Income Tax Appellate Tribunal - Chennai
Mathialagan Gathya,Chennai vs Ddit / Adit (Inv.), Erode on 4 May, 2026
आयकरअपील यअ धकरण 'बी' यायपीठ,चे नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH: CHENNAI
ी इं तूरी रामा राव ले खासद एवं ी मनु कुमार िग र, ाियक सद
BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND
SHRI MANU KUMAR GIRI, JUDICIAL MEMBER
काला धन अ ध नयम /BMA No 24 & 25/Chny/2025
नधारण वष/Assessment Year: 2016-17 & 2018-19
Mathialagan Gathya, v. DDIT/ADIT (Inve),
A-04-301, Provident Cosmocity, R2, Nallappa Street, Periyar
Pudhupakkam, Chennai-603 103. Nagar, Erode-638 001.
[PAN: BEFPG 2002 C]
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओर से/ : Mr. S. Sridhar (Erode)
Advocate
Appellant/Assessee by
यथ क ओर से /Respondent by : Ms. Gouthami Manivasagam,
Addl. CIT
सुनवाई क तार ख/Date of Hearing : 11.03.2026
घोषणा क तार ख /Date of : 04.05.2026
Pronouncement
आदे श / O R D E R
PER MANU KUMAR GIRI, JM:
Both appeals are directed against the orders of the Ld. Commissioner of Income Tax (Appeals) both dated 27.11.2025, arising out of the assessment framed under section 10(3) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter referred to as "BMA") for AYs 2016-17 and 2018-19.
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2. Brief facts of the case are that the appellant, Smt. Mathialagan Gathya, is an individual and a resident in India for tax purposes for the Assessment Year (AY) 2016-17. She filed her return of income on 05.07.2016 declaring a total income of Rs.3,08,130/-. Subsequently, information was received from the office of the Additional Director of Income Tax (Investigation), Coimbatore, indicating that the appellant had earned salary income in Sweden during the relevant previous year, which was not disclosed in the return of income.Based on this information, proceedings were initiated under the provisions of the Black Money (Undisclosed Foreign Income and Assets) Act, 2015 (BMA). A summons under section 131(1A) of the Income-tax Act was issued on 25.01.2022 calling for details of the foreign salary. The appellant, however, did not admit or disclose the foreign salary amounting to Rs.2,88,618/- (SEK 36,372) earned in Sweden.
Thereafter, a notice under section 10(1) of the BMA dated 30.03.2023 was issued, to which the appellant failed to furnish any reply.Consequently, the Assessing Officer (AO) passed an order under section 10(3) of the BMA treating the said amount as "undisclosed foreign income" under section 4(1)(a) of the Act.
3. On appeal before the CIT(A), the appellant submitted that the salary earned in Sweden had been credited to a bank account maintained with Nordea Bank, Sweden. It was contended that such bank account constitutes a foreign "asset" and, therefore, in terms of the proviso to section 3 of the BMA, the same should be taxed only in the year in which it came to the notice of the AO and not in AY 2016-
17. The appellant further contended that the return was filed in ITR-1, which did not contain a specific column for reporting foreign salary. It was also submitted that the appellant had stayed in India for 318 BMA No 24 & 25 /Chny/2025 (AY 2016-17 & 2018-19) Mathailagan Gathya Vs DDIT/ADIT (Inv.) :: 3 ::
days during the relevant previous year and had earned salary from Tata Consultancy Services Sverige AB, a company incorporated and tax resident in Sweden.
The appellant also relied upon Article 15 of the Double Taxation Avoidance Agreement (DTAA) between India and Sweden to contend that the salary earned for employment exercised in Sweden is taxable only in Sweden and not in India.
4. ISSUES INVOLVED:
a. Whether the salary income of Rs.2,88,618/- earned by the appellant in Sweden and not disclosed in the return of income can be treated as "undisclosed foreign income" under the BMA. b. Whether the foreign bank account in Sweden constitutes an "undisclosed foreign asset" and, if so, whether taxation should arise only in the year in which such asset came to the notice of the AO.
c. Whether, under the scheme of the BMA, undisclosed foreign income and undisclosed foreign assets are required to be assessed together.
d. Whether the addition made in AY 2016-17 is valid when the information regarding foreign income was received by the Department in a later year.
e. Whether, in view of Article 15 of the DTAA between India and Sweden, the salary earned in Sweden is taxable exclusively in Sweden and hence not liable to tax in India.
f. Whether the appellant is entitled to relief under the DTAA despite non-disclosure of foreign income in the return of income.
g. Whether the notices issued under section 10(1) and the order passed under section 10(3) of the BMA are invalid on account of being unsigned.
