TaxTMI 
TaxTMI 
2026 (6) TMI 124
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....of the Black Money Act. At the outset the learned Departmental Representative submitted that the controversy involved in the present appeals is exactly similar in parameters to the issue which had come up before this Bench in the appeal heard on 25.02.2026 and therefore the present appeals also arise on an identical factual matrix and involve the same legal issue. 3. From the perusal of the impugned orders and the material placed on record the brief factual backdrop giving rise to the present controversy is that the assessee company had made an investment in a foreign entity namely FM Overseas FZC located in Sharjah, UAE. Being a resident assessee the company was required to disclose details of such foreign financial asset in Schedule FA of the income tax return for the relevant assessment years. During the course of proceedings the Assessing Officer noticed that although the assessee had made such foreign investment the details of the said investment were not furnished in Schedule FA of the return of income. According to the Assessing Officer the failure to disclose the foreign asset in the specific reporting schedule constituted a violation of the statutory reporting requireme....
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....to the findings recorded by the Assessing Officer while levying the penalty under section 43 of the Black Money Act governing the controversy. 3.5 After careful consideration, the AO rejected the appellant's submissions. It was observed that under Section 43 of the BMA, the failure to furnish information regarding a foreign asset or financial interest in the income-tax return attracts a penalty of Rs. 10 lakh, irrespective of the intent or reason behind such failure. The AO emphasized that the provision is one of strict liability, and there is no exemption for cases involving bonafide belief or inadvertent error. 3.5 Upon verification of the appellant's ITR for the years, the AO noted that the appellant had answered "NO" to Question No. 14 of Part B-TTI, which specifically asks whether the taxpayer held any foreign asset or income during the year. Moreover, Schedule FA in the return was left completely blank, despite the appellant's admitted ownership of foreign shares. This, according to the AO, amounted to furnishing inaccurate particulars and a clear violation of Section 43. 3.6 The AO further held that disclosure of the investment in the balance sheet....
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.... before this Tribunal vide order dated 26.02.2026 in BMA No.43/Mum/2025 and other connected appeals, wherein the scope and import of section 43 of the Black Money Act had been examined in detail and the Tribunal had considered the circumstances in which the statutory trigger for levy of penalty under the said provision can be said to arise. In essence the Tribunal had analysed whether omission to disclose the foreign asset in a particular reporting schedule of the return, despite disclosure in the financial statements and other parts of the return itself, can be construed as a failure to furnish information in the return of income so as to attract the rigour of section 43 of the Act. 9. At this stage it would be appropriate to refer to the statutory provision contained in section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. "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, 1961, fails to furnish in the return of income any information relating to an asset (including financial interest in any entity) located outside India, as r....
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....scuss the facts for A.Y. 2016-17, and our findings given therein shall apply mutatis mutandis to the other years under consideration, since identical facts and the same foundational controversy permeate each year leading to the impugned penalty under section 43. 5. Briefly stated, a search and seizure action under section 132 was carried out on 31.12.2021 in the Sawai&Bhoomi Group and, upon examination of the records, it was noticed that the assessee had made investments in FM Overseas FZC, located at SAIF Zone, Sharjah, UAE. The Ld. Assessing Officer observed that the assessee had invested Rs.10,16,303/- (equivalent to AED 41,084) in shares of the said foreign entity on 16.05.2014 and, according to him, such foreign financial asset was required to be disclosed in Schedule FA of the return of income for the relevant assessment years. Since the assessee did not fill up the said Schedule FA, the Ld. Assessing Officer initiated penalty proceedings under section 43 by issuing show cause notice dated 30.07.2024. 6. In response, the assessee raised certain contentions which can be summarised in the following manner: (i) The assessee asserted that the foreign as....
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....partment. (vii) Reliance was also placed on the decision of the Mumbai Tribunal in Addl. CIT, Central Range-1, Mumbai vs. Leena Gandhi Tiwari, 2022(6) TMI 1191 (ITAT Mumbai), to reinforce the proposition that section 43 penalty should not be imposed in a mechanical manner where the surrounding facts show disclosure and bona fides. 7. The Ld. Assessing Officer, however, did not accept the aforesaid contentions and proceeded to levy penalty under section 43 by, in sum and substance, assigning the following reasons as emerging from the penalty order and the record: (i) First, upon verification of the returns, the Assessing Officer noted that the assessee had answered "NO" to Question No. 14 of Part B-TTI, which, according to him, specifically asks whether the taxpayer held any foreign asset or income during the year. In his view, this response, coupled with a blank Schedule FA, evidenced non-reporting in the precise reporting architecture mandated for foreign assets. (ii) Secondly, the Assessing Officer held that Schedule FA was left completely blank despite admitted ownership of foreign shares, and such omission amounted to furnishing inaccurate pa....
