The Income Tax Appellate Tribunal, Mumbai, has clarified that an inadvertent error in disclosing the correct account number of a foreign bank account in Schedule FA of the income tax return does not attract penalty under Section 43 of the Black Money Act if the full transactional details and peak balance of the actual account are disclosed. This ruling reinforces the principle that substance must prevail over technical non-compliance where there is no intent to conceal.
Background & Facts
The Dispute
The appellant, Sameetaa Sanjay Arora, was assessed for the financial year 2016-17 (assessment year 2017-18). The Revenue alleged that she failed to disclose a foreign bank account maintained with Barclays Bank UK PLC in Schedule FA of her income tax return, thereby attracting a penalty of Rs. 10 lakh under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The appellant contended that she had disclosed the account but mistakenly cited the account number of a USD-denominated add-on account instead of the primary GBP account.
Key Facts
- The appellant maintained three accounts with Barclays Bank UK PLC:
- Primary account: GBP account No. 83547264
- Add-on account: USD account No. 59654799
- Add-on account: EUR account No. 74563877
- All transactions during the year were conducted exclusively through the GBP account (No. 83547264)
- The USD and EUR accounts had a nil balance throughout the financial year
- The appellant disclosed the peak balance of GBP 175,303.27 (equivalent to Rs. 1,67,26,681) in Schedule FA of her ITR-2 filed on 31.10.2017
- In Schedule FA, she incorrectly listed the USD account number (59654799) instead of the GBP account number (83547264)
- The appellant submitted bank statements and a printout from Barclays Bank’s website indicating that the USD and EUR accounts were automatically generated as add-on accounts to facilitate multi-currency transactions without separate management
- The appellant had no transactions, credits, or debits in the USD or EUR accounts
Procedural History
- 31.10.2017: Assessee filed return of income for A.Y. 2017-18
- 13.06.2023: Assessing Officer issued show cause notice and levied penalty of Rs. 10 lakh under Section 43 of the Black Money Act for non-disclosure of foreign asset
- 18.08.2025: Commissioner of Income Tax (Appeals)-51, Mumbai, upheld the penalty
- 09.03.2026: Hearing before ITAT Mumbai
- 23.03.2026: ITAT Mumbai delivered order
The Parties' Positions
For the Appellant
- The disclosure of the peak balance and transactional details of the GBP account constituted full compliance with the spirit of Section 43
- The error in account number was purely inadvertent and technical
- The USD and EUR accounts were not independent accounts but add-ons linked to the GBP account, as per Barclays Bank’s policy
- The bank statement confirmed no activity in the other two accounts
- Relied on the Coordinate Bench’s decision in Sanjana Sanjay Arora v. DDIT (BMA No. 34/Mum/2025) for identical facts
For the Revenue
- Section 43 requires accurate disclosure of account numbers
- The failure to mention the correct account number constitutes furnishing inaccurate particulars
- The Revenue argued that the accounts are distinct under bank records and cannot be presumed linked without documentary proof
- The penalty was justified as a deterrent against non-disclosure
Relief Sought
The appellant sought deletion of the penalty of Rs. 10 lakh levied under Section 43 of the Black Money Act, on the ground that there was no failure to disclose or furnishing of inaccurate particulars, and the error was inadvertent.
The Legal Issue
The central question was whether an inadvertent misstatement of the foreign bank account number in Schedule FA, while correctly disclosing the peak balance and transactional details of the actual account, constitutes a failure to disclose or furnishing of inaccurate particulars under Section 43 of the Black Money Act, warranting a penalty.