5. FINDINGS OF THE ASSESSING OFFICER (AO):
The AO observed that the appellant, being a resident of India, is liable to tax on her global income under section 5(1)(c) of the Income-tax BMA No 24 & 25 /Chny/2025 (AY 2016-17 & 2018-19) Mathailagan Gathya Vs DDIT/ADIT (Inv.) :: 4 ::
Act. The AO noted that the appellant had earned salary income in Sweden during the relevant previous year, which was not disclosed in the return of income filed.Despite issuance of summons and show- cause notice, the appellant failed to furnish any satisfactory explanation or details regarding the foreign income. Accordingly, the AO concluded that the salary earned in Sweden constituted "undisclosed foreign income" within the meaning of section 4(1)(a) of the BMA.The AO further held that since the income was not disclosed in the return of income, the provisions of the BMA were attracted. Consequently, the AO brought the amount of Rs.2,88,618/- to tax under section 10(3) of the BMA and completed the assessment accordingly.
6. The ld.CIT(A) examined the assessment order, grounds of appeal, and written submissions filed by the appellant and recorded the following findings:
A. Validity of Notice and Order:
The contention of the appellant that the notice under section 10(1) and the order under section 10(3) were unsigned was rejected. On verification, it was found that the documents bore valid manual signatures of the AO.
B. Taxability of Undisclosed Foreign Income:
The ld. CIT(A) held that the appellant had admittedly earned salary in Sweden during the relevant previous year and had failed to disclose the same in the return of income. Therefore, the AO was justified in invoking the provisions of the BMA and bringing the said income to tax.
C. Whether Foreign Bank Account Constitutes an Asset:
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While acknowledging that a foreign bank account may qualify as an "asset" under section 2(11) of the BMA, the CIT(A) held that the Act does not mandate that undisclosed foreign income and undisclosed foreign asset must be assessed together. The scheme of the Act permits independent taxation of undisclosed foreign income and undisclosed foreign assets.
D. Year of Taxability:
The ld.CIT(A) rejected the appellant's contention that the income should be taxed in the year in which it came to the knowledge of the AO. It was held that the proviso to section 3 applies only to undisclosed foreign assets and not to undisclosed foreign income. Accordingly, the salary income was rightly taxed in AY 2016-17, being the year in which it was earned.
E.Applicability of DTAA (India-Sweden):
The ld. CIT(A) held that Article 15 of the DTAA does not grant exclusive taxing rights to Sweden but only provides that such income "may be taxed" in Sweden. Therefore, India retains the right to tax the global income of its residents. It was further held that relief from double taxation is available under Article 24 of the DTAA by way of foreign tax credit, subject to proper disclosure and compliance with prescribed procedures.
F. Non-disclosure and Denial of Treaty Benefit:
The ld.CIT(A) observed that the appellant failed to disclose the foreign salary income in the return and did not claim any foreign tax credit. Due to such non-disclosure, the appellant could not avail the benefit of DTAA relief in the normal course.
G. Distinction from Case Laws Relied Upon:
The decisions relied upon by the appellant, including those relating to Norway, were held to be distinguishable on facts and not directly applicable to the present case involving Sweden.
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The ld.CIT(A) concluded that the appellant, being a resident of India, is liable to tax on global income.The salary earned in Sweden, having not been disclosed in the return, constitutes undisclosed foreign income under the BMA.The AO was justified in taxing the said income in AY 2016-17.DTAA relief is available only through proper disclosure and compliance, which was not done in the present case.Accordingly, the addition made by the AO was upheld, and the appeals for AY 2016-17 and similarly for AY 2018-19were dismissed. Now assessee is in appeal before this Tribunal.
7. The ld.AR for the assessee has filed the following written submissions:
The admitted facts are that the appellant, a salaried employee in TCS, for the Asst. Years-2016-17 & 2018-19, filed the return of income in ITR-1, that the income earned by way of salary in Sweden was not admittedly included.
