MAHENDRAKUMAR MEHATA ,MUMBAI V. ITO WARD 3(2)(10, MUMBAI

BMA 21/MUM/2025

AI Insights

The case involves three appeals by Mahendra Kumar Mehta against the penalties imposed for non-disclosure of foreign assets in his Income Tax Returns for the assessment years 2019-20, 2020-21, and 2021-22. The penalties were imposed under section 43 of the Black Money Act, 2015, after it was found that Mehta had investments in RL 360 Life Insurance Company which were not reported in the FA Schedule of his ITR. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) upheld the penalties, citing a default under the Black Money Act. However, the Tribunal, referencing similar cases and the discretion provided under the Act, ruled that the penalties were not warranted due to the inadvertent nature of the non-disclosure and the lack of any intent to conceal income or evade tax.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397124 (ITAT-MUMBAI)
• Appeal Type: Black Money Appeal
• Pronouncement Date: 27-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2020-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside; Reasonable cause; Principle of natural justice; Bonafide mistake; Residential status
• Section: 139; 139(5)

Judgement Text

"Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E”, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER & SHRI. RAJ KUMAR CHAUHAN, JUDICIAL MEMBER 1. BMA NO. 20/MUM/2025 (A.Y: 2019-20) 2. BMA NO. 21/MUM/2025 (A.Y: 2020-21) 3. BMA NO. 22/MUM/2025 (A.Y: 2021-22) Mahendra Kumar Mehta 403, Suhas Bldg 12, Gulmohar Cross Road, JVPD Road Juhu, Mumbai-400 049 PAN: BNQPM6548D Vs. ITO Ward 3(2)(1), Kautilya Bhavan, Mumabi-400 051 (Appellant) (Respondent) Assessee Represented by : Shri Purav Gindra, Ld. AR Department Represented by : Shri Hemanshu Joshi (Sr. DR.) Date of conclusion of Hearing : 06.05.2025 Date of Pronouncement : 27.05.2025 O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. These three (3) appeals filed by the appellant/assessee against the order of Learned Commissioner of Income Tax (Appeals) – 51, Mumbai BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 2 [hereinafter referred to as the “CIT(A)”] for the A.Y. 2019-20, 2020-21 and 2021-22 respectively, wherein penalty of Rs. 10 lakhs each year has been imposed upon the assessee u/s 43 of the Black Money (Undisclosed Foreign Income and Assets – UFIA) and imposition of Tax Act 2015 herein referred as „Black Money Act‟ on the ground that during the concerned years, the investment in RL 360 Life Insurance Company (ISLE of MAN) has not been reported in FA Schedule of ITR filed for the relevant assessment years and therefore AO found there is default within the meaning of section 43 of the Black Money Act, 2015. 2. Since the facts of all the appeals filed by the assessee are exactly same and parties are same, grounds are same and impugned order are on similar lines, hence all the appeals are taken up together in order to avoid the multiplicity of the decision. First of all, we are taking ITA No. 20/Mum/2025 for AY 2019-20 as lead case. 3. The brief facts of the case are that, the residential status of the assessee as per his return of income filed is resident for tax purpose for AY 2019-20 to 2022-23. Credible information was received by the AO that assessee has made foreign investments in RL 360 Life Insurance Company BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 3 with Account Number: C123031G, 3022148R, C122393C, C122396F. The AO observed that the Foreign Asset Schedule (FA Schedule) was introduced in the Return of Income, since A.Y. 2012-13 in Finance Bill 2012 in order to keep a track of the foreign assets and income generated thereon in the foreign jurisdictions by Indian residents. A new provision of penalty u/s 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was introduced for non-disclosure of such foreign assets since AY 2016-17 (the year of enactment of BMA). 