PRAKASH NIMMAGADDA,SECUNDERABAD. V. DIRECTOR OF INCOME TAX, INVESTIGATION, DDIT- ADIT(INV-2(1), AYAKAR BHAVAN, BASHEERBAGH, HYDERABAD.

BMA 1/HYD/2024

AI Insights

The case revolves around the penalty imposed on Shri Prakash Nimmagadda for not disclosing foreign assets in his income tax return for the assessment year 2019-20, as required under the Black Money (UFIA) and Imposition of Tax Act, 2015. The assessee argued that the non-disclosure was inadvertent and that the assets were disclosed in previous and subsequent years' returns. The Tribunal considered the explanations provided and the precedents cited, ultimately deciding in favor of the assessee by deleting the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126823 (ITAT-HYDERABAD)
• Appeal Type: Black Money Appeal
• Pronouncement Date: 21-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2019-2020
• Other Referred Cases: M/s. Ocean Diving Centre Ltd vs. CIT (A), Shri Prasad Nimmagadda vs. DIT (Inv.), Ms. Shobha Harish Thawani vs. Jt.CIT, Nirmal Bhanwarlal Jain vs. CIT (A) & DDIT/ADIT(Inv), Mylan Laboratory vs. Union of India
• Laws Referred To: Black Money (Undisclosed Foreign Income and Assets) (UFIA) and Imposition of Tax Act, 2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAI PRASAD
• Keywords: Reasonable cause; Rule of consistency; Gift; Bonafide mistake; Grounds of appeal; Subsequent Assessment; Judgment; HRA; Commissioner; Commissioner of Income Tax; AMP; Identical facts; Deleted; Department; Explanation; ADIT; Disclosure
• Section: 43; 13; 139

Judgement Text

" BMA No 1 of 2024 Prakash Nimmagadda Page 1 of 10 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ DB-B ‘ Bench, Hyderabad Before Shri Vijay Pal Rao, Vice-President A N D Shri Manjunatha, G. Accountant Member आ.अपी.सं /BMA No.1/Hyd/2024 (िनधाŊरण वषŊ/Assessment Year: 2019-20) Shri Prakash Nimmagadda Hyderabad PAN:ACAPN4246R Vs. Director of Income Tax (Investigation)/DDIT- ADIT(Inv.)2(1) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Shri, K.A. Sai Prasad, CA राज̾ व Ȫारा/Revenue by:: Shri L.V. Bhaskar Reddy, CIT(DR) सुनवाई की तारीख/Date of hearing: 30/01/2025 घोषणा की तारीख/Pronouncement: 21/04/2025 आदेश/ORDER Per Vijay Pal Rao, Vice President This appeal by the assessee is directed against the order dated, 28/06/2024 of the learned CIT (A)-11, Hyderabad arising from the penalty order passed under section 43 of the Black Money (Undisclosed Foreign Income and Assets) (UFIA) and Imposition of Tax Act, 2015 for the A.Y. 2019-20. 2. At the outset, it is noted that there is a delay of 2 days in filing the appeal. An affidavit filed has been filed by the learned AR of the assessee to explain the delay as under: BMA No 1 of 2024 Prakash Nimmagadda Page 2 of 10 3. Considering the explanation of the assessee that the delay of 2 days is due to technical difficulties on the ITAT E-filing Portal and no objection on the part of the learned DR for condonation of delay, we condone the delay of 2 days in filing the present appeal. 4. The assessee has raised the following grounds of appeal: “1. The order u/s 43 of Black Money (UFIA) and Imposition of Tax Act dt 26.03.2022 passed by the DDIT (Inv.),2(1) and confirmed by the Ld. Commissioner of Income Tax (Appeals) Hyderabad is incorrect and wrong both in law and on facts. 2. The Ld. Commissioner of Income Tax (Appeals) ought to have noted that the Appellant has explained the sources for the investment fully and no undisclosed income was determined in the assessment u/s 10 and hence no penalty u/s 43 ought to have been levied taking a lenient view. 3. The Ld. Commissioner of Income Tax (Appeals) to have noted that the omissions in the FA schedule are clerical in nature and committed in inadvertence and were rectified in subsequent years voluntarily by the Appellant and hence no penalty u/s 43 ought to have been levied. 4. The Ld. Commissioner of Income Tax (Appeals) failed to observe that the Appellant is mere subject of insurance and had no legal or beneficial interest therein, and hence no disclosure in FA schedule of the insurance policies was required. BMA No 1 of 2024 Prakash Nimmagadda Page 3 of 10 5. The appellant craves leave to add, amend, modify, rescind, supplement or alter any or more grounds of appeal stated herein above either before or at the time of hearing of this appeal.” 