The Income Tax Appellate Tribunal, Ahmedabad, has clarified that penalty under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, cannot be imposed when undisclosed foreign assets are voluntarily disclosed in a return filed under Section 153A, even if omitted in the original return under Section 139(1). This ruling reinforces the legal equivalence of Section 153A returns with original returns for penalty purposes and affirms that bona fide, non-malicious omissions do not attract punitive action under the BMA.
Background & Facts
The Dispute
The appellant, Addl. Commissioner of Income Tax, Central Range-1, Ahmedabad, imposed a penalty of Rs. 10,00,000 on the respondent, Ansul Darshan Shah, under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA), for failure to disclose foreign assets in the original income tax returns for Assessment Years 2016-17 to 2019-20. The respondent had acquired assets in the USA during his non-resident status in India but did not report them in Schedule FA of his original returns filed under Section 139(1). The penalty was triggered after a search and seizure operation under Section 132 of the Income Tax Act, 1961, conducted on 10.04.2019 at ADS Group, during which the respondent voluntarily disclosed the foreign assets. Subsequently, he disclosed these assets in the returns filed under Section 153A for the relevant assessment years and also in the return for AY 2020-21 filed under Section 139(1).
Key Facts
- The respondent was a non-resident of India during the period he acquired foreign assets in the USA
- He filed original income tax returns for AYs 2016-17 to 2019-20 under Section 139(1) without disclosing foreign assets in Schedule FA
- A search under Section 132 was conducted on 10.04.2019 at ADS Group, leading to voluntary disclosure of foreign assets by the respondent
- The respondent filed returns under Section 153A for AYs 2016-17 to 2019-20, disclosing all foreign assets in Schedule FA
- The Assessing Officer accepted the disclosures in the Section 153A returns and made no additions to the respondent’s income in relation to these assets
- No adverse inference or penalty was levied under Section 153A
- The respondent also filed a revised return for AY 2020-21 under Section 139(1), disclosing the foreign assets
- The Assessing Officer levied penalty of Rs. 10,00,000 under Section 43 of the BMA on the ground of non-disclosure in original returns
Procedural History
- 10.04.2019: Search and seizure conducted under Section 132 at ADS Group
- 2019-2020: Respondent filed returns under Section 153A for AYs 2016-17 to 2019-20, disclosing foreign assets
- 2020: Assessing Officer issued penalty notice under Section 43 of the BMA
- 27.06.2024: Commissioner of Income Tax (Appeals)-11, Ahmedabad, deleted the penalty
- 17.03.2026: Hearing before ITAT Ahmedabad
- 27.05.2026: ITAT pronounced order dismissing Revenue’s appeals
The Parties' Positions
For the Appellant (Revenue)
The Revenue contended that the penalty under Section 43 of the BMA was justified because the respondent failed to disclose foreign assets in the original returns filed under Section 139(1). It argued that Section 153A returns are merely procedural outcomes of search proceedings and cannot override the statutory obligation to disclose assets in the original return. The Revenue relied on the literal interpretation of Section 43, which penalizes non-disclosure in the return filed under Section 139(1), and asserted that voluntary disclosure during search does not absolve the assessee of liability for prior omission.
For the Respondent (Assessee)
The respondent argued that the return filed under Section 153A supersedes the original return for all purposes, including penalty proceedings. He submitted that the disclosure was voluntary, made during a lawful search, and accepted by the Revenue without any addition. He emphasized the absence of any intent to evade tax, the technical nature of the omission, and the fact that the foreign income was fully offered to tax. He relied on judicial precedents from the Gujarat High Court and ITAT to support his position.
Relief Sought
The Revenue sought to set aside the order of the CIT(A) deleting the penalty of Rs. 10,00,000 and restore the penalty order. The respondent sought confirmation of the CIT(A)’s order and dismissal of the Revenue’s appeals.
The Legal Issue
Can penalty under Section 43 of the Black Money Act be levied for non-disclosure of foreign assets in the original return filed under Section 139(1), when the same assets are fully disclosed in the return filed under Section 153A following a search, and no addition is made in the assessment under Section 153A?
