Facts of the Case

The petitioner, Sundeep Kathuria, was employed with Vodafone Idea Ltd. until February 2021. He received Employee Stock Option Plans (ESOPs) from the parent company, Vodafone Group PLC.

For Assessment Year 2016–17, the petitioner disclosed the ESOP details in his income tax return, including:

  • Value of ESOP: ₹34,74,022
  • Tax deducted at source by employer
  • Total returned income: ₹1,88,43,430

Despite this, proceedings were initiated under Section 43 of the Black Money Act through a show cause notice dated 12.09.2022 for alleged non-disclosure of foreign income/assets.

Issues Involved

  1. Whether ESOPs received from a foreign parent company constitute undisclosed foreign income or assets under the Black Money Act, 2015.
  2. Whether initiation of penalty proceedings under Section 43 was justified despite disclosure in income tax returns.
  3. Whether the writ petition is maintainable at the stage of show cause notice.

Petitioner’s Arguments

  • The petitioner contended that all ESOP-related income was duly disclosed in the income tax return for AY 2016–17.
  • The value of ESOPs was included in salary income and subjected to TDS.
  • There was no undisclosed foreign income or asset, hence the Black Money Act provisions were wrongly invoked.
  • Multiple replies were submitted to the department (2019 and 2022), providing full disclosure and clarification.

Respondent’s Arguments

  • The Revenue initiated proceedings alleging failure to disclose foreign income/assets.
  • A show cause notice under Section 43 of the Black Money Act was issued based on investigation.
  • The department sought to proceed with adjudication based on available material.

Court’s Findings / Order

  1. The competent authority shall adjudicate the show cause notice dated 12.09.2022.
  2. The petitioner must be granted a personal hearing.
  3. A speaking order must be passed after considering all replies.
  4. The authority must specifically address the petitioner’s contention regarding lack of jurisdiction due to no undisclosed income/assets.
  5. The adjudication must be completed within 8 weeks.
  6. If the order is adverse, it shall not be given effect for 8 weeks, allowing the petitioner to seek remedies.

Important Clarification

  • The Court emphasized that at the show cause notice stage, judicial interference is limited.
  • However, it ensured procedural fairness, including:
    • Right to hearing
    • Reasoned (speaking) order
    • Protection period against adverse order
  • The Court highlighted that jurisdictional issues (absence of undisclosed income/assets) must be specifically examined by the authority.

Sections Involved

  • Section 43 – Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
  • Section 8 – Black Money Act, 2015
  • Section 131(1A) – Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/59013012023CW175242022_114751.pdf

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