The Pune Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the assessee’s appeal by deleting the addition made towards undisclosed foreign assets to the extent of ₹86.80 lakhs, while simultaneously upholding the addition of ₹6.99 crore on account of undisclosed foreign income arising from Bitcoin transactions under Section 10 read with Section 3(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“BMA”).

With regard to the addition relating to undisclosed foreign assets, the ITAT noted that as per Section 3 of the BMA, tax on an undisclosed foreign asset located outside India is chargeable in the previous year in which such asset comes to the notice of the Assessing Officer. The Tribunal observed that the Assessing Officer received information regarding the assessee’s undisclosed foreign bank account during Assessment Year 2018-19; however, the addition was made in Assessment Year 2017-18. Accordingly, the ITAT held that the Assessing Officer had erroneously made the addition in Assessment Year 2017-18 and therefore lacked jurisdiction to make such addition for undisclosed foreign assets in that year. On this limited issue, the addition was deleted.

In relation to the addition towards undisclosed foreign income earned through Bitcoin transactions, the ITAT observed that the assessee did not dispute the fact that Bitcoin trading transactions were carried out through the foreign bank account. The Tribunal rejected the assessee’s contention that she was unaware of the transactions on the ground that they were allegedly carried out by her husband, noting that the assessee herself had admitted during proceedings under Section 10 of the BMA that the Bitcoin trading transactions were conducted through her foreign bank account.

The ITAT also dismissed the assessee’s alternate plea of double taxation, wherein it was argued that the addition towards undisclosed foreign income had already been considered while making addition for undisclosed foreign assets. The Tribunal emphasized that the income was first earned through Bitcoin trading and thereafter the accumulated income lying in the foreign bank account took the form of an asset. Thus, the addition on account of undisclosed foreign income and undisclosed foreign asset operate in distinct fields.

Further, the ITAT observed that since the assessee had accepted earning income from Bitcoin trading through a Fiji-based undisclosed foreign bank account and had failed to disclose both the foreign bank account and the corresponding income in her income-tax return, the provisions of Section 43 of the BMA were clearly attracted. Consequently, the Tribunal upheld not only the addition but also the penalty levied on undisclosed foreign income arising from Bitcoin activity.

Accordingly, the appeal of the assessee was partly allowed—granting relief in respect of the addition for undisclosed foreign assets due to wrong assessment year, while sustaining the addition and penalty relating to undisclosed foreign income from Bitcoin transactions.