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2025 (1) TMI 276 - AT - Income TaxImposition of tax and penalty under Black Money Act - Effective date of implementation of Black Money Act, 2015 - AY 2014-15 AY 2015-16 - HELD THAT - The first previous year under the provisions of Black Money Act, 2015 would be FY 2015-16 and the corresponding AY will be AY 2016-17. Therefore, the AO could not have assessed the income of the assessee for AYs 2014-15 and 2015-16. Similarly, there would not have any jurisdiction to impose penalty for AYs 2014-15 and 2015-16 before coming into force the Black Money Act, 2015. Assessee was not supposed to comply the provisions of Black Money Act, 2015, before it has come into force and, therefore, the assessee cannot be held liable for non-compliance of any provisions of the Black Money Act, 2015 in relation to AY 2014-15 and 2015- 16 and penalty levied u/s. 41 43 of the Black Money Act, 2015 and would also be not sustainable for AY 2014-15 and AY 2015-16. Therefore, there is no force in the appeals of the revenue relating to action of the Ld. CIT(A) in deleting the tax imposed u/s. 10 of the Black Money Act, 2015 and penalty levied u/s. 41 43 of the Black Money Act, 2015 for AYs 2014-15 and 2015- 16. Non-Retirement Fund (NRF) held by the assessee - dividend income reinvested in the NRF - AY 2016-17 - AO calculated the equivalent currency in Indian value of the undisclosed foreign income at Rs. 1,95,537/- and imposed tax @ 30% - HELD THAT - Undisclosed foreign income and asset are to be assessed by the AO under the Black Money Act, 2015 in the year in which it has come to the knowledge of the AO. Admittedly, there was no undisclosed asset of the assessee in the foreign country. Regarding the dividend income earned on the NRF fund, the plea of the Ld. AR of the assessee is that the same would not fall in the definition of income as the assessee had invested in a fund, wherein, the dividend, if any, earned on such fund would automatically form part of the fund and was not separately taxable. The assessment year 2016-17 was the first year when the Black Money Act, 2015 came into force. The foreign income earned by the assessee was taxable, otherwise, in that country.. The tax on the said dividend income was withheld as per the USA Tax Law as such dividend income formed part of the investment/fund itself. The Ld. Counsel in this respect has explained that the Black Money Act, 2015 had come into force for the first time in AY 2016-17 only and that the provisions of the Black Money Act, 2015 were not so clear and it was not ascertainable as to whether the dividend earned by the assessee on the fund, which had become part of the investment fund, itself, was required to be disclosed in the return of income filed u/s. 139 of the Act. As per the provisions of section 3 of the Act, the undisclosed asset was to be taxed in the year in which the information regarding the same comes to the knowledge of the AO which of course came to his knowledge in November, 2018, relevant to AY 2019-20. No infirmity in the order of the Ld. CIT(A) in deleting the impugned addition made by the AO. This appeal of the revenue is accordingly, dismissed. Penalty imposed u/s. 41 of the Black Money Act, 2015 on the addition made u/s. 10(3) of the Black Money Act, 2015 on account of foreign income assessed deleted as we have upheld the order of the Ld. CIT(A) in quashing the assessment and, therefore, by deleting the addition made by the AO u/s. 10 of the Black Money Act, 2015. Penalty levied u/s. 43 of the Black Money Act, 2015 - the assessee s foreign assets and foreign income during the year, which the assessee had not disclosed in the income tax return filed u/s. 139(1) of the Act, were of the value, which was more than Rs. 5,00,000/- - CIT(A) deleted penalty observing that the AO has not properly dealt with the issue and the order passed by the AO u/s. 10(3) of the Act did not indicate on which basis the decision has been reached that the assessee had undisclosed foreign income/asset - HELD THAT - Provisions of section 43 do not suggest that the aforesaid penalty is mandatory, rather, as per the provisions, AO may direct that such person shall pay, by way of penalty, a sum of Rs. 10 lakhs . It has been held time and again that the word may also include may not . Since this was the first year of the implementation of the Black Money Act, there was no undisclosed assets of the assessee, the assets in question have been earned by the assessee from known sources of income (salary) and due taxes paid thereupon as per USA Tax Laws and not taxes were payable by the assessee on such assets in India and further that the provisions of Black Money Act, 2015 were new and it was very difficult even for tax Practitioners, what to say of the ordinary assessees, who are not conversant with such complicated provisions to differentiate between the assets and undisclosed assets. Hence, the procedural lapse occurred on the part of the assessee was not intentional rather the assessee has been caught unawares of such lapse. Under the circumstances, in our view, the Ld. CIT(A), considering the overall facts and circumstances of the case was justified in deleting the impugned penalty. Appeals of the revenue are hereby dismissed. 1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Notices and Assessments under BMA Act, 2015
Issue 2: Penalties under Sections 41 and 43 of the BMA Act, 2015
Issue 3: Classification of NRF as Undisclosed Foreign Asset
Issue 4: Taxability of Reinvested Dividend Income
Issue 5: Applicability of Section 81 for Procedural Errors
3. SIGNIFICANT HOLDINGS
In conclusion, the appeals of the revenue were dismissed, and the assessments and penalties under the BMA Act, 2015 for the assessment years 2014-15, 2015-16, and 2016-17 were quashed.
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