TMI Blog2022 (6) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... nk account, her and her husband s conduct all along has unequivocally established complete detachment with the said asset so far as any personal interest is concerned- a typical hallmark of someone holding an asset in a fiduciary capacity and in trust. When the beneficial owner of the said bank account, i.e. her late mother, passed away, she and her husband simply donated money to a well-known charity of global repute, as was the wish of the departed soul. All the thirty years that she was the technical owner of this legacy left behind by her father, which was for the benefit of her mother, she simply did not touch the money- did not take a penny or add a penny. It is a somewhat rare situation with touching reverence, almost to a fault, to the wish of the assessee s late father that the money was kept intact for the benefit of the assessee s mother, which mother never used, and then donated it, within weeks of her mother s death, to a charity of her late mothers choice, and a charity which has earned the prestigious Noble Peace Prize in 1999 for its humanitarian work. The degree of reverence for the feelings of the parents, as unambiguously shown by the mother, is undisputed. Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elonging to the assessee, and the entire money has been brought to tax in the hands of the assessee s late mother. Even before the bank account was detected by the revenue authorities, the entire balance in the said account, as per instruction of the assessee s late mother, has been donated to a bonafide charity of the global repute. In these circumstances, the plea that such a lapse of non-disclosure, even if that be so, is only an inadvertent mistake, and that conscious non-disclosure or any mens rea in the non-disclosure is completely contrary to human probabilities, does merit acceptance. No reasonable person would consciously or deliberately withhold disclosure about this foreign bank account, for an ulterior motive, from the tax authorities, and, in any case, admittedly the money does not belong to the assessee- as is the position accepted by the Assessing Officer himself. Viewed thus, on merits of assessee s conduct, it was not a fit case for the imposition of impugned penalty. It is also not a case of siphoning of unaccounted Indian wealth to the undisclosed foreign bank accounts, prevention of which was the noble cause for which the Black Money (Undisclosed Foreign Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed foreign bank account, and the legal owner as such, the penalty under section 43 of the BMA must be imposed. There is no dispute that the money held in the said account was eventually donated to a charity of global repute i.e. namely M decins Sans Fronti res UK, in deference to the wishes of the assessee s late mother, that it was brought to tax in the hands of the late mother s legal representative, and that, at no stage, assessee used the said money in any manner whatsoever. 3. To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before us is one of the prominent businesspersons in India, chairperson of a well known pharmaceutical company, and she was one of the signatories to a foreign bank account, which she had not undisclosed to the Indian tax authorities until she filed her income tax returns under section 153A on 21st April 2018. This bank contained a balance of UK 2,34,710 which was eventually donated, much before the Indian tax authorities even came to know about it, to a Noble Peace Prize awarded to charity by the name of M decins Sans Fronti res (MSF) on 9th February 2017- in deference to the wishes of her late mother ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bank account purely as trustees and the monies were to be used for the benefit of Dr Pramila Gandhi, as was apparently wished by late AVG. The interpersonal relationship between the assessee and her husband vis- -vis Dr Pramila Gandhi hit a tough patch and normalcy could resume only in 1999. This account, in the meantime, was lying dormant and inactive. In 1999, upon resumption of normalcy in this relationship, and at the instructions of Dr Pramila Gandhi, the bank account was transferred to Kleinwort Benson, London branch and then to Kleinwort Benson, Guernsey. There is a mention about the account being maintained with Societe Generale Bank, St James Square, London branch, but the account is the same and the difference in names of the bank is apparently on account of change of ownership by way of acquisition. This bank account remained by and large unattended though there were accretions in the account of yields from the investments When Dr Pramila Gandhi enquired about this account in January 2016, it was found, in July 2016, that this bank account had no transactions by the assessee and her husband, that this bank account had become inoperative and dormant, and that the KYC f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year and the aggregate annual tax liability, including that of her husband and the private company of which she is chairperson, is of Rs 516.30 crores for the year, such an omission is nothing more than a bonafide mistake. It was also explained that the money has come from a legitimate source and the bank account, right from the time she became a signatory of the same, was not at all touched, and eventually, everything in the said account was donated as per the wishes of the actual owner of the account in whose hands it is assessed to tax under the BMA anyway. It was then submitted that everything was duly disclosed under section 132(4) of the Income Tax Act, 1961, and, therefore, the provisions of the BMA have no application in the matter. It was then submitted that the BMA does not have any retrospective application, as it would be violative of the provisions of Article 20(1) of the Constitution of India. A reference was then made as to what could constitute furnishing inaccurate particulars in the return and how the present non-disclosure would not fit into the same. It was once again reiterated that non-disclosure in question, which is in respect of being a signatory to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT Vs Zoom Communications Pvt Ltd [(2010) 327 ITR 510 (Del)], as also to the wordings of Section 43. On the basis of these reasons, as also the detailed discussions in his order, the Assessing Officer concluded that it was a fit case for imposition of penalty. The Assessing Officer thus proceeded with the imposition of penalty under section 43. Aggrieved, assessee carried the matter in appeal before the CIT(A) who deleted the penalty, after noting that the appellant is not found to be engaged in managing the account under dispute as it is owned up by her husband, on the short ground that since her (the assessee s) husband has been imposed the penalty for non-disclosure of this account which has been confirmed by the CIT(A) , it is held that no penalty is leviable under section 43 of the BMIT Act in the hands of the assessee . The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us. 4. We have heard the learned Departmental Representative, perused the material on record, as also the case records, and duly considered facts of the case in the light of the applicable legal position. We have noted that the notice of he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 and for no other purpose in the BMA. The position so far as undisclosed foreign income is concerned, the position is quite different inasmuch the definition of undisclosed foreign income is concerned, it is materially different- as provided under section 4(1)(a) and (b) of the BMA, but then right now we are not concerned with that aspect of