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TMI Blog2024 (11) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act as well as the preamble to the said Act to understand the discretionary power vested with the AO for imposition of penalty vis-à-vis object sought to be achieved keeping in mind the legislative intent.
The purpose of reporting requirement of foreign assets/income in Schedule FA of the Income tax return is for tracking and monitoring the investments held abroad by the residents of India. Preamble to the Act describes its objective to deal with problem of black money, i.e., undisclosed foreign income and assets.
The said Act must not be invoked for punishing a technical /venial /bonafide breach of any statutory obligation and therefore bonafide actions of the tax payers must be excluded from the application of provisions of this stringent legislation. We draw our force from the decision of Hindustan Steel Ltd. [1969 (8) TMI 31 - SUPREME COURT]
Admittedly it is not a case where foreign asset remained undisclosed in entirety and that there is any malafide intention or ulterior motive on the part of the assessee for not disclosing the same. Decided against revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... d in an online broking account bearing user ID: 1528635 which was opened by the employer itself to facilitate the allotment of ESOPs. These ESOPs were considered as perquisites in the hands of the assessee which were valued and disclosed as per the provisions of the Income-tax Act, 1961 (the IT Act) in Form No. 12BA issued by the employer. This perquisite was included in annexure to Form 16 - Part B as per section 17(2) of the IT Act. The employer had deducted appropriate and full amount of tax at source (TDS) on the value this of perquisite. According to the assessee, since the entire amount of ESOP is fully taxed by way of TDS and which has been disclosed and offered to take under the head income from salary in his return form, it does not fall within the definition of 'undisclosed asset located outside India' as per section 2(11) of the Act. A reference was also made to definition of assessee under section 2(2) of the Act and to the preamble of the Act to describe its objectives. The same are extracted below for ease of reference: i. The preamble of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA), describes the objective of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 43 of the Act according to which assessee contended that section does not specify that details of foreign assets must be disclosed in particular schedule, that is Schedule FA as alleged, of the income-tax return form. Assessee was under a bonafide belief that he is not supposed to disclose his foreign assets in any separate schedule such as schedule FA when the same had already been adequately disclosed in schedule AL as part of his assets and liabilities. According to the assessee, levy of penalty under section 43 is not mandatory but is at the discretion of the Assessing Officer since the word used in the said section is that Assessing Officer "may" levy penalty. It was submitted that legislature has given discretionary power to the Ld. Assessing Officer to decide the levy of penalty after considering all relevant factors including the purpose and object, the Act seeks to achieve. The discretion to impose a penalty puts the ld. Assessing Officer under a corresponding obligation to exercise the said discretion by taking into account the facts and circumstances of the case, holistically. Provisions of section 43 of the Act are extracted below: "If any person, being a reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd taxed in India in the same assessment year 4) He has disclosed, beyond doubt, the source of investment in such asset. He has furnished the relevant information and particulars to the extent required to be submitted in the tax return 5) It is not a case of malafide intention of not disclosing either the income or the asset 3.8. In respect of Assessment Years 2020-21 and 2021-22, assessee submitted that in addition to the above tabulated disclosures, he had filed updated returns u/s 139(8A) of the IT Act wherein all the details are furnished in Schedule FA. These were filed on 30.09.2022 for Assessment Year 2020-21 and on 12.10.2022 for Assessment Year 2021-22, copies of which are placed in the paper book. Thus without prejudice to the submissions made of the three assessment years, in these two assessment years, the specific requirement alleged by the ld. Assessing Officer is duly complied with and therefore penalty so levied is not justified. 3.9. Assessee placed strong reliance on the decision of Coordinate Bench of ITAT Mumbai in his own case for the preceding Assessment Year 2016-17 in BMA No. 11/M/2024 dated 26.08.2024 which had dealt with the identical issue on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the Hon'ble Co-ordinate Bench of the Tribunal in the case referred to above, wherein the Co-ordinate Bench dealt with the identical situation and ultimately deleted the penalty; hence we are inclined to delete the penalty under consideration. Thus, the same is deleted." 