On 1.4.2024, UI Ltd., an Indian company, borrowed 50 crores @ 10% p.a. from M Inc., a US entity, thereby increasing its total borrowings to 70…

On 1.4.2024, UI Ltd., an Indian company, borrowed 50 crores @ 10% p.a. from M Inc., a US entity, thereby increasing its total borrowings to 70 crores. The said loan is guaranteed by H Inc., another US entity. The place of effective management of both M Inc. and H Inc. is in the USA. The total assets of UI Ltd. are 180 crores. UI Ltd. imported telecommunication equipment worth 22 crores from H Inc. to resale in India to independent customers. Import duty of 4.50 crores on the same was paid by UI Ltd. The equipment was sold to customers in India for 30 crores. Normal GP margin of UI Ltd. in similar uncontrolled transaction is 20% on sale. Net profit of UI Ltd. of A.Y.2025-26 was - 10.25 crores after debiting interest of 6.25 crores (out of which - 1.25 crores was interest pertaining to borrowings made in India from unrelated entities), depreciation of 2.5 crores and income tax of 1.5 crores. Interest expenditure to the extent of 2 crore was disallowed for the AY 2024-25 on account of the interest paid to a foreign associated enterprise under the provision relating to limitation on interest deduction in respect of debt issued by a non-resident associated enterprise. Mrs. Jenifer, a Director of UI Ltd., during the financial year 2023-24 visited USA and stayed there for a period of 90 days. During that period, she opened a bank account with a Branch of USA Bank and deposited an amount equivalent to 50 Lakhs. The said amount was deposited by remitting the money from her bank account in India out of the salary income earned by her in India and duly disclosed in her returns of income. She invested the said money in purchase of shares in a US based company during the said financial year. The balance in the foreign bank account as on 31st December, 2023 and on 31st March, 2024 was 4 lakhs and 1 lakhs respectively. Neither any interest was credited or allowed by the Branch of USA bank during the said financial year, nor was any income arisen from investment in shares of USA company directly or indirectly. Mrs. Jenifer has not disclosed the foreign bank account and the investment made in the shares of the foreign company in the return of income filed for A.Y. 2024-25. Based on the information received under the automatic exchange of information, the Assessing officer has served a notice under the Black Money & Imposition of Tax Act, 2015 (Black Money Act) on 06/12/2024 asking Mrs. Jenifer to explain as to why the penalty under relevant provisions of Black Money Act should not be imposed for non-disclosure of foreign bank account and investment made in shares of USA based company. During the FY 2023-24, Mr. Shyam father-in-law of Mrs. Jenifer, on the occasion of her marriage gifted 20 Lakhs by way of issue of cheque on the date of her marriage in her name. Mrs. Jenifer invested the gifted amount in fixed deposit with a private bank in Mumbai. On the said fixed deposit interest of 80,000/- was accrued during the FY 2023-24 and - 1,20,000/- during the FY 2024-25. She disclosed the said accrued interest income in her returns of income filed for relevant AY i.e. AY 2024-25 and AY 2025-26 under the head "Income from other sources."