Indians who were once spotted with secret foreign bank accounts are in for the long haul, with the past returning to haunt them just when they believed their run-ins with the taxman were over for good.

Several individuals – including those who were investigated, re-assessed and taxed – have been asked by the Foreign Assets Investigation Unit (FAIU) to share details of offshore bank accounts since 2001, residency status for the past two decades, passport copies and names of overseas service providers. Overseas service providers are professional outfits setting up tax haven vehicles and trusts to hold the funds.

FAIU is a newly-formed wing under the Income Tax (I-T) Department. The notices and summons were issued during the past 10 days by FAIU cells in the Air India and Scindia House offices of the I-T Department in Mumbai, three persons told ET.

The recipient of the notices, issued under Section 131 (1A) of the Income Tax Act, 1961, have to spell out the name of the ‘introducer’ or ‘guarantor’, if any, of the bank accounts.

Reopening Period

They also have to inform whether these accounts were disclosed in the tax returns, whether tax was paid on funds credited to the accounts, provide bank statements since the date of opening and closure of accounts and transactions made, along with source and supporting documents.

“As far as the extensive period for which data is sought, facts permitting, it is possible one may contend that such old records are not retained. Even under the I-T Act, reopening notices can now be issued only for 10 years backwards,” said Ashish Mehta, partner at the law firm Khaitan & Co.

Prior to April 2021, the reopening period for offshore assets was 16 years; it was reduced to 10 years under the Finance Act 2021.

“Data gathered under the Act can be used for invocation of Black Money Act,” said Mehta. “While much would depend on the peculiarity of facts in each case, some would argue that persons investigated have already been taxed in proceedings under the I-T Act, in which case the same assets or incomes cannot be assessed again under the Black Money Act.”

“Various retrospective aspects of the Black Money Act are under challenge before various courts, and until these cases are decided, taxpayers will need to tread cautiously in such proceedings,” said Mehta.

Black Money Act

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, or BMA, which was brought in to tax undisclosed foreign income and assets, came into force on April 1, 2016.

“Many cases have possibly been assessed, re-assessed, investigated and even settled by the tax tribunals, courts or the Settlement Commission,” said Mitil Chokshi, senior partner, Chokshi & Chokshi. “The question is if the assessee can argue whether these are resulting in retrospective assessment today. Secondly, assessments initiated under the BMA are now under the jurisdiction of the Investigation Wing of the department. So, it appears the department, through the new investigation division, is trying to collect information prior to 2011, so as to assess such undisclosed income or accounts under the BMA of 2015.”