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Recovering black money from Swiss banks was one of the most potent promises of the 2014 general election campaign. Narendra Modi pledged to bring back every rupee stashed abroad. Within a year, his government enacted the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The Supreme Court-appointed Special Investigation Team on black money began examining names.

SwissLeaks arrived in the same period. The 2015 international investigation, coordinated by the International Consortium of Investigative Journalists and published in India by The Indian Express, disclosed 1,195 Indian names connected to HSBC’s Swiss private bank. The list included prominent industrialists, diamond traders and politicians.

A decade later, one case from that list has reached the Supreme Court. The question before the court is whether the government completed its assessment on time.

The family and the account

The Indian Express listed Bhushan Lal Sawhney, Managing Director of Sawhney Tyres, and family as holding a combined $2.69 million in an HSBC Geneva account. The court record confirmed that the account stood in the names of B.L. Sawhney and his wife, Sneh Lata Sawhney.

Income Tax authorities had moved before SwissLeaks. On July 28, 2011, search operations were conducted at the premises of B.L. Sawhney and related persons under Section 132 of the Income Tax Act, 1961. A separate warrant was issued in the name of his son, Praveen Sawhney, whose statement during the search was later relied on by the Revenue as confirming the account. B.L. Sawhney denied maintaining any foreign account.

The assessment order in Praveen Sawhney’s case was passed on March 4, 2015, under Section 153A read with Section 143(3). It added income on account of the HSBC account balance and unexplained expenditure under Section 69C.

The treaty request and its failure

Before completing the assessment, the Revenue sought information from Switzerland. On June 11, 2013, India’s competent authority made a formal request to the Swiss tax authorities under the exchange-of-information clause (Article 26) of the India-Switzerland DTAA.

India and Switzerland had amended their treaty through a protocol signed on August 30, 2010, substituting a new Article 26 that allowed meaningful exchange of banking information for the first time. Before this amendment, the original 1995 treaty had contained a narrower exchange clause – Article 24. Switzerland had historically interpreted it restrictively, treating banking secrecy as a bar to disclosure. The 2011 amendment was designed to align the treaty with the model promoted by the Organisation for Economic Co-operation and Development, under which states must share banking information on request and cannot refuse by invoking banking secrecy.

But Article 14 of the Amending Protocol restricted the new exchange provision to fiscal years beginning on or after April 1, 2011.

The Revenue’s request sought information for assessment years 2006-07 through 2011-12 – all relating to periods before that threshold. Switzerland’s reply, which came on July 2, 2019 – more than six years after the request – confirmed that the treaty created no obligation for the pre-April 2011 period. India asked in 2013. Switzerland said no in 2019. (See Paragraphs 30 and 18 of the High Court judgement linked.)

The limitation question

The Revenue’s case rested on Clause (ix) of the Explanation to Section 153B – numbered as Clause (viii) at the material time. This clause permits the exclusion of up to one year from the limitation period if a reference for information has been made to a foreign authority under a tax treaty. As the Delhi high court recorded, (Paragraph 26) if this exclusion applied, the Revenue had until March 31, 2015. The assessment order of March 4, 2015 would then be within time. If the exclusion did not apply, the assessment was time-barred. The entire case turns on this single question.

The assessees argued the treaty request was itself invalid. An invalid reference could not trigger the statutory exclusion, they submitted.

The ITAT and the high court

The Income Tax Appellate Tribunal (ITAT) accepted the limitation plea. By a common order dated May 18, 2023, it allowed the batch of appeals filed by Praveen and Sangeeta Sawhney on limitation alone, leaving the merits untouched (Paragraph 9 of the High  court judgment). An earlier ITAT order of June 1, 2021 had allowed B.L. Sawhney’s appeals on this ground and also deleted the additions on merits.

The Revenue appealed. A division bench of Justices Vibhu Bakhru and Tejas Karia heard 29 connected appeals and delivered judgment on May 13, 2025. The court upheld the ITAT. On a plain reading of Clause (ix), the statutory exclusion requires a reference made “in terms of” the treaty. The Revenue’s request was contrary to the temporal restriction in Article 14 of the Amending Protocol and therefore invalid, the High Court had held.

