TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 1191
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugh the money held therein did not belong to, and were not beneficially owned by, the taxpayer and that position is accepted by the authorities and has attained finality as such. The short case of the Assessing Officer is that dehors the non-taxability of the amount in the hands of the assessee and dehors the bonafide conduct of the assessee, as long as the assessee is a signatory of the undisclosed foreign bank account, and the legal owner as such, the penalty under section 43 of the BMA must be imposed. There is no dispute that the money held in the said account was eventually donated to a charity of global repute i.e. namely Médecins Sans Frontières UK, in deference to the wishes of the assessee's late mother, that it was brought to tax in the hands of the late mother's legal representative, and that, at no stage, assessee used the said money in any manner whatsoever. 3. To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before us is one of the prominent businesspersons in India, chairperson of a well known pharmaceutical company, and she was one of the signatories to a foreign bank account, which she had not undisclosed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... tough patch, including on her health front, she approached her eldest daughter for taking care of the business as also, inter alia, this Swiss bank account as well. It was in this backdrop that the assessee and her husband, alongwith Vasant Thakkar, travelled to Zurich and completed formalities about the transfer of this bank account to their names, but the understanding was said to be that the assessee and her husband were holding the bank account purely as trustees and the monies were to be used for the benefit of Dr Pramila Gandhi, as was apparently wished by late AVG. The interpersonal relationship between the assessee and her husband vis-à-vis Dr Pramila Gandhi hit a tough patch and normalcy could resume only in 1999. This account, in the meantime, was lying dormant and inactive. In 1999, upon resumption of normalcy in this relationship, and at the instructions of Dr Pramila Gandhi, the bank account was transferred to Kleinwort Benson, London branch and then to Kleinwort Benson, Guernsey. There is a mention about the account being maintained with Societe Generale Bank, St James Square, London branch, but the account is the same and the difference in names of the bank i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....undertaking given by her husband, even though she is technically a second signatory to the said bank account, the account is operated by the first signatory, i.e. the husband. It was also explained that the assessee's being the second signatory was entirely in a fiduciary capacity and for the benefit of her ailing mother. It was submitted that looking to the financial status of the assessee, and the fact that her personal tax liability is Rs 159.20 crores for the year and the aggregate annual tax liability, including that of her husband and the private company of which she is chairperson, is of Rs 516.30 crores for the year, such an omission is nothing more than a bonafide mistake. It was also explained that the money has come from a legitimate source and the bank account, right from the time she became a signatory of the same, was not at all touched, and eventually, everything in the said account was donated as per the wishes of the actual owner of the account in whose hands it is assessed to tax under the BMA anyway. It was then submitted that everything was duly disclosed under section 132(4) of the Income Tax Act, 1961, and, therefore, the provisions of the BMA have no applicat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oduction" of the BMA. It was then noted that the plea of a voluntary disclosure under section 132(4) was not acceptable as the declaration was made after the existence of the unaccounted foreign bank account was detected. It was again reiterated that non-disclosure of a foreign bank account for all these years, till the search and seizure operation was carried out, cannot be said to be "bonafide'. A reference was then made to Hon'ble Delhi High Court's decision in the case of CIT Vs Zoom Communications Pvt Ltd [(2010) 327 ITR 510 (Del)], as also to the wordings of Section 43. On the basis of these reasons, as also the detailed discussions in his order, the Assessing Officer concluded that it was a fit case for imposition of penalty. The Assessing Officer thus proceeded with the imposition of penalty under section 43. Aggrieved, assessee carried the matter in appeal before the CIT(A) who deleted the penalty, after noting that "the appellant is not found to be engaged in managing the account under dispute" as it is owned up by her husband, on the short ground that since "her (the assessee's) husband has been imposed the penalty for non-disclosure of this account which has been confir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as no explanation about the source of such investment in such asset or the explanation given by him is, in the opinion of the Assessing Office, not satisfactory". The definition of an undisclosed foreign asset, under the BMA, is thus not dependent on the disclosure made, or not made, in the income tax return. So far as disclosure of an undisclosed foreign asset in the income return is concerned, it is relevant only for the purpose of penalty under section 43 and for no other purpose in the BMA. The position so far as undisclosed foreign income is concerned, the position is quite different inasmuch the definition of undisclosed foreign income is concerned, it is materially different- as provided under section 4(1)(a) and (b) of the BMA, but then right now we are not concerned with that aspect of the matter. The observations that we make in this order here, therefore, may not have any bearings, in view of the peculiarities of that definition of the "undisclosed foreign income, particularly with reference to "filing' of the return within the statutory time frame provided under the ITA and for a variety of reasons that we need not elaborate at this stage. Suffice to say that, in the pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment years immediately preceding the assessment year in which search is conducted or requisition is made becomes open to assessment or re-assessment. Two aspects are crucial here. One