Arguments Presented
For the Appellant
The Revenue argued that Section 43 of the BMA explicitly links penalty liability to non-disclosure in the return filed under Section 139(1). It contended that Section 153A returns are not substitutes but supplementary filings triggered by search proceedings, and therefore cannot erase the statutory obligation under Section 139(1). The Revenue cited the legislative intent behind the BMA to deter concealment of foreign assets and argued that allowing penalty avoidance through Section 153A disclosures would undermine the Act’s deterrent effect. It further claimed that the CIT(A) erred in relying on Kirit Dahyabhai Patel and Leena Gandhi Tiwari, as those cases were distinguishable.
For the Respondent
The respondent argued that Section 153A returns are legally recognized as the final returns for the assessment year in cases of search and seizure, and are treated as the return filed under Section 139 for all purposes, including penalty proceedings. He relied on the Gujarat High Court’s decision in Kirit Dahyabhai Patel v. ACIT and ITAT’s ruling in Leena Gandhi Tiwari, both holding that disclosure in a Section 153A return extinguishes penalty liability under the BMA. He emphasized that the disclosure was voluntary, timely, and accepted by the Revenue, with no tax evasion or addition resulting from the omission. He argued that imposing penalty under these circumstances would violate principles of natural justice and proportionality.
The Court's Analysis
The Tribunal examined the statutory framework of the Income Tax Act and the Black Money Act, particularly the interplay between Section 139(1) and Section 153A. It noted that Section 153A mandates the filing of returns for the assessment years affected by search proceedings, and that such returns are to be assessed under the same provisions as original returns. The Tribunal emphasized that the Hon’ble Gujarat High Court in Kirit Dahyabhai Patel v. ACIT had held that a return filed under Section 153A is to be treated as a return filed under Section 139 for the purpose of penalty proceedings. The Tribunal further noted that the coordinate bench of the ITAT in Leena Gandhi Tiwari had applied this principle to penalty under the BMA, holding that once disclosure is made in the Section 153A return, the earlier omission cannot be the basis for penalty.
"Once the return filed under section 153A substitutes the original return, the disclosure made therein cannot be ignored while examining levy of penalty."
The Tribunal observed that the respondent had not concealed assets with intent to evade tax. The disclosure was made voluntarily during a lawful search, and the Revenue had accepted the disclosure without making any addition to income. The Tribunal found no evidence of deliberate evasion, fraud, or concealment. It held that the omission was technical and bona fide, and that the legislative purpose of the BMA - to bring undisclosed foreign assets into the tax net - had been fully achieved by the disclosure in the Section 153A return.
The Tribunal also noted that the penalty under Section 43 is not automatic and requires proof of intent or negligence. In the absence of any adverse finding or addition under Section 153A, and with full disclosure made, the penalty could not be sustained. The Tribunal concluded that the CIT(A) had correctly applied the law and that the Revenue’s appeals lacked merit.
The Verdict
The Revenue’s appeals were dismissed. The ITAT upheld the order of the CIT(A) dated 27.06.2024, which deleted the penalty of Rs. 10,00,000 levied under Section 43 of the Black Money Act. The Tribunal confirmed that disclosure of foreign assets in the return filed under Section 153A, following a search, extinguishes liability for penalty under Section 43, even if such assets were omitted in the original return under Section 139(1). No further directions were issued as the penalty was fully set aside.
What This Means For Similar Cases
Disclosure in Section 153A Return Overrides Original Omission
- Practitioners can now confidently argue that non-disclosure in the original return under Section 139(1) does not attract penalty under Section 43 of the BMA if the same assets are disclosed in the Section 153A return
- The voluntary nature of disclosure during search proceedings is a critical mitigating factor
- No addition under Section 153A strengthens the case for penalty deletion
Bona Fide Omissions Are Not Punishable Under BMA
- The Tribunal reaffirmed that intent to evade must be established for penalty imposition
- Technical lapses, especially where tax is fully paid and disclosure is made promptly, do not warrant punitive action
- Assessing Officers must distinguish between evasion and error - the BMA is not a strict liability regime
Precedent Binding Across Jurisdictions
- The Kirit Dahyabhai Patel and Leena Gandhi Tiwari precedents are now firmly established as binding on ITAT benches
- Revenue authorities must cease initiating penalties under Section 43 where Section 153A disclosures are complete and accepted
- Appeals against such penalties should be resisted on the basis of substitution of returns under Section 153A
