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Can Income Tax Reopen Decades-Old Foreign Asset Cases? Delhi HC Refers Matter to Larger Bench

The biggest issue for taxpayers who might end up with such notices would be digging out documentation from the late 1990s or early 2000s that may prove impossible, thus leading to serious compliance and fairness issues.

Income Tax Notices

Can the income tax department dig up cases from nearly three decades ago to reassess foreign assets? That’s the big question now pending before a larger Bench of the Delhi High Court.

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At the heart of the matter is whether reassessment notices issued under Section 148 of the Income-tax Act, 1961, some for assessment years going as far back as 1996–97, can be revived after a 2012 amendment extended the window for reopening cases involving foreign assets from six years to 16 years. That amendment, introduced to tighten the net around black money, gave the department wider powers to reopen assessments.

But not everyone agrees on how far back this extended reach should go. Several companies and individuals, including UK Paints (Overseas), BJN Holdings (India), and KS Dhingra, have challenged these reassessment notices, arguing that they were already time-barred under the earlier six-year rule when the new law came into effect.

The Delhi High Court had earlier ruled in the Brahm Datt case (2018) that the new time limit could not be applied retroactively to closed cases. But during the latest hearing on May 30, a Division Bench led by Justice Vibhu Bakhru and Justice Tejas Karia observed that this view may need re-examination, and accordingly referred the matter to a larger Bench.

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If the court allows retrospective application in such cases, it could open the floodgates for a wave of reassessment notices targeting high-net-worth individuals (HNIs), business owners, and professionals with offshore assets or trusts.

The biggest issue for many of these taxpayers would be digging out documentation from the late 1990s or early 2000s that may prove impossible, raising serious compliance and fairness issues.

There’s also a broader implication. If the court sides with the income tax department, it could undermine the spirit of voluntary disclosure schemes that were introduced to encourage transparency, particularly the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

One major concern is that allowing retrospective reopening could deter people from participating in such schemes in future, fearing the goalposts may shift again.

For now, the matter rests with the larger Bench.

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