AKSHAY BHAN,CHANDIGARH V. ADDL. CIT, CENTRAL CIRCLE, CHANDIGARH

BMA 2/CHANDI/2024

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The case involves Shri Akshay Bhan, who faced penalties for non-disclosure of foreign assets in his income tax returns for the Assessment Years 2016-17 to 2018-19 under the Black Money Act. The penalties were initially imposed by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals). The main contention was whether the penalties were justified given that the investments were made from legitimate sources and the non-disclosure was due to a clerical error. The Tribunal considered various precedents and the discretionary nature of penalties under Section 43 of the Black Money Act, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780191 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 14 day(s)
• Appeal Type: Black Money Appeal
• Pronouncement Date: 07-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 23-12-2024
• Other Referred Cases: Prasad Nimmagadda vs. Addl. CIT, Palanirajan Rajarajan vs. Addl. CIT, Addl. CIT vs. Leena Gandhi Tiwari, Hindustan Steel Ltd. vs. State of Orissa, Ocean Driving Centre Ltd. vs. Addl. CIT, Mylan Laboratories Ltd. vs. Addl. CIT, M/s Shobha Harish Thawani vs. Addl. CIT
• Laws Referred To: Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN LD.
• Assessee Lawyers: JASPAL SHARMA LD
• Keywords: Reasonable cause; Ignorance of law; Source of fund
• Section: 143(3)

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, CHANDIGARH PHYSICAL HEARING BEFORE HON’BLE SHRI LALIET KUMAR, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1. BMA No.1/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2016-17) & 2. BMA No.2/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2017-18) & 3. BMA No.3/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2018-19) Shri Akshay Bhan H. No. 302, Sector 10-B Chandigarh - 160017 बनाम/ Vs. Addl. CIT Central Circle Chandigarh-160017 ˕ायीलेखासं./जीआइआरसं./PAN/GIR No. AAXPB-9928-P (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Sh. Jaspal Sharma (Advocate) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Shri Vivek Vardhan (Addl. CIT) –Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 29-09-2025 घोषणाकीतारीख /Date of Pronouncement : 07/10/2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1.1 The sole grievance of the assessee in the captioned appeals for Assessment Years (AY) 2016-17 to 2018-19 is confirmation of penalty of Rs.10 Lacs in each of these three years u/s 43 of Black Money Printed from counselvise.com 2 (undisclosed foreign income & assets) and imposition of Tax Act, 2015 (‘BMA’ in short). First, we take up appeal for AY 2016-17 which arises out of an order passed by learned Commissioner of Income Tax (Appeals)-3, Gurgaon [CIT(A)] on 29-10-2024 u/s 16 of BMA in the matter of impugned penalty of Rs.10.00 Lacs as levied by Ld. Assessing Officer [AO] u/s. 43of BMA Act vide order dated 03-06- 2022. The grounds of appeal read as under: - 1. The impugned order is both against facts and erroneous in law. 2. On the facts and circumstances of the case, the Ld. Commissioner (Appeals)-3 Black Money (UFIA) and Imposition of Tax, 2015, Gurgaon has erred in having disposed of the assessee’s appeal ex-parte confirming the order of the Ld. AO without having considered the assessee’s written submissions dated 08.10.2024 uploaded on portal on same date. 3. The Ld. CIT(Appeals) has gravely erred in having held in para 3 that the assessee has made no compliance to substantiate the grounds of appeal taken. 4. On the facts and circumstances of the case, the CIT (Appeals) has erred in having sustained the penalty of Rs.10,00,000/- imposed by the Ld. AO u/s 43 of Black Money (UFIA) and Imposition of Tax, 2015 arbitrarily without having considered the written submissions of the assessee and facts on record. 1.2 The Ld. AR advanced arguments with the support of various case laws, the copies of which have been placed on record. The same include the decision of Hyderabad Tribunal in the case of Prasad Nimmagadda (173 Taxmann.com 444) as well as the decision of Chennai Tribunal in the case of Palanirajan Rajarajan (172 Taxmann.com 817). The written submissions have also been filed assailing the confirmation of impugned penalty. The Ld. Sr. DR also advanced arguments and justified the invocation of provisions of Sec.43 of BMA against the assessee. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Printed from counselvise.com 3 1.3 At the outset, it is noted that the provisions of Sec. 43 of BMA provide that if any person, being a resident other than not ordinarily resident who has furnished the return of income for any previous year under sub-sections (1) or (4) or (5) of Sec.139 fails to furnish any information or furnishes inaccurate particulars in such return relating to any asset (including financial interest in any entity) located outside India, held by him as a beneficial owner or otherwise, or in respect of which he was a beneficiary, or relating to any income from a source located outside India, at any time during such previous year then Assessing Officer may direct that such person shall pay, by way of penalty, a sum of Rs.10 Lacs. The exception is with respect to an asset being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to Rs.5 Lacs at any time during the previous year. It would be pertinent to note that Section 4 r.w.s. 2 (11) of the BMA, dealing with chargeability of undisclosed foreign asset, defines an undisclosed foreign asset as \"an asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is beneficial owner, and he has no explanation about the source of such investment in such asset or the explanation given by him is, in the opinion of the Assessing Office, “not satisfactory\". The definition of an undisclosed foreign asset, under the BMA, is thus not dependent on the disclosure made, or not made, in the income tax return. So far as disclosure of an undisclosed foreign asset in the income tax return is concerned, it is relevant only for the purpose of penalty u/s 43 and for no other Printed from counselvise.com 4 purpose in the BMA. The provisions of Sec. 43 trigger a penalty for non-disclosure of a foreign asset, held as a beneficial owner or otherwise, or non-disclosure of a foreign income in the income tax return filed and this penalty is an additional consequence. Proceedings before lower authorities 2.1 The assessee, being resident individual, has made three foreign remittances for acquiring shares of a foreign company M/s Ten Legs, New York as follows: - No. Date of Investment Amount Invested (INR) Amount Invested (in USD) 1. 08-11-2011 50,00,000/- USD 100,300.90 2. 11-09-2012 56,00,000/- USD 100,000 3. 15-01-2015 69,97,034/- USD 112,719 Total 1,75,97,034/- It could be seen that all these investments were made in FY 2011-12, 2012-13 & 2015-16 and no remittances have been made in any of the impugned AYs. However, in terms of statutory requirements as applicable from AY 2016-17, the assessee was required to disclose the same in ‘Schedule FA’ of the return of income. 2.2 There is no dispute on the fact that all the remittances were out of legitimate tax paid funds and the return of income was duly accepted u/s 143(3) vide order dated 19-04-2021. It was duly explained by the assessee that these investments were made through banking channels under Liberalized Remittances Scheme for resident individuals which permitted the resident individuals to acquire the shares outside India without prior approval of RBI. No adverse view was taken by Ld. AO on these investments. Printed from counselvise.com 5 2.3 The grievance of the assessee stem from the fact that Ld. AO initiated penalty u/s 43 of BMA Act on account of the fact that these investments were not disclosed as per extant law under ‘Schedule FA’. The assessee’s case was that the above mistake was an inadvertent mistake and only a clerical mistake due to the fact that the above disclosure requirement arose only from AY 2016-17 and act was new and still not familiar with tax consultants. There was no mala fide motive for the assessee for not making above disclosure. Reliance was placed on various judicial decisions to assail the proposed levy of penalty. However, Ld. AO held that ignorance of law could not be an excuse and accordingly, levied penalty of Rs.10 Lacs. Similar penalty was imposed for AYs 2017-18 & 2018-19 though a partial disclosure of the investment was already made by the assessee therein. The Ld. CIT(A) confirmed the penalty in all the three years and hence, these appeals by the assessee. Our findings and Adjudication 3. From the facts, it emerges that the assessee has made investments in foreign assets in earlier years and there is no dispute on the fact that all these investments were out of legitimate sources. No new investment ahs been made by the assessee during this year. From AY 2016-17, BMA was introduced wherein there was a new requirement on a resident to disclose the details of prescribed foreign assets. This requirement was a newly introduced requirement and introduced for the first time w.e.f. AY 2016-17. As per new law, the assessee was under an in obligation to quote the value of investments Printed from counselvise.com 6 in ‘Schedule FA’ of the return of income. This was the first year of such reporting and it was quite possible that the assessee missed out to take note of those old investments. In our considered opinion, the assessee would not stand to gain anything by not reporting these investments since the investments were out of accounted sources of income only. From the above tabulation, it could be seen that the specified foreign assets were acquired long ago. Under these circumstances, the claim that there was inadvertent mistake on the part of the assessee for not disclosing such asset was to be accepted. 