2023 (7) TMI 1561 - AT - Income Tax

Penalty u/s 43 of Black Money Act - non disclosure of foreign asset in schedule FA of the Income-tax returns - plea of the assessee is that the impugned assets primarily belonged to the husband of the assessee who has disclosed the same in the return of income in Schedule FA and therefore it can not be said that the details of the impugned assets are not furnished HELD THAT - As plain interpretation of the words used in section 43 means that the legislature has given a discretionary power to the AO to decide the levy of penalty after considering all relevant factors including the purpose and object the statute seeks to achieve. The discretion to impose a penalty puts the AO under a corresponding obligation to exercise the said discretion with proper regard to the facts and circumstances of the case in a holistic manner and in totality. In assessee s case the assets are already disclosed by assessee s husband in his return of income which is being scrutinized and accepted by the revenue. Therefore the assets in our view cannot be termed as black money. There is no reason for the assessee to intentionally not furnish the details of the same assets except a bonafide belief that the details are already furnished by her husband who is the primary owner and that the assessee being secondary owner is not required to furnish the details once again. Therefore in our considered view a reasonable conclusion could be drawn that the lapse in reporting foreign investments in Schedule FA of the return of income by the assessee is bona fide and devoid of any ulterior motives. Accordingly AO is not justified in exercising the discretionary power just because it would be lawful to do so. Further in the present case there are sufficient prima facie evidences well demonstrated by the assessee not to doubt bona fide intentions and therefore it is not just and fair for the assessee to face stringent penal consequences under BMA. Accordingly the penalty levied u/s 43 of BMA is hereby deleted. Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The core legal issue considered by the Tribunal was the imposition of penalties under section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA) for the non-disclosure of foreign assets in the income tax returns filed by the assessee. Specifically, the Tribunal examined whether the penalties levied for the assessment years 2016-17 to 2019-20 were justified given the facts and circumstances of the case.

ISSUE-WISE DETAILED ANALYSIS

1. Condonation of Delay in Filing Appeals

The Tribunal considered the delay of 16 days in filing the appeals. The assessee argued that the delay was due to an inadvertent mistake of filing the appeal before the wrong authority. The Tribunal, referencing the Supreme Court's decision in Collector, Land Acquisition Vs. MST. Katiji & Ors., found sufficient cause for the delay and condoned it, allowing the appeals to proceed.

2. Imposition of Penalty under Section 43 of the BMA

Relevant Legal Framework and Precedents: Section 43 of the BMA mandates penalties for failing to disclose foreign assets in income tax returns. The section requires disclosure of any foreign asset held as a beneficial owner or otherwise. The Tribunal noted that the power to impose penalties is discretionary, not mandatory.

Court's Interpretation and Reasoning: The Tribunal underscored the discretionary nature of penalty imposition under section 43, emphasizing that penalties should not be imposed in the absence of a conscious breach of law. It referenced the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which held that penalties should not be imposed for technical or venial breaches or in the absence of mens rea.

Key Evidence and Findings: The Tribunal examined evidence showing that the investments were made by the assessee's husband, who had disclosed them in his tax returns. The assessee was merely a secondary holder for administrative convenience, with no financial contribution to the investments.

Application of Law to Facts: The Tribunal applied the discretionary aspect of section 43, determining that the non-disclosure was a bona fide mistake without any intent to evade tax. The investments were already disclosed by the primary owner (the husband), and there was no evidence of black money.

Treatment of Competing Arguments: The Tribunal considered the Department's argument that non-disclosure warranted penalties under section 43. However, it found the assessee's explanation credible, supported by documentary evidence, and consistent with the legislative intent behind the BMA.

Conclusions: The Tribunal concluded that the penalties were not justified, given the bona fide nature of the omission and the discretionary nature of the penalty provision.

SIGNIFICANT HOLDINGS

The Tribunal held that the imposition of penalties under section 43 of the BMA was not warranted due to the bona fide nature of the non-disclosure. It emphasized that penalties should not be imposed in the absence of a deliberate breach of law or mens rea. The Tribunal stated:

"...the lapse in reporting foreign investments in Schedule FA of the return of income by the assessee is bona fide and devoid of any ulterior motives. Accordingly, the Assessing Officer is not justified in exercising the discretionary power just because it would be lawful to do so."

The Tribunal also highlighted the discretionary nature of the penalty provision, stating that the Assessing Officer must exercise discretion judiciously, considering the facts and circumstances of each case. It concluded that the penalties for all assessment years under consideration should be deleted.

In conclusion, the Tribunal allowed the appeals in favor of the assessee, setting aside the penalties imposed for the assessment years 2016-17 to 2019-20.

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