, I-T dept imposed Rs 1.86 lakh penalty; He escalates the case but ITAT Delhi offers no relief

Vimal Kumar, a judicial member and Ramit Kochar, an accountant member of ITAT Delhi,recently upheld a penalty of Rs 1.86 lakh imposed under Black Money Act, 2015 against businessman Mr Shankar from Basavangudi, Bangalore. This penalty was imposed under the Black Money Act, 2015, due to his failure to file schedule FA in his income tax return (ITR), to report his foreign bank account (Emirates NBD) and shareholding in an UAE company.

How non-disclosure of Dubai bank account led to this tax penalty

This judgement came after an income tax raid (search) conducted under Section 132 in the Bhandari Group, which included Mr Shankar. The tax raid (search) was carried out on April 27, 2016.

During this search, the income tax department uncovered evidence indicating that Mr Shanker might possess foreign income/assets. This suspicion was confirmed when the competent authority from the United Arab Emirates (UAE) provided some information about Mr Shanker to India on April 25, 2019.


The UAE authorities communicated the information to the Assessing Officer (AO), Central Circle-26, New Delhi on April 25, 2019 under provisions of 'Exchange of Information' Article of the India-UAE Double Taxation Avoidance Agreement (DTAA).

According to the UAE authorities, Mr Shanker has a bank account in his name at the Emirates National Bank of Dubai (Emirates NBD) Bank , Quasais Branch, P.O. Box 2923, Dubai. The UAE authorities reported that this Emirates NBD bank account was opened on January 18, 2010, and Mr Shanker is the authorised signatory. The bank account has total cash deposits of AED 5025.

The UAE authorities also provided the bank account statement, customer information-individuals form, KYC information and the account opening form duly signed by Mr Shanker. The name, date of birth and passport number of Mr Shanker were duly reflected in the customer information form as the authorised representative.

Information was also received that Mr Shanker is one of the Directors of a UAE based company as well as a shareholder of this company. This UAE company was incorporated on February 21, 2006 and the total directors' paid up share capital is AED 15000 of which Mr Shanker's paid up share capital was AED 3000.

Also read: Wife paid Rs 58 lakh from Indian bank a/c, husband paid Rs 80 lakh from UAE bank a/c for property purchase; she gets tax notice for unexplained investment, wins case in ITAT Mumbai for this reason

Mr Shanker had not disclosed any foreign assets/income in his income tax return (ITR) filed with the Indian Income Tax Department, and didn't pay any taxes on this.

Thus Income Tax Department has stated that Shankat's foreign assets and foreign income of Mr Shanker are not disclosed under the Black Money Act, 2015. Consequently Mr Shanker received a tax notice on July 30, 2019, to assess his undisclosed foreign assets and income under the Black Money Act, 2015, for AY 2020-21.

In reply to the tax notice, Mr Shanker explained that he had forgotten about his Emirates NBD bank account until the ED (Executive Directoriate) brought it to his notice since the account was closed on April 6, 2017. He claimed that the 5,000 Dirhams are still with the bank itself and he hasn't received any remittance.

Additionally, Mr Shanker explained that the AED 5000 (UAE Dirham) was received on April 4, 2010 and not January 18, 2010 and it was deposited by his friend for starting business in Dubai. However, the business never materialized and so the money remained in the bank. He also clarified that a credit of AED 25 was a reversal of maintenance fee, the entry for which appeared in December, 2012.

Also read: Dubai earnings sent through banking channels, yet tax notice issued: ITAT Ahmedabad rules property purchase can’t be treated as unexplained investment

Regarding the UAE company, he claimed he had not invested any money and was merely associated with the company started by Mr Bhandari. However, the Income Tax Department rejected his arguments and proposed to tax this foreign income and assets. The Assessing Officer noted that Mr Shanker has never shown any income or information related to such foreign assets in schedule FA from AY 2010-11 to AY 2020-21 in his income tax return.

Moreover, the Commissioner of Appeals (CIT (A)) also dismissed his appeal and confirmed the levy of penalty under Section 41 of Rs 1,86,810. So Mr Shankar filed an appeal in Income Tax Appellate Tribunal (ITAT) Delhi. On August 5, 2026 he lost the case in ITAT Delhi.

Keep reading to understand why Mr Shanker lost the case.

Also read: UAE based taxpayer earned Rs 4 crore income in India on which TDS was deducted but didn't file ITR, got tax notice; wins case in ITAT Delhi

Summary of the judgement

Chartered Accountant Suresh Surana said to ET Wealth Online that in this case, Mr Shanker was an individual who had remained a tax resident of India.

