JCIT, RANGE-2(C), KOLKATA, KOLKATA V. VIKASH MARDA, KOLKATA

BMA 8/KOL/2024

AI Insights

The case involves appeals by the revenue against the orders of the Ld. Commissioner of Income Tax (Appeals), Kolkata, which related to the imposition of tax and penalties on Vikash Marda under the BMA Act, 2015. The primary contention was whether the provisions of the BMA Act, which came into effect on July 1, 2015, could be applied retrospectively to the assessment years 2014-15 and 2015-16. The Tribunal found that the Act was not in force during these years and thus, the tax and penalties imposed were not sustainable. For the assessment year 2016-17, although the Act was in force, the Tribunal agreed with the CIT(A) that the information regarding the undisclosed foreign income and assets came to the notice of the AO in 2018, relevant to AY 2019-20, and thus could not be applied to AY 2016-17.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 298771 (ITAT-KOLKATA)
• Appeal Type: Black Money Appeal
• Pronouncement Date: 23-12-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Other Referred Cases: Krishna Das Agarwal v. DDIT, SSS Projects Ltd. v. DCIT
• Laws Referred To: Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Fair market value; Salary income; Source of fund; Residential status; Procedural lapse
• Section: 139(1); 43; 13; 139; 92C; 20

Judgement Text

"आयकर अपीलीय अिधकरण कोलकाता 'B' पीठ, कोलकाता मŐ IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA ŵी संजय गगŊ, Ɋाियक सद˟ एवं ŵी संजय अव̾थी, लेखा सद˟ क े समƗ Before SRI SANJAY GARG, JUDICIAL MEMBER & SRI SANJAY AWASTHI, ACCOUNTANT MEMBER B.M.A. Nos. 4 to 6/KOL/2024 Assessment Years: 2014-15 & B.M.A. Nos. 7 to 9/KOL/2024 Assessment Years: 2015-16 & B.M.A. Nos. 10 to 12/KOL/2024 Assessment Years: 2016-17 JCIT, Range-2(C), Kolkata ………. Appellant Vs. Vikash Marda ......... Respondent Flat No. C101, Olympus Court, 4/2, Sarat Bose Road, Lansdown, Kolkata-700020. (PAN: AEUPM6044A) Appearances: Appellant represented by : Shri Prakash Nath Barnwal, CIT, DR Respondent represented by : Shri P. K. Himmatsinghka, FCA Date of concluding the hearing : December 12th, 2024 Date of pronouncing the order : December 23rd 2024 ORDER Per Bench: The captioned appeals have been preferred by the revenue against the separate orders of the Ld. Commissioner of Income Tax (Appeals), Kolkata-20 BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 2 of 15 [hereinafter referred to as Ld. 'CIT(A)'] relating to the imposition of tax and penalty under Black Money (Undisclosed Foreign Income and Assets) and imposition of Tax Act, 2015 (hereinafter referred to as the “BMA Act, 2015”). 2. All the appeals of the revenue are time barred by 30 days. Separate condonation of delay petitions have been filed. Considering the shortness of delay, the delay in filing the present appeals is hereby condoned. 3. Since the facts and issues involved in all these appeals are identical, hence, all the appeals of the revenue have been heard together and are being disposed of by this common order. BMA NO. 4 & 6/KOL/2024 for AY: 2014-15 & BMA Nos. 7, 8 & 9/Kol/2024 for AY 2015-16. 4. BMA Nos. 04 & 09/Kol/2024 are relating to imposition of tax u/s. 10(3), BMA Nos. 6/Kol/2024 and 7/Kol/2024 are relating to imposition of penalty u/s. 41, whereas BMA Nos. 05 and 08/Kol/2024 are relating to imposition of penalty u/s. 43 of the BMA Act, 2015. 5. Assessee’s appeal BMA No. 4 /Kol/2024 is taken as the lead case for the purpose of narration of facts. 6. Brief facts of the case are that the assessee, an Indian citizen, travelled to the USA in 1993 for higher studies. After completing his education, he worked at Siebel Systems and Oracle Corporation from 1999 to 2007, during which he was a tax resident in the USA, filing tax returns as required. He invested/ accumulated a Non-Retirement Fund (NRF) with a corpus of $29,000 between January 22, 2003, and September 8, 2005, derived from savings from his employment in the USA. The assessee returned to India in the financial year 2007-08, leaving his job in the USA. Subsequently, he received dividends on the NRF fund, which as per the plan were reinvested in the same fund in USA and not remitted to India. The details of the dividends received by the assessee is as under: BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 3 of 15 Dividend details Financial Year Dividend (USD) 2013-14 2,750 2014-15 2,249 2015-16 2,933 6.1. The Assessing Officer (AO) received information regarding above dividends in Financial Year (FY) 2018-19 and issued notices u/s. 10(1) dated 29.11.2018, for the assessment years (AY) 2014-15, 2015-16 and 2016-17. The AO upon verification, found that the