2023 (4) TMI 1403 - AT - Income Tax

Penalty of Rs. 10.00 Lacs Under Section 43 Dismissed Due to Bona Fide Mistake in Foreign Asset Disclosure

Addl. CIT, Central Range-8, Mumbai Versus Tejal Ashish Mehta

Addl. CIT, Central Range-8, Mumbai Versus Tejal Ashish Mehta - TMI ISSUES PRESENTED and CONSIDEREDThe core legal issue considered in this judgment was whether the penalty of Rs. 10.00 lacs imposed under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, for non-disclosure of a foreign asset in Schedule-FA of the Income Tax Return, was rightly deleted by the Commissioner of Income Tax (Appeals) [CIT(A)].ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The relevant legal framework involves Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which mandates the disclosure of foreign assets in Schedule-FA of the Income Tax Return. Circular No. 13 of 2015, specifically Question No. 18, clarifies that non-reporting of foreign assets in Schedule-FA results in a penalty.The CIT(A) relied on the precedent set in the Tribunal's decision in the case of Addl. CIT vs. Leena Gandhi Tiwari, which was instrumental in the deletion of the penalty.Court's interpretation and reasoning:The Tribunal examined whether the non-disclosure of the foreign asset, a Life Insurance Policy, was a bona fide mistake given the circumstances. The Tribunal considered the fact that the asset was surrendered during the financial year, and the maturity amount was disclosed in the Income Tax Return under exempt income.Key evidence and findings:The Tribunal noted that the assessee had declared the surrender value of the policy under Section 59 of the Act and paid the requisite tax and penalty under the One Time Compliance Scheme. This declaration was accepted by the CIT, and a compliance certificate was issued. The maturity value of the policy was reflected in the Income Tax Return, and taxes were paid accordingly.Application of law to facts:The Tribunal applied the legal framework to the facts by considering the bona fide belief of the assessee that the foreign asset need not be disclosed after its surrender and subsequent compliance under the One Time Compliance Scheme. The Tribunal found that the non-disclosure was not due to an intention to furnish inaccurate particulars but was a reasonable mistake under the circumstances.Treatment of competing arguments:The Department argued that the non-disclosure warranted a penalty as per the Act and Circular No. 13 of 2015. However, the Tribunal found merit in the assessee's argument that the non-disclosure was a bona fide mistake, especially since the asset was surrendered, and all taxes and penalties were paid. The Tribunal upheld the CIT(A)'s decision, finding no reason to interfere with the deletion of the penalty.Conclusions:The Tribunal concluded that the penalty under Section 43 of the Act was not warranted due to the bona fide mistake of the assessee in not disclosing the foreign asset in Schedule-FA, given the full compliance with tax obligations under the One Time Compliance Scheme.SIGNIFICANT HOLDINGSThe Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing that:'Bonafide mistake in not disclosing foreign asset in Schedule -FA of the Income Tax Return is a reasonable cause for deleting penalty in the given circumstances.'The core principle established is that a bona fide mistake in non-disclosure, when coupled with full compliance with tax obligations, can be a reasonable cause for deleting a penalty under Section 43 of the Act.The final determination was to dismiss the Revenue's appeal, affirming the CIT(A)'s order to delete the penalty, as the appeal was deemed devoid of merit.