Addl. CIT v. Tejal Ashis Mehta

Case snapshot

Sections / provisions: 43

Questions before the Court / Tribunal

• Black Money Act section 43 penalty: non-disclosure of foreign insurance policy and bona fide error defence.
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

आयकर अपील य अ धकरण मंब ु ई पीठ “ एच ”, मंब ु ई पीठ ी वकास अव थी, या यक सद य एवं ी गगन गोयल, लेखाकार सद य के सम% IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H ”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI GAGAN GOYAL, ACCOUNTANT MEMBER बी.एम.ए. 5/म/ंु 2022 ( न.व.2016-17) BMA NO. 5/MUM/2022(A.Y. 2016-17) Addl.CIT, Central Range-8, Room NO.657, 6th Floor, Aaykar Bhavan, M.K.Road, Mumbai 400 020. ...... अपीलाथ+ /Appellant

अपीलाथ+ .वारा/ Appellant by : Ms. Madhumalti Gh osh, CIT-DR , तवाद .वारा/Respondent by : Shri Prakash Jotwani, Advocate सन ु वाई क/ त थ/ Date of hearing : 09/01/2023 घोषणा क/ त थ/ Date of pronouncement : 03/04/2023

3. Ms. Madhumalti Gosh, representing the Department submitted that the assessee is an Indian Resident having an asset located outside India in the form of Life Insurance Policy. As per the provisions of the Act the assessee was under obligation to disclose all assets held by assessee located outside India in Schedule –FA of the Income-tax Return. The assessee failed to disclose Life Insurance Policy held by assessee outside India in Schedule-FA to the return of income. Hence, the Assessing Officer levied penalty u/s. 43 of the Act. In first appellate proceedings, the CIT(A) deleted the penalty placing reliance on the decision of Tribunal in the case of Addl.CIT vs. Leena Gandhi Tiwari in BMA No.1/Mum/2022 decided on 29/03/2022. The ld. Departmental Representative submitted that the CIT(A) failed to take note of Circular No.13 of 2015 dated 06/07/2015, wherein the Board has clarified while answering Question No.18 that disclosure of foreign asset in Schedule –FA in return of income is mandatory. Question No.18 of the said Circular specifically deals with the non-reporting of the assets in Schedule –FA of the Income-tax return. In a categoric answer to the said question, the Board…

4. Shri Prakash Jotwani appearing on behalf of the assessee submitted that the assessee had Life Insurance Policy of a foreign company which is a foreign asset. The assessee declared surrender value of policy under section 59 of the Act and paid 30% tax and 30% penalty thereon. The declaration made by the assessee under One Time Compliance Scheme was accepted by the CIT and a certificate in Form-7 was issued by the CIT towards tax compliance with regard to foreign asset. After declaration of the said policy, the assessee in F.Y. 2015-16 surrendered the policy and the receipts therefrom were declared in the return of income in Schedule –EI of the return for assessment year 2016- 17. The Ld.Counsel for the assessee submitted that after the surrender of policy the assessee was under bonafide belief that since the declaration of foreign asset is made under One Time Compliance Scheme of the Act and that the policy has been surrendered during the Financial Year 2015-16, there was no further requirement to declare the same in the return of income. The Ld.Counsel for the assessee pointed that the assessee in the Statement of Income filed along with return of income had disclosed maturity…

(i) Pranit Kirthikant Nanavati vs. ACIT in ITA No.2277/Ahd/2017 for assessment Year 2013-14 decided on 28/09/2021. (ii) ACIT vs. Leena Gandhi Tiwari, BMA NO.1/Mum/2022,A.Y.2017-18 decided On 29/03/2022. 5. We have heard the submissions made by rival sides and have examined orders of authorities below. The assessee has furnished a copy of Income Tax return for assessment year 2016-17. A perusal of the same shows that in Schedule – EI, wherein the assessee was required to declare exempt income, the assessee has duly reflected the maturity value of the insurance policy. The same amount has been disclosed by the assessee in the Statement of Income annexed to the return of income. It is an undisputed fact that the assessee has paid 30% taxes on fair market value of foreign asset along with 30% penalty, aggregating to 60% of the total value of the foreign asset under One Time Compliance Scheme of the Act. The CIT(A) deleted the penalty levied u/s. 43 of the Act by Assessing Officer by placing reliance on the decision of Tribunal in the case of Leena Gandhi Tiwari(supra).