assessee had been reporting his foreign accounts in the Income Tax Return (ITR) under Schedule FA starting from assessment year 2017-18 and onwards. The AO issued quantum orders u/s 10(3) of the Black Money Act (BMA Act) for the aforementioned assessment years: Assessment Year 2014-15: The AO noted Notional increase in the NRF value from $68,811 (31-12-2008) to $132,504 (31-12-2013), treating the difference of $63,693 as undisclosed assets, along with the dividend of $2,750 aggregate $ 66,443, and brought in tax net as per sec. 3(1). Assessment Year 2015-16: The AO found that there is a decrease in NRF value, concluding only the reinvested dividend of $2,249 should be taxed u/s 3(1). Assessment Year 2016-17: Similarly, the AO found that there is a decrease in NRF value and taxed only reinvested dividend of $2,933. 6.2. The Ld. CIT(A), however, deleted the impugned made by the AO observing as under: “I have carefully considered the facts of the case and submission of the appellant. A.O. has passed a very cryptic assessment order without explaining the reasons for arriving at the conclusion that assessee had undisclosed foreign assets/income in the relevant assessment year. However, without going into the merits of the issue involved, I would like to discuss the technical/legal issue vehemently raised by the appellant that notice u/s.1 0(1) for A.Y. 2014-15 is not valid. It is a fact that SMA Act was initially notified to come into existence w.e.f. 01-04-2016. However, for removing certain difficulties for the' purpose of declaration u/s.59 of the Act, another notification was issued making the Act applicable w.e.f. 01-07-2015. Thus, the Act was not applicable for AY. 2014-15, as it was not in existence for that year. Further, Assessing BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 4 of 15 Officer under the BMA, 2015 have been notified in January, 2018. As per the Act, foreign income/assets can be brought to tax for the year in which such undisclosed foreign income/asset has come to the notice of the AO. Thus, cognizance of any information regarding undisclosed foreign income assets can be taken by the A.O. under BMA, 2015, for the years when Act has become operative and A.O. have been notified under BMA, 2015 to implement the Act. In this case, information was received in November, 2018. Thus, the information came to the notice of the A.O. in AY. 2019-20. Thus, as per the Act, A.O. could have assumed jurisdiction to process the information, for A.Y. 2019-20. However, A.O. has made a grave mistake by initiating proceedings for A.Y. 2014-15 when the BMA, 2015 was neither in existence nor any A.O. under the Act was authorized to implement the provisions of the Act. Under the circumstances, I agree with appellant's submission that notice u/s. 10(1) of the BMA, 2015 was defective and jurisdiction assumed under BMA, 2015 for the A.Y. 2014- 15 is illegal. Hence, without going into merits of the issue involved, order u/s.10(3) of the BMA, 2015 dated 31-03-2021 is quashed.” 6.3. Being aggrieved by the above action of the Ld. CIT(A), the revenue has come in appeal. 7. The Ld. Counsel for the assessee has made the following submissions: “Submission on the Black Money Act 2015 The Black Money Act 2015 was established to combat the issue of undisclosed income generated from illicit activities within India and subsequently hidden abroad. Key definitions under the Act include: Undisclosed Assets Located Outside India [Section 2(11)]: This refers to any asset held by an assessee outside India for which the source of investment cannot be satisfactorily explained. Undisclosed Foreign Income and Asset [Section 2(12)]: This encompasses the total amount of undisclosed income sourced from outside India, along with the value of undisclosed assets located abroad, as computed according to Section 5. Charge of Tax [Section 3(1)]: The Act stipulates that for every assessment year starting on or after April 1, 2016, a tax shall be levied on every assessee based on their total undisclosed foreign income and assets from the previous year, at a rate of 30%. Specifically, any undisclosed asset located outside India will be taxed at its value in the previous year in which it comes to the notice of the Assessing Officer. Trigger Points for Tax Assessment: To initiate tax proceedings, it is crucial to identify the trigger points, which include: (i) Existence of an undisclosed asset located outside India. (ii) Presence of undisclosed foreign income and assets. BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 5 of 15 Upon receiving relevant information, the assessing officer (AO) must evaluate these trigger points and issue a notice