Penalty under Section 43 of Black Money Act deleted where foreign investment disclosed in balance sheet despite Schedule FA omission

ITAT Mumbai held that penalty under Section 43 of Black Money Act was not warranted where assessee failed to disclose foreign investment in Schedule FA but disclosed it in balance sheet and Schedule part-A-BS filed with income tax return. The tribunal found this constituted substantial compliance with statutory provisions rather than willful non-disclosure. The case involved technical breach rather than malafide concealment, as information was available in audited accounts attached to return. Appeal allowed, penalty deleted.

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Issues Involved:
1. Non-disclosure of foreign investment in Schedule FA of the Income Tax Return.
2. Imposition of penalty under Section 43 of the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act, 2015 (B.M. Act).

Summary:

Issue 1: Non-disclosure of Foreign Investment in Schedule FA
The Assessee, a domestic company, filed a return of income declaring "NIL" income but did not reflect its foreign investment in Helen Incorporated S.A., Panama in the Schedule of "Foreign Assets" (Schedule FA). The Assessee argued that the investment was disclosed in the balance sheet and Schedule Part A-BS under "Non-current Investments" and claimed the omission in Schedule FA was a typographical error or bona-fide omission.

Issue 2: Imposition of Penalty under Section 43 of B.M. Act
The Assessing Officer (AO) rejected the Assessee's claim and imposed a penalty of Rs. 10,00,000 under Section 43 of the B.M. Act, stating that the legislation mandates disclosure in the prescribed format, and the Assessee's failure to do so for multiple years indicated a pattern of non-compliance. The Ld. Commissioner upheld the penalty, emphasizing that non-disclosure in the return hinders proper investigation and compliance with disclosure requirements.

Appellate Tribunal's Decision:
The Tribunal noted that the Assessee had disclosed the foreign investment in its audited balance sheet and Schedule Part A-BS, thus indirectly complying with statutory provisions. Citing the Supreme Court's principle that penalties should not be imposed for technical or bona fide breaches, the Tribunal held that the Assessee's omission did not warrant the harsh penalty under Section 43 of the B.M. Act. The Tribunal emphasized that penalties should be imposed judiciously, considering all relevant circumstances and the Assessee's bona fide actions.

Conclusion:
The Tribunal deleted the penalty, stating that the Assessee's case did not fall under the rigorous provisions of Section 43 of the B.M. Act, and allowed the appeal. The judgment was pronounced in the open court on 30-08-2023.

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