4. Before us, ld. Counsel for the assessee has placed reliance on long line of judicial precedents by the various coordinate benches, especially that of ITAT Mumbai, on the issue being dealt here in these appeals to assert the contentions of the assessee and bring clarity on the subject matter by pointing out change in stand taken on different occasions by the same author / co-author. The same are listed as under in the chronology of their date of pronouncement. Sr. No. Name of the parties BMA Number Date of pronounce ment i) ACIT vs. Tejal Ashish Mehta 5/Mum/2022 03.04.2023 ii) Aditi Avinash Athavankar vs. CIT 16 to 19/Mum/2023 10.07.2023 iii) Nirmal Bhanwalal Jain Vs. CIT 13 to 15/Mum/2023 31.07.2023 iv) Shobha Harish Thawani vs. JCIT 01 to 03/Mum/2023 09.08.2023 v) CIT vs. Shrem Alloys Pvt. Ltd 08 to 11/Mum/2023 29.08.2023 vi) Ocean Diving Centre Ltd. vs. CIT 24 to 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 43 uses the words "the Assessing Officer may direct" which would mean that power of Assessing Officer to impose penalty is discretionary and not mandatory. Non-disclosure in assessee's return was considered as bonafide mistake since required disclosure was made in the return of income of husband of the assessee. There was no intention to evade tax on this account. Reliance was also placed on the decision of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. (Supra). On the use of word "may" in section 43 for levy of penalty, it was observed that it is necessary to find out from the scheme of the Act, the intention of the legislature for which reference was made to the speech of the then Hon'ble Finance Minister given while introducing the Act. Thus, after considering all these facts and law, it was concluded that Assessing Officer was not justified in exercising the discretionary power just because it would be lawful to do so. According to the decision, the discretionary power would have to be exercised having regard to facts of each case in a fair, objective and judicious manner and the intention of the legislation. It was noted that intention behind the introduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords "may levy penalty" and relied on the decision of Leena Gandhi Tiwari (supra). It was observed that since foreign asset has not been disclosed in the return of income in Schedule FA, the Assessing Officer exercised his discretion judiciously. It was concluded that provisions of section 43 does not provide any room not to levy penalty even if the foreign asset is disclosed in books since penalty is levied only towards non-disclosure of foreign assets in Schedule FA. Penalty was thus confirmed and appeal of the assessee was dismissed. v) CIT vs. Shrem Alloys Pvt. Ltd., in BMA Nos. 08 to 11/Mum/2023, dated 29.08.2023 e. In this case, assessee declared its foreign asset in the return filed u/s.153A of the IT Act. However, due to oversight requisite details were not filed in Schedule FA in the return filed u/s.139(1) of the IT Act. It was also claimed that investment was made in Assessment Year 201213 which was duly disclosed in the return of income and income therefrom offered to tax. Reliance was placed on decision in the case of Hindustan Steel Ltd. (supra). It was observed that at the initial stage i.e., in Assessment Year 2012-13, investment made was disclosed in Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t non-reporting only in Assessment Year 2016-17 and relied on the decision of Leena Gandhi Tiwari (supra). He also placed reliance on the decision of Shrem Alloys [supra- Sr. No.v) above]. By following the judicial precedents, it was held to be not a fit case for penalty and appeal of the Revenue was dismissed. ix) Rohit Krishna vs. CIT (supra - assessee's own case) i. This has already been discussed in the above paragraphs, wherein decisions of Ocean Diving Centre (supra - Sr. No.vi above) and Hindustan Steel Ltd. (supra) were relied upon, giving relief to the assessee. 6. Ld. Counsel for the assessee strongly submitted that existence of discretionary power u/s.43 of the Act by the use of the words 'may levy penalty' is well founded. Intention behind introduction of the Act is mainly to track and bring into tax net the un-disclosed black money stashed abroad. For exercising the discretion, object of the law must be clearly borne in mind. Legislature has given discretionary power to the Assessing Officer to decide levy of penalty after considering all relevant factors including purpose and object, the statute seeks to achieve. This discretion puts the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eamble to the Act describes its objective to deal with problem of black money, i.e., undisclosed foreign income and assets. The said Act must not be invoked for punishing a technical /venial /bonafide breach of any statutory obligation and therefore bonafide actions of the tax payers must be excluded from the application of provisions of this stringent legislation. In this regard, we draw our force from the decision of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. (supra).
8.2. Accordingly, considering the facts and circumstances of the case as discussed above, admittedly it is not a case where foreign asset remained undisclosed in entirety and that there is any malafide intention or ulterior motive on the part of the assessee for not disclosing the same. Also, taking into account, detailed discussions on long line of judicial precedents referred by the ld. Counsel, we delete the penalty in all the five appeals under consideration before us. Accordingly, grounds taken by the Revenue in this respect are dismissed.
9. In the result, all the five appeals of the Revenue are dismissed.
Order is pronounced in the open court on 27 November, 2024 X X X X Extracts X X X X X X X X Extracts X X X X
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