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TMI Blog2025 (3) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... ve purposes and hence the assessee was under bonafide belief that he is not required to disclose the foreign assets, as it belongs to his son.
Tax authorities have placed reliance on the fact that the assessee has lent money to his son Shri Chintan S Shah, who has, in turn, used those funds to make investments.
Under the General law, merely for the reason that a person has purchased certain assets out of borrowed funds, the lender would not automatically become owner of those assets. The buyer would continue to remain owner of those assets, until it is recovered from him by the lender in accordance with law. In the event of failure of the borrower to adhere to the terms and conditions of loan. Further, the said loan transaction has taken place in India and it has been duly recorded in the books of both the lender and borrower. Hence the provisions of BMA will not extend to the loan transaction entered between the parties in India.
We are of the view that the tax authorities are not justified in levying penalty of Rs. 10.00 lakhs in each of the three years under consideration. Appeals of the assessee are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... AO levied penalty of Rs. 10 lakhs in AYs. 2019-20, 2020-21 & 2021-22. Before Ld.CIT(A), the assessee did not succeed. Hence, the assessee has filed these appeals. 4. We heard the parties and perused the record. In the instant cases, penalty of Rs. 10.00 lakhs per year has been levied u/s 43 of the Black Money (Undisclosed Foreign Income and Asset) & Imposition of Tax Act, 2015. The said section reads as under:- "43. Penalty for failure to furnish in return of income, an information or furnish inaccurate particulars about an asset (including financial interest in any entity) located outside India.- If any person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6 of the Income-tax Act, who has furnished the return of income for any previous year under sub-section (1) or sub-section (4) or sub-section (5) of section 139 of the said Act, 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 incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even if the beneficial owner has disclosed the same as 100% owner in his return of income as per his understanding of the provisions of BM Act. We may refer to certain decisions rendered in this type of issue by the co-ordinate benches. (A) A co-ordinate bench has considered the object of introduction of Black Money Act (BMA) in the case of Nirmal Bhanwarlal Jain (BMA No.13/Mum/2023 dated 31.07.2023) and observed as under:- "The BMA was introduced with the intention of curbing stashing away of black money abroad, it was consequent to introduction of BMA that an amendment was made under the provisions of Income tax Act, 1961 to enable the assessee to report foreign investments directly held in the name of assessee or where they are beneficial owner or are in any way beneficiary to any assets or income from source located outside India. It is mandatory on the part of assessee's to report investments/assets held outside India. Where the assessee makes default in reporting of such investments/assets in Schedule FA of the return of income, the assessee is liable for penalty under section 43 of BMA" (B) In the case of M/s Ocean Diving Centre Ltd (BMA No.22/Mum/2023 and others date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Schedule FA, when the assessee has already declared the same in the Balance sheet and the said Balance sheet was also incorporated in the return of income. In the above said cases, it has been held that failure to disclose foreign assets/income in the Schedule FA would not automatically lead to levy of penalty u/s 43 of the BMA Act, since the assessing officer is having discretion not to levy the said penalty. Accordingly, it has been held that the AO is expected to act judicially before levying penalty. 7. The Ld A.R also relied upon certain case laws, wherein the penalty u/s 43 of BMA levied in the hands of the assessee for non-disclosure of foreign asset in Schedule FA of Income tax return has been cancelled by the Tribunal on noticing that the said investments actually belong to some other person. (A) In the case of Ms Harshita Nirmal Jain (BMA No.28/M/2023 dated 18-01-2024), the Tribunal noticed that the investment in the name of above assessee was made by her father and hence the assessee did not disclose the same under bonafide belief that she was not required to disclose the same. Accordingly, the Tribunal accepted the plea of bonafide belief and accordingly deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " is not decisive for arriving at a finding as to whether statute is directory or mandatory and in this context it is necessary to find out from the scheme of the Act the intention of the Legislature. In other words in construing a penal statue, the object of the law must be clearly borne in mind as held in the case of Pratap Singh v. State of Jharkhand [(2005) 3 SCC 551. The Finance Minister in his speech while introducing the BMA stated that "tracking down and bringing back the wealth which legitimately belongs to the country is our abiding commitment to the country. Recognising the limitations under the existing legislation, we have taken a considered decision to enact a comprehensive new law on black money to specifically deal with such money stashed away abroad". This would mean that the intention behind introduction of BMA is mainly to track and bring into the tax net the undisclosed black money stashed abroad. Therefore the plain interpretation of the words used in section 43 means that the legislature has given a discretionary power to the Assessing Officer to decide the levy of penalty after considering all relevant factors including the purpose and object the statute seek ..... X X X X Extracts X X X X X X X X Extracts X X X X
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