under section 10(1). This should be done in the year the information is received or within a reasonable timeframe, typically 30 days, in accordance with Board guidelines. Consequently, the AO can charge the undisclosed foreign assets or income for the previous year in which the information was obtained. (4) Submission on Non retirement Fund falls outside scope of BMA The Non retirement fund acquired by the respondent assessee cannot be treated as undisclosed foreign assets under Section 2(11) of the Black Money Act (BMA) 2015. As clarified in FAQ 24 of Circular 13 dated July 6, 2015 (attached at paper book page at 131), any individual who is currently a resident and acquired foreign assets using income not subject to tax in India cannot be deemed to hold undisclosed foreign assets. Thus, the respondent's case falls outside the scope of the BMA, as the NRI fund was acquired from clearly explained and undisputed sources. Section 4 defines the scope of total undisclosed foreign income & assets computing undisclosed foreign income and assets and in that context envisages a situation to tackle a foreign income which is not reported in return submitted u/s 139(1),(4),(5) of Income Tax Act. The assessee was under bona fide believe that dividend income earned on which tax has already been withheld by US Tax Authorities and which was reinvested in NRF will be taxable in India in the year of maturity/termination of fund. In any case, the assessee case falls for taxation U/s 5(1)(c) of Income Tax Act, not under BMA 2015. The assessee admittedly has started reporting his foreign account in FA schedule of return from F.Y. 2016-17 (asst. year 2017-18). (5) Submission on Chargeability Under the Black Money Act The assessee would like to submit that the year of chargeability under the Black Money Act (BMA) is not the year in which income has been earned. The BMA recognises the specific year in which the Assessing Officer (AO) receives information regarding undisclosed foreign income and assets and the year of obtaining information is the previous year rather than the year to which the income or assets pertain. The AO should have issued a notice under Section 10(1) for the previous year in which he got the information regardless of the year related to the undisclosed income or assets, and the tax will be charged according to Section 3(1) of the BMA. The Central Board of Direct Taxes (CBDT) has issued guidelines dated January 23, 2018, which recommend that notices under section 10(1) should be issued within 30 days from the end of the financial year in which the information was received. This guideline serves to ensure a timely and efficient process in addressing undisclosed foreign income and assets. BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 6 of 15 (6) Submission on Jurisdiction of Notice and Orders Under the Black Money Act The Assessing Officer (AO) issued a notice under Section 10(1) on November 29, 2018, concerning undisclosed assets in the form of dividends held in a fund account in the USA for the assessment years 2014-15, 2015-16 and 2016-17. However, the subsequent orders issued under Section 10(3) for these assessment years are contrary to the provisions of Section 3(1) in conjunction with Sections 2(12) and 4 of the Black Money Act (BMA). It is important to highlight that the BMA was enacted in 2015 but only became operational on April 1, 2016. Although the Act was preponed to July 1, 2015, through Notification No. 1790(E) to facilitate voluntary disclosures under specific provisions, it does not retroactively apply for any other purposes. The deadline for voluntary declarations was September 30, 2015, with tax payments due by December 31 2015. This suggests that the government recognized the need to clarify the application of the BMA for compliance purposes for submission of voluntary disclosure U/s 59 for the A.Y. 2016-17. If April 1, 2016, is considered the commencement date of the assessment year, the relevant previous year would be 2015-16. In that scenario, it would have been unnecessary to issue the removal of difficulties order in 2015 if the intention was to cover voluntary declarations from earlier periods. Moreover, the Hon'ble Jaipur ITAT in Krishna Das Agarwal v. DDIT (para 39, sub-para) confirmed that the BMA came into effect on April 1, 2016, and asserted that the first assessment year applicable under the BMA for non-disclosure is AY 2017-18. In conclusion, the notice issued under Section 10(1) and the corresponding orders under Section 10(3) for the assessment years 2014- 15, 2015-16, and 2016-17 lack valid assumption of jurisdiction and are therefore illegal and unenforceable, as the BMA was not in operation during those years and notice u/s 10(1) could only be issued for the assessment year relevant to previous year in which information has been received. 