Bona fide belief of a salaried employee exempts them from harsh Black Money Act non-disclosure penalties.

By | June 19, 2026
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Bona fide belief of a salaried employee exempts them from harsh Black Money Act non-disclosure penalties.

Bona fide belief of a salaried employee exempts them from harsh Black Money Act non-disclosure penalties.

Issue

Whether a penalty of ₹10 lakh under Section 42 read with Section 46 of the Black Money Act, 2015 can be sustained against a salaried individual who failed to file a return disclosing a foreign retirement payout under the bona fide belief that no taxable income arose during the relevant financial year.

Facts

  • Foreign Remittance Received: During the financial year relevant to Assessment Year 2019-20, a sum of ₹7.87 lakh was credited directly into the Indian bank account of the assessee from an overseas source.

  • Nature of the Receipt: The assessee was a salaried employee who had previously worked for an offshore company in Dubai from 2016 until April 2018. The credited amount was a maturity payout remitted by the ex-employer, representing past salary deductions accumulated toward a severance/retirement plan.

  • Non-Filing of Return: The assessee did not file an income tax return for A.Y. 2019-20 or report this remittance, acting under the belief that no fresh taxable income was generated during the year.

  • Penalty Imposed: The Assessing Officer treated the non-disclosure as a structural default and levied a flat penalty of ₹10 lakh under Section 42 read with Section 46 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Decision

  • Bona Fide Belief Established: Held in favour of assessee. The assessee was a routine salaried employee who held a genuine, bona fide belief that because he had no active earnings or salary in India during the relevant year, he was exempt from filing a return of income altogether.

  • Penalty Deleted: Held in favour of assessee. Given the transparent nature of the retirement payout and the absence of any deliberate attempt to hide unaccounted wealth, this was not a fit case for invoking the stringent penalty provisions of the Black Money Act. The penalty was deleted.

Key Takeaways

  • Black Money Act Requires Intent/Grave Omission: The harsh provisions of the Black Money Act, 2015 are designed to target systemic tax evasion and hidden offshore wealth, not to penalize everyday salaried professionals receiving legitimate, traceable retirement settlements.

  • Bona Fide Mistakes Mitigate Penalties: While underreporting foreign assets can carry heavy statutory consequences, a provable, bona fide misunderstanding of filing requirements by a taxpayer can successfully mitigate or wipe out penalty actions.

IN THE ITAT JAIPUR BENCH ‘A’
Arpit Gupta
v.
DDIT/ADIT (Inv.)*
Sanjay Garg, Judicial Member
and Ratnesh Nandan Sahay, Accountant Member
BMA No. 03 (JPR) of 2025
[Assessment year 2019-20]
MAY  26, 2026
Rohan Sogani, CA for the Appellant. Gaurav Awasthi, JCIT for the Respondent.
ORDER
Sanjay Garg, Judicial Member. – The present appeal has been preferred by the assessee against the order of Ld. Commissioner of Income Tax (Appeal), Jaipur-4(hereinafter referred to as “Ld. CIT(A)”) dated 28.08.2025,passed u/s 250 of the Income Tax Act,1961 (hereinafter referred to as “the Act”).
2. The assessee in his appeal has taken following grounds of appeal:-
1. In the facts and circumstances of the case and in law, Id. CIT(A) has erred in confirming the action of Id. DDIT/ADIT(Inv.) FAIU Jaipur, levying penalty under Section 42 read with Section 46 of Black Money (UFIA) and Imposition of Tax Act, 2015 of Rs. 10.00 lacs. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please begranted by deleting the entire penalty levied by Id. DDIT/ADIT(Inv.) FAIU Jaipur and confirmed by Id. CIT(A).
2. In the facts and in the circumstances of the case and in law, the ld.DDIT/ADIT(Inv.) FAIU Jaipur has grossly erred in mechanically levying penalty under Section 42 read with Section 46 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, without appreciating the merits, facts, and explanations furnished during the proceedings. The imposition of penalty being mechanical, arbitrary. unjustified, and contrary to the settled principles of law deserves to be quashed. Appropriate relief may kindly be granted by deleting the penalty imposed.
3. The assessee craves his rights to add, amend or alter any of the grounds on or before the hearing.
3. The assessee, in this appeal, is aggrieved by the action of the ld. Commissioner of Income-tax (Appeals) (hereinafter referred to as “the CIT(A)”) in confirming the penalty levied by the Assessing Officer (in short, “the AO”) of Rs. 10 lacs u/s 42 r.w.s 46 of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The Assessing Officer imposed impugned penalty on the ground that during the financial year relevant to A.Y 2019-20, an amount of Rs.7,86,852/- was showing credited in the account of the assessee the source of which was out of India. However, the assessee neither filed his return of income for the year under consideration nor disclosed the said amount. The ld. CIT(A) confirmed the penalty so levied by the A.O.
4. We have heard rival contentions and gone through the record. The ld. Counsel for the assessee has demonstrated before us that the assessee was an employee in an Offshore company at Dubai and served there from the year 2016 to April, 2018; that the assessee was neither resident nor taxable in India during his service at Dubai; that after shifting to India, the assessee did not earn any income in India, therefore, the assessee did not file any return of income; that the aforesaid amount of Rs. 7,86,852/- was credited to the account of the assessee which was deducted towards some retirement plan by his foreign employer when the assessee was in the job in Dubai, and that the said amount was credited by the foreign employer to the account of the assessee on maturity in the year under consideration, however, the assessee was not aware of the same. The assessee was under the bona fide impression that since the assessee had not earned any income during the Financial Year 2018-19, therefore, the assessee was not liable to file any return of income. The ld. Counsel for the assessee, therefore, has submitted that the aforesaid remittance of Rs. 7,86,852/-was not earned by the assessee during the year under consideration, rather, the same was the receipt of past deductions out of his salary during the earlier period which was deducted by the foreign employer towards retirement plan of the assessee and was remitted during the year, which escaped the attention of the assessee.
5. Ld. DR, though, could not rebut the aforesaid facts on the file, however, has contended that as per the provisions of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the assessee is liable to be penalized for not disclosing the foreign asset in the shape of aforesaid remittance into his account, by way of filing a valid return of income.
6. We have considered the rival submissions and gone through the record. It is the matter of record that the assessee has not earned any foreign asset or income during the financial year under consideration, but, the aforesaid remittance of Rs. 7,86,852/- was remitted by his foreign employer out of the past deductions out of the salary of the assessee towards severance and retirement plan. Since the assessee had left the job, therefore, the said amount was remitted to the assessee by the company later on and the assessee was under bona fide belief that since the said amount was not out of any income earned during the year, therefore, he was not required to file any return of income. Even as per the provisions of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, earlier the limit prescribed for the amount which need not to be disclosed in the bank of the assessee was of Rs. 5 lacs and after considering the problems faced by bona fide assessee sespecially the salaried persons, the limit of the said amount was increased from Rs.5lacs to Rs.20lacs w.e.f. 01.10.2024. Hence, considering the overall facts and circumstances of the case, it is not a case of any concealment of foreign asset or income, rather it is a case of salaried employee, who was of bona fide belief that during the year, since he has not earned any income, he was not required to file any return of income. We, therefore, do not deem it a fit case for levy of penalty under Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015 and the same is accordingly ordered to be deleted.
7. In the result, the appeal of the assessee stands allowed.