5. The assessee is an individual and was found holding the assets located outside India which were not disclosed in the return of income furnished u/s 139 of the I.T. Act, 1961 under the schedule “Foreign Assets” and consequently a penalty u/s 43 of Black Money (UFIA) and Imposition of Tax Act, 2015 was levied vide order dated 26/03/2022. The assessee challenged the levy of penalty before the learned CIT (A) but could not succeed. Before the Tribunal, the learned AR of the assessee has submitted that though the assessee has omitted to disclose the asset located outside India in the return of income, however, the same were duly disclosed in the balance sheet of the assessee including the preceding years as these investments/insurance policies pertains to the preceding A.Ys not to the A.Y under consideration. He has further submitted that in the assessment order passed u/s 10(3) of Black Money (UFIA) and Imposition of Tax Act, 2015, the Assessing Officer has accepted the source of the investment made by the assessee in the preceding years and no addition has been made on this account. The learned AR has further submitted that it was only a Bonafide and inadvertent mistake on the part of the assessee for not disclosing these assets in the return of income for the A.Ys 2017-18 to 2019-20 whereas the assessee has duly disclosed these assets in the return of income for the A.Y 2016- 17. The learned AR has submitted that once the Assessing Officer has accepted the source of investment in the assets in question while passing the assessment order u/s 10(3) of the BMA Act, BMA No 1 of 2024 Prakash Nimmagadda Page 4 of 10 2015, then the assessee had no intention to get any benefit for such breach of non-disclosure of the investment in the return of income. In support of his contention, he has relied upon the decision of the Mumbai Bench of the Tribunal in the case of M/s. Ocean Diving Centre Ltd vs. CIT (A) in BMA Nos.20 to 26/Mum/2023, dated 30/08/2023 as well as the decision of the Coordinate Bench of this Tribunal in the case of assessee’s brother Shri Prasad Nimmagadda vs. DIT (Inv.) in BMA No.2/Hyd/2024, dated 16/01/2025. The learned AR has thus, submitted that on identical facts, the Tribunal in case of assessee’s brother has deleted the penalty levied u/s 43 of Black Money (UFIA) and Imposition of Tax Act, 2015. Hence, he has prayed that the penalty levied by the Assessing Officer and confirmed by the learned CIT (A) be deleted. 6. On the other hand, the learned DR has submitted that for the last 3 financial years, the assessee has not disclosed these assets in the return of income and therefore, the order of this Tribunal in the case of brother of the assessee cannot be applied in the facts of the assessee. The disclosure of the assets in the balance sheet and schedule of assets is irrelevant for levy of penalty u/s 43 of Black Money (UFIA) and Imposition of Tax Act, 2015 when the assessee has failed to disclose the assets in the schedule of foreign assets in the return of income. The learned DR has relied upon the following decisions: i) Mumbai Bench of the Tribunal in the case of Ms. Shobha Harish Thawani vs. Jt.CIT (2023) 154 Taxmann.com 564(Mum-Trib). ii) Mumbai Benches of the Tribunal in the case of Nirmal Bhanwarlal Jain vs. CIT (A) & DDIT/ADIT(Inv) in BMA No.13 to 15/Mum/2023 dated 31/07/2023. BMA No 1 of 2024 Prakash Nimmagadda Page 5 of 10 7. We have considered the rival submission as well as relevant material available on record. There is no quarrel that the assessee failed to disclose the assets held outside India. The details of the assets have been recorded by the Assessing Officer in the assessment order passed u/s 10(3) of Black Money (UFIA) and Imposition of Tax Act, 2015 in Para No.11.1 as under: “11.1 Sh. Nimmagadda Prakash failed to disclose the ownership of shares of Ample Orient Ltd, British Virgin Island for A.Y 2012-13 to 2015-16 and A.Y 2017-18 to 2019-20 and also holding of insurance policies bearing No.94427754 for 10 million USD in the company M/s. Ample Orient Ltd, British Virgin Island, for the A.Y 2012-13 to 2015-16 (as these policies closed in the month of June,2015)”. 