7. Submission on Wrong classification of NRI Fund Value as Undisclosed Foreign asset : The Assessing Officer (AO) erroneously classified the notional increase in the value of the NRI fund, amounting to $63,693, as an undisclosed foreign asset for the assessment year 2014-15. This classification contradicts Section 2(11) of the Black Money Act, especially considering that the source of the original corpus of the NRI fund was satisfactorily explained. The funds were derived from savings accumulated during the respondent's employment in the USA, for which tax returns were duly filed. BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 7 of 15 Furthermore, FAQ No. 24 of Circular 13 dated July 6, 2015 (enclosed in the paper book at page 131), explicitly states that a person who is currently a resident and acquired foreign assets using income not subject to tax in India cannot be deemed to hold undisclosed foreign assets. In the light of this clarification and the satisfactory explanation of the fund's source, the treatment of the increased value of the NRI fund which is nothing but notional increase in market value as an undisclosed foreign asset is both inappropriate and unfounded (8). Submission on Department's Appeal and Section 81 Protection The department has filed an appeal before the ITAT, Kolkata, asserting that the notices and subsequent orders issued for the assessment years 2014-15, 2015-16, and 2016-17 are protected under Section 81 of the Black Money Act, which is analogous to section 292B of the Income Tax Act. However, the Hon'ble Karnataka High Court, in the case of SSS Projects Ltd. v. DCIT (129 Taxmann.com 378), clarified that only clerical errors or accidental omissions can be protected under Section 292B. This precedent emphasizes that the protection afforded by these provisions does not extend to substantive issues or fundamental flaws in the proceedings. In this context, the department's reliance on Section 81 as a protective measure is misplaced, as the issues at hand involve substantive legal determinations rather than mere clerical errors. In view of the above, the respondent assessee case do not fall under Black Money Act 2015 and all the notices issued for A Y 2014-15, A Y 2015-16 and A Y 2016-17 are liable to be quashed & consequently assessment order passed U/S 10(3) along with the penalty order passed U/s 41 & 43 are also liable to be quashed.” 8. We have heard the rival contentions and gone through the records. Admittedly, initially the Black Money Act, 2015 vide section 1(3) had come into force on 01.04.2016. However, its implementation was preponed w.e.f. 01.07.2015, through Notification No. 1970(E) to facilitate voluntary disclosures so that a reasonable opportunity may be given to the concerned persons to voluntarily disclose their undisclosed assets and pay due taxes to avoid the tax penalty and prosecution on coming into force the Black Money Act, 2015. Under such a position, the first previous year under the provisions of Black Money Act, 2015 would be FY 2015-16 and the corresponding AY will be AY 2016-17. Therefore, the AO could not have assessed the income of the assessee for AYs 2014-15 and 2015-16. Similarly, there would not have any jurisdiction to impose penalty for AYs 2014-15 and 2015-16 before coming BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 8 of 15 into force the Black Money Act, 2015. The assessee was not supposed to comply the provisions of Black Money Act, 2015, before it has come into force and, therefore, the assessee cannot be held liable for non-compliance of any provisions of the Black Money Act, 2015 in relation to AY 2014-15 and 2015- 16 and penalty levied u/s. 41 & 43 of the Black Money Act, 2015 and would also be not sustainable for AY 2014-15 and AY 2015-16. Therefore, there is no force in the appeals of the revenue relating to action of the Ld. CIT(A) in deleting the tax imposed u/s. 10 of the Black Money Act, 2015 and penalty levied u/s. 41 & 43 of the Black Money Act, 2015 for AYs 2014-15 and 2015- 16. 9. Appeals of the revenue relating to AY 2014-15 and AY 2015-16 are hereby dismissed. BMA No. 12/Kol/2024, AY: 2016-17: 10. The Black Money Act, 2015 had come into operation for the AY 2016- 17 onwards. The AO noted that there was decrease in the funds value of the investment by the assessee. Therefore, he did not tax any income of the assessee in that respect. However, he noted that there was reinvested dividend of $2133. He calculated the equivalent currency in Indian value of the undisclosed foreign income at Rs.1,95,537/- and imposed tax @ 30%. 