No penalty for foreign asset disclosure technicality if cured in Section 153A return before notice

Issue

Whether a penalty for concealment of income under Section 271(1)(c) is sustainable when foreign assets were disclosed in the original returns and books, but allegedly not in the “prescribed format,” and this technical defect was cured in a return filed under Section 153A before the issuance of the penalty notice.

Facts

Acquisition & Disclosure: The assessee acquired foreign assets during Assessment Years 2012-13 and 2013-14. The acquisition was disclosed in the returns filed for those years at the time of acquisition.
Books of Account: The acquisition of these assets was clearly reflected in the books of account produced by the assessee.
Search Proceedings: A search/requisition presumably occurred, leading to proceedings under Section 153A.
Section 153A Return: The assessee filed a return under Section 153A, which also disclosed the foreign assets. This return was filed before any penalty notice was issued.
Penalty Imposition: The Assessing Officer initiated penalty proceedings and imposed a penalty of Rs. 10 lakhs, contending that the disclosure was not made in the “prescribed format.”
Tribunal’s Stand: The Tribunal deleted the penalty, holding that there was no failure to disclose.

Decision

Substantial Compliance: The Tribunal held that since the disclosure was made in the original returns at the time of acquisition and reflected in the books of account, there was no intent to conceal.
Cure via Section 153A: The disclosure was reiterated in the return filed under Section 153A. The Tribunal treated the return under Section 153A as a return under Section 139(1), effectively curing any prior technical defect.
Timing of Notice: The “technical glitch” regarding the format was remedied by the assessee before the Department issued the penalty notice.
No Concealment: Penalty under Section 271(1)(c) requires concealment of income or furnishing inaccurate particulars. A technical error in the format of disclosure, which is subsequently corrected before detection/notice, does not amount to concealment.
Conclusion: The penalty of Rs. 10 lakhs was deleted as unwarranted.

Key Takeaways

Technical Glitches vs. Concealment: A mere failure to disclose foreign assets in a specific “prescribed format” (like a specific schedule) does not attract concealment penalty if the asset was disclosed in the return’s main body or books of account.

Effect of Section 153A Return: A return filed under Section 153A is treated as a valid return under Section 139(1). Full disclosure in this return, prior to a penalty notice, demonstrates bona fide conduct.

Preventative Remediation: Rectifying a reporting error voluntarily (or in a subsequent statutory return) before the tax authority issues a specific show-cause notice for that error is a strong defense against penalties.

HIGH COURT OF BOMBAY

Principal Commissioner of Income- tax

Shrem Alloys (P.) Ltd

M.S. Sonak and Advait M. Sethna, JJ.

IT APPEAL(IT) NO. 391 OF 2024

NOVEMBER 12, 2025

Ms. Swapna Gokhale, Adv. for the Appellant. Madhur Agarwal, Punit Shah and Sameer G. Dalal, Advs. for the Respondent.

ORDER

1. Heard Ms. Gokhale, learned counsel for the appellant and Mr. Madhur Agarwal, learned counsel for the respondent.

2. The tax effect in this case is only Rs. 10 Lakhs. However, Ms. Gokhale submits that this case falls within the exceptions carved out by the CBDT Circular No. 3 of 2018 dated 11 July 2018.

3. However, without going into the issue as to whether this case indeed falls within the exceptions, we have heard the learned counsel for the parties on merits.

4. Ms. Gokhale urges the admission of this appeal on the substantial questions of law formulated in the appeal memo. She points out that though the assessee may have disclose the acquisition of the foreign assets, such disclosure was not in the prescribed format and therefore, there was justification for imposing penalty.

5. Mr. Agarwal submits that the acquisition of the assets was disclosed in the return files for the Assessment Year 2013-14 when the assets were actually acquired. He points out that disclosure in the returns for Assessment Year 2013-14 is valid. He further pointed out that there was disclosure in the return filed under Section 153A as well. Even the books of account clearly reflected the acquisition of these assets.

6. Mr. Agarwal submitted that the return under Section 153 A disclosing the acquisition of these assets was filed even before any notice for penalty could be issued. He therefore submitted that the assessee’s case was covered by the decision of this Court in the case of Pr. CIT v. JSW Steel Limited /[2020] 422 ITR 71 (Bombay).

7. The rival contentions falls for our determination.

8. As was fairly pointed by Ms. Gokhale, this is not a case where no disclosure of the acquired foreign assets was ever made by the respondent assessee. Her only contention was that such disclosure was not made in the prescribed format and this warranted the imposition of the penalty of Rs.10 Lakhs.

9. The record indeed shows that the disclosure was made in the returns filed for the Assessment Years 2012-13 and 2013-14, at the time when the asset was actually acquired. The disclosure was also made in the return filed under Section 153A, even before any penalty notice could be issued to the respondent assessee. Even the books of account produced from time to time clearly reflected the acquisition of this asset.

10. In the case of JSW Steel Limited (supra), a coordinate Bench of this Court has taken the view that the return filed under Section 153A is also a return for the purposes of Section 139(1) of the Income Tax Act. The Commissioner (Appeals)-I and Income Tax Appellate Tribunal have relied upon this decision to hold that there was no failure to disclose and in any event, no penalty was warranted based upon some technical glitch which was remedied even before the notice for penalty could be issued.

11. For the above reasons, we are satisfied that the questions proposed in the appeal memo cannot be called as substantial questions of law.

12. The appeal is therefore dismissed on the ground that it does not involve any substantial questions of law. No costs.