4. On verification of ITR AY 2019-20 to 2021-22 filed by the assessee, the AO found that the investment in RL 360 Life Insurance Company has not been reported in FA schedule of ITR filed for these concerned years and therefore held that there is a default within the meaning of Section 43 of the Black Money Act, 2015 in respect of the investment in RL 360 Life Insurance Company. The Jurisdictional AO issued show cause /summons to the assessee u/s 131(1A) of the Act and the same was replied vide reply dated 2nd November 2022 stating that assessee has /had the foreign bank account and asset located outside India and the said bank account was being used for payment of Life Insurance premium only and not for any BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 4 other activity; assessee is owner of immovable property viz. residential maisonette located in Nairobi, Kenya, since 1988. Further a show cause was issued on 22.11.2022 u/s 131(1A) of the Act for asking the more details and in response vide letter dated 28.11.2022, the assessee explained for non- declaration of Schedule FA details of foreign assets and income from any other source outside India stating that he was unaware of law about the disclosure as well as declaration of foreign assets and income from any source outside India while filing income tax return in India for the concerned relevant years. 5. Before the jurisdictional AO who was DDIT(Inv.), FAIU-3(1), Mumbai, it was stated that the assessee had unintentionally committed inadvertent mistake due to not knowing the provisions, requirement of declaration of foreign asset in Schedule FA and for these reasons, the discretion u/s 43 of the BMA Act given to the AO for imposing the penalty be exercised in favour of the assessee on such mistake which was inadvertent and unintentional. Ld. AO did not agree with the said contentions of the assessee and imposed a penalty of Rs. 10 lakhs u/s 43 of BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 5 BMA Act on the ground of non disclosure of offshore investment in RL 360 Life Insurance Company. 6. Aggrieved by the said order of AO, assessee preferred am appeal before Ld. CIT(A) u/s 17 of Black Money (UFIA) and Imposition of Tax Act and reiterated the same grounds which were taken before the Ld. AO and submitted that non-disclosure thereof occurred due to inadvertent and bond fide oversight and relied on the decision of Coordinate Bench of ITAT in the case of ACIT vs. Leena Gandhi Tiwari (2022) 136 taxmann.com 409 (Mum-Trib). The Ld. CIT(A) distinguished the said judgment on the facts being different and noted that it is an admitted fact that assessee has failed to report overseas investment made during the period relevant to AY 2016- 17 when the said investment was made in his own name as well as in the name of his minor children. The Ld. CIT(A) confirmed the penalty and dismissed the appeal of the assessee on the ground that provision of section 43 of BMA by plain reading of section leaves no scope of gateway to delete the penalty even if overseas investment are made from known source, but not reported in Schedule FA of the return of income. BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 6 7. Aggrieved with the order of Ld. CIT(A) assessee preferred the present appeal before us by raising the following grounds as under: Ground No. 1: On the given facts and Circumstances of the case and in the law, the Ld. AO has erred in considering the Assessee at default under the Act for non-disclosure of foreign assets even when the Assessee has explained the source of investment in such assets Ground No. 2: Penalty levied u/s 43 of the Black Money (UFIA) and Imposition of Tax Act, 2015. On the facts and in the circumstances of the case and in the law, the Ld. AO has erred in levying penalty u/s 43 of Black Money (UFIA) and Imposition of Tax Act, 2015 without appreciating the facts of the case and being non-compliant of procedures set under section 46 of the act in the right perspective. The Appellant reserves the right to add, amend, and alter any of the above ground of appeal at any stage of hearing. 8. Before proceeding, we notice that there is delay of 11 days in filing the appeal before the Tribunal and application for seeking the condonation of delay supported by affidavit have been filed by the assessee stating that he is 74 years old suffering from various diseases and due to health issues, he could not file the appeal on time, therefore prayed for condonation of delay. We have heard Ld. AR and Ld. DR and considered the submission of BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 7 assessee. In the interest of justice, we accept the contents of the affidavit and found it a fit case for condonation of delay. The delay of filing the appeal before the Tribunal is condoned. Therefore, we admit the appeals and proceed to adjudicate the matter on merit. 