8. Thus, the Assessing Officer has given the details of the assets held by the assessee comprising of shares of Ample Orient Ltd, British Virgin Island not disclosed for the A.Y 2012-13 to 2015-16 and further for the A.Ys 2017-18 to 2019-20. This shows that these shares were acquired by the assessee during the financial year 2011-12 and there is no fresh investment during this year. From the order, it is clear that the assessee has disclosed these shares in the return of income for the A.Y 2016- 17. Similarly, another asset was found as insurance policy which was also not disclosed by the assessee in the return of income for the A.Y 2012-13 to 2015-16 and the policies were closed in the month of June, 2015. Thus, it is clear that for the year under consideration, the assessee was not holding any insurance policy outside India and therefore, there is no requirement of the disclosure of the said asset in the subsequent A.Ys after closing of the policy. The Assessing Officer has accepted the source of investment made in these 2 assets namely shares of Ample Orient Ltd and Insurance Policy in para 11 & 12 as under: BMA No 1 of 2024 Prakash Nimmagadda Page 6 of 10 “11. From the submission of the assessee and verification, it is seen that the assessee has explained the sources of investment in foreign assets/beneficial interest held by him by submitting the affidavit from Shri Nimmagadda Prasad wherein he has categorically declared that he has gifted those shares to his brother Shri Nimmagadda Prakash. However, the assessee failed to disclose the possession of these shares in the return of income. 11.1……………… 12. Based on the above, I am satisfied that investment as mentioned in Para 11, that were made and not disclosed in ITRs in the relevant A.Ys are undisclosed foreign assets of the assessee. The assets came to notice of the Assessing Officer in financial year 2018-19 and are being assessed to tax in the A.Y 2019-20. As the assessee has explained the source of investment, hence no tax as per section 3(1) of the Black Money Act is required to pay. However, as the assessee is failed to disclose these assets in FA Schedule in his ITR in the A.Ys as discussed in Para 11, penalty proceedings u/s 46(1) w.r.t section 43 of the Black Money has been initiated separately”. 9. Thus, it is not a case of complete non-disclosure of the assets located outside India, when the assessee disclosed these assets in the return of income for the A.Y 2016-17. An identical issue has been considered by the Coordinate Bench of this Tribunal in the case of brother of the assessee Shri Prasad Nimmagadda vs. DIT (Inv) (Supra) vide order dated 16/01/2015 in para No.12 to 18 as under: “12. We have heard the rival contentions and perused the material available on record. It is an undisputed fact that the assessee, in the return of income for the AY 2017-18, had failed to disclose the foreign assets held by him outside India, which were required to be disclosed in the return of income. The Ld. CIT(A), in para 6.8 of his order, have captured various investments which were required to be disclosed by the assessee and yet not disclosed in the return of income for the AY 2017-18 which are as under: \"i. Investment in Best Skyline Inc., for AY 2017-18. ii. Insurance policies bearing no. 94428125 and 60158671 for 40 million USD in the company Best Skyline Inc, for AY 2017-18. BMA No 1 of 2024 Prakash Nimmagadda Page 7 of 10 iii. Investment in Lemon Stone Holding Ptd Ltd, Mauritius in the AY 2017-18. iv. Investment amounting to Rs. 7,22,07,540/- in residential flats in Singapore made during FY 2016-17 relevant to AY 2017-18 and investment amounting to Rs. 12,72,798/- in property situated at Malaysia made during FY 2016-17 relevant to AY 2017-18.\" 13. The above said non-disclosure of the assets by the assessee in the return of income for the AY 2017-18 had not been disputed. However, the assessee has contended that the failure on the part of the assessee to disclose the same was on account of omission due to inadvertent mistake and it should have been considered as a curable mistake. It was further submitted that the assessee has all along been showing the assets in the return of income for the assessment years prior to AY 2017-18 and thereafter also. Further, the assessee Prasad Nimmagadda BMA 2/Hyd/2024 has already furnished the information with regard to the source of the investment during the assessment proceedings for the AY 2019-20. It was submitted that the assessee will not gain by not disclosing the information more particularly, when the assessee has been disclosing the same information in the previous and subsequent assessment years. 