Arguments Presented
For the Appellant
The appellant’s representative relied on the factual and legal reasoning in Sanjana Sanjay Arora v. DDIT (BMA No. 34/Mum/2025), where the Coordinate Bench held that when the taxpayer discloses the correct peak balance and transactional details of the primary account, and the other accounts are merely add-ons with nil balances, the technical error in account number cannot be construed as a deliberate concealment. The appellant submitted that the bank’s policy, as evidenced by its website, allows customers to conduct multi-currency transactions through linked add-on accounts without maintaining separate balances. The appellant further emphasized that the Revenue had access to the bank statement and could have verified the nil balances in the USD and EUR accounts. The penalty, she argued, was disproportionate and contrary to the principle of proportionality under Article 14 of the Constitution.
For the Respondent
The Departmental Representative conceded that the facts in the present case were identical to those in the sister’s case decided by the Coordinate Bench. He did not dispute the bank’s policy or the nil balances in the add-on accounts. However, he maintained that Section 43 requires precise disclosure of account numbers and that the Revenue cannot be expected to infer linkage between accounts without explicit documentation. He argued that the penalty was statutory and mandatory unless the assessee could conclusively prove the accounts were not separate.
The Court's Analysis
The Tribunal carefully examined the decision in Sanjana Sanjay Arora v. DDIT and found the factual matrix to be indistinguishable. The Court noted that the appellant had disclosed the correct peak balance of Rs. 1,67,26,681 in Schedule FA, which was the only material information required to assess the value of the foreign asset. The Tribunal observed:
"It is evident that in the present case, the assessee made the disclosure regarding the peak balance in her bank account maintained with Barclays Bank UK PLC in Schedule FA of her ITR filed for the year under consideration on 31.10.2017."
The Court further acknowledged that while the bank statements confirmed nil balances in the USD and EUR accounts, the absence of an official bank letter or policy document explicitly stating the linkage between the accounts created ambiguity. However, the Tribunal emphasized that the purpose of Section 43 is to penalize deliberate concealment of foreign assets, not technical errors in form-filling. The Tribunal held:
"In the interest of justice and fair play, we deem it appropriate to grant one more opportunity to the assessee to bring necessary information on record regarding these three bank accounts..."
The Court declined to uphold the penalty on the basis of a technical discrepancy when the substance of disclosure - the existence, value, and activity of the foreign asset - was fully and accurately reported. The Tribunal distinguished between intentional non-disclosure and inadvertent error, noting that the Revenue’s own records (bank statements) corroborated the appellant’s claim.
The Verdict
The appeal was allowed for statistical purposes. The Tribunal set aside the penalty order dated 18.08.2025 and restored the matter to the file of the Assessing Officer for de novo adjudication. The AO was directed to verify the linkage between the GBP account and the USD/EUR add-on accounts by seeking official confirmation from Barclays Bank UK PLC through proper channels. The appellant was granted an opportunity to submit additional documentary evidence, including a bank letter confirming the add-on nature of the accounts. No penalty was confirmed, and the Rs. 10 lakh penalty stands suspended pending fresh adjudication.
What This Means For Similar Cases
Inadvertent Errors Are Not Equivalent to Concealment
- Practitioners must argue that Section 43 requires proof of intent to conceal or furnish inaccurate particulars - not mere clerical errors
- Disclosure of peak balance and transaction history is the substantive requirement; account number mismatch alone is insufficient for penalty
- Taxpayers should retain and submit bank policy documents, account statements, and correspondence to establish the nature of multi-currency accounts
Add-On Accounts May Not Qualify as Separate Assets
- Where banks automatically generate currency-specific accounts without separate balances or transactional autonomy, these may not constitute distinct foreign assets
- The burden shifts to the Revenue to prove that the add-on accounts are functionally independent and hold separate value
- In cases involving international banks with multi-currency facilities, taxpayers should proactively obtain written confirmation from the bank regarding account structure
Procedural Fairness Over Technical Rigidity
- Tribunals are increasingly prioritizing substance over form in tax compliance matters
- The ITAT’s decision to restore the matter for fresh adjudication, rather than outright quashing the penalty, reflects a balanced approach
- Practitioners should request de novo adjudication in similar cases where the taxpayer has disclosed the asset’s value and activity, even if account details are misstated