9. At the outset, Ld. AR submitted orally as well as in written submissions that it was an inadvertent mistake on the part of the assessee for not disclosing the foreign asset in schedule FA column A to E of Income Tax Return for the relevant assessment years. Ld. AR has brought to our notice para no. 6.4 and 6.5 of page no. 9 of the paper book which is extracted below:- 6.4 Admittedly, the Ld.AO has failed to even consider the fact that your assessee is 72 years of age wherein it is a possibility and a much fact that he was not aware of all the existing provisions. The assessee has been a non-resident all his life and the Act came into force from AY 2016-17, just two years prior to your assessee becoming a resident and staying in India on a full-time basis. Due to lack of proper guidance and no assistance in filing of the income tax return, there was a bonafide mistake on the part of the assessee. There was no benefit in not disclosing of these assets as there is no income from them in all the years under consideration. Immediately, on becoming aware of the provisions, the assessee voluntarily revised his return within the timeline as provided under section 139(5) of The Income Tax Act, 1961, for AY 2022-23, thereby disclosing his foreign assets under schedule FA (copy enclosed). He could only revise his return for AY BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 8 2022-23, due to limitation of the timeline given in section 139 (5) of the Income Tax Act, 1961. The Ld.AO has not even considered this fact and straightaway imposed a penalty for AY 20022-23 as well which simply indicates his non- application of mind to the facts of the case. 6.5 Undoubtedly, the Assessing Officer has discretion in the matter while assessing a case, the use of the expression \"may\" in Section 43 suggests that. When the exercise of a statutory power is not warranted or justified on a well- considered appreciation of the facts of the case on which a reasonable conclusion would be that the lapse is bonafide and devoid of any ulterior motives, a public authority must not exercise that power just because it would be lawful for the said authority to exercise the same. That's why human discretion is involved in the exercise of such powers, and this discretion is to be exercised having regard to the facts of each case in a fair, objective and judicious manner and without losing sight of the bigger picture about the related state of affairs and the scheme of relevant legislation. Unless there are sufficient prima facie reasons to at least doubt bonafides well demonstrated by the assessee, an assessee cannot be visited with penal consequences. The bonafides actions of the assessee must, therefore, be excluded from the application of provisions of such stringent legislation as the BMA. 10. The grievance of the assessee against the lower authorities is that the above submissions were not considered in a fair and just manner because the non disclosure has occurred due to inadvertent and bonafide oversight on the part of the assessee without any intention to evade tax or suppress the material information. Ld. AR submitted that the said non disclosure has not resulted in any loss of revenue because the undisclosed foreign assets BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 9 did not generate any taxable income chargeable under the Act nor the same were from any source of income in India while the assessee was an NRI. In support of his written arguments, Ld. AR had placed reliance on the case of Additional Commissioner of Income Tax, Central Range- 8 Vs. Mr. Manoj Mahendrakumar Pandya at ITAT Mumbai, in BMA No. 6/M/2024 order dated 26.06.2024 wherein it was held that \"A mere non-disclosure of a foreign asset in the income tax return by itself is not a valid reason for penalty under the Black Money Act.\" 11. Ld. AR further placed reliance on the case of Additional Commissioner of Income Tax Central Range 1, Mumbai vs. Leena Gandhi Tiwari, [2022] 136 taxmann.com 409 (Mumbai Trib.), wherein in para no.7, it was held as under:- “7. It is only elementary that a 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 5,00,000. Clearly, therefore, even statutorily, it is not a simple cause and effect relationship between non- disclosure of an undisclosed foreign asset in the income tax return, and penalty under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The unambiguous intent of the legislature thus is to exclude BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 10 trivial cases of lases which can be attributed to a reasonable cause. It is also to be noted that Section 43 provides that the Assessing Officer “may” impose the penalty, and the use of the expression “may” signifies that the penalty is not to be imposed in all cases of lapses and that there is no cause and effect relationship simpliciter between the lapse and the penalty. As to what should be the considerations for the exercise of this inherent discretion by the Assessing Officer, we find some guidance from Hon‟ble Supreme Court‟s judgment in the case of Hindustan Steel (supra), 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 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.” 