ACIT v. Rohit Krishna

Case snapshot

Sections / provisions: Black Money Act 43

Questions before the Court / Tribunal

• Penalty for non-disclosure of foreign asset/ESOP interest: The reported order concerns Black Money Act penalty for alleged failure to report a foreign financial interest/ESOP asset. Because the penalty regime is highly fact-specific and depends on ownership/beneficial-interest and return disclosure, the official Tribunal order is required before stating the ratio.

Material facts and background

Brief facts of the case are that assessee was resident of India

during the years under consideration. It is alleged that assessee had foreign assets being investments with Equatex UK Ltd. (United Kingdom of Great Britain and Northern Ireland) having account No. 1660701 but was not reported in schedule FA (Foreign Assets) of the income tax return filed for the years under consideration, as revealed in the enquiries conducted by the investigation Wing.

3.1. According to the Ld. Assessing Officer, schedule FA was introduced in the return of income from Assessment Year 2012 – 13 by the Finance Act, 2012, making it mandatory for the Indian residents to report about their foreign assets and income generated thereupon in foreign jurisdiction in order to track the same. According to the Ld. Assessing Officer, failure on the part of the assessee to make the said reporting attracted penalty of ₹ 10 lakhs under section 43 of the Act. Ld. Assessing Officer had issued a show cause notice seeking explanation from the assessee to this effect which was replied upon.

3 ITA No.37 to 40/MUM/2024 Rohit Krishna., AYs 2018-19, 2017-18,2020-21,2020-21 and 2019-20

3.2. Assessee submitted that he was an employee of Vodafone M-Pesa Ltd and was granted stock options that is ESOPs by the company as part of his employment. Assessee received equity shares of Vodafone Group PLC (foreign listed company of the Vodafone group) which were valued at ₹18,99,873/- by the employer for assessment year 2018-19. These shares were held in an online broking account bearing user ID: 1528635 which was opened by the employer itself to facilitate the allotment of ESOPs. These ESOPs were considered as perquisites in the hands of the assessee which were valued and disclosed as per the provisions of the Income-tax Act, 1961 (the IT Act) in Form No. 12BA issued by the employer. This perquisite was included in annexure to Form 16 – Part B as per section 17(2) of the IT Act. The employer had deducted appropriate and full amount of tax at source (TDS) on the value this of perquisite. According to the assessee, since the entire amount of ESOP is fully taxed by way of TDS and which has been disclosed and offered to take under the head income from salary in his return form, it does not fall within the definition of ‘undisclosed asset located outside India’ as per section...

The preamble of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA), describes the objective of the Act to be make provisions to deal with the problem of the Black money that is undisclosed foreign income and assets, the procedure for dealing with such income and assets and to provide for imposition of tax on any undisclosed foreign income and asset held outside India and for matters connected therewith or incidental thereto.”

Section 2(2) of the BMA, defines an assessee as "(2) "assessse" means a person, being a resident other than not ordinarily resident in India within the meaning of claute (6) of section 6 of the Income tax Adler-wlwm tus in respect of undisclosed foreign income and assets, or any other payable

Appellant / assessee submissions

3.2. Assessee submitted that he was an employee of Vodafone M-Pesa Ltd and was granted stock options that is ESOPs by the company as part of his employment. Assessee received equity shares of Vodafone Group PLC (foreign listed company of the Vodafone group) which were valued at ₹18,99,873/- by the employer for assessment year 2018-19. These shares were held in an online broking account bearing user ID: 1528635 which was opened by the employer itself to facilitate the allotment of ESOPs. These ESOPs were considered as perquisites in the hands of the assessee which were valued and disclosed as per the provisions of the Income-tax Act, 1961 (the IT Act) in Form No. 12BA issued by the employer. This perquisite was included in annexure to Form 16 – Part B as per section 17(2) of the IT Act. The employer had deducted appropriate and full amount of tax at source (TDS) on the value this of perquisite. According to the assessee, since the entire amount of ESOP is fully taxed by way of TDS and which has been disclosed and offered to take under the head income from salary in his return form, it does not fall within the definition of ‘undisclosed asset located outside India’ as per section...

3.4. Further, assessee submitted that he had adequately disclosed his assets and liabilities in schedule AL of the income-tax return form which included value of these ESOPs under the head “shares and securities”. It was thus claimed that since assessee had disclosed the entire amount of income by way of perquisite received as ESOPs and has paid the full amount of tax on such income, there is no occasion for imposing penalty under section 43 of the Act. Summary of disclosures made by the assessee is tabulated as under for which relevant documents are placed in the paper book on record:

3.8. In respect of Assessment Years 2020-21 and 2021-22, assessee submitted that in addition to the above tabulated disclosures, he had filed updated returns u/s 139(8A) of the IT Act wherein all the details are furnished in Schedule FA. These were filed on 30.09.2022 for Assessment Year 2020-21 and on 12.10.2022 for Assessment Year 2021-22, copies of which are placed in the paper book. Thus without prejudice to the submissions made of the three assessment years, in these two assessment years, the specific requirement alleged by the ld. Assessing Officer is duly complied with and therefore penalty so levied is not justified.