Consequent to issue of notice u/s.10(1) of the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act, 2015- hereinafter referred as BMA, the assessment was completed by independent orders u/s.10(3) dt.29-01- 2025 for the above two years, determining the undisclosed foreign income at Rs.2,88,618/- and Rs 6,58,738/- respectively.
During the course of First Appellate Proceedings, the appellant filed submissions on two occasions-copies attached- and they are as under.
First Submission- filed on 14-10-2025.
In the said submission, the appellant challenged that the taxability of the salary income earned in Sweden on the ground that the bank account in Sweden shall be called an asset and hence the income credited therein should have been taxed in the year in which it had come to the knowledge of the Assessing Officer which was, as per the Assessment order, received on 26-11-2021.
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The First Appellate Authority in Para-5.5.4 in page-8 of the order held that However, the structure of the BMA makes it clear that the Act provides for taxation of Undisclosed Foreign Income an Undisclosed Foreign Assets earned during the relevant year as per sec.3. There is no statutory requirement that the two must co-exist or to be taxed together. Undisclosed Foreign Income can be taxed even in the absence of an Undisclosed Foreign Asset and conversely, an Undisclosed Foreign Asset can be taxed even if no Undisclosed Income is separately established. Accepting the Appellant's argument would render the scheme of the Act unworkable.
The First Appellate Authority, while deciding the above issue, has not considered the decisions by the ITAT, Mumbai in BMA Nos.3 & 5/MUM/2021- reported in 132 taxmann.com 20 and by the ITAT. Kolkata in BMA Nos.4 to 12/KOL/2024. Copies are attached.
Second Submission-filed on-07-11-2025.
The impugned assessment order shows that the appellant was in India for a period of 318 days and 269 days respectively for both the years, that salary was earned from TCS, Sweden and that the legal entity of TCS in Sweden being TATA CONSULTANCY SERVICES SVERIGE AB, a company incorporated and operating under Swedish Law, is a tax resident of Sweden. The appellant, by relying on the DTAA between India and Sweden, more particularly Clause-2 of Article-15 and Clause-3 of Article-15, submitted that the salary income earned is taxable only in Sweden as per Clause-1 of Article-15.
The appellant, while submitting so, relied on Chennai ITAT decision in BMA-1/CHNY/2025 dt.24-10-2025, rendered in the context of DTAA between India and Norway, which is pari-materia to the Article-15 between India and Sweden, submitted that the salary income earned in Sweden is not chargeable income in India either under Income Tax Act or under BMA.
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Copies of Article-15 of the DTAA between India-Norway and India- Sweden are attached, along with the decision of the ITAT, Chennai referred above.
WRITTEN SUBMISSIONS BY ASSESSEE:
In support of Ground Nos.2 & 5 The fact remains is that the salary of the appellant received in Sweden had been credited in NORDEA BANK in the account number 1108000002042714.
In view of the above, the initial question to be adjudicated is whether the above account of the appellant, in Sweden, shall be called an ASSET?
The ITAT, Mumbai, after a detailed analysis, held that the such bank account is an asset, in the decision in Appeal Nos. BMA Nos.3 & 5/MUM/2021 dt.02.11.2021.
The ITAT, Kolkata in BMA Nos.4 to 12/KOL/2024 dt. 23.12.2024 held as under:
Section 2(12) of the Black Money Act, 2015 defines "undisclosed foreign income and asset", as per which it will be the total amount of undisclosed income of assessee from a source located outside India and the value of undisclosed asset located outside India as referred to in section 4. It is to be noted that "undisclosed foreign income" has not been singularly defined in the Black Money Act, 2015. Either as per the definition u/s. 2(12) of the Act or as per the provisions of section 4 of the Black Money Act, 2015, the "undisclosed foreign income and asset" have to be taken together for the purpose of assessment for the purpose of assessment u/s. 10 of the Black Money Act, 2015. The collective reading of the aforesaid provisions along with section 3 of the Black Money Act, 2015 would reveal that the undisclosed foreign income and asset of an year are to be assessed together and further as per the proviso to section 3, undisclosed assets located outside India shall be charged to tax on its value in the previous year in which such assets come to the notice of the BMA No 24 & 25 /Chny/2025 (AY 2016-17 & 2018-19) Mathailagan Gathya Vs DDIT/ADIT (Inv.) :: 9 ::
AO. The collective reading of all the provisions would give an inference that the undisclosed foreign income and asset are to be assessed by the AO under the Black Money Act, 2015 in the year in which it has come to the knowledge of the AO. Copies of both the above decisions are attached. In view of the above, the additions made in the impugned years are not sustainable and hence, require deletion.