The court also rejected the Revenue’s argument that the original 1995 treaty (Article 24) survived the 2011 amendment. It held that substitution operated as novation: the old exchange clause ceased to exist after August 30, 2010. No saving clause preserved the old Article 24. The Amending Protocol’s non-obstante clause in Article 14(3) made the position explicit, the High Court held.

The judgment has already had consequences beyond this family. In *ACIT v. Deepa Talwar* (October 2025), the ITAT cited the Sawhney judgment to quash a similar assessment.

What the Supreme Court will decide

The Revenue has moved the Supreme Court. Diary No. 14609/2026, along with two connected petitions, came before Justices K.V. Viswanathan and S.V.N. Bhatti on March 25, 2026. Additional solicitor general Raghavendra P. Shankar pressed two arguments the High Court had considered and rejected.

First, the 1995 treaty also contained an exchange provision (Article 24) that governed the period from April 1, 1995 to March 31, 2011. The Revenue’s June 2013 request was validly made under it.

Second, even under the 2011 DTAA, the request was valid for the period April 1, 2011 to March 31, 2012, which falls within the new Article 26’s temporal scope. If a valid reference existed for even part of the period, the one-year exclusion would be triggered.

The bench issued notice, returnable on May 18, 2026.

What is ‘novation analysis’?

When two countries sign a new version of a treaty clause to replace an old one, the question arises: does the old clause still exist for any purpose, or is it completely dead?

Novation is a contract law concept. It means that when parties agree to replace an old obligation with a new one, the old obligation is wiped out entirely. It does not survive in any form. The new obligation is the only one that exists.

In this case, the old Article 24 (later renumbered Article 26) of the 1995 India-Switzerland treaty allowed some exchange of information, but was narrow – Switzerland treated banking secrecy as a bar. In 2010, India and Switzerland signed a protocol that deleted this old clause and substituted a new, broader Article 26. But the new clause came with a condition: it applies only to fiscal years from April 2011 onward.

The Revenue’s argument was: for the years before April 2011, the old clause should still apply. We can still ask for information under the old rule, the Revenue submitted.

The high court said no. Substitution is novation. The moment the new Article 26 replaced the old one, the old one ceased to exist. It was not suspended or put aside – it was extinguished. And there was no saving clause in the protocol that preserved any rights under the old version. So for the period before April 2011, the Revenue was left with no treaty mechanism at all to request information from Switzerland. The new clause did not reach back that far, and the old clause no longer existed.

In other words, the 2011 amendment broadened the future but closed off the past.

The Sawhney case is not a headline case by SwissLeaks standards. The $2.69 million account is modest against the top entries, which ran into tens of millions. But the legal question is systemic.

The Revenue’s investigation of the HSBC Geneva cohort required information about account activity that mostly predated the 2011 treaty amendment. If the Supreme Court upholds the novation analysis, the one-year limitation extension would be unavailable wherever the Revenue made a treaty reference for pre-2011 information and relied on it to stay within time.

The Revenue’s strongest counter is that the problem is not state tardiness but a gap in the treaty architecture: Switzerland, as a condition of the 2011 protocol, insisted on limiting exchange to post-April 2011 fiscal years, creating a dead zone for the very period most relevant to the HSBC Geneva cases.

But the high court’s novation reasoning is formidable. If substitution of Article 26 extinguished the old Article 24, the Revenue was left without any treaty mechanism to obtain Swiss information for the pre-April 2011 period. The 2011 amendment, while broadening the scope of future exchange, effectively closed off the past.

Consider the timeline. The search was in 2011. The assessment was in 2015. The ITAT set it aside in 2021 and 2023. The High Court upheld that result in 2025. The Supreme Court issued notice in 2026. In fifteen years, no court has examined whether the Sawhney family held undisclosed offshore wealth. The courts have examined only whether the Revenue completed its assessment on time.

If the Revenue loses, the assessments stand quashed and the question of the HSBC account goes unresolved. If it wins, the case returns for a fresh hearing – first on limitation, then eventually on the substance. Either way, the distance between political promise and legal outcome is the story. When the state promises to pursue offshore wealth, it must do so within the time the law allows, through the channels the treaty permits. The Sawhney case is a measure of whether that machinery works. May 18 will bring the next answer.

© The Wire