12. The Ld. Coordinate Bench in para no. 9 of the same judgment has further observed as under:- BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 11 “…….The path of idol worshipping the law, even at the cost of sacrificing the unambiguous intent of the law, cannot take us to the goal of protecting the majesty of law in letter and in spirit- something that every judicial officer must strive for. The well-intended harsh laws meant for checking the economic offenders, stashing their ill-gotten monies abroad, must not be invoked for punishing a venial breach of the law by a bonafide businessperson. Undoubtedly, the Assessing Officer has discretion in the matter, and that is what, as we have noted earlier as well, the use of the expression „may‟ in Section 43 suggests. When the exercise of a statutory power is not warranted or justified on a well- considered appreciation of the facts of the case on which a reasonable conclusion would be that the lapse is bonafide and devoid of any ulterior motives, a public authority must not exercise that power just because it would be lawful for the said authority to exercise the same. That‟s why human discretion is involved in the exercise of such powers, and this discretion is to be exercised having regard to the facts of each case in a fair, objective and judicious manner and without losing sight of the bigger picture about the related state of affairs and the scheme of relevant legislation. Unless there are sufficient prima facie reasons to at least doubt bonafides well demonstrated by the assessee, an assessee cannot be visited with penal consequences. The bonafides actions of the taxpayers must, therefore, be excluded from the application of provisions of such stringent legislation as the BMA. In this light, and keeping in mind the object of the BMA, we do not subscribe to the learned Departmental Representative‟s perception that in the name of strict implementation of the BMA, a penalty for non-disclosure of the bank account in question will be justified under the stringent provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015……………” 13. In addition to above, the Ld. AR relied on the judgment of Hon‟ble Supreme Court in the case of Price water house coopers Pvt. Ltd. Vs BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 12 C.I.T-Kolkata-I & Anr, in civil appeal no. 6924 of 2012 order dated 25.09.2012 wherein the Hon'ble Supreme Court held that \"The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income\". Therefore, Ld. AR submitted that the inadvertent error in the filing of the return cannot serve as a ground to impute any intent to furnish inaccurate particulars or conceal income. Accordingly, the Assessee respectfully pleads for the waiver of penalty u/s 43 of the BMA. 14. Ld. AR while relying the above case i.e. Additional Commissioner of Income Tax, Central Range- 8 Vs. Mr. Manoj Mahendrakumar Pandya (supra) submitted that the facts of this case are similar to the case in hand where the assessee in that case has made 3 foreign investments in Dubai for F.Y. 2012-13 and the assessee has not shown the same in Schedule FA of his return for AY 2016-17 and assessee has submitted that the assets was not disclosed despite that the same was duly BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 13 disclosed in the ITR for the preceding and succeeding years, but the lower authorities has imposed the penalty u/s 43 of Black Money Act. The Ld. Coordinate Bench of ITAT referred and relied the case of Additional Commissioner of Income Tax Central Range 1, Mumbai vs. Leena Gandhi Tiwari, (supra) wherein it was held that “A mere non-disclosure of a foreign asset in the income tax return by itself is not a valid reason for penalty under the Black Money Act ; the unambiguous intent of the legislature is to exclude trivial cases of lapses which can be attributed to a reasonable cause ; Section 43A of the Black Money Act provides that the AO „may‟ impose the penalty, and the use of the expression „ may‟ signifies that the penalty is not to be imposed in all cases of lapses and there is no cause and effect relationship simpliciter between the lapse and the penalty ; that once there is a clear finding of bona fides in conduct, irrespective of whether such conduct is lawful or not, the penalty is not imposable unless the penalty is statutorily simply an automatic consequence, in cause and effect relationship.” BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 14 15. On the other hand, Ld. DR relied on the orders passed by the lower authorities and submitted that the appeal filed by the assessee is liable to be dismissed. 