2024 (8) TMI 1532 - AT - Income Tax

Penalty u/s 43 of Black Money Act - non disclosure of foreign assets from A.Y. 2016-17 - HELD THAT - Admittedly the Assessee has not disclosed the foreign assets in particular schedule i.e. FA Schedule however it is a fact that the Assessee has duly disclosed the foreign assets i.e. ESOP and its value in Schedule AL of the income tax return and the employer of the Assessee has also deducted the TDS on the value of the foreign asset/ESOP and shown the details/value of the same in Form No.16 Part B as well as in Form No.12BA. Hence it cannot be said that the Assessee has not disclosed the foreign assets in any manner. As decided in M/s. Ocean Diving Centre Ltd. 2023 (12) TMI 54 - ITAT MUMBAI considering the fact that the Assessee has disclosed the foreign assets may not be in form FA but otherwise in its return of income ultimately held that the penalty is not warranted. As it is not the case of the Revenue Department that the foreign asset/ESOP remained undisclosed entirely and there was malafide intention or ulterior motive for hiding the foreign assets from disclosing ; and as in the case of Hindustan Steel Ltd. 1969 (8) TMI 31 - SUPREME COURT has laid down the dictum that simply on the technical or venial breach of the law the penalty is not automatically leviable - Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the Assessee was required to disclose foreign assets in the "FA Schedule" of the Income Tax Return under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA).
• Whether the penalty under Section 43 of the BMA is applicable for non-disclosure of foreign assets in the specific "FA Schedule" when the assets were disclosed elsewhere in the tax return.
• Whether the Assessee's disclosure of foreign assets in other parts of the tax return suffices to avoid penalties under the BMA.
• Interpretation of the term "undisclosed foreign assets" under the BMA and whether the Assessee's actions constituted a technical or venial breach of the Act.

ISSUE-WISE DETAILED ANALYSIS

Disclosure Requirement under the BMA

• Legal Framework: The BMA mandates the disclosure of all foreign assets in the "FA Schedule" of the Income Tax Return. Section 43 of the BMA imposes a penalty for non-disclosure.
• Court's Interpretation: The Tribunal noted that the BMA requires disclosure of foreign assets in the "FA Schedule" without distinguishing based on the source of the asset.
• Key Evidence: The Assessee disclosed the foreign assets in "Schedule AL" of the tax return and the employer deducted TDS on the ESOP value.
• Application of Law to Facts: The Tribunal evaluated whether the Assessee's disclosure in "Schedule AL" and other forms sufficed under the BMA.
• Treatment of Competing Arguments: The Tribunal considered the Assessee's argument that the assets were disclosed in other parts of the return and the Revenue's insistence on disclosure in the "FA Schedule".
• Conclusions: The Tribunal found that the Assessee had disclosed the foreign assets in a manner that did not constitute non-disclosure under the BMA.

Applicability of Penalty under Section 43 of the BMA

• Legal Framework: Section 43 of the BMA imposes a penalty for non-disclosure of foreign assets. The discretion to impose penalties is vested in the Assessing Officer.
• Court's Interpretation: The Tribunal emphasized the need for judicial discretion in imposing penalties, particularly in cases of technical or venial breaches.
• Key Evidence: The Tribunal considered the Assessee's disclosure of foreign assets in other schedules and the lack of malafide intent.
• Application of Law to Facts: The Tribunal applied the principles of judicial discretion and considered the Assessee's actions as a technical breach.
• Treatment of Competing Arguments: The Tribunal weighed the Revenue's strict interpretation against the Assessee's bona fide belief and disclosure in other parts of the return.
• Conclusions: The Tribunal concluded that the penalty was not warranted due to the Assessee's bona fide actions and lack of malafide intent.

Interpretation of "Undisclosed Foreign Assets"

• Legal Framework: The BMA targets undisclosed foreign income and assets, with penalties for non-disclosure.
• Court's Interpretation: The Tribunal interpreted "undisclosed" to mean assets not disclosed anywhere in the return, which was not the case here.
• Key Evidence: The Assessee disclosed the ESOP value in "Schedule AL" and other forms, and TDS was deducted by the employer.
• Application of Law to Facts: The Tribunal assessed whether the disclosure in other parts of the return met the BMA's requirements.
• Treatment of Competing Arguments: The Tribunal considered the Assessee's argument that the assets were disclosed and the Revenue's focus on the specific schedule requirement.
• Conclusions: The Tribunal found that the assets were disclosed, albeit not in the "FA Schedule", and thus not "undisclosed".

SIGNIFICANT HOLDINGS

Verbatim Quotes and Core Principles

• The Tribunal cited the principle 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 Tribunal emphasized that the BMA should not be interpreted to cause undue hardship to bona fide breaches.

Final Determinations

• The Tribunal held that the penalty under Section 43 of the BMA was not warranted in this case due to the Assessee's bona fide disclosure of foreign assets in other parts of the tax return.
• The appeal filed by the Assessee was allowed, and the penalty was deleted.