ADDITIONAL WRITTEN SUBMISSIONS BY ASSESSEE: Facts require a revisit.
The appellant for the impugned year filed the return of income in ITR-1, which, admittedly, did not contain column to report salary earned abroad.
The perusal the order passed u/s.10(3) of the Black Money Act, 2015 shows the following:
1. During the FY-2015-16, relevant to the AY-2016-17, the appellant was in India for the period of 318 days.
2. The appellant earned salary from M/s. Tata Consultancy Services, Sweden.
3. Tata Consultancy Services Sverige AB is the official legal entity of TCS in Sweden. a private limited company (Aktiebolag) and as a company incorporated and operating under Swedish law, it is a tax resident of Sweden.
Article-15 of DTAA between India and Sweden is given under for reference.
DEPENDENT PERSONAL SERVICES
1. Subject to the provisions of Articles 16. 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions of paragraph (1), remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first- mentioned State if:
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(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned: and
(b) the remuneration is paid by. or on behalf of. an employer who is not a resident of the other State: and
(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.
3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State may be taxed in that State. Where a resident of Sweden derives remuneration in respect of an employment exercised aboard an aircraft operated in international traffic by the Swedish, Danish and Norwegian air transport consortium Scandinavian Airlines System (SAS), such remuneration shall be taxable only in Sweden. ' Now, the point to be considered is whether the appellant is saved by the DTAA mentioned above?
Before going into this, the following are to be considered first.
a. The appellant is a resident of a Contracting State, which is India.
b. The employment has been exercised in the Other Contracting State, which is Sweden.
Hence, remuneration received by the appellant, since the employment was exercised in Sweden, shall be taxable only in Sweden as per clause 1 of Article-15.
Now, whether the case of the appellant is hit by clause-2 of Article-15?
Clause-2 of Article-15 contains three cumulative conditions. As you are aware, if one of the conditions fails, clause-2 may not be applicable.
As M/s. Tata Consultancy Services, Sweden is a company incorporated and operating under Swedish law and is a tax resident of Sweden and since the appellant received BMA No 24 & 25 /Chny/2025 (AY 2016-17 & 2018-19) Mathailagan Gathya Vs DDIT/ADIT (Inv.) :: 11 ::
remuneration from the employer who is a resident of Sweden. Clause-2 is not applicable.
Clause-3 of Article-15 is not applicable to the appellant. Article-15 of the DTAA between India and Norway is pari- materia/ similar to Article- 15 of DTAA between India and Sweden.
The Jurisdictional Chennai ITAT in Appeal No.BMA-1/CHNY/2025 dt.24-10-2025held, by considering the DTAA between India and Norway, held that the income derived by way of salary is exempt from tax in India by virtue of Sec.90 (2) of the IT Act read with DTAA and went on to hold that there is no chargeable income in India which could form the basis of any addition, either under the IT Act or the BM Act Copy is attached. The appellant submits that considering the binding nature of the Jurisdictional Chennai ITAT decisions mentioned above and the conceptual similarities between the DTAAS of India with Norway and Sweden, taxing the salary earned in Sweden is not correct and hence the appeal may be decided accordingly.
8. Per contra, the ld.DR for the revenue filed the following written submissions:
The Revenue respectfully submits the following in response to the appeal filed by the Appellant under Section 15 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter referred to as the "BMA"). These submissions defend the order passed by the Ld. Commissioner of Income Tax (Appeals) [CIT(A)], Chennai-18, dated 27.11.2025, which upheld the assessment order passed by the Assessing Officer (AO) under Section 10(3) of the BMA dated 29.01.2025.
I. Brief Facts of the Case i. The Appellant, a resident of India for tax purposes during the relevant Financial Year 2015-16 (Assessment Year 2016-17), filed her return of income under the Income tax Act, 1961 (IT Act) on 05.07.2016, declaring total income of Rs. 3,08,130/- from sources in India.
ii. Information received from the Additional Director of Income Tax (Investigation). Coimbatore, revealed that the Appellant had earned salary income of SEK 36,372 (equivalent to Rs. 2,88,618/-) from M/s. Tata Consultancy Services Sverige AB (TCS Sweden) during March 2016, while on deputation/exercise of employment in Sweden.