the matter. The observations that we make in this order here, therefore, may not have any bearings, in view of the peculiarities of that definition of the undisclosed foreign income, particularly with reference to filing of the return within the statutory time frame provided under the ITA and for a variety of reasons that we need not elaborate at this stage. Suffice to say that, in the present case, we are concerned with the non-disclosure of an undisclosed foreign asset, i.e. a foreign bank account, in the income tax return filed under section 139(1), and our observations, even with respect to discussions on possibility of one possible approach to the issue before us, hereinabove must essentially be viewed in that limited context. Coming to the provisions of Section 43 of the BMA, quite clearly trigger for penalty under section 43 thus is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e., use of the expression notwithstanding is indicative of the legislative intent that provisions of section 153-A(1) would have overriding effect over the provisions contained in sections 139, 147, 148, 149, 151 and 153 . It was in this backdrop that Their Lordships of Hon ble jurisdictional High Court held that the original return which had been filed loses its originality and the subsequent return filed under section 153A of the said Act (which is in consequence to the search action under section 132) takes the place of the original return. In such a case, the return of income filed under section 153A(1) of the said Act, would be construed to be one filed under section 139(1) of the Act and the provisions of the said Act shall apply to the same accordingly . Viewed thus, it could possibly be said that the income tax return filed on 21st April 2018 under section 153A is the income tax return that obliterates the original income tax return filed under section 139(1), and it is that return that is now required to be treated as income tax return filed under section 139(1). In the present case also, it is the income tax return filed under section 153A on 21st April 2018 which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A can indeed work to the advantage of the assessee, as apparently in this case, and even fresh claims may be made which have, as in the case of JSW Ltd (supra), meeting the judicial approval. Whatever be the consequence of this legal position, such conceptual notions, cannot negate the binding effect of the law laid down by the Hon ble jurisdictional High Court. We may, however, add that the present discussion hereinbefore is in the light of the applicability of Section 43 of the BMA, and the observations made by us must be construed only in this limited context. As regards such a non-disclosure for the earlier assessment years, which is what the learned Assessing Officer has harped upon vehemently in the impugned order, those were the assessment years that pertain to the period prior to the BMA coming into force, and, nothing, therefore, turns on those lapses, even if any, so far as the application of the provisions of Section 43 of the BMA is concerned. We have also taken note of the fact that the learned Assessing Officer has defended the imposition of penalty under section 43 of the BMA, on the ground that the bank account in question was in existence till 9th February 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. The penalty will not also be imposed merely because it is lawful to do so. Whether a penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose a penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute . Essentially, therefore, the overall conduct of the assessee, and materiality of the lapse as also its being in the nature of a technical or venial breach of law, is the most critical factor so far as taking a call on the question of whether or not a penalty should be imposed for the assessee s failure to discharge a statutory obligation. The imposition of penalty under section 43 is surely at the discretion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, and truly dealing with this as trust money in letter and in spirit, her belief that she was not required to disclose it as her bank account, cannot be said to be lacking bonafides. While the amount held in the said account is donated to the charity, the entire tax liabilities in respect of the same have been paid by the legal representative of Dr Pramila Gandhi, and the matter has attained finality as such. It is also important to bear in mind the fact that the uncontroverted stand of the assessee is that the assessee, as also her husband, were signatories because Dr Pramila Gandhi was having health issues and was not in a position to travel. It was more of being a signatory for the operation of the bank account, rather than holding the bank account even in a fiduciary capacity, and, as such, the assessee s belief that she was not required to disclose this bank account cannot be said to be lacking bonafides. Whether this belief was correct or incorrect, for the present purpose of adjudicating on the penalty, is wholly irrelevant, as we are only concerned with bonafides of the plea of the assessed at this stage. The reason is simple. The scheme of penalty is of such a that ess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is also not a case of siphoning of unaccounted Indian wealth to the undisclosed foreign bank accounts, prevention of which was the noble cause for which the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was enacted immediately upon the present Government coming to the power. Such well-intended stringent legislation as the BMA, enacted for the larger causes of public good and to check tax evaders, cannot be so interpreted as to cause undue hardship to the citizenry for such harmless technical or venial breaches of the law. Francis Bacon, in his classic essay Of Judicature (The Works of Francis Bacon, Volume 1 (1984), has said that Judges must beware of hard constructions, and strained inferences, for there is no worse torture than the torture of laws: especially in case of laws penal, they ought to have care that that which was meant for terror be not turned into rigour . Viewed in the light of these discussions, in our considered view, it was not a fit case for invoking the penal provisions under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, even if it was lawful for the Assessing Officer to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Dr Pramila Gandhi had health issues and she was not in a position to travel to Zurich when formalities in respect pf the account inherited by her were to be completed. The subsequent developments spanning over several decades unambiguously corroborate this stand of the assessee. When we objectively see all these factors in totality, the inescapable impression is that the assessee is certainly not from the category of persons who were sought to be checked by this piece of legislation. To use it in a case in which a person has not reported a bank account, which is a lawful inheritance from her father and which contains a small amount that is eventually donated by her to a medical charity of global repute, will surely be inappropriate- more so when the assessee has an explanation which the Assessing Officer himself has accepted. The path of idol worshipping the law, even at the cost of sacrificing the unambiguous intent of the law, cannot take us to the goal of protecting the majesty of law in letter and in spirit- something that every judicial officer must strive for. The well-intended harsh laws meant for checking the economic offenders, stashing their ill-gotten monies abroad, mu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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