9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (5) TMI 1078 - AT - Income TaxBlack money - Penalty u/s 43 of the BMA for non-disclosure of foreign assets - AO had received a credible information to the effect that the Assessee had foreign assets in the form of investments in the financial entities registered in United Arab Emirates and Isle of MAN - HELD THAT - Admittedly the provisions of section 43 of the BMA provides that where the person is a beneficial owner or otherwise or in respect of which he was a beneficiary or relating to any income from a source outside India at any time during such previous year fails to furnish any information or furnishes inaccurate particulars relating to any such asset then the AO may direct that such person shall pay by way of penalty a sum of Rs. 10, 00, 000/-. In the instant case as the Assessee has claimed that life insurance policy from RL 360 Life Insurance Company (Isle of Man) was taken by Mr. Zahid Kothari (brother in law of Assessee) in order to protect/save his sister as the Assessee was used to visit foreign countries frequently and therefore there was probability of any mis-happening /causality and the Assessee neither purchased this policy nor paid any premium for the same. If that is the case so then in our considered opinion the Assessee cannot be held as beneficial owner or beneficiary of the policy as the Assessee s wife was inducted as a beneficiary and therefore the liability on the Assessee for imposing the penalty cannot be fastened. And therefore we are inclined to delete the penalty imposed qua insurance policy obtained from RL 360 Life Insurance Company (Isle of Man) however subject to verification by the AO qua purchasing and making subsequent payment of the instant insurance policy. Coming to second life insurance policy of Zurich International Life Ltd. Branch (United Arab Emirates) the Assessee has claimed that since Assessee s job had involved travelling to various countries and had also considerable risks and therefore the said policy was bought by the Assessee in the year 2010. Somehow the said policy lapsed after 2014 and therefore the same ceased to be an asset and thus there was no requirement to disclose such asset in a FA Schedule of ITR. The Assessee in support of such claim has also filed a copy of summary of policy according to which the same was started on 01.09.2010 and last premium was paid on 24.03.2014 thereafter nothing appears from the policy document as to whether any subsequent premium has been paid or not . In the policy status of the policy is mentioned as lapse meaning thereby the policy lapsed due to non-payment of premium which was lastly paid on 24.03.2014. Admittedly the provisions for imposing the penalty u/s 43 of the BMA 2015 came into effect from A.Y. 2016-17 onwards and therefore policy if any lapsed before introducing the provisions for levy of penalty for not disclosing the asset could not be made applicable. We are of the considered view that since the necessary condition to hold a particular foreign asset as undisclosed foreign asset located outside India as provided u/s 2(11) of Black Money Act 2015 remained to be fulfilled ld. AO was not justified in invoking the provisions of Black Money (UFIA) And Imposition of Tax Act 2015 to make an addition in the hands of the assessee at Rs. 1, 08, 01, 726/-. We thus reverse the finding of ld. CIT(A) and delete the addition made in the hands of the assessee and allow ground nos. 1 to 5 raised by the assessee in the instant appeal. Admittedly the insurance policy obtained from Zurich International Life Ltd. Branch (United Arab Emirates) has elapsed for non-payment of premium in the year 2014 itself and/or before the enactment and enforcement of the penalty provisions by BMA and therefore the penalty on this particular insurance is un-sustainable and thus we are inclined to delete the penalty imposed on this insurance policy of Zurich International Life Ltd. Branch (United Arab Emirates). Thus the penalty imposed is deleted in the aforesaid terms. Resultantly the orders passed by the authorities below are set aside and appeal filed by the Assessee is allowed.
The core legal questions considered in this judgment revolve around the applicability and interpretation of the penalty provisions under section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA). Specifically:
Issue-wise Detailed Analysis 1. Obligation to Disclose Foreign Assets in Schedule FA and Applicability of Penalty under Section 43 of BMA The legal framework mandates that any person resident in India, other than not ordinarily resident, must disclose in Schedule FA of their ITR any foreign asset held by them as owner or beneficial owner. This requirement was introduced from Assessment Year (AY) 2012-13 onwards. Section 43 of the BMA prescribes a penalty of Rs. 10 lakhs for failure to disclose such foreign assets. Precedents and CBDT Circular No. 13 of 2015 (FAQs) clarify that even if the foreign assets are fully explained and acquired from tax-paid income, non-reporting in Schedule FA attracts penalty, except for foreign bank accounts with aggregate balances not exceeding Rs. 5 lakhs. The AO found that the Assessee had foreign life insurance policies in his name with Zurich International Life Ltd. (UAE) and RL 360 Life Insurance Company (Isle of Man), which were not disclosed in Schedule FA for AY 2016-17 onwards. The Assessee admitted the policies stood in his name but claimed no beneficial interest or investment in the RL 360 policy, and that the Zurich policy had lapsed before the penalty provisions came into effect. The AO rejected the Assessee's explanations, emphasizing that ownership in the name of the Assessee triggers the disclosure obligation regardless of who paid the premiums or who benefits. The AO relied on the circular's clarification that reporting is mandatory irrespective of the source of funds or beneficial interest. The Commissioner upheld this view, holding that the Assessee was the primary and legal owner of the foreign assets and thus liable to disclose them. The penalty under section 43 was sustained for each AY where non-disclosure occurred. The Assessee's contention that he was not a beneficial owner or beneficiary was analyzed against the definitions in BMA Explanation 4 and 5, which define beneficial owner as one who provides consideration directly or indirectly for the asset for immediate or future benefit, and beneficiary as one who derives benefit from the asset. The Assessee argued that since premiums were paid by his relative and he did not derive benefit, these explanations do not apply. However, the authorities emphasized that the statutory obligation to disclose foreign assets is not limited to beneficial ownership but extends to any asset held in the person's name. The penalty is imposed for non-furnishing of particulars and is independent of ownership or beneficial interest. 