11. The Ld. CIT(A), however, has deleted the addition so made by the AO observing that as per section 10(3) of the Black Money Act, 2015, foreign asset can be brought to tax in the year in which such undisclosed foreign income/asset has come to the notice of the AO. He, therefore, held that the cognizance of any information regarding undisclosed foreign income/asset can be taken by the AO under Black Money Act, 2015 for the years when Act has become operative and the AO has been notified under Black Money Act, 2015 to implement the Act. He further observed that in this case, information was received in November, 2018. Thus, the information came to the notice of the AO in AY 2019-20. He held that as per the Act, AO could have assumed jurisdiction to process the information for AY 2019-20, and not for earlier years. He held that the AO had made grave mistake by initiating proceeding for AY 2016-17 when no order under the Act was there to implement the BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 9 of 15 provisions of the Act. He, therefore, held that the assumption of jurisdiction by the AO u/s. 10 of the Black Money Act, 2015 was defective and that the jurisdiction assumed for AY 2016-17 was illegal. He, therefore, quashed the assessment order passed u/s. 10(3) of the Black Money Act, 2015 dated 31.03.2021. 12. Being aggrieved by the said order of the Ld. CIT(A), revenue has come in appeal before us. 13. We have heard the rival contentions and gone through the records. Section 2(11) of the Black Money Act, 2015 defines the “undisclosed asset” as under: “2(11) \"undisclosed asset located outside India\" means 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 a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the Assessing Officer unsatisfactory.” 14. “Undisclosed foreign income and asset” has been defined u/s. 2(12) of the Black Money Act, 2015 as under: “undisclosed foreign income and asset\" means the total amount of undisclosed income of an assessee from a source located outside India and the value of an undisclosed asset located outside India, referred to in section 4, and computed in the manner laid down in section 5.” 15. Section 3 is relating to the charge of tax, which for the sake of ready reference, is reproduced as under: “Charge of tax. 3. (1) There shall be charged on every assessee for every assessment year commencing on or after the 1st day of April, 2016, subject to the provisions of this Act, a tax in respect of his total undisclosed foreign income and asset of the previous year at the rate of thirty per cent of such undisclosed income and asset: Provided that an undisclosed asset located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer. (2) For the purposes of this section \"value of an undisclosed asset\" means the fair market value of an asset (including financial interest in any entity) determined in such manner as may be prescribed.” BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 10 of 15 16. Section 4 of the Black Money Act, 2015 deals with the scope of “total undisclosed foreign income and asset”, the contents of which for the sake of ready reference are reproduced as under: “Scope of total undisclosed foreign income and asset. 4. (1) Subject to the provisions of this Act, the total undisclosed foreign income and asset of any previous year of an assessee shall be,— (a) the income from a source located outside India, which has not been disclosed in the return of income furnished within the time specified in Explanation 2 to sub-section (1) or under sub-section (4) or sub- section (5) of section 139 of the Income-tax Act; (b) the income, from a source located outside India, in respect of which a return is required to be furnished under section 139 of the Income-tax Act but no return of income has been furnished within the time specified in Explanation 2 to sub-section (1) or under sub-section (4) or sub- section (5) of section 139 of the said Act; and (c) the value of an undisclosed asset located outside India. (2) Notwithstanding anything contained in sub-section (1), any variation made in the income from a source outside India in the assessment or reassessment of the total income of any previous year, of the assessee under the Income-tax Act in accordance with the provisions of section 29 to section 43C or section 57 to section 59 or section 92C of the said Act shall not be included in the total undisclosed foreign income. (3) The income included in the total undisclosed foreign income and asset under this Act shall not form part of the total income under the Income-tax Act.” 17. The aforesaid provisions of the Black Money Act, 2015 when applied to the facts of the case, it would show that the NRF fund of the assessee would not fall in the definition of undisclosed asset as the assessee had earned the income during his employment at USA and the aforesaid investment was made out of the disclosed funds of the assessee, that were being taxed in the USA as per the provisions of USA Tax Laws. 