Revenue / respondent submissions

applicable and assessee is mandatorily required to disclose foreign assets in Schedule FA, failure of which would lead to imposition of penalty. According to ld. Sr. DR, disclosure of foreign asset in the return is not merely technical requirement without any purpose. It enables the Department to ensure proper investigation. Hence, its nondisclosure is to be viewed with disfavour.

Court / Tribunal analysis and reasoning

employer of the Assessee has also deducted the TDS on the value of the foreign asset/ESOP and shown the details/value of the same in Form No.16 Part-B as well as in Form No.12BA. Hence, it cannot be said that the Assessee has not disclosed the foreign assets in any manner. The Hon'ble Co-ordinate Bench of the Tribunal in the case of M/s. Ocean Diving Centre Ltd. vs. CIT BMA No.22/M/2023 & ors. decided on 30.08.2023 has also considered almost the similar circumstances, wherein though the Assessee has not disclosed the foreign assets in Schedule FA but in fact disclosed the same in its balance sheet and schedule part-A-BS under "non-current investments" attached with the return of income and therefore the Co-ordinate Bench considering the fact that the Assessee has disclosed the foreign assets may not be in form FA but otherwise in its return of income ultimately held that the penalty is not warranted. For brevity and ready reference, the conclusion drawn by the Hon'ble Co-ordinate Bench of the Tribunal is reproduced herein below”....... ……8.1 Hence, considering the aforesaid facts and circumstances of the case, as it is not the case of the Revenue Department that the foreign...

8.1. We also take note of the provisions of section 43 of the Act as well as the preamble to the said Act to understand the discretionary power vested with the Assessing Officer for imposition of penalty vis-à-vis object sought to be achieved keeping in mind the legislative intent. The purpose of reporting requirement of foreign assets/income in Schedule FA of the Income tax return is for tracking and monitoring the investments held abroad by the residents of India. Preamble to the Act describes its objective to deal with problem of black money, i.e., undisclosed foreign income and assets. The said Act must not be invoked for punishing a technical /venial /bonafide breach of any statutory obligation and therefore bonafide actions of the tax payers must be excluded from the application of provisions of this stringent legislation. In this regard, we draw our force from the decision of Hon’ble Supreme Court in the case of Hindustan Steel Ltd. (supra).

Operative decision and relief

17 ITA No.37 to 40/MUM/2024 Rohit Krishna., AYs 2018-19, 2017-18,2020-21,2020-21 and 2019-20

as discussed above, admittedly it is not a case where foreign asset remained undisclosed in entirety and that there is any malafide intention or ulterior motive on the part of the assessee for not disclosing the same. Also, taking into account, detailed discussions on long line of judicial precedents referred by the ld. Counsel, we delete the penalty in all the five appeals under consideration before us. Accordingly, grounds taken by the Revenue in this respect are dismissed.

Copy to : 1 The Assessee 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER,

Authorities and precedents appearing in the judgment

• Hindustan Steel Ltd. vs State of Orissa (1972) 83 ITR
• Ocean Diving Centre Ltd. v. CIT in BMA No. 22/M/2023 dated
• Hindustan Steel Ltd. v. State of
• Tribunal in the case of M/s. Ocean Diving Centre Ltd. vs. CIT BMA
• ACIT vs. Tejal Ashish Mehta
• Aditi Avinash Athavankar 16 to 19/Mum/2023 vs. CIT
• CIT vs. Shrem Alloys Pvt. 08 to 11/Mum/2023
• Addtl.CIT vs. Manoj 6/Mum/2024
• Rohit Krishna vs. CIT
• ACIT vs. Tejal Ashish Mehta in BMA No. 5/Mum/2022
• ITAT of Mumbai in the case of ACIT vs. Leena
• Aditi Avinash Athavankar vs. CIT in BMA Nos.16 to 19/Mum/2023

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Penalty for non-disclosure of foreign asset/ESOP interest. The operative result is classified as Operative order controls. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Penalty for non-disclosure of foreign asset/ESOP interest. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Check the exact penalty charge in the show-cause notice, the assessment finding and the final penalty order; ambiguity or a changed statutory limb can be material.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

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