14. Section 43 of BMA, Act, 2015 requires the Assessing Officer to impose a penalty of Rs. 10 lakhs in case there is a failure on the part of the assessee to furnish inaccurate particulars of investment outside India. In the present case, admittedly the assessee has failed to disclose the said assets outside India and when this fact came to the notice of the Assessing Officer in the assessment proceedings for the AY 2019-20 then as per the procedure provided U/s. 46 of the BMA Act, 2015, the Assessing Officer had issued the show cause to the assessee for imposing the penalty. 15. The assessee, though had pleaded ignorance or omission or technical glitch to justify non-disclosure in the return of income, the same has been rejected by the Assessing Officer/CIT(A). We are of the opinion that though Section 43 has been couched in the mandatory manner which commands the Assessing Officer to impose the penalty Prasad Nimmagadda BMA 2/Hyd/2024 unless some reasonable cause has been demonstrated by the assessee for not disclosing the assets in the return of income. There is sacrosanct purpose for providing this imposition of penalty i.e., to curb the menace of Black Money and the assets possessed outside India with the help of Black Money in foreign countries. But the question arises whether the BMA No 1 of 2024 Prakash Nimmagadda Page 8 of 10 imposition of penalty is automatic in case there was a venial or technical breach also. In our considered opinion, that cannot be the inference and conclusion. The law has contemplated to issue show cause notice to the assessee as per Section 46 of B.M.A Act and if the penalty is necessarily being required to be imposed then there was no purpose of issuing the show cause notice to the assessee. The Legislature has deliberately provided and mandated for issuance of the show cause notice so that the assessee can explain the reasonable cause for not disclosing the investment in foreign countries in the return of income. In the present case, the Assessing Officer after examining the case of the assessee had not made any addition under Section 10 of the B.M.A Act as the Assessing Officer was satisfied that the assessee had explained the source of investment which was containing for the earlier years starting from A.Y. 2012- 13 onwards. In the present assessment year, no fresh investment was made by the assessee and Prasad Nimmagadda BMA 2/Hyd/2024 the previous investments made by the assessee were required to be disclosed during the year under consideration. Undoubtedly, the explanation of source of investment as per Sections 3 and 10 of B.M.A Act and failure to disclose as per Section 43 of B.M.A Act per se may be independent but both are required to be read together and find out the intention of the Legislation. In the present case, since the explanation relating to the source of investment has been accepted and therefore, the failure on the part of the assessee to disclose the assets for the year under consideration cannot be vitiated on account of malafide or an attempt to evade the rigors of the Act. No fresh investment has been made and all the investments made in the earlier years, simply have been continued in the year under consideration. All these aspects clearly show that there was Bonafide mistake on the part of the assessee to mention and disclose the same in the return of income. In view of the above, the penalty imposed by the lower authority is required to be deleted. Furthermore, we may follow the reasoning given by the co-ordinate Bench of the Tribunal in the case of Ocean Diving Centre (supra) wherein on identical facts, the Tribunal had deleted the penalty imposed upon the assessee. 