Penalty u/s 43 of Black Money Act Deleted: Wife Added as Joint Holder for Administrative Convenience Not Liable

Issue

Whether a penalty of ₹10 Lakhs under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA), can be levied on an assessee (wife) for failing to disclose foreign assets in Schedule FA of her Income Tax Return, when she was merely a joint holder for administrative convenience, had not contributed funds, and the primary holder (husband) had already fully disclosed the assets in his return.

Facts

The Non-Disclosure: The assessee, a resident individual, held a foreign asset (bank account/investment) jointly with her husband. She did not disclose this asset in Schedule FA (Foreign Assets) of her Income Tax Return for Assessment Year 2017-18.
AO’s Action: The Assessing Officer (AO) invoked Section 43 of the Black Money Act, which prescribes a penalty of ₹10 lakhs for failure to furnish information or furnishing inaccurate particulars about an asset located outside India.
Assessee’s Defense:
- She was named in the investment holding solely for administrative convenience (e.g., ease of operation/succession).
- The entire investment was made by her husband from his known sources.
- The husband had fully declared these investments in Schedule FA of his own Income Tax Return.
- She was not the beneficial owner of the asset in the substantive sense.

Decision

The Tribunal (ITAT) ruled in favour of the assessee and deleted the penalty.
Discretionary Penalty (“May” vs “Shall”): The Tribunal noted that the language of Section 43 uses the word “may,” indicating that the penalty is discretionary and not mandatory. It should not be imposed mechanically for technical venial breaches.
Administrative Convenience: The Tribunal accepted that the assessee’s name was added purely for administrative convenience. Since she did not contribute funds and the beneficial ownership lay with the husband, the non-disclosure was a technical lapse, not an attempt to hide black money.
No Tax Evasion: Since the husband had already disclosed the asset in his return, the information was available to the Department. There was no intent to evade tax or conceal the existence of the asset from the Revenue.
Reasonable Cause: The belief that a joint holder (who is not the beneficial owner) need not report the asset when the primary owner has done so constitutes a “reasonable cause” for the default.

Key Takeaways

Beneficial Ownership vs. Legal Title: The Black Money Act targets undisclosed assets. If an asset is disclosed by the beneficial owner (the person who provided consideration), a secondary joint holder added for convenience generally cannot be penalized for non-reporting, provided the intent is bona fide.
Schedule FA Reporting: While strict interpretation requires all residents (ROR) to report foreign assets (even as signatories or beneficiaries), Tribunals are taking a lenient view where the omission is due to a “reasonable cause” and the asset is already on the government’s radar via the primary holder.
“May” Implies Discretion: Section 43 penalties are not automatic. The AO must exercise judicial discretion, considering whether the breach was technical or deliberate.

HIGH COURT OF BOMBAY

Principal Commissioner of Income-tax

Aditi Avinash Athavankar^*

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

IT NO. 629 OF 2024

OCTOBER 15, 2025

Suresh Kumar for the Appellant. Ms. Priyanka Bora for the Respondent.

ORDER

1. Heard Mr. Kumar, learned Counsel for the Appellant and Ms. Bora, learned counsel for the Respondents.

2. Mr. Kumar urges the admission of this appeal on the substantial questions of law set out in paragraph No. 4 of the Appeal Memo.

3. However, upon hearing the learned Counsel for the parties, we are satisfied that no substantial question of law is involved in this Appeal. The only allegation against the Assessee (wife) was that she failed to disclose the foreign investment holding in Schedule FA along with her return for the assessment year 2017-2018. However, the record shows that the Respondent-Assessee was only named in the investment holding made by her husband for administrative convenience. The record bears out that the Assessee’s husband, Mr. R. Venkataraman, had declared the said investments in Schedule FA along with his return of income.

4. Mr. Kumar pointed out that though the tax effect in this Appeal is of Rs. 10 Lakhs, still the Appeal falls within one of the exceptions carved out in the CBDT Circulars because it relates to penalty under the provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Therefore, we have heard the learned Counsel for the parties on merits.

5. The Tribunal has held that the levy of penalty is at the discretion of the authorities. After taking into consideration the circumstances, that this was a case of joint investment by the husband and the wife, and the husband had clearly disclosed this investment in his return of income, no penalty came to be levied. The above situation, which is mainly the result of the exercise of discretion, does not give rise to any question of law.

6. This is not a case of any perversity in the exercise of discretion. Accordingly, on the ground that this Appeal involves no substantial question of law, we dismiss this Appeal.

7. No costs.