ITAT Ahmedabad: No BMA Penalty When Foreign Assets Disclosed in Section 153A Return — ACIT vs Ansul Darshan Shah
Overview of the Dispute
The Income Tax Appellate Tribunal, Ahmedabad Bench, delivered a significant ruling in ACIT vs Ansul Darshan Shah, dismissing four appeals filed by the Revenue against consolidated orders dated 27.06.2024 passed by the Commissioner of Income Tax (Appeals)-11, Ahmedabad. The appeals spanned Assessment Years 2016-17 through 2019-20 and revolved around a singular legal question: whether a penalty imposed under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter "BMA") could survive when the assessee had duly disclosed foreign assets in returns filed under Section 153A of the Income Tax Act, 1961, even though such assets were absent from the original returns filed under Section 139(1).
Since all four appeals raised an identical legal issue, the Tribunal proceeded to adjudicate on the facts pertaining to Assessment Year 2016-17, with its findings applied mutatis mutandis to the remaining Assessment Years 2017-18, 2018-19, and 2019-20 (BMA Nos. 2 to 4/Ahd/2024).
Background and Factual Matrix
How the Foreign Assets Were Acquired
The assessee, Ansul Darshan Shah, had acquired certain assets located in the United States of America during the period when he was a non-resident in India. These assets were funded entirely from income earned abroad during his non-resident phase, which forms an important contextual backdrop to the nature of the omission that followed.
Non-Disclosure in Original Returns
Despite having an obligation to report foreign assets in Schedule FA of the return of income, the assessee failed to include these assets when filing returns under Section 139(1) of the Income Tax Act, 1961 for the relevant Assessment Years. This omission became the primary basis for the Revenue's subsequent penalty action.
Search and Seizure and Voluntary Disclosure
On 10.04.2019, a search and seizure operation under Section 132 of the Income Tax Act, 1961 was carried out in the case of the ADS Group. Crucially, during the course of these search proceedings, the assessee came forward and voluntarily disclosed the existence of the foreign assets held in the USA. Following this voluntary disclosure:
- The assessee duly reported the foreign assets in Schedule FA of the returns filed under
Section 153Afor Assessment Years 2016-17 to 2019-20. - The foreign assets and associated income were also disclosed in the return filed under
Section 139(1)for Assessment Year 2020-21. - The foreign income was offered to tax in India in the appropriate manner.
Penalty Imposed by the Assessing Officer
Notwithstanding the voluntary disclosure and the subsequent inclusion of foreign assets in the Section 153A returns, the Assessing Officer took the position that since the assets were not disclosed in the original return filed under Section 139(1), a penalty was warranted. On this basis, the Assessing Officer levied a penalty of Rs. 10,00,000/- under Section 43 of the BMA for each of the four Assessment Years.
Proceedings Before the CIT(Appeals)
The assessee, aggrieved by the penalty order, preferred an appeal before the Commissioner of Income Tax (Appeals)-11, Ahmedabad.