2025 (4) TMI 791 - AT - Income Tax

Penalty imposed u/s 41 of the Black Money - HELD THAT - Considering the fact that the addition sustained by the CIT(A) have been reduced by the Tribunal in both the cases the penalty is also required to be computed as per Section 41 of the Black Money (Undisclosed Foreign Income and Assets) and imposition of Tax Act 2015 in so far as the additions sustained by the Tribunal. Therefore we direct the AO to re-compute the amount of penalty and pass order accordingly in accordance with law. Penalty proceedings are initiated u/s 43 of the Black Money Act - Assessee has failed to furnish the information of Foreign Income/Assets held by him in the ITR - HELD THAT - AO has recorded the satisfaction for initiation of penalty proceedings u/s 43 of the Black Money Act only for AY 2012-13 to 2017-18 and no satisfaction has been recorded by the AO for the year under consideration i.e. Assessment Year 2018-19. Considering the fact that no satisfaction has been recorded by the AO in the assessment order for AY 2018-19 the imposition of the penalty for the year under consideration cannot be sustained.

ISSUES PRESENTED and CONSIDERED

The Tribunal considered the following core legal questions:

1. Whether the penalty imposed under Section 41 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, should be recomputed in light of the reduced additions determined by the Tribunal in the quantum appeals.

2. Whether the penalty imposed under Section 43 of the Black Money Act for the Assessment Year (AY) 2018-19 is valid, given the alleged failure to furnish information on foreign income/assets in the Income Tax Returns (ITR) for that year.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Re-computation of Penalty under Section 41

- Relevant Legal Framework and Precedents: Section 41 of the Black Money Act deals with the imposition of penalties related to undisclosed foreign income and assets. The Tribunal's previous decision in the quantum appeals reduced the additions, impacting the penalty computation.

- Court's Interpretation and Reasoning: The Tribunal noted that since the quantum of additions had been reduced, the penalty should be recalculated accordingly. The Tribunal emphasized that the penalty must align with the reduced additions as per the Tribunal's prior order.

- Key Evidence and Findings: The Tribunal relied on the seized materials and the previous order, which detailed the commission amounts and their apportionment. The Tribunal affirmed the CIT(A)'s determination of the commission based on these materials.

- Application of Law to Facts: The Tribunal directed the Assessing Officer (AO) to recompute the penalty under Section 41, considering the reduced additions, ensuring compliance with the legal framework.

- Treatment of Competing Arguments: Both parties agreed that the penalty should be recalculated in light of the reduced additions, leading to a consensus on this issue.

- Conclusions: The Tribunal concluded that the penalty should be recomputed, and directed the AO to pass an order in accordance with the law.

Issue 2: Validity of Penalty under Section 43 for AY 2018-19

- Relevant Legal Framework and Precedents: Section 43 of the Black Money Act imposes penalties for failing to furnish information on foreign income/assets. The legal question centered on whether the AO recorded satisfaction for AY 2018-19.

- Court's Interpretation and Reasoning: The Tribunal examined the assessment order and found that while the AO initiated penalty proceedings for AYs 2012-13 to 2017-18, there was no recorded satisfaction for AY 2018-19. The Tribunal emphasized the necessity of recording satisfaction for each assessment year to impose a penalty.

- Key Evidence and Findings: The Tribunal scrutinized the assessment order's language, noting the omission of AY 2018-19 in the satisfaction recording, which is crucial for penalty imposition.

- Application of Law to Facts: The Tribunal applied the legal requirement of recorded satisfaction to the facts, determining that the absence of such satisfaction for AY 2018-19 invalidated the penalty.

- Treatment of Competing Arguments: The Department argued that the omission was a clerical error, but the Tribunal held that the absence of recorded satisfaction was a substantive issue that could not be overlooked.

- Conclusions: The Tribunal quashed the penalty orders for AY 2018-19, as the necessary satisfaction was not recorded, rendering the penalty unsustainable.

SIGNIFICANT HOLDINGS

- The Tribunal held that penalties under Section 41 must be recalculated in accordance with the reduced additions determined in the quantum appeals. The Tribunal directed the AO to recompute the penalties, reflecting the reduced amounts.

- The Tribunal established that for penalties under Section 43 to be valid, the AO must record satisfaction for each specific assessment year. The omission of AY 2018-19 in the satisfaction recording invalidated the penalty for that year.

- The Tribunal's decision underscores the importance of precise procedural compliance in penalty impositions under the Black Money Act, highlighting the necessity of recorded satisfaction for each relevant assessment year.

- The Tribunal's final determination was to allow the appeals related to Section 43 penalties for AY 2018-19, while partially allowing the appeals concerning Section 41 penalties for statistical purposes, directing recalculations based on the Tribunal's findings.

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