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iii. This foreign salary income was credited to the Appellant's bank account with Nordea Bank in Sweden (A/c No. 1108000002042714) and was not disclosed in the Appellant's Indian income-tax return.
iv. Summons under Section 131(1A) of the IT Act were issued on 25.01.2022, seeking details of the foreign salary, bank statements, and tax payments. The Appellant did not fully comply or disclose the income.
v. The Appellant's residential status for FY 2015-16 was determined as "Resident" under Section 6 of the IT Act, with 318 days in India, making her liable to tax in India on global income under Section 5(1) of the IT Act.
vi. A notice under Section 10(1) of the BMA was issued on 30.03.2023, treating the salary as undisclosed foreign income under Section 4(1)(a) of the BMA. No response was received from the Appellant.
vii. The AO completed the assessment under Section 10(3) of the BMA on 29.01.2025, assessing the undisclosed foreign income at Rs. 2,88,618/-, levying tax at 30% plus interest, totaling Rs. 1,78,365/-.
viii. The Appellant filed a belated appeal before the CIT(A) with a 220-day delay, which was condoned. The CIT(A), after detailed consideration of the Appellant's submissions, dismissed the appeal on 27.11.2025, upholding the AO's order.
ix. Aggrieved, the Appellant has preferred this appeal before the Hon'ble Tribunal.
x. The Revenue submits that the orders of the AO and CIT(A) are well-reasoned, in accordance with law, and warrant no interference.
3. Response to Grounds of Appeal The Appellant has raised four grounds of appeal. Each is addressed below:
Ground No. I: The impugned order is bad and erroneous in law. i. This ground is general and non-specific. It does not point out any particular error in the CIT(A)'s order. The Revenue submits that the CIT(A) has meticulously examined the facts, provisions of the BMA, IT Act, and the India-Sweden Double Taxation Avoidance Agreement (DTAA), and provided a reasoned decision.
ii. The assessment treats the foreign salary as undisclosed foreign income under Section 4(1)(a) of the BMA, as it was not offered in the return of income filed under the IT Act. Section 3 BMA No 24 & 25 /Chny/2025 (AY 2016-17 & 2018-19) Mathailagan Gathya Vs DDIT/ADIT (Inv.) :: 13 ::
of the BMA charges tax on such income for the assessment year commencing from AY 2016-17 onwards, irrespective of when the information came to light (unlike undisclosed assets, which are taxed in the year of discovery under the proviso to Section
3).
iii. The CIT(A) correctly distinguished undisclosed foreign income from undisclosed foreign assets, holding that they are separate and independently taxable under Sections 2(12), 3, and 4 of the BMA. The salary income is chargeable in the year it was earned (FY 2015-16), not deferred to the year of discovery (paras 5.5 to 5.5.5 of the CIT(A) order). The Mumbai and Kolkata ITAT decisions relied upon by the Appellant were distinguished as they involved cases where income and assets were aggregated, not standalone undisclosed income as here. iv. This ground deserves dismissal for lack of specificity and merit.
Ground No. 2: The Ld. First Appellate Authority grossly erred in violating the principle of natural justice, by not providing copies of the notices and assessment order, challenged by the appellant on account of NO SIGNATURE.
i. The Revenue denies any violation of natural justice. The CIT(A) issued hearing notices and provided opportunities for submissions. The Appellant filed written submissions on multiple occasions, which were duly considered and reproduced in the order (paras 4.1, 4.2, and 5.1 of the CIT(A) order). ii. Regarding signatures: The Appellant contends that the notice under Section 10(1) dated 30.03.2023 and the assessment order dated 29.01.2025 were unsigned. However, the CIT(A) examined copies furnished by the AO and confirmed they bore manual signatures (para 5.4 of CIT(A) order). The Appellant provided no contrary evidence, and the objection appears to be based on conjecture.
iii. If copies were not provided during appellate proceedings, the Appellant could have requested them, but no such request is recorded. The Appellant participated fully without demonstrating any prejudice. Principles of natural justice require proof of actual prejudice, which is absent (as held by the Hon'ble Supreme Court in Dharampal Satyapal Ltd. v. Deputy Commissioner of Central Excise [2015] 8 SCC 519). iv. This ground is misconceived and should be rejected. Ground No. 3: The Ld. First Appellate Authority erred in not considering the submissions in proper perspective.