16. We have considered the rival submission and examined the record. While perusing the legal precedents relied by the Ld. AR in the case of Additional Commissioner of Income Tax, Central Range- 8 Vs. Mr. Manoj Mahendrakumar Pandya at ITAT Mumbai (supra) and Additional Commissioner of Income Tax Central Range 1, Mumbai vs. Leena Gandhi Tiwari (supra), we notice that the facts and circumstances of these case are almost similar to the facts of the case in hand where the assessee due to inadvertent and unintentional mistake could not show the owning of foreign assets in Schedule FA of the Income Tax Return and in both the cases the Ld. Coordinate Benches set aside the penalty imposed by the lower authorities u/s 43 of BMA. 17. In the case before us, it has been sufficiently established through believable facts and bonafide of the assessee that it was an inadvertent and unintentional mistake while filing the return through representative and assessee was not aware of the requirement of showing the foreign asset BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 15 owned by the assessee in the Schedule FA in the Income Tax Return for the relevant assessment years. Therefore, assessee is entitled to exercise of the discretionary power of the AO which has been given to him while using the word „may‟ in section 43 while considering to impose the penalty due to non disclosure of the foreign asset in Income Tax Return. No doubt the word „may‟ give discretion to the AO who is a quasi judicial authority and is required to follow the principle of natural justice and fair play and is required to take decision based on objective appreciation of section 43 of BMA wherein by plain reading of section leaves no scope for subjective satisfaction of the lower authorities in exercising the discretion available u/s 43 of the BMA by using the word „may‟ while considering imposing the penalty provided therein. The Ld. Lower authorities while exercising the said power in the present case, seems to have acted in a mechincal manner while refusing to exercise the discretion available u/s 43 of BMA and has not considered the submission of the assessee in a fair and justified manner who has claimed and justified sufficiently that the mistake has occurred in advertently and there was no revenue loss due to non disclosure of the foreign asset in Schedule FA of the Income Tax Return for the relevant concerned assessment years 2019-20 to 2021-22. From the material on BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 16 record and the above reasons, we are of the considered opinion that the contentions raised on behalf of the assessee has justified that failure of the assessee in disclosing of the foreign asset in a Schedule FA of the Income Tax Return was an inadvertent and unintentional mistake and the assessee should not be penalized u/s 43 of the BMA and the Ld. Lower authorities were required to exercise their discretion given to them u/s 43 of the BMA. For these reasons, the impugned order in the appeals under consideration suffers from illegality and perversity and therefore not legally sustainable in the eyes of law. We accordingly set aside the impugned order passed by the Ld. CIT(A) and therefore the direct the Ld. AO to delete the penalty imposed upon the assessee. Resultantly, the grounds raised by the assessee are allowed. The appeal is decided in favour of the assessee. BMA NO. 21/MUM/2025 (A.Y: 2020-21) & BMA NO. 22/MUM/2025 (A.Y: 2021-22-20) 18. Since we have already decided the similar grounds of appeal raised by the assessee in BMA No. 20/Mum/2025 for AY 2019-20 in favour of the assessee and the grounds of these appeals are exactly similar to those in the BMA NO. 20, 21 & 22/MUM/2025 Mahendra Kumar Mehta Page | 17 said decided appeal, therefore the findings in ITA No. 20/Mum/2025 shall mutatis mutandis apply to these appeals also. Hence, the Grounds raised in these appeals of assessee are also allowed. 19. In the result, all the appeals filed by the assessee are allowed in above terms. Order pronounced in the open court on 27.05.2025 Sd/- Sd/- (VIKRAM SINGH YADAV) (RAJ KUMAR CHAUHAN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Mumbai / Dated 27.05.2025 Dhananjay, Sr. PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mumbai "