is use of the expression "notwithstanding" in sub-section (1); and secondly that returns of income filed pursuant to notice under section 153-A (1)(a) would be construed to be returns under section 139. The use of non obstante clause in sub-section (1) of section 153-A i.e., use of the expression "notwithstanding" is indicative of the legislative intent that provisions of section 153-A(1) would have overriding effect over the provisions contained in sections 139, 147, 148, 149, 151 and 153". It was in this backdrop that Their Lordships of Hon'ble jurisdictional High Court held that "...the original return which had been filed loses its originality and the subsequent return filed under section 153A of the said Act (which is in consequence to the search action under section 132) takes the place of the original return. In such a case, the return of income filed under section 153A(1) of the said Act, would be construed to be one filed under section 139(1) of the Act and the provisions of the said Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he income tax return filed under section 139(1) because, in the considered view of the Hon'ble jurisdictional High Court, the return subsequently filed for the same assessment year under section 153A is to be "construed as one filed under section 139(1) of the Act and the provisions of the said Act (Income Tax Act, 1961) will apply to the same accordingly". On a conceptual note, there can be situations in which the opportunity to file the return under section 153A can indeed work to the advantage of the assessee, as apparently in this case, and even fresh claims may be made which have, as in the case of JSW Ltd (supra), meeting the judicial approval. Whatever be the consequence of this legal position, such conceptual notions, cannot negate the binding effect of the law laid down by the Hon'ble jurisdictional High Court. We may, however, add that the present discussion hereinbefore is in the light of the applicability of Section 43 of the BMA, and the observations made by us must be construed only in this limited context. As regards such a non-disclosure for the earlier assessment years, which is what the learned Assessing Officer has harped upon vehemently in the impugned order, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es that the penalty is not to be imposed in all cases of lapses and that there is no cause and effect relationship simpliciter between the lapse and the penalty. As to what should be the considerations for the exercise of this inherent discretion by the Assessing Officer, we find some guidance 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 judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty 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 liab....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the assessee's late father that the money was kept intact for the benefit of the assessee's mother, which mother never used, and then donated it, within weeks of her mother's death, to a charity of her late mothers choice, and a charity which has earned the prestigious Noble Peace Prize in 1999 for its humanitarian work. The degree of reverence for the feelings of the parents, as unambiguously shown by the mother, is undisputed. With this kind of detachment, and truly dealing with this as trust money in letter and in spirit, her belief that she was not required to disclose it as "her' bank account, cannot be said to be lacking bonafides. While the amount held in the said account is donated to the charity, the entire tax liabilities in respect of the same have been paid by the legal representative of Dr Pramila Gandhi, and the matter has attained finality as such. It is also important to bear in mind the fact that the uncontroverted stand of the assessee is that the assessee, as also her husband, were signatories because Dr Pramila Gandhi was having health issues and was not in a position to travel. It was more of being a signatory for the operation of the bank account, rather t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....completely contrary to human probabilities, does merit acceptance. No reasonable person would consciously or deliberately withhold disclosure about this foreign bank account, for an ulterior motive, from the tax authorities, and, in any case, admittedly the money does not belong to the assessee- as is the position accepted by the Assessing Officer himself. Viewed thus, on merits of assessee's conduct, it was not a fit case for the imposition of impugned penalty. It is also not a case of siphoning of unaccounted Indian wealth to the undisclosed foreign bank accounts, prevention of which was the noble cause for which the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was enacted immediately upon the present Government coming to the power. Such well-intended stringent legislation as the BMA, enacted for the larger causes of public good and to check tax evaders, cannot be so interpreted as to cause undue hardship to the citizenry for such harmless technical or venial breaches of the law. Francis Bacon, in his classic essay "Of Judicature' (The Works of Francis Bacon, Volume 1 (1984), has said that "Judges must beware of hard constructions, and strai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the bank account, considering the status of the persons involved, is a very small amount of money. The person who inherited the said money or the persons who were signatories to the bank account, did not put that money to any use so much so that ultimately that money was donated to a charity of global repute. The assessee and her husband were signatories to the said bank account because, as is the uncontroverted stand of the assessee, the actual owner, late Dr Pramila Gandhi had health issues and she was not in a position to travel to Zurich when formalities in respect pf the account inherited by her were to be completed. The subsequent developments spanning over several decades unambiguously corroborate this stand of the assessee. When we objectively see all these factors in totality, the inescapable impression is that the assessee is certainly not from the category of persons who were sought to be checked by this piece of legislation. To use it in a case in which a person has not reported a bank account, which is a lawful inheritance from her father and which contains a small amount that is eventually donated by her to a medical charity of global repute, will surely be inappro....