2. Treatment of Life Insurance Policy from RL 360 Life Insurance Company (Isle of Man) The Assessee claimed that the RL 360 policy was purchased by his brother-in-law in the Assessee's name to protect his sister (Assessee's wife), with all premiums paid by the brother-in-law. The Assessee submitted an affidavit from the brother-in-law confirming these facts and asserted he was neither beneficiary nor investor. The Tribunal acknowledged that under section 43, penalty applies if the person is a beneficial owner or beneficiary or otherwise holds the asset. Given the Assessee's submission supported by affidavit that he neither provided consideration nor was beneficiary, the Tribunal found that the Assessee cannot be held liable as beneficial owner or beneficiary for this policy. Consequently, the Tribunal deleted the penalty imposed on the RL 360 policy, subject to verification by the AO of the facts concerning purchase and premium payments. 3. Treatment of Life Insurance Policy from Zurich International Life Limited (UAE) The Assessee submitted that the Zurich policy was purchased in 2010 using foreign currency carried during foreign visits, with the last premium paid in 2014, and that the policy had lapsed before the penalty provisions of BMA came into effect in AY 2016-17. The Tribunal relied on a precedent where the Tribunal held that discontinued or lapsed policies, with no premiums paid after a certain date and no asset in existence during the relevant year, do not qualify as foreign assets under section 2(11) of BMA and thus are not liable for penalty under section 43. Since the Zurich policy had lapsed prior to the enforcement of penalty provisions, the Tribunal held that the penalty on this policy was unsustainable and deleted the penalty imposed on this asset. 4. Levy of Penalty for Multiple Assessment Years The Assessee argued that even if penalty was leviable, it should be restricted to one assessment year as the same offence was alleged repeatedly. The authorities rejected this submission, holding that each assessment year is a separate entity with independent reporting requirements for foreign assets in existence during the relevant calendar year. Since the Assessee failed to demonstrate that the assets were not in existence in those years, penalty was correctly levied for each assessment year where non-disclosure occurred. 5. Interpretation of "Beneficial Owner" and "Beneficiary" under BMA The Assessee relied on Explanation 4 and 5 of section 139(1) of BMA which define "beneficial owner" as one who provides consideration for the asset for immediate or future benefit, and "beneficiary" as one who derives benefit from the asset during the previous year. The Tribunal noted that these definitions are relevant to determine the nature of ownership or benefit but the penal provision under section 43 is triggered by non-disclosure of foreign assets held by the person, whether as beneficial owner or otherwise. The penalty is not contingent upon proving beneficial ownership but on the obligation to disclose foreign assets accurately. Therefore, the mere fact that the asset is in the Assessee's name imposes a disclosure obligation, regardless of beneficial interest or source of funds. Treatment of Competing Arguments The Assessee's primary defense was non-beneficial ownership and lack of investment or benefit in the foreign assets, supported by documentary evidence and affidavits. The authorities emphasized the strict statutory disclosure requirements and the importance of the asset being in the Assessee's name. The Tribunal balanced these arguments by deleting penalty on the RL 360 policy due to credible evidence negating beneficial ownership and on the Zurich policy due to its lapsed status prior to penalty provisions, while upholding penalty for other years and assets where non-disclosure was established. Significant Holdings "The sources of investment done in foreign assets is not relevant for the purpose of reporting requirements and the only requirement is the ownership/beneficial ownership of a foreign asset. In this case, the said investment in RL360 Life Insurance Company is undisputedly in the name of the appellant and the appellant is the primary or the legal owner of the same. Regardless of the sources of investment, the appellant being the primary/legal owner has the responsibility to disclose the same in Schedule FA of the return of income." "The penalty under section 43 of the Act is not with respect to ownership of such assets but with respect to non-furnishing of particulars in respect of the foreign asset." "Since the disclosure was not made in Schedule FA of the ITRs for AY 2016-17 to AY 2023-24, the AO has correctly levied the penalty of Rs. 10,00,000/-u/s 43 of BMA separately for each of the assessment years." "The Assessee cannot be held as beneficial owner or beneficiary of the policy, as the Assessee's wife was inducted as a beneficiary and therefore the liability on the Assessee for imposing the penalty, cannot be fastened." "Since the insurance policy from Zurich International Life Limited has lapsed for non-payment of premium before the enactment and enforcement of BMA penalty provisions, the penalty on this particular insurance is unsustainable." Final Determinations
|