Appellant / assessee submissions

3. Ms. Madhumalti Gosh, representing the Department submitted that the assessee is an Indian Resident having an asset located outside India in the form of Life Insurance Policy. As per the provisions of the Act the assessee was under obligation to disclose all assets held by assessee located outside India in Schedule –FA of the Income-tax Return. The assessee failed to disclose Life Insurance Policy held by assessee outside India in Schedule-FA to the return of income. Hence, the Assessing Officer levied penalty u/s. 43 of the Act. In first appellate proceedings, the CIT(A) deleted the penalty placing reliance on the decision of Tribunal in the case of Addl.CIT vs. Leena Gandhi Tiwari in BMA No.1/Mum/2022 decided on 29/03/2022. The ld. Departmental Representative submitted that the CIT(A) failed to take note of Circular No.13 of 2015 dated 06/07/2015, wherein the Board has clarified while answering Question No.18 that disclosure of foreign asset in Schedule –FA in return of income is mandatory. Question No.18 of the said Circular specifically deals with the non-reporting of the assets in Schedule –FA of the Income-tax return. In a categoric answer to the said question, the Board…

4. Shri Prakash Jotwani appearing on behalf of the assessee submitted that the assessee had Life Insurance Policy of a foreign company which is a foreign asset. The assessee declared surrender value of policy under section 59 of the Act and paid 30% tax and 30% penalty thereon. The declaration made by the assessee under One Time Compliance Scheme was accepted by the CIT and a certificate in Form-7 was issued by the CIT towards tax compliance with regard to foreign asset. After declaration of the said policy, the assessee in F.Y. 2015-16 surrendered the policy and the receipts therefrom were declared in the return of income in Schedule –EI of the return for assessment year 2016- 17. The Ld.Counsel for the assessee submitted that after the surrender of policy the assessee was under bonafide belief that since the declaration of foreign asset is made under One Time Compliance Scheme of the Act and that the policy has been surrendered during the Financial Year 2015-16, there was no further requirement to declare the same in the return of income. The Ld.Counsel for the assessee pointed that the assessee in the Statement of Income filed along with return of income had disclosed maturity…

Revenue / respondent submissions

3. Ms. Madhumalti Gosh, representing the Department submitted that the assessee is an Indian Resident having an asset located outside India in the form of Life Insurance Policy. As per the provisions of the Act the assessee was under obligation to disclose all assets held by assessee located outside India in Schedule –FA of the Income-tax Return. The assessee failed to disclose Life Insurance Policy held by assessee outside India in Schedule-FA to the return of income. Hence, the Assessing Officer levied penalty u/s. 43 of the Act. In first appellate proceedings, the CIT(A) deleted the penalty placing reliance on the decision of Tribunal in the case of Addl.CIT vs. Leena Gandhi Tiwari in BMA No.1/Mum/2022 decided on 29/03/2022. The ld. Departmental Representative submitted that the CIT(A) failed to take note of Circular No.13 of 2015 dated 06/07/2015, wherein the Board has clarified while answering Question No.18 that disclosure of foreign asset in Schedule –FA in return of income is mandatory. Question No.18 of the said Circular specifically deals with the non-reporting of the assets in Schedule –FA of the Income-tax return. In a categoric answer to the said question, the Board…

Court / Tribunal analysis and reasoning

(i) Pranit Kirthikant Nanavati vs. ACIT in ITA No.2277/Ahd/2017 for assessment Year 2013-14 decided on 28/09/2021. (ii) ACIT vs. Leena Gandhi Tiwari, BMA NO.1/Mum/2022,A.Y.2017-18 decided On 29/03/2022. 5. We have heard the submissions made by rival sides and have examined orders of authorities below. The assessee has furnished a copy of Income Tax return for assessment year 2016-17. A perusal of the same shows that in Schedule – EI, wherein the assessee was required to declare exempt income, the assessee has duly reflected the maturity value of the insurance policy. The same amount has been disclosed by the assessee in the Statement of Income annexed to the return of income. It is an undisputed fact that the assessee has paid 30% taxes on fair market value of foreign asset along with 30% penalty, aggregating to 60% of the total value of the foreign asset under One Time Compliance Scheme of the Act. The CIT(A) deleted the penalty levied u/s. 43 of the Act by Assessing Officer by placing reliance on the decision of Tribunal in the case of Leena Gandhi Tiwari(supra).

Operative decision and relief

accepted and maturity amount of Life Insurance Policy has been disclosed in Income Tax Return. Thus, taking into consideration entire facts, we are of the view that the impugned order warrants no interference. Hence, the same is upheld and appeal by the Revenue is dismissed being devoid of any merit.

7. In the result, appeal by the Revenue is dismissed.

Ratio and legal principle

• The packaged judgment addresses Black Money Act section 43 penalty: non-disclosure of foreign insurance policy and bona fide error defence. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with black money act section 43 penalty: non-disclosure of foreign insurance policy and bona fide error defence. Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

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Section / provision impact

• 43 - apply the exact version considered in the judgment.

Case network

Similar issue / useful comparison

• Narayan Devarajn Iyengar v. ITO - ITAT Mumbai

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