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....he appellant has furnished documentary evidence to show that the said foreign asset, namely FM Overseas FC at Sharjah amounting to INR 10,16,303/-has been duly disclosed under the section "Part A-BS - Balance Sheet as on 31st day of March, 2016" and under the head "Non- Current Investment". The appellant has also placed on record copy of balance sheet, wherein investment in the foreign entity is duly disclosed under Note 7 under the heading Non-Trade Investments. The appellant has relied upon the decision of ITAT, Mumbai in the case of Ocean Diving Centre Ltd Vs CIT(A)-51, Mumbai in BMA No. 22/Mum/2023 dated 30.08.2023 to argue that penalty u/s 43 of BMA could not be levied for mere technical or venial breach. 5.4 In this regard it is seen that the Hon'ble Mumbai ITAT in the case of Ocean Diving Centre Ltd v CIT (BMA No. 22/Mum/2023 order dated 30.08.2023), has held that once the concerned assessee has disclosed the investment made in the foreign asset in another schedule of the ITR, the assessee can be said to have directly or indirectly complied with the statutory provisions and the case of such an assessee cannot be said to fall under the rigorous provisions of sect....
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....to the proposition that Schedule FA is a specific statutory reporting requirement and, therefore, non-furnishing of particulars therein, by itself and without more, automatically triggers the penalty contemplated under section 43. It is in this precise factual and legal setting that we are called upon to examine the true amplitude of section 43, the nature of the reporting obligation it creates, and the jurisdictional threshold that must be satisfied before a fixed penalty can be sustained. 10. At this stage, it is apposite to extract section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which reads as under:- "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, 1961, fails to furnish in the return of income any information relating to an asset (including financial interest in any entity) located outside India, as required under the Act, he shall be liable to a penalty of Rs.10,00,000/-." 10.1. A careful reading of the provision shows that the statutory trigger is the failure "to furnish in the return of income any ....
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....le FA. We also cannot be unmindful of the statutory design of penalty provisions under the Black Money Act. The provision uses the phrase "shall be liable to a penalty", which underscores seriousness; yet, the imposition of penalty still has to be rooted in a correct appreciation of the jurisdictional fact, namely, that there is a failure to furnish in the return of income any information relating to the foreign asset. Where the jurisdictional fact itself is absent because information is furnished, though not in the preferred schedule, the penalty cannot be sustained by treating a format lapse as equivalent to substantive non-reporting, for that would amount to substituting the statutory trigger with a different trigger not borne out from the language of the provision. 12. It is in this context that the reasoning of the coordinate Bench in Ocean Diving Centre Ltd., as noticed by the Ld. CIT(A) in the original draft, assumes significance, for the ratio proceeds on the premise that where the foreign asset is disclosed in another schedule of the return and in audited financials, the assessee can be said to have complied directly or indirectly, and the case does not fall under....
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....guidance to override parliamentary command, which is impermissible in law. Secondly, even on its own terms, Question 18 contemplates a situation where foreign assets were not reported in Schedule FA "in the past". The answer clarifies that such assets, if fully explained, are not to be declared under Chapter VI, but carries a rider about penalty for non-reporting in Schedule FA from A.Y. 2016-17 onwards. This is a general clarification intended to warn taxpayers that, going forward, Schedule FA reporting is mandatory. However, it does not address, much less decide, the nuanced factual situation where the taxpayer has disclosed the foreign investment in the return itself in Part A-BS and audited balance sheet schedules and yet has failed to populate Schedule FA. In such a case, the statutory question still remains whether there is failure to furnish "any information" in the return, and that question must be answered on the facts and statutory language, not by an FAQ's broad cautionary tone. Thirdly, section 43 is undoubtedly a deterrent provision, but it does not operate in a vacuum divorced from the reality of return-filing mechanics. The return is not a single li....