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i. This ground is vague and unsubstantiated. The CIT(A) order provides a comprehensive analysis (paras 5.1 to 5.6.5), reproducing the Appellant's submissions verbatim and addressing them point-by-point.
ii. Key submissions on timing of taxation (Grounds 2 & 5 before CIT(A)), lack of signatures (Grounds 3 & 4), and DTAA relief were thoroughly examined:
a. On bank account as "asset" and proviso to Section 3: The CIT(A) held that undisclosed income and assets are distinct; income is taxed in the year earned, not discovery, even if credited to a foreign bank (paras 5.5 to 5.5.5). The ITAT Mumbai (BMA Nos. 3 & 5/MUM/2021) and Kolkata (BMA Nos.
4 to 12/KOL/2024) decisions were distinguished, as they do not mandate aggregating income with assets where no undisclosed asset is separately established. b. On DTAA: The CIT(A) analyzed Article 15 of the India- Sweden DTAA, noting concurrent taxing rights (Sweden "may tax," not exclusively). Relief is available via foreign tax credit under Article 24 and Rule 128 of the Income-tax Rules, but requires disclosure and claim, which the Appellant failed to do (paras 5.6 to 5.6.5). Non-disclosure triggers BMA taxation at 30%, overriding potential IT Act exemptions. iii. All submissions were considered in proper legal perspective.
This ground lacks merit.
Ground No. 4: The Ld. First Appellate Authority erred in not considering the binding nature of the decision by the ITAT, having a persuasive value rendered by considering DTAA between India and Norway.
h. The Revenue submits that the cited ITAT Chennai decision in BMA- 1/CHNY/2025 dated 24.10.2025 (pertaining to India- Norway DTAA) is distinguishable and not binding in this context. ii. In the cited case, salary was earned in Norway, taxed there, and held exempt in India under Section 90(2) of the IT Act read with DTAA, as no undisclosed asset was identified and the income was not chargeable in India. Here:
a. The income is from Sweden, governed by the India-Sweden DTAA, which is pari materia but applied to different facts. b. No evidence was provided by the Appellant that the salary was taxed in Sweden or that foreign tax credit was claimed The Appellant did not respond to notices or disclose the income, making it "undisclosed" under Section 4(1)(a) of the BMA. c. Article 15 of the India-Sweden DTAA provides concurrent BMA No 24 & 25 /Chny/2025 (AY 2016-17 & 2018-19) Mathailagan Gathya Vs DDIT/ADIT (Inv.) :: 15 ::
rights: Remuneration "may be taxed" in Sweden if employment exercised there (para I), subject to conditions in para 2. Since the employer is a Swedish resident, para 2(b) fails, reverting to para I's permissive taxing right for Sweden, but India retains primary right as the residence state. Relief is via credit under Article 24, which requires disclosure (not done here). d. The BMA is a special law for undisclosed foreign income, overriding the IT Act where applicable (Section 71 of BMA). Non-disclosure triggers BMA taxation, irrespective of DTAA benefits under the IT Act.
iii. The CIT(A) correctly distinguished the case (para 5.6.4), noting different treaty provisions and factual matrix (no proof of Swedish taxation or double taxation here). While the decision has persuasive value, it is inapplicable due to these distinctions. iv. This ground should be dismissed.
9. We have heard the rival submissions and perused the record and written submissions filed. Our issue-wise adjudication are as under:
Scheme of the BMA - Income vs Asset:
The BMA defines "undisclosed foreign income and asset" in a composite manner. A harmonious reading of sections 2(12), 3, and 4 indicates that the legislative intent is to bring to tax undisclosed foreign income in conjunction with foreign assets.In the present case, the salary earned in Sweden was credited into a bank account maintained with Nordea Bank, Sweden. Such bank account, as held in judicial precedents relied upon by the assessee, constitutes a foreign asset.Once it is accepted that the income is embedded in a foreign asset, the proviso to section 3 becomes relevant, which provides that such asset shall be taxed in the year in which it comes to the notice of the Assessing Officer. Herein, the Revenue's attempt to artificially segregate income from the corresponding asset, in our view, defeats the scheme of the Act.We find merit in the reasoning adopted in the decisions of the co-ordinate benches relied upon by the assessee, wherein it has been held that undisclosed foreign income and asset BMA No 24 & 25 /Chny/2025 (AY 2016-17 & 2018-19) Mathailagan Gathya Vs DDIT/ADIT (Inv.) :: 16 ::
are to be read together and assessed in the year of detection. Year of Taxability:
It is an undisputed fact that the information regarding the foreign income came to the notice of the Department only in November 2021.Therefore, even assuming the applicability of the BMA, the taxation, if any, could arise only in the year of detection and not in AY 2016-17.