16. The reliance of the Revenue on the decision of the Coordinate Bench in the case of Ms. Shobha Harish Thawani (supra), is not applicable to the present facts of the case as the assessee in the present case, has all along disclosed the investment in the prior and subsequent assessment years and furthermore, the assessee was able to disclosed and explained the source of investment in foreign countries for the assessment year 2017-18 and therefore, the said decision is not applicable to the facts of the present case. Furthermore, we may fruitfully rely upon the decision of the jurisdictional BMA No 1 of 2024 Prakash Nimmagadda Page 9 of 10 High Court in the case of Mylan Laboratory reported in [2022] 137 taxmann.com 178 (TELANGANA) wherein it was held as under:- \"35. In Union of India v. Kamakshi Finance Corporation Ltd. 1992 taxmann.com 16, Supreme Court held and reiterated that the principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the department, which in itself is an objectionable phrase, and is the subject matter of an appeal can be no ground for not following the appellate order unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to the assessee and chaos in administration of the tax laws. 36. Following the above decision, Supreme Court again in Collector of Customs v. Krishna Sales (P.) Ltd. 1994 Supp. (3) SCC 73, reiterated the proposition that mere filing of an appeal does not operate as a stay or suspension of the order appealed against. It was pointed out that if the authorities were of the opinion that the goods ought not to be released pending the appeal, the straight-forward course for them is to obtain an order of stay or other appropriate direction from the Tribunal Prasad Nimmagadda BMA 2/Hyd/2024 or the Supreme Court, as the case may be. Without obtaining such an order they cannot refuse to implement the order under appeal. 37. Following the above decisions of the Supreme Court, a Division Bench of the Bombay High Court in Ganesh Benzoplast Ltd. v. Union of India 2020 (374) ELT 552 held that non-compliance of orders of the appellate authority by the subordinate original authority is disturbing to say the least as it strikes at the very root of administrative discipline and may have the effect of severely undermining the efficacy of the appellate remedy provided to a litigant under the statute. Principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. 38. This principle has been reiterated by the Bombay High Court in Himgiri Buildcon & Industries Ltd. v. Union of India 2021 (376) ELT 257. 39. Therefore, the stand taken by the Assessing Officer that since the decision of the Income Tax Appellate Tribunal in the case of the petitioner itself for the assessment year 2014-15 has been appealed against the issue in question has not attained finality, is not only wrong but is required to be deprecated in strong terms being highly objectionable.\" BMA No 1 of 2024 Prakash Nimmagadda Page 10 of 10 17. Respectfully, following the decision of the Coordinate Bench in the case of Ocean Diving (supra) and the judgment of the Hon'ble Telangana High Court in the case of Mylan Laboratories (supra), we hereby allow the appeal of the assessee. 18. Since we have allowed the appeal of assessee on merits, therefore, we have left open the grounds raised by the assessee for the limitation of issuing the show cause notice by the Assessing Officer in the proceedings for A.Y. 2019-20 for the breach happened in the assessment year 2017-18 to be decided in appropriate case.” 10. Accordingly, to maintain the rule of consistency, we follow the order of the Coordinate Bench of this Tribunal in the case of assessee’s brother (cited supra) and hence, delete the penalty levied u/s 43 of the Black Money (UFIA) and Imposition of Tax Act, 2015. 11. In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 21st April, 2025. Sd/- Sd/- (MANJUNATHA, G) ACCOUNTANT MEMBER (VIJAY PAL RAO) VICE-PRESIDENT Hyderabad, dated 21st April, 2025 Vinodan/sps Copy to: S.No Addresses 1 Shri Prakash Nimmagadda c/o Katrapati & Associates, 1-1-298/2/B/3 Sowbhagya Avenue Apts, 1st Floor, Ashoknagar, Street No.1 Secunderabad 500029. 2 Director of Income Tax (Investigation)/DDIT/ADIT (Inv.) 2 (1) Aayakar Bhavan, Basheerbagh, Hyderabad 500004 3 Pr. CIT - Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order "