2023 (12) TMI 54 - AT - Income Tax

Levy of Penalty under Black Money Act - undisclosed investment in foreign entity - Assessee had investment in foreign entities but has not reflected said investment in Schedule of Foreign Assets in its return of income filed - HELD THAT - It is not in controversy that the Assessee has not disclosed the information qua investment in foreign entity in Schedule FA of the Income Tax return but disclosed the same in its balance-sheet and Schedule part-A-BS under Non Current Investments attached with the return of income filed for the AY under consideration. In the instant case, the Assessee admittedly duly recorded and disclosed the investment in foreign entity in its audited balance-sheet and also furnished such information under Non Current Investments in Schedule para-A-BS in its return of income, hence we are in concurrence with the claim of the Assessee that the Assessee has directly or indirectly complied with the statutory provisions and therefore, the case of the Assessee does not fall under the rigorous provisions of section 43 of the B.M. Act. No doubt the Schedule FA and BMI Act, have been introduced and enacted for checking the economic offenders, tax evaders and for analyses of information qua foreign investment/income by using artificial intelligence and Schedule FA applicable specifically to the Assessee(s) whose accounts are not required to be audited or if audited but books of account not filed along with the return of income. However, in each and every case, the penalty as prescribed in section 43 of the Act, cannot be imposed. With regard to the contention raised by Ld. DR to the effect that the Assessee is a habitual defaulter. In our view as the Black Money Act was introduced and enacted in 2015 and therefore, that could be a reason for technical / venial breach starting from AY 2016-17 onwards which is under consideration before us, however, in the instant case, it is not the case of total defiance or malafide or dishonest breach/non disclosure of information of foreign investment in schedule FA, therefore, on the aforesaid analyzations and considerations, in our view the penalty is not warranted, hence, the same is deleted. Consequently, the appeal filed by the Assessee is allowed.

Summary

Issues Involved:
1. Non-disclosure of foreign investment in Schedule FA of the Income Tax Return.
2. Imposition of penalty under Section 43 of the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act, 2015 (B.M. Act).

Summary:

Issue 1: Non-disclosure of Foreign Investment in Schedule FA
The Assessee, a domestic company, filed a return of income declaring "NIL" income but did not reflect its foreign investment in Helen Incorporated S.A., Panama in the Schedule of "Foreign Assets" (Schedule FA). The Assessee argued that the investment was disclosed in the balance sheet and Schedule Part A-BS under "Non-current Investments" and claimed the omission in Schedule FA was a typographical error or bona-fide omission.

Issue 2: Imposition of Penalty under Section 43 of B.M. Act
The Assessing Officer (AO) rejected the Assessee's claim and imposed a penalty of Rs. 10,00,000 under Section 43 of the B.M. Act, stating that the legislation mandates disclosure in the prescribed format, and the Assessee's failure to do so for multiple years indicated a pattern of non-compliance. The Ld. Commissioner upheld the penalty, emphasizing that non-disclosure in the return hinders proper investigation and compliance with disclosure requirements.

Appellate Tribunal's Decision:
The Tribunal noted that the Assessee had disclosed the foreign investment in its audited balance sheet and Schedule Part A-BS, thus indirectly complying with statutory provisions. Citing the Supreme Court's principle that penalties should not be imposed for technical or bona fide breaches, the Tribunal held that the Assessee's omission did not warrant the harsh penalty under Section 43 of the B.M. Act. The Tribunal emphasized that penalties should be imposed judiciously, considering all relevant circumstances and the Assessee's bona fide actions.

Conclusion:
The Tribunal deleted the penalty, stating that the Assessee's case did not fall under the rigorous provisions of Section 43 of the B.M. Act, and allowed the appeal. The judgment was pronounced in the open court on 30-08-2023.