TIMOTHY JOHN BRINKMAN,UNITED KINGDOM V. DEPUTY DIRECTOR OF INCOME-TAX (INV.) FAIU-4(1), MUMBAI

BMA 29/MUM/2024

AI Insights

The case involves Timothy John Brinkman, a British citizen and tax resident in India for the Assessment Year 2022-23, who faced a penalty under Section 43 of the Black Money (UFIA) and Imposition of Tax Act, 2015 for allegedly failing to disclose foreign assets in his income tax return. Initially, Brinkman did not disclose his foreign assets due to incorrect professional advice but later filed a revised return upon receiving a summons from the tax authorities. The penalty was contested on grounds of it being harsh and unwarranted, considering the voluntary disclosure made in the revised return. The Tribunal's decision to allow the appeal was based on the assessee's compliance with the disclosure requirements upon realization of the oversight and the legislative intent of the Act, which aims to address undisclosed foreign income and assets without punishing technical or venial breaches.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474448 (ITAT-MUMBAI)
• Appeal Type: Black Money Appeal
• Pronouncement Date: 04-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2022-2023
• Other Referred Cases: Nirmal Bhanwarlal Jain vs. CIT, ACIT, CC-22(1) vs. Rohit Krishna, K Mohammad Haris vs. ITO
• Laws Referred To: Black Money (UFIA) and Imposition of Tax Act, 2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANSHU JOSHI
• Assessee Lawyers: VASANTI PATEL
• Keywords: Set aside; Revised return; Onus to prove; Residential status
• Section: 143(1); 54; 139(1); 43; 139; 139(5)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E”, MUMBAI BEFORESHRI AMARJIT SINGH, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER B.M.A. 29/Mum/2024 (Assessment Year 2022-23) Timothy John Brinkman Authorised Representative in India for this matter: AMJ & CO, Chartered Accountants. 59, Maker Tower F, Cuffe Parade, Mumbai-400 005 PAN: EIEPB6112G vs Director of Income Tax (Inv.) FAIU- 4(1), Mumbai Room No.419, 4th Floor Scindia House, Ballard Estate Mumbai-400 001 APPELLANT RESPONDENT Assessee by : Smt. Vasanti Patel Respondent by : Shri Hemanshu Joshi (SR DR) Date of hearing : 16/01/2025 Date of pronouncement : 04/02/2025 O R D E R PER ANIKESH BANERJEE: Instant appeal of the assessee was filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals)-54, Mumbai, [for brevity, ‘Ld.CIT(A)’) passed under section 17 of the Black Money (UFIA) and Imposition of Tax Act, 2015 (for brevity the “Act”), date of order 27/05/2024 for A.Y. 2022- 23.The impugned order was emanated from the order of the DDIT / ADIT (Inv)- 2 B.M.A.29/Mum/2024 Timothy John Brinkman 4(1)/FAIU/MUM passed under section 43 of Black Money (UFIA) And Imposition of Tax Act, 2015, date of order 29/05/2023. 2. The assessee has taken the following grounds:- GROUND OF APPEAL “I. PENALTY LEVIED UNDER SECTION 43 OF BLACK MONEY (UFIA) AND IMPOSITION OF TAX ACT, 2015, OF RS. 10,00,000/-: 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), erred in upholding the penalty levied under Section 43 of the Black Money (UFIA) and Imposition of Tax Act, 2015 (the Act) by the Assessing Officer for a sum of Rs. 10,00,000/- for alleged non- disclosure of foreign assets in the Schedule-FA of the Return of Income. 2 It is submitted that the alleged non-disclosure of foreign assets/non- compliance is neither intentional nor deliberate and has resulted consequent to ignorance of the relevant provisions and no proper guidance provided. Accordingly, it is submitted that the rigorous/stringent provisions of Section 43 of the Act, cannot be invoked in case of such a solitary incident. 3. The learned Assessing Officer & the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant has co-operated wholeheartedly throughout the assessment proceedings and has furnished all the relevant details/data/documents required for the assessment and has also furnished a Revised return of Income voluntarily and on his own volition after paying the related taxes, as soon as the Appellant discovered the oversight/lapse on his part 4. The Appellant prays that the penalty levied under Section 43 of the Black Money (UFIA) and Imposition of Tax Act, 2015 may kindly be deleted as the same is too harsh and unwarranted, unreasonable and unjustified. The Appellant herby reserves the right to add to, after or amplify the above grounds of appeal.” 3 B.M.A.29/Mum/2024 Timothy John Brinkman 3. The brief facts of the case are that the assessee, Mr. Timothy John Brinkman, citizen of United Kingdom, date of birth 11 July, 1959 came to India for employment for the first time on 20th January, 2019; was employed with Reliance Industries Ltd. as the Head of the Nita Mukesh Ambani Cultural Centre (NMACC) for a fixed period of 5 years. He had left India in January 2024 after completion of his term of employment. Prior to coming to India he was working in the United Kingdom and was in possession of various investments including property income, from which he was earning Rent, Interest, Dividend & pension. These investments and properties have been accumulated by him over the course of his career and have not been earned while he was employed in India. Brief list of assets held by him, overseas:  3 savings bank accounts & 1 current account with U.K. banks.  Joint investment with his wife in a house property located in the U.K.;  Investments in Foreign Assets managed by AFH Independent Financial Services Limited: 1) Canada life Offshore Bond (jointly held with my wife Mrs. Carolyn Brinkman); 2) Stocks and Shares ISA Scheme; 3) James Hay - Pension (FHJH1708);  Investment in Virgin Fixed Rate Cash ISA Issue 280. Days of stay in India: F.Y. 2018-19- 71 days (Non-resident) F.Y. 2019-20- 343 days (Resident but Not ordinarily Resident) F.Y. 2020-21- 365 days (Resident but Not ordinarily Resident) 4 B.M.A.29/Mum/2024 Timothy John Brinkman F.Y. 2021-22- 307 days (Resident) Thus, he has become a Tax resident in India during the Assessment Year 2022-23. Mr. Brinkman filed the Return of Income (ROI) by a wrong advice that his global income would only be taxable in India post the completion of 4+ years in India. Accordingly, the assessee e-filed his ROI for impugned assessment year in the United Kingdom on 06/04/2022 for the period from 06/04/2021 to 05/04/2022. Although, he filed his ROI for the A.Y. 2022-23 on 30/07/2022 under the residential status of 'Resident’. But the assessee has not only failed to disclose his Foreign Assets but also did not subject his global income to tax in India. The assessee received a summon under Section 131(1A) dated 07/10/2022 from the DDIT (Inv)-4(1) FAIU inquiring into his investment in the Canada Life Offshore Bond (Canada Life International Limited) which is registered in the Isle of Man, a tax haven. Considering the importance of the summon the assessee filed a revised return of Income surrendering the income earned overseas to tax in India, along with making adequate disclosures in the Foreign Assets schedule of the ITR. Revised ROI was filed on 24-11-2022, i.e. within the time available under Section 139(5) of the Act. The Revised ROI was processed and found to be in order vide Intimation under Section 143(1) dated 24/11/2022. The Revised ROI was also produced before the DDIT (Inv)-4(1) FAIU during the course of his investigation. A complete disclosure of the facts and figures were made during the course of the investigation proceedings which concluded in the Ld. AO levied a penalty of Rs. 10,00,000/-under Section 43 of the BMA (UFIA), 2015. The aggrieved assessee 5 B.M.A.29/Mum/2024 Timothy John Brinkman filed an appeal before the Ld. CIT(A). But the impugned was failed. Being aggrieved, the assessee filed appeal before us. 4. We have heard the arguments presented by both parties and carefully examined the documents on record. During the financial year in question, the assessee was classified as a ‘Resident and Ordinary Resident’ and held British citizenship. The original ITR, as required under Section 139(1), was duly filed on 30/07/2022.Subsequently, upon receiving a summons from the Deputy Director of Income Tax (Investigation)-4(1) FAIU, the assessee submitted a revised return under Section 139(5) of the Act on24/11/2022. This revised return included a declaration of foreign assets in the FA column of the revised ROI. The primary issues arising in this case are as follows: (a) Whether the assessee disclosed the foreign asset to the Indian Taxation Authority in accordance with the provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015; (b) Whether the return was filed only after receiving a notice from the taxation authority; (c) Since the foreign asset was declared in the revised return within the prescribed time frame, whether the assessee is liable for the imposition of a penalty. 5. Considering the submission of the Ld. DR, we find that the revenue authorities have referred the judgment related to the Hon’able ITAT in the case of Nirmal Bhanwarlal Jain vs. CIT, BMA No.13/Mum/2023, date of order 31/07/2023, where it was held that even if a disclosure has been made about the 6 B.M.A.29/Mum/2024 Timothy John Brinkman foreign asset, but the assessee has filed inaccurate particulars about the foreign asset, the assessee was still liable for penalty under section 43 of the Black Money (UFIA) and Imposition of Tax Act, 2015 and the co-ordinate bench of ITAT rejected the appeal of the assessee. In argument, the Ld.DR relied on the order of Ld.CIT(A) and the relevant para-No.9.8 of the impugned appeal order is extracted as follows: - “9.8 In my view, for the purpose of section 43 of the BMA, there is no onus on the AO to demonstrate that the funds or assets in these accounts were owned by the assessee or beneficially owned by him. Section 43 of the Act has two limbs with respect to non-disclosure the first being failure to furnish any information sought in the return filed under section 139(1) and second being furnishing of inaccurate particulars in such return relating to any asset located outside India, held by him as a beneficial owner or otherwise or in respect of which he was a beneficiary, or in relation to any income from a source located outside India. The term \"fails to furnish any information is sufficient to include in its ambit non-disclosure of a foreign asset. Also, even if the disclosure is made, furnishing of inaccurate particulars about a foreign asset also would make the assessee liable for penalty u/s 43 of BMA. In the present case, it was mandatory for the assessee to disclose the foreign assets accurately in the return. The mandate to file such information was introduced in the Income Tax Act from AY 2012-13 onwards and it is noted that the appellant has failed to file the particulars of the foreign asset in the return filed by him for the relevant assessment year.” 6. The Ld.AR in argument placed that the assessee filed the return of income under section 139(1) where the assessee had not declared the foreign asset, but he revised his return and filed within the due date by declaring the foreign asset accordingly. Due to wrong advice from the professionals, the assessee had not submitted the details of foreign asset in the original return. The revised return 7 B.M.A.29/Mum/2024 Timothy John Brinkman was within the time limit and the revenue authorities rejected the revised return of the assessee filed under section 139(5) of the Act. The Ld.AR distinguished that the co-ordinate bench of ITAT in case of Nirmal Bhanwarlal Jain vs CIT (supra) where the assessee is a resident Indian and Citizen of India and also placed that the details filed were inaccurate particulars, but in case of assessee, the assessee itself is a British Citizen and only for the last 3 years, was in India to complete the project of NMACC. The Ld.AR respectfully relied on the order of the co-ordinate bench “E” in the case of ACIT, CC-22(1) vs. Rohit Krishna BMA No.36 – 40/Mum/2024, date of pronouncement 27/11/2024. The relevant observations of the Bench at para 8.1 is reproduced below: - “8.1. We also take note of the provisions of section 43 of the Act as well as the preamble to the said Act to understand the discretionary power vested with the Assessing Officer for imposition of penalty vis-à-vis object sought to be achieved keeping in mind the legislative intent. The purpose of reporting requirement of foreign assets/income in Schedule FA of the Income tax return is for tracking and monitoring the investments held abroad by the residents of India. Preamble to the Act describes its objective to deal with problem of black money, i.e., undisclosed foreign income and assets. The said Act must not be invoked for punishing a technical /venial /bonafide breach of any statutory obligation and therefore bonafide actions of the tax payers must be excluded from the application of provisions of this stringent legislation. In this regard, we draw our force from the decision of Hon’ble Supreme Court in the case of Hindustan Steel Ltd. (supra).” 7. The Ld. AR further contended that the assessee filed the revised return only after the issuance of a notice under Section 131(1A) of the Act by the revenue authorities. Consequently, the burden was on the assessee to establish whether the omission to declare the foreign asset in the original return was inadvertent. However, the revised return was filed within the prescribed time, and the 8 B.M.A.29/Mum/2024 Timothy John Brinkman assessee duly declared the foreign asset in the revised ROI. The revenue authorities did not reject the revised return nor express any doubts regarding the declared foreign asset. The issue at hand is directly covered by the ruling of the Hon’able Karnataka High Court in the case of K Mohammad Haris vs. ITO(2022) 448 ITR 707 (Kar), dated September 24, 2021. The relevant excerpt from paragraph 16 of the judgment is as follows: \"Although the learned counsel for the respondent argued that the presumption under Section 54 of the Black Money Act favors the prosecution, requiring the accused to rebut it, this argument is not sustainable. The initial burden of proof always lies with the complainant-prosecution. Once this burden is discharged, only then does the burden shift to the accused to rebut the legal presumption. If the foreign assets were already disclosed in the revised ITR under Section 139(5) of the Income Tax Act, it cannot be concluded that there was any willful non-disclosure on the part of the accused. The question of rebutting the presumption under Section 54 of the Black Money Act arises only when there is mens rea on the part of the accused. Moreover, if an assessee fails to disclose foreign assets under sub-sections (1), (4), or (5) of Section 139 of the Income Tax Act or fails to furnish any information regarding an asset for a given financial year, the Assessing Officer may impose a penalty as per Section 43 of the Black Money Act. However, in the present case, the Income Tax Department has not established that the petitioner derived any income from these assets. Therefore, since the assessee has already filed a revised ITR disclosing the foreign assets, the complaint is unsustainable, and the allegation of willful non- disclosure is unfounded. Conducting proceedings against the petitioner in such circumstances constitutes an abuse of the legal process, and hence, the proceedings are liable to be quashed. Accordingly, the following order is passed: ORDER The criminal petition is allowed. The criminal proceedings in C.C.No.4179/2019, based on complaint P.C.No.73/2019 against the petitioner and pending before the II Judicial Magistrate First Class, Mangalore, are hereby quashed.” In our considered view, we find that the assessee is a British citizen and was only a tax resident in India for the impugned assessment year. We respectfully rely on the judgment of the Hon’able Karnataka High Court in K Mohammad Haris 9 B.M.A.29/Mum/2024 Timothy John Brinkman (supra) and the order of the Co-ordinate Bench of the ITAT, Mumbai, in the case of Rohit Krishna (supra). It is evident that the assessee disclosed the foreign asset in the revised return, which was filed within the prescribed time limit. Therefore, there is no basis for rejecting the return, nor have the revenue authorities identified any discrepancies in the declaration made by the assessee. The legislative intent behind the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, is to address the issue of undisclosed foreign income and assets. In the present case, the assessee is a British citizen, and the revenue authorities have failed to establish that the assessee was previously an Indian citizen or that the foreign investment was made using undisclosed income (black money) from India. Furthermore, the authorities relied upon by the Ld. DR and the Ld. CIT(A) are factually distinguishable from the present case. Accordingly, the penalty of Rs.10,00,000/- imposed under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, is deleted. The order passed by the Ld. CIT(A) is set aside, and consequently, the assessee’s appeal is allowed. 8. In the result, the appeal of the assessee bearing BMA- 29/Mum/2024 is allowed. Order pronounced in the open court on 04th day of February 2025. Sd/- sd/- (AMARJIT SINGH) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 04/02/2025 Pavanan 10 B.M.A.29/Mum/2024 Timothy John Brinkman Copy of the Order forwarded to: 1. अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकरआयुक्त CIT 4. दवभ गीयप्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्डफ इल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, Mumbai "