The foreign bank account contained a credit of AED 5,000. A further credit of AED 25 represented the reversal of bank maintenance charges and was not in dispute. The UAE information also showed that the taxpayer was a director and shareholder of a UAE based company, and had a paid-up share capital of AED 3,000 in that entity. However, neither the foreign bank account nor the financial interest in Santech UAE had been disclosed in Mr Shanker's income-tax returns, including Schedule FA, or under the one-time declaration mechanism provided under Section 59 of the Black Money Act, 2015.

Mr Shanker also challenged AY 2020-21 as the relevant assessment year. He argued that the information relating to the foreign assets was available during the search conducted in 2016 and, therefore, the matter, if taxable at all, should have been considered in AY 2017-18. He also argued that the bank account had already been closed and no foreign asset existed in the previous year relevant to AY 2020-21.

Surana says that the ITAT Delhi rejected Mr Shanker's explanation concerning the AED 5,000 credit because he did not furnish the friend's identity, bank records, confirmation, the purpose or terms of the alleged transfer, or any other supporting evidence.

Surana says: "The mere assertion that the money had been transferred by a friend was held to be insufficient to explain the source of the deposit."

Surana says that the authenticated documents received from the UAE authorities, on the other hand, proved that the account was maintained in the taxpayer's name and that he had signed the relevant account-opening and KYC documents.

Surana says that the tax tribunal similarly rejected the taxpayer's denial of investment in Santech UAE. The taxpayer was a signatory to the company's Memorandum and Articles of Association and had acknowledged that the company was set up to pursue business opportunities and that shares were allotted to him.

These facts demonstrated his knowledge of and involvement with the company. Surana says: "His bare assertion that he had not contributed the AED 3,000 was not supported by documentary evidence capable of displacing the information furnished by the UAE authorities."

Coming to his objection on the assessment year, Surana says the ITAT Delhi relied on the proviso to Section 3 of the Black Money Act, 2015, under which an undisclosed foreign asset is chargeable to tax in the previous year in which it comes to the notice of the Assessing Officer.

Surana says that ITAT Delhi also referred to the deeming provision in Section 72(c), under which a foreign asset acquired before the Black Money Act, 2015 came into force, but not declared under Chapter VI, is deemed to have been acquired in the year in which the notice under Section 10 is issued.

Since the information was forwarded to the Assessing Officer on April 25, 2019 and the Section 10 notice was issued on July 30, 2019, the tax tribunal held that FY 2019-20, corresponding to AY 2020-21, was the correct year.

Surana says: "The fact that the bank account had been closed in April 2017 did not prevent its taxation under the Black Money Act."

The ITAT Delhi further observed that merely disclosing a foreign asset in Schedule FA would not, by itself, prove that it had been acquired from explained or tax-paid sources. A resident taxpayer must substantiate either that the asset was acquired from funds not chargeable to tax in India or that the relevant funds had already been offered to tax in India. Mr Shanker failed to establish either of these circumstances.

Why did Mr Shanker lose the case?

Surana says Mr Shanker lost primarily because the Income Tax Department possessed reliable documentary evidence received from the UAE authorities, whereas his explanations were unsupported and internally inconsistent.

Surana says: "The foreign account and investment had never been disclosed, the source of the AED 5,000 credit was not proved, and the claim of having made no investment in Santech UAE was inconsistent with the corporate documents bearing his signature and his admitted involvement with the company."

Surana pointed out that since the relevant facts were known to Mr Shankar but were withheld or not adequately explained, the ITAT Delhi ruled that an adverse presumption could be drawn against him under Section 106 of the Indian Evidence Act, 1872, corresponding to Section 109 of the Bharatiya Sakshya Adhiniyam, 2023.

Accordingly, the ITAT Delhi upheld the assessment under Section 10(3) and confirmed the additions under Section 3 read with Sections 4 and 5 of the BMA. It also upheld the penalty of Rs 1,86,810 imposed under Section 41, having regard to the particular facts and circumstances of the case.

However, Surana says that the tax Tribunal left open the broader legal question of whether a penalty under Section 41 is mandatory or discretionary, noting that the Special Bench decision relied upon by Mr Shanker in Vinil Venugopal v. DDIT (Investigation) concerned Section 43 rather than Section 41.

Consequently, both the quantum and penalty appeals were dismissed.