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 BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 11 of 15 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 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. Admittedly, there was no undisclosed asset of the assessee in the foreign country. Regarding the dividend income earned on the NRF fund, the plea of the Ld. AR of the assessee is that the same would not fall in the definition of income as the assessee had invested in a fund, wherein, the dividend, if any, earned on such fund would automatically form part of the fund and was not separately taxable. Further, the assessment year 2016-17 was the first year when the Black Money Act, 2015 came into force. The foreign income earned by the assessee was taxable, otherwise, in that country.. However, the tax on the said dividend income was withheld as per the USA Tax Law as such dividend income formed part of the investment/fund itself. The Ld. Counsel in this respect has explained that the Black Money Act, 2015 had come into force for the first time in AY 2016-17 only and that the provisions of the Black Money Act, 2015 were not so clear and it was not ascertainable as to whether the dividend earned by the assessee on the fund, which had become part of the investment fund, itself, was required to be disclosed in the return of income filed u/s. 139 of the Act. Moreover, as per the provisions of section 3 of the Act, the undisclosed asset was to be taxed in the year in which the information regarding the same comes to the knowledge of the AO which of course came to his knowledge in November, 2018, relevant to AY 2019-20. Considering the aforesaid facts and circumstances of the case, we do not find any infirmity in the order of the Ld. CIT(A) in deleting the impugned addition made by the AO. This appeal of the revenue is accordingly, dismissed. BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 12 of 15 BMA No. 10/Kol/2024, AY : 2016-17: 18. The revenue vide this appeal has contested the action of the Ld. CIT(A) in deleting the penalty imposed u/s. 41 of the Black Money Act, 2015 on the addition made u/s. 10(3) of the Black Money Act, 2015 on account of foreign income assessed. As per section 41 of the Black Money Act, 2015, the AO may direct that in case where tax has been computed u/s. 10 in respect of undisclosed foreign incomed and asset, the assessee shall pay by way of penalty in addition to tax, if any, payable by him a sum equal to 3 times the tax computed in that section. 19. As per our observation made above while adjudicating BMA Nos. 12/Kol/2024, we have upheld the order of the Ld. CIT(A) in quashing the assessment and, therefore, by deleting the addition made by the AO u/s.10 of the Black Money Act, 2015. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) in deleting the impugned penalty as the very basis upon the impugned penalty was levied has ceased to exist. This appeal of the revenue is accordingly, dismissed. BMA NO. 11/KOL/2024, AY : 2016-17: 20. The revenue in this appeal has contested the action of the Ld. CIT(A) in deleting the penalty levied by the AO u/s. 43 of the Black Money Act, 2015. 21. As per the provisions of section 43 of the Black Money Act, 2015, a penalty of Rs. 10 lakh may be levied by the AO, if a person being a resident of India, who has furnished the return of income for any previous year u/s. 139 of the Income Tax Act and has failed to furnish any information or furnishes inaccurate particulars in the 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 any time during such previous year. However, proviso to the said section states that this section shall not apply in respect of an asset or assets other than immovable property, where aggregate value of such asset or assets does not exceeds Rs. 5,00,000/-, BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 13 of 15 which amount has been further substituted by Rs. 20,00,000/- w.e.f. 01.10.2024. 22. The AO levied the impugned penalty of Rs. 10,00,000/- observing that the assessee’s foreign assets and foreign income during the year, which the assessee had not disclosed in the income tax return filed u/s. 139(1) of the Act, were of the value, which was more than Rs. 5,00,000/-. He, therefore, levied the impugned penalty of Rs. 10,00,000/-. 