4. In our opinion, the imposition of penalty is not mandatory since the provisions of Sec.43 uses the expression “the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten lakh rupees” as against expression “shall” which would show that the element of discretion was embedded in the statutory provisions itself and the issue of levy of penalty was to be examined with reference to specific facts of the case. 5. Our view is duly supported by the order of Mumbai Tribunal in the case of Addl. CIT vs. Leena Gandhi Tiwari (136 Taxmann.com 409) holding that mere non-disclosure of a foreign asset in the income tax return, by itself, is not a valid reason for a penalty under the BMA. While disclosure of all foreign assets is mandatorily required to be made in an income tax return, the penalty under Section 43 of BMA comes into play only when the aggregate value of these assets exceeds Rs.5 Lacs. Therefore, even statutorily, it is not a simple cause and effect relationship between non-disclosure of an Printed from counselvise.com 7 undisclosed foreign asset in the income tax return and penalty under BMA. The unambiguous intent of the legislature thus was to exclude trivial cases of lapses which could be attributed to a reasonable cause. It could also be noted that Sec.43 provide that the Assessing Officer \"may\" impose the penalty, and the use of the expression \"may\" signify that the penalty is not to be imposed in all cases of lapses and that there is no cause-and-effect relationship simplicitor between the lapse and the penalty. As to what should be the considerations for the exercise of this inherent discretion by the Assessing Officer, some guidance could be taken from Hon'ble Supreme Court's judgment in the case of Hindustan Steel Ltd. (83 ITR 26) which, inter alia, observes that \"……..penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. The penalty will not also be imposed merely because it is lawful to do so. Whether a penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose a penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute\". Essentially, therefore, the overall conduct of the assessee, and materiality of the lapse as also its being in the nature of a technical or Printed from counselvise.com 8 venial breach of law, is the most critical factor so far as taking a call on the question of whether or not a penalty should be imposed for the assessee's failure to discharge a statutory obligation. The imposition of penalty under Section 43 is surely at the discretion of the Assessing Officer, but the manner in which this discretion is to be exercised has to meet the well-settled tests of judicious conduct by even quasi- judicial authorities. The bench also considered the objective of BMA legislation and finally confirmed the order of first appellate authority in deleting the impugned penalty as imposed by Ld. AO. This decision has subsequently been followed by Chennai Tribunal in the case of Palanirajan Rajarajan (172 Taxmann.com 817).Similar view has been taken by Hyderabad Tribunal in the case of Prasad Nimmagadda (173 Taxmann.com 444)wherein the bench has followed the decision of Mumbai Tribunal in Ocean Driving Centre Ltd. (156 Taxmann.com 360)as well as the decision of Hon’ble Telangana High Court in the case of Mylan Laboratories Ltd. (137 Taxmann.com 178) while deleting the penalty for non-disclosure of foreign assets. In this decision, the bench has distinguished the decision of Mumbai Tribunal in M/s Shobha Harish Thawani (154 Taxmann.com 564) as quoted by the revenue. Respectfully following these decisions, we delete the impugned penalty and allow the appeal of the assessee. 6. Facts in AYs 2017-18 & 2018-19 are pari-materia the same wherein the assessee has made partial disclosure of these investments. Since facts are substantially the same, taking the same Printed from counselvise.com 9 view, we delete the impugned penalty, for both the years, on similar reasoning. 7. All the appeals stand allowed. Order pronounced on 07/10/2025 Sd/- Sd/- (LALIET KUMAR) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07/10/2025 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "