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2023 (4) TMI 1403 - AT - Income TaxPenalty u/s. 43 of Black Money Act - non-disclosure of a foreign asset in Schedule-FA of the Income Tax Return - CIT(A) deleted addition -HELD THAT - As in Schedule EI wherein the assessee was required to declare exempt income the assessee has duly reflected the maturity value of the insurance policy. The same amount has been disclosed by the assessee in the Statement of Income annexed to the return of income. As undisputed fact that the assessee has paid 30% taxes on fair market value of foreign asset along with 30% penalty aggregating to 60% of the total value of the foreign asset under One Time Compliance Scheme of the Act. CIT (A) deleted the penalty levied u/s. 43 of the Act by Assessing Officer by placing reliance on the decision of Tribunal in the case of Leena Gandhi Tiwari 2022 (6) TMI 1191 - ITAT MUMBAI As undisputed fact that by the end of F.Y. 2015-16 the foreign asset ceases to exists as the assessee surrendered the said policy and the maturity amount of policy was duly reflected in Income Tax Return. Bonafide mistake in not disclosing foreign asset in Schedule FA of the Income Tax Return is a reasonable cause for deleting penalty in the given circumstances. Furnishing of inaccurate particulars about asset located outside India cannot be imputed as the assessee had already made declaration under the Act the same was accepted and maturity amount of Life Insurance Policy has been disclosed in Income Tax Return. Appeal by the Revenue is dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal issue considered in this judgment was whether the penalty of Rs. 10.00 lacs imposed under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, for non-disclosure of a foreign asset in Schedule-FA of the Income Tax Return, was rightly deleted by the Commissioner of Income Tax (Appeals) [CIT(A)]. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The relevant legal framework involves Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which mandates the disclosure of foreign assets in Schedule-FA of the Income Tax Return. Circular No. 13 of 2015, specifically Question No. 18, clarifies that non-reporting of foreign assets in Schedule-FA results in a penalty. The CIT(A) relied on the precedent set in the Tribunal's decision in the case of Addl. CIT vs. Leena Gandhi Tiwari, which was instrumental in the deletion of the penalty. Court's interpretation and reasoning: The Tribunal examined whether the non-disclosure of the foreign asset, a Life Insurance Policy, was a bona fide mistake given the circumstances. The Tribunal considered the fact that the asset was surrendered during the financial year, and the maturity amount was disclosed in the Income Tax Return under exempt income. Key evidence and findings: The Tribunal noted that the assessee had declared the surrender value of the policy under Section 59 of the Act and paid the requisite tax and penalty under the One Time Compliance Scheme. This declaration was accepted by the CIT, and a compliance certificate was issued. The maturity value of the policy was reflected in the Income Tax Return, and taxes were paid accordingly. Application of law to facts: The Tribunal applied the legal framework to the facts by considering the bona fide belief of the assessee that the foreign asset need not be disclosed after its surrender and subsequent compliance under the One Time Compliance Scheme. The Tribunal found that the non-disclosure was not due to an intention to furnish inaccurate particulars but was a reasonable mistake under the circumstances. Treatment of competing arguments: The Department argued that the non-disclosure warranted a penalty as per the Act and Circular No. 13 of 2015. However, the Tribunal found merit in the assessee's argument that the non-disclosure was a bona fide mistake, especially since the asset was surrendered, and all taxes and penalties were paid. The Tribunal upheld the CIT(A)'s decision, finding no reason to interfere with the deletion of the penalty. Conclusions: The Tribunal concluded that the penalty under Section 43 of the Act was not warranted due to the bona fide mistake of the assessee in not disclosing the foreign asset in Schedule-FA, given the full compliance with tax obligations under the One Time Compliance Scheme. SIGNIFICANT HOLDINGS The Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing that: "Bonafide mistake in not disclosing foreign asset in Schedule -FA of the Income Tax Return is a reasonable cause for deleting penalty in the given circumstances." The core principle established is that a bona fide mistake in non-disclosure, when coupled with full compliance with tax obligations, can be a reasonable cause for deleting a penalty under Section 43 of the Act. The final determination was to dismiss the Revenue's appeal, affirming the CIT(A)'s order to delete the penalty, as the appeal was deemed devoid of merit.
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