On this short ground alone, the addition made in AY 2016-17 is liable to be deleted.
Applicability of DTAA (India-Sweden):
We now turn to Article 15 of the DTAA between India and Sweden. The relevant facts are that the assessee is a resident of India. The employment was exercised in Sweden. The employer, Tata Consultancy Services Sverige AB, is a tax resident of Sweden. Under Article 15(1), where employment is exercised in the other Contracting State, the remuneration derived therefrom is taxable in that State.Clause (2) provides exceptions, but the same are not applicable in the present case, as the employer is a resident of Sweden.Thus, the case falls squarely under Article 15(1), and the right to tax such income rests with Sweden.The expression "may be taxed" has been judicially interpreted to mean that where the source State is granted the right to tax, and the conditions of the treaty indicate attribution to that State, the residence State must grant relief so as to avoid double taxation.Further, section 90(2) of the Income-tax Act provides that the provisions of the DTAA shall prevail where they are more beneficial to the assessee.In the present case, applying the DTAA, the income is not chargeable to tax in India. If the income itself is not chargeable under the Act read with the DTAA, the same cannot be brought to tax under the BMA.
BMA No 24 & 25 /Chny/2025 (AY 2016-17 & 2018-19) Mathailagan Gathya Vs DDIT/ADIT (Inv.) :: 17 ::
Effect of Non-disclosure:
The Revenue has emphasized non-disclosure by the assessee. While non-disclosure may trigger proceedings, it cannot create a charge of tax where none exists in law.The BMA is a machinery and charging statute for taxing undisclosed foreign income. However, it cannot override the provisions of section 90(2) of the Income-tax Act and the binding effect of DTAA.Where income is not chargeable to tax in India by virtue of DTAA, it cannot be treated as "undisclosed foreign income" merely because it was not reported.
Distinction from Revenue's Arguments:
The contention of the Revenue that DTAA relief is available only upon disclosure is not supported by the statutory framework. Treaty rights are substantive rights and cannot be denied on procedural lapses alone, particularly when the foundational charge fails.Similarly, the argument that the BMA overrides the DTAA cannot be accepted in the absence of an express non obstante provision overriding section 90(2).
10.In view of the above, the foreign salary income, being linked to a foreign bank account, assumes the character of an asset and is taxable, if at all, only in the year of detection. The addition in AY 2016-17 is therefore unsustainable. Independently, under Article 15 of the India-Sweden DTAA read with section 90(2), the said income BMA No 24 & 25 /Chny/2025 (AY 2016-17 & 2018-19) Mathailagan Gathya Vs DDIT/ADIT (Inv.) :: 18 ::
is not chargeable to tax in India. Consequently, the provisions of the BMA cannot be invoked in the present case.
11. In the result, the appeal of the assessee for AY 2016-17 is allowed and the addition of Rs.2,88,618/- is hereby deleted. This order is equally mutatis mutandis applicable to AY 2018-19. Hence, we delete the addition for AY 2018-19 also.
Order pronounced in the open court on the 04th day of May 2026, in Chennai.
Sd/- Sd/-
(इं तूरी रामा राव) (मनु कुमार िग र)
(INTURI RAMA RAO) (MANU KUMAR GIRI)
लेखा सद*य/ACCOUNTANT MEMBER या यक सद*य/JUDICIAL MEMBER
चे नई/Chennai,
+दनांक/Dated: 04th May, 2026.
SNDP, Sr. PS
आदे श क त-ल.प अ/े.षत/Copy to:
1. अपीलाथ /Appellant
2. थ /Respondent
3. आयकरआयु /CIT, Chennai / Madurai / Salem / Coimbatore.
4. िवभागीय ितिनिध/DR
5. गाडफाईल/GF