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TMI Blog2025 (3) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... ty will be justified in refusing to impose a penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute". Essentially, therefore, the overall conduct of the assessee, and materiality of the lapse as also its being in the nature of a technical or venial breach of law, is the most critical factor so far as taking a call on the question of whether or not a penalty should be imposed for the assessee's failure to discharge a statutory obligation. The imposition of penalty under Section 43 is surely at the discretion of the Assessing Officer, but the manner in which this discretion is to be exercised has to meet the well-settled tests of judicious conduct by even quasi judicial authorities. The bench also considered the objective of BMA legislation and finally confirmed the order of first appellate authority in deleting the impugned addition as imposed by Ld. AO. Similar favorable view has been taken in Ocean Driving Centre Ltd. [2023 (12) TMI 54 - ITAT MUMBAI] wherein deleted similar penalty on the ground that it was not a case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case. 2. The CIT(Appeals) - 18, Chennai erred in confirming the levy of penalty u/s. Section 43 of The Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Act, 2015), herein after referred to as the Act to the tune of Rs. 10,00,000/- on the presumption of failure in furnishing information of the investments made by the appellant in the return of income filed for the* assessment year under consideration without assigning proper reasons and justification. 3. The CIT(Appeals)- 18, Chennai failed to appreciate that provisions in Section 2(11) of the Act had no application to the facts of the present case, thereby negating the levy of penalty under provisions of Black Money (Undisclosed Foreign Income and Assets) and imposition of tax Act, 2015. 4. The ClT(Appeals) - 18, Chennai failed to appreciate that there was no precise charge in the notice initiating the penalty proceedings under consideration, thereby vitiating the impugned order levying penalty in terms of Section 43 of the Act. 5. The CIT(Appeals) * 18, Chennai failed to appreciate that in any event the provisions of Section 43 of the said Act had no application to the present facts of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chennai failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law. 1.2 The Ld. AR advanced arguments with the support of various case laws, the copies of which have been placed on record. The Ld. Sr. DR also advanced arguments and justified the invocation of provisions of Sec.43 of BMA against the assessee. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. 1.3 At the outset, it is noted that the provisions of Sec. 43 of BMA provide that if any person, being a resident other than not ordinarily resident who has furnished the return of income for any previous year under sub-sections (1) or (4) or (5) of Sec.139 fails to furnish any information or furnishes inaccurate particulars in such return relating to any asset (including financial interest in any entity) located outside India, held by him as a beneficial owner or otherwise, or in respect of which he was a beneficiary, or relating to any income from a source located outside India, at any time during such previous year then Assessing Officer may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee held one bank account also. The details thereof have been extracted on Page No.1 & 2 of penalty order dated 19-03-2022. Though all these investments were not reflected in the Schedule "Foreign Assets" (FA in short) in the return of income, nevertheless, sources for the investment abroad were clearly explained by the assessee with supporting documents. The same is also evident from the fact that the assessment was completed with 'Nil' addition. However, Ld. AO initiated penalty u/s 43 since the assessee failed to furnish information of such investments in the returns of income. Accordingly, the assessee was show-caused. 2.4 The assessee opposed levy of penalty on the ground that it maintained non-residential status up-to AY 2011-12 and for AYs 2012-13 and 2013-14, the status was not ordinarily resident. For subsequent years, the assessee was a resident. The issue is only for AY 2016-17 when the act was first introduced. The assessee reflected income from foreign sources but could not reflect foreign asset which was mere inadvertent mistake. The mistake happened due to the fact that return of income for all AYs 2009-10 to 2016-17 were filed at a stretch. From AY 2017-18 onw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudication 3. From the facts, it emerges that the assessee was a non-resident up-to AY 2011-12 and for AYs 2012-13 and 2013-14, the status was not ordinarily resident. Thereafter, the assessee has become resident. From AY 2016-17, BMA was introduced wherein there was a new requirement on a resident to disclose the details of prescribed foreign assets. This requirement was a newly introduced requirement and introduced for the first time w.e.f. AY 2016-17. Undisputedly, this information was not furnished by the assessee is regular return of income filed on 30-11- 2016. 4. Subsequently, the assessee was searched on 09-11-2017 and notices were issued u/s 153C for various assessment years on 13-09- 2019. In response, the assessee filed return of income on 21-11-2019 which was scrutinized under Income Tax Act and an assessment was framed u/s 143(3) r.w.s. 153C on 31-12-2019 wherein Ld. AO made certain addition of rental income as well as certain other addition u/s 69A. However, whatever income was earned from foreign sources, the same was offered to tax which was accepted by Ld. AO. No addition has been made for foreign income. At the same time, an assessment was also framed u/s 10(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign asset in the income tax return and penalty under BMA. The unambiguous intent of the legislature thus was to exclude trivial cases of lapses which could be attributed to a reasonable cause. It could also be noted that Sec.43 provide that the Assessing Officer "may" impose the penalty, and the use of the expression "may" signifies that the penalty is not to be imposed in all cases of lapses and that there is no cause and effect relationship simplicitor between the lapse and the penalty. As to what should be the considerations for the exercise of this inherent discretion by the Assessing Officer, some guidance could be taken from Hon'ble Supreme Court's judgment in the case of Hindustan Steel (supra), which, inter alia, observes 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 penalty will not also be imposed merely because it is lawful to do so. Whether a penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty order passed u/s 42 of BMA 19-03-2022 9. It could be seen that in his year, the regular return of income was filed by the assessee on 20-11-2018 admitting income of Rs. 81.30 Lacs which was held to be invalid return. In this return, the assessee had disclosed foreign assets / investments in Schedule FA. Subsequent to search on the assessee, notices u/s 153C was issued and the assessee filed return of income on 21-11-2019 admitting income of Rs. 79.53 Lacs. The Ld. AO made addition of Rs. 4 Lacs but Ld. AO adopted original returned income of Rs. 81.30 Lacs while framing the assessment. However, penalty u/s 42 was initiated on the ground that the assessee failed to file the return of income within prescribed time limit. Accordingly, the assessee was show-caused. The provisions of Sec. 42 provide that if a person, being a resident other than not ordinarily resident in India, who is required to furnish a return of his income for any previous year, as required under sub-section (1) of section 139 of the Income-tax Act or by the provisos to that sub-section and who at any time during such previous year held specified foreign assets or earned income from a source located outside I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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