23. The Ld. CIT(A), however, deleted the penalty so levied by the AO observing that the AO has not properly dealt with the issue and the order passed by the AO u/s. 10(3) of the Act did not indicate on which basis the decision has been reached that the assessee had undisclosed foreign income/asset. 24. We note that as per section 43 of the Black Money Act, 2015, the penalty can be levied if an assessee fails to disclose in its return of income filed u/s. 139 of the Income Tax Act about its foreign assets and foreign income. This section does not deal with the undisclosed foreign asset or undisclosed foreign income. This section mandates that an assessee should also declare its foreign assets and income in the return of income even which would not fall in the definition and scope of undisclosed foreign asset and income. However, the fact is to be noted that this was the first year of the implementation of the Black Money Act, 2015. The provisions of the Act are made stringent to curb the black money especially the undisclosed asset and undisclosed income of a person, which has been stashed away by him avoid taxes in India. However, in this case, the assessee was a tax resident of USA for the period from 1998 to 2007. The income earned by the assessee was salary income upon which the assessee had paid due taxes as per USA tax laws. He invested the income earned during the period in a non-retirement fund. The said fund of the assessee would not fall in the definition of undisclosed asset as defined under the Act. As observed above, the assessee was not a person who had stashed away his black money to avoid due taxes in India. Even the assessee duly disclosed its foreign assets and income in the return filed for the subsequent AY 2017-18. This was the first year of the implementation of the Black Money BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 14 of 15 Act and the time period was very short as the Act had come into force on 01.04.2016, itself, though the implementation was preponed from 01.07.2015 to give opportunity to certain assessees to avail voluntary disclosure scheme. However, in the case of the assessee, the assets of the assessee did not constitute as undisclosed assets and there was no question for the assessee to avail any such voluntary disclosure scheme. It is pertinent to mention here that as per the earlier proviso to section 43 no penalty was leviable if the value of such foreign assets does not exceed Rs. 5,00,000/-. Considering that the bona fide innocent persons who genuinely earned foreign income, while they were foreign residents and the said income earned by them was not from any undisclosed sources and due taxes have been paid by them as per foreign tax laws, should not be punished for procedural lapses, the penalty has been exempted for an asset upto the value of Rs. 5,00,000/- for such assets, which has been further increased to Rs. 20 lakh w.e.f. 01.10.2024. The provisions of section 43 do not suggest that the aforesaid penalty is mandatory, rather, as per the provisions, “AO may direct that such person shall pay, by way of penalty, a sum of Rs. 10 lakhs”. It has been held time and again that the word ‘may’ also include ‘may not’. Considering the over all facts and circumstances of the case, since this was the first year of the implementation of the Black Money Act, there was no undisclosed assets of the assessee, the assets in question have been earned by the assessee from known sources of income (salary) and due taxes paid thereupon as per USA Tax Laws and not taxes were payable by the assessee on such assets in India and further that the provisions of Black Money Act, 2015 were new and it was very difficult even for tax Practitioners, what to say of the ordinary assesees, who are not conversant with such complicated provisions to differentiate between the assets and undisclosed assets. Hence, the procedural lapse occurred on the part of the assessee was not intentional rather the assessee has been caught unawares of such lapse. Under the circumstances, in our view, the Ld. CIT(A), considering the overall facts and circumstances of the case was justified in deleting the impugned penalty. BMA Nos.4 to 12/KOL/2024 Vikash Marda Page 15 of 15 25. In the result, all the captioned appeals of the revenue are hereby dismissed. Order pronounced in the open Court on 23rd December, 2024. Sd/-[Sanjay Awasthi] Sd/- [Sanjay Garg] Accountant Member Judicial Member Dated: 23.12.2024 Jd., Sr.P.S) Copy of the order forwarded to: 1. Appellant – 2. Respondent – 3. CIT(A)-Kolkata-20. 4. Pr. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "