Penalty not imposed as assessee not beneficial owner/beneficiary of foreign life insurance policy bought by brother-in-law.

I. Black Money Act Penalty for Undisclosed Foreign Asset: Life Insurance Policy Not Owned by Assessee

Issue: Whether an assessee is liable to penalty under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, for not disclosing a foreign life insurance policy in Schedule FA of the ITR, when the policy, though in the assessee’s name, was purchased and entirely funded by his brother-in-law to secure the life of the assessee’s sister (the brother-in-law’s wife), with the assessee’s wife as beneficiary.

Facts:

For assessment years 2016-17 to 2022-23, the Assessing Officer (AO) received information that the assessee had investments in two financial entities but failed to disclose these foreign assets in Schedule FA of the ITR.
Penalty proceedings under Section 43 were initiated, and the assessee was show-caused.
In response, the assessee claimed that a life insurance policy from RL 360 Life Insurance Company (Isle of Man), though standing in his name, was actually procured/purchased by his brother-in-law to secure the life of his sister (the assessee’s wife), as the assessee frequently traveled abroad.
All insurance premiums had been paid by the brother-in-law, and the assessee never paid any premium.
The brother-in-law also submitted an affidavit to this effect before the AO.
The assessee’s wife was inducted as a beneficiary of the policy.

Decision: The court held that since the assessee neither purchased the life insurance policy taken by his brother-in-law nor paid any premium for the same, the assessee could not be held as the beneficial owner or beneficiary of the policy (as the assessee’s wife was the actual beneficiary). Therefore, liability for imposing penalty under Section 43 could not be fastened upon the assessee. The penalty imposed qua the insurance policy obtained from RL 360 Life Insurance Company (Isle of Man) was to be deleted, subject to verification by the Assessing Officer regarding the purchasing and subsequent payment of the instant insurance policy.

Key Takeaways:

Beneficial Ownership vs. Legal Ownership: For the purpose of the Black Money Act, the distinction between legal ownership (policy in assessee’s name) and beneficial ownership is crucial. If the assessee is merely a nominal owner without any beneficial interest or financial contribution, they may not be liable.
Burden of Proof for Non-Disclosure: The assessee successfully discharged the burden of proving that the asset was not beneficially owned or controlled by him.
Importance of Evidence: The affidavit from the brother-in-law and the detailed explanation regarding the purpose and funding of the policy were critical pieces of evidence.
AO’s Verification Role: While the penalty was deleted, the court still allowed the AO to verify the claims regarding the purchase and payment, ensuring due diligence.

II. Black Money Act Penalty: Policy Lapsed Before Act’s Introduction, Penalty Not Sustainable

Issue: Whether penalty under Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, can be levied for not disclosing a foreign asset (life insurance policy) if the policy was bought and subsequently lapsed before the introduction of the provisions for levy of penalty under Section 43.

Facts:

The assessee obtained a life insurance policy from Zurich International Life Ltd., Branch (United Arab Emirates).
This policy was bought by the assessee in the year 2010.
The policy lapsed in 2014, which was before the introduction of the provisions for the levy of penalty under Section 43 of the Black Money Act.

Decision: The court held that since the life insurance policy was bought by the assessee in 2010 and lapsed in 2014, before the introduction of the provisions for the levy of penalty under Section 43 for not disclosing an asset, the penalty on this insurance was unsustainable.

Key Takeaways:

Prospective Application of Penal Provisions: Penal provisions, unless explicitly stated to be retrospective, generally apply prospectively. An assessee cannot be penalized for non-disclosure of an asset if the obligation to disclose, and the penalty for non-disclosure, did not exist at the time the asset ceased to exist (e.g., by lapsing).
Date of Introduction of Black Money Act: The Black Money Act, 2015, came into effect from July 1, 2015. Penalties under this Act would typically apply to undisclosed foreign income and assets acquired or held on or after this date, or in assessment years governed by the Act.
Non-Existence of Asset at Relevant Time: If the foreign asset in question (the policy) had already lapsed and ceased to exist before the penal provisions came into force, there is no asset to be disclosed for the relevant assessment years under the Black Money Act, and thus no penalty can be imposed.

IN THE ITAT MUMBAI BENCH ‘E’

Akil Abbas Rassai

Deputy Director of Income -tax/ADIT (Inv)

NARENDER KUMAR CHOUDHRY, Judicial Member
and Prabhash Shankar, Accountant Member

BMA Nos. 1 to 7(Mum.) OF 2025
[Assessment years 2016-17 to 2022-23]

APRIL 30, 2025

Rakesh Joshi, Ld. A.R. for the Appellant. Manish Ajudiya, Ld. Sr. D.R. for the Respondent.

ORDER

1. These appeals have been preferred by the Assessee against the orders even dated 11.11.2024, impugned herein, passed by the Ld. Commissioner of Income Tax (in short Ld. Commissioner) u/s 17 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (in short “BMA”) for the A.Y.s 2016-17, 2017-18, 2018-19, 2019-20, 2020-21, 2021-22 & 2022-23.

2. All these appeals under consideration, are based on the identical facts except variation in amounts and having involved identical issue and therefore for the sake of brevity, the same were heard together and are being disposed of by this composite order by taking into consideration the facts and circumstances and issue involved in BMA No.1/M/2025 as a lead case and result of the same would be applicable mutatis mutandis to all these appeals under consideration.

3. BMA No.1/M/2025 :

In this case, Ld. DDIT/ADIT(Inv.)-1(1) FAIU, Mumbai [Assessing Officer] (in short “the 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, namely Zurich International Life Ltd (UAE) and RL 360 Life Insurance Company (Isle of Man) respectively and therefore during the course of investigation, a summon u/s 131(1a) of the BMA was issued to the Assessee on 27.06.2023. The Assessee in response filed the requisite details on 31.07.2023.

3.1 Thereafter, on inquiring on e-filing/ITBA portal, it was observed by the that the Assessee has filed income tax returns/ITRs for the AYs 2011-12, 2023-24 and has declared status as “resident” for all the assessment years. However, on the basis of information received in the office of the AO, it was observed that the Assessee has made following investments but not disclosed in FA Schedule in ITR:

Information Source	INFID	Account No	Interest Received	Dividend Received	Gross Proceeds/ Redemption
Zurich International Life Limited- Branch (UNITED ARAB EMIRATES)	C21 AAEZILL4974 0002848	1000591187I N6334974	0	0	0
RL 360 Life Insurance Company (ISLE OF MAN)	C21AIMRLIC0 91J0002581	4031091J	0	0	4,69,67,921

3.2 The AO thereafter observed that the foreign assets schedule (FA Schedule) was introduced in the return of income since A.Y. 2012-13 in Finance Bill 2012 and in order to keep a track of the foreign assets and income generated thereon in the foreign jurisdiction of Indian residents, whereby it has been made mandatory for any “person” being a resident other than not ordinary resident in India within the meaning of section 6 of BMA to furnish any information or accurate particulars in such return (in FA Schedule) relating to any asset (including financial interest in any entity) located outside India, held by him as a beneficiary owner or otherwise or in respect of which he was a beneficiary or relating to any income from a source located outside India, at any time during such previous year.

4. The AO further observed that for non-disclosure of such foreign assets, a new provision for imposition of penalty u/s 43 of the BMA, has also been introduced from 2016-17 (the year of enactment of BMA) onwards. As the Assessee has not disclosed such aforesaid foreign assets in the prescribed FA schedule in the ITR and therefore has committed a default within the meaning of section 43 of the BMA and consequently is liable for penalty prescribed therein. The AO therefore on the aforesaid reasons, show caused the Assessee by issuing show cause notice dated 26-092023, relevant part of the same is reproduced herein below:

“Kindly refer to the above.

2 During the course of investigation on the basis of information received in this office regarding your association with/financial interest in certain financial entity registered in Switzerland & Smgapore, namely, Zunch International Life Limited-Branch (UNITED ARAB EMIRATES) & RL360 Life Insurance Company (ISLE OF MAN), respectively, it is observed that therein you have made the investment, the details are as under:

Information Source	INFID	Account No
Zurich International Life Limited – Branch (UNITED ARAB EMIRATES)	C21AAEZILL49740002848	1000591187IN6334974
RL 360 Life Insurance Company (ISLE OF MAN)	C21AIMRLIC091J0002581	4031091J

3 On verification of ITRs filed by you, it is found that you have filed Returns of Income for AYs 2011-12 to 2023-24 declaring residential status as Resident in India for tax purposes for all the AYs.

4. After verification of details submitted during the course of investigation, it is seen that you have not declared the above said investments made in a Zurich International Life Limited-Branch (UAE) & RL360 Life Insurance Company (ISLE OF MAN) in Schedule FA of the Income Tax Return filed by you for the AY 2016-17.

5. As you have failed to disclose your total investments in a Zurich international Life Limited – Branch (UAE) & RL360 Life Insurance Company (ISLE OF MAN) in your retum of Income filed for the AY 2016-17, you are hereby required to show cause in writing as to why a penalty of Rupees Ten Lakhs for each assessment year should not be levied for the AV 2016-17 for nondisclosure of information about an asset located outside India in accordance with the provisions of section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

6. The compliance to this show cause notice shall be made by 05.10.2023.”

5. The Assessee, in response to the aforesaid show cause notice, made submissions vide letter dated 18.10.2023, which read as under:

“7. Assessee’s submission:

7.1. In response to the aforesaid show-cause notice issued to the Assessee, the Assessee submitted reply vide letter dated 18.10.2023. The reply submitted by him is reproduced as under

“I am in receipt of your above-captioned notice dated 26.09.2023 (enclosed as Annexure 1). In this regard, I would like to submit as under:

At the outset, I would like to submit that I don’t have any association with or financial interest in financial entity RL 360 Life Insurance Company (ISLE OF MAN) or Zurich International Life Limited. As submitted in my earlier replies, I merely have a life insurance policy in my name. With regards to a life insurance policy from RL 360 Life Insurance Company (ISLE OF MAN), it is submitted that I am neither a beneficiary nor an investor. The said life insurance policy was purchased by my relative and premium of the policy was also paid by them. The Policy document alongwith the confirmation from relative are once again attached herewith for your reference and record as Annexure 2 & 3 respectively. Further, with regards to a life insurance policy from Zurich International Life Limited as submitted earlier, I had bought one life insurance policy in year 2010 from the foreign currency I used to carry during my foreign visit since my job involved travelling to various countries and also had considerable risks. To the best of my knowledge last premium paid by me was sometime in 2014. The Policy document is once again attached herewith for your reference and record as Annexure-4.

Further, as mentioned by your goodself in notice that the alleged investment in RL 360 Life Insurance Company (ISLE OF MAN) and Zurich International Life Limited was not disclosed in Schedule FA of the income tax return for the AY 2016-17, I would like to reiterate that as I have neither invested any money nor am I having any beneficial interest in the entity RL 360 Life Insurance Company (ISLE OF MAN) the same was not disclosed in the Income tax Return filed for assessment year 2016-17. In addition, as mentioned in aforesaid para since the last insurance premium for Life insurance policy from Zurich International Life Limited was paid by me sometime in 2014, the same was not disclosed in the Income tax Return filed for assessment year 2016-17.

Thus the fact mentioned by your goodself that I have failed to disclose the investments made in RL 360 Life Insurance Company (ISLE OF MAN) or Zurich International Life Limited in return of income does not hold good. It is further submitted that the same does not amount to non-disclosure of information about an asset located outside India in accordance with the provisions of section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Therefore, in consideration of the above mentioned facts and documents, it is humbly submitted that the penalty of Rupees Ten Lakhs for assessment year 2016-17 should not be levied.”

6. The AO though considered the reply/submission of the Assessee but could not find the same, as acceptable, on the following reasons:

“8.1. The residential status of the assessee is verified from return of income and it is found that the assessee is Indian resident from A.Y. 2011-12 to AY 2023-24. Further, from the perusal of FA Schedule in the return of income filed, it is observed that the assessee had not disclosed his foreign investments in various accounts of Zurich International Life Limited Branch (UNITED ARAB EMIRATES) & RL360 Life Insurance Company (ISLE OF MAN) in schedule FA of his ITR filed for AY 2016-17. The assessee has also not denied these facts.

8.2. The Foreign Asset Schedule (FA Schedule) was introduced in the Return of Income, since A.Y. 2012-13 in Finance Bill 2012 in order to keep a track of the foreign assets and income generated thereon in foreign jurisdiction of Indian resident. Accordingly, the foreign assets/investments were required to be disclosed in the Schedule FA of the Income Tax Returns for AY 2012-13 onwards. A penal provision for not disclosing the foreign assets/investments in Schedule FA in ITRs u/s 43 of the Black Money Act, 2015 was introduced for non-disclosure of foreign assets since AY 2016-17 (the year of enactment of Black Money Act). Thus, the investment in various accounts in Zurich International Life Limited Branch (UNITED ARAB EMIRATES) & RL360 Life Insurance Company (ISLE OF MAN) were required to be disclosed in the Schedule FA of the Income Tax Returns from AY 2016-17 onwards.

8.3. The assessee had submitted that he was employed with M/s. Colonial Trading LLC in granite falls, North Carolina for sales & marketing of their product, Yarn Threads. The assessee’s wife’s brother, Mr. Zahid Kothari from USA decided to lend some money to make necessary payments to the assessee for purchase of policy. Further, with regards to a life insurance policy from Zurich International Life Limited, the assessee had bought one life insurance policy in year 2010 from the foreign currency he used to carry during his foreign visit since his job involved travelling to various countries and also had considerable risks, the last premium paid by him was sometime in 2014. The assessee has neither invested any money nor having any beneficial interest in the entity RL 360 Life Insurance Company (ISLE OF MAN) the same was not disclosed in the income tax Return filed for assessment year 2016-17, In addition, as mentioned in aforesaid para since the last insurance premium for Life insurance policy from Zurich International Life Limited was paid by him sometime in 2014, the same was not disclosed in the Income tax Return filed for assessment year 2016-17.

8.4. From the plain reading of the submission and the policy documents, it is seen that the investment in the form of various accounts in Zurich International Life Limited (UNITED ARAB EMIRATES) & RL 360 Life Insurance Company (ISLE OF MAN) is in the name of the assessee. This fact has not been denied by the assessee also. As the foreign investment in the form of various accounts is in the name of the assessee, he is in duty to disclose the same in the FA schedule of return of Income. Further, the assessee had committed default in the subsequent year as well. Thus, it cannot be said that the default was bona fide. The submission cannot be considered as plausible explanation for not disclosing the investment in the FA schedule and thereby committing default within the meaning of the provisions of S 43 of the Black Money Act 2015

8.5 Further, Chapter IV of Black Money Act, 2015 provides for penalties leviable in respect of various defaults mentioned within the meaning of provisions of Black Money Act, 2015. As per this Chapter IV, there are separate penalties provided for default u/s 41 & u/s.43 of the Black Money Act. 2015. Section 41 of the Black Money Act, 2015 provides for the penalty in respect of tax computed us 10 of the Black Money Act, 2015. Whereas, section 43 of the Black Money Act. 2015 provides for a penalty in respect of non-disclosure of Foreign Income & Assets under FA Schedule of Return of Income. Thus, the Act, itself provide two different penalties for different defaults. These penalties leviable u/s 41 & 43 of the Black Money Act, 2015 are independent of each other. Thus, even though no income is received or accrued to the assessee, he should have disclosed this asset in FA schedule of his return of Income.

8.6. It is also relevant to rely upon the Board circular no.13 of 2015 dated 06.07.2015 wherein the clarification on tax compliance for undisclosed Foreign Income & Assets under Black Money Act, 2015 have been issued in the form of FAQs. In the said circular vide question no. 18, the Board had clarified as under:

“A person holds certain foreign assets which are fully explained and acquired out of tax paid income. However, he was not reported these assets in Schedule FA of the Income-tax Return in the past should be declare such assets under Chapter VI of the Act?

Question No. 18.

Since, these assets are fully explained, they are not treated as undisclosed foreign assets and should not be declared under Chapter VI of the Act. However, if these assets are not reported in Schedule FA of the Income-tax Return for assessment year 2016-17 (relating to previous year 201516) or any subsequent assessment year by a person, being a resident (other than not ordinarily resident), then he shall be liable for penalty of Rs.10 lakhs under section 43 of the Act. The penalty is however, not applicable in respect of an asset being one or more foreign bank accounts having an aggregate balance not exceeding an amount equivalent to Rs.5 lakhs at any time during the previous year.”

7. The AO, therefore, on the aforesaid reasons and facts and circumstances of the case, as well as legal position in view of section 43 of BMA, ultimately levied the penalty of Rs.10,00,000/-for non-disclosure of foreign asset investments in Zurich International Life Ltd. (UAE) and RL 360 Life Insurance Company (Isle of Man) in Schedule FA of return of income, for the AY under consideration.

8. The Assessee, being aggrieved, challenged the decision of AO in levying the penalty, by filling first appeal before the Ld. Commissioner and made following submissions:

“6.1 During the course of appellate proceedings, the appellant filed written submissions which are reproduced as under:-

Background of the case:

1. Shri Akil Abbas Rassai (hereinafter referred as an Appellant) is an Individual having PAN-AACPR1058F.

2. Proceedings under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter referred to as “BMA”) were initiated in appellant’s case by issuance of summons u/s.131(1A) of the Income Tax Act, 1961 (hereinafter referred to as the Act) dated 15.07.2022 by the DDIT/ADIT(Inv)-3(4), FAIU, Mumbai which were duly complied by the appellant. Subsequently, similar summon u/s. 131(1A) of the Act dated 27.06.2023 were issued to the appellant by the DDIT/ADIT(Inv)-1(1), FAIU, Mumbai which was once again complied by the appellant within the due time.

3. Thereafter notice u/s. 43 of the Black Money Act, 2015 bearing DIN and Notice No. ITBA/COM/F/17/2023-24/1056539761 (1) dated 26/09/2023 was issued to the appellant in response to which all the detail called for were duly submitted to the officer. During the course of said proceedings, the appellant had clarified the stand as regarding alleged nondisclosure of offshore investment in Zurich International Life Limited and RL 360 Life Insurance Company (ISLE OF MAN) in FA schedule of the ITR for AY 2016-17 to 2022-23 as under:

With regards to a life insurance policy from RL 360 Life Insurance Company (ISLE OF MAN), the appellant had clarified with documents that he is not holding any investment in such alleged company and neither he is a beneficiary nor has he invested any amount in such a company. The appellant also further furnished the policy documents and clarified that though the policy stood in the appellant’s name the premium on the same was never paid by him. An affidavit from his non-resident relative stating that policy was taken under appellant name but the premium was paid by the relative was also furnished before the learned Assessing officer.

Further, with regards to a life insurance policy from Zurich International Life Limited. the appellant had clarified with the policy documents that he had bought one life insurance policy in the year 2010 from the foreign currency he used to carry during his foreign visit, since appellant’s job involved travelling to various countries and also had considerable risks. The appellant also had submitted that to the best of his knowledge last premium paid by him was sometime in 2014.

1. However, the learned assessing officer failed to appreciate the various submissions and documents put forth by the appellant at the time of proceedings and levied a penalty of Rs 10,00,000/- in accordance with the provisions of section 46 r.w.s. 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act. 2015 in each of the assessment years ie from AY 2016-17 to AY 2022-23.

Being aggrieved by the same, the appellant is in appeal before Your Honor on the following grounds:

1. Ground No. 1:

“The Learned Assessing Officer has erred in levying a penalty of Rs. 10,00,000/- under section 43 r.w.s. 46 of the of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 without considering the facts and circumstances of the case.”

1. The appellant had life insurance policies in his name from RL 360 Life Insurance Company (ISLE OF MAN) and Zurich International Life Limited. With regards to the life insurance policy from RL. 360 Life Insurance Company (ISLE OF MAN), it is submitted that the appellant was neither a beneficiary nor an investor of the same. The said life insurance policy was purchased by appellant’s relative and premium of the policy was also paid by them. With regards to the life insurance policy from Zurich International Life Limited, it is submitted that the appellant had bought one life insurance policy in year 2010 from the foreign currency used to carry during his foreign visit since his job involved travelling to various countries and also had considerable risks. For the said policy, the last premium was paid by the appellant in 2014. All the documents substantiating the above facts were also provided to the AO. Copy of the submission filed on 09.11.2023 is enclosed herewith as Annexure 1. However, the AO ignored the above facts and proceeded to levy a penalty of Rs. 10 Lacs for AY 2016-17 to 2022-23 for non-disclosure of assets in Schedule FA of the ITR.

2. Thereafter, with regards to allegation made in the impugned order that the alleged investment in RL 360 Life Insurance Company (ISLE OF MAN) and Zurich International Life Limited was not disclosed in Schedule FA of the income tax return for the AY’s 2016-17 to 2022-23, it is submitted that the appellant was not required to report the same under Schedule FA. The appellant had neither invested any money nor was having any beneficial interest in the entity RL 360 Life Insurance Company (ISLE OF MAN) and was therefore not required to disclose the same in Schedule FA of the ITR. Similarly, the last insurance premium for Life insurance policy from Zurich International Life Limited was paid by the appellant in 2014. It is also pertinent to mention here that the said insurance policy from Zurich International Life Limited has lapsed as on date and the appellant did not receive a single rupee ever from the same. Thus, it is submitted that there was no requirement on part of the appellant to disclose either of the insurance policies in his ITR.

3. While rejecting the above submissions of the appellant, the Ld. AO also placed reliance on the FAQ No:18 issued by the Board Circular no. 13 of 2015 dated 06.07.2015 which clarifies on tax compliance for undisclosed Foreign Income & assets under the Black Money Act, 2015. The relevant extract of the FAQ is reproduced as under: “A person holds certain foreign assets which are fully explained and acquired out of tax paid income. However, he was not reported these assets in Schedule FA of the Income-tax Return in the past should be declare such assets under Chapter VI of the Act?

Question No. 18.

Since, these assets are fully explained, they are not treated as undisclosed foreign they of assets and should not be declared under Chapter VI of the Act. However, if these assets are not reported in Schedule FA of the Income-tax Return for assessment year 2022-23 (relating to previous year 2015-16) or any subsequent assessment year by a person, being a resident (other than not ordinarily resident), then he shall be liable for penalty of Rs. 10 lakhs under section 43 of the Act. The penalty is however, not applicable in respect of an asset being one or more foreign bank accounts having an aggregate balance not exceeding an amount equivalent to Rs 5 lakhs at any time during the previous year”

It is submitted that the Ld. AO erred in placing reliance on the aforesaid circular as the appellant was never a beneficial owner/beneficiary of either of these policies.

1. Thus, the allegation levied against the appellant, that the appellant has failed to disclose the investments made in RL 360 Life Insurance Company (ISLE OF MAN) or Zurich International Life Limited in return of income does not hold good. It is submitted that the same does not amount to non-disclosure of information about an asset located outside India in accordance with the provisions of section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 and hence we humbly request your goodself to quash the impugned order passed u/s 43 of the Black Money Act, 2015 and delete the penalty amounting to Rs 10,00,000/- passed for each assessment year i.e AY 2016-17 to AY 2022-23.

2. Without prejudice to above, it is submitted that even if any penalty is to be levied, the same should be restricted to Rupees Ten Lakhs for one assessment year only as the learned assessing officer is alleging the same offence in multiple years. It is humbly submitted that levying a penalty on multiple occasions for the alleged offence would cause great prejudice to the appellant, especially when the appellant does not have any beneficial interest in the said asset.”

9. The Ld. Commissioner though considered the submissions of the Assessee, however, found the same as un-acceptable and therefore ultimately affirmed the levy of penalty, by observing and holding as under:

“7. 6 Coming to the facts of the instant case, there is no dispute that the appellant is a resident within the meaning of Income Tax Act for the instant year and hence the reporting requirements of Foreign Assets in Schedule FA of the return of income applies to him. The only issue to be decided is whether he is the owner/beneficial owner if any foreign investment for the calendar year relevant to the instant assessment year.

7.7 From the details available with the AO, it is another undisputed fact that the foreign investments, namely various accounts of Zurich International Life Limited Branch (UAE) & RL360 Life Insurance Company (Isle of Man) is in the name of the appellant. The appellant, in his written submissions has submitted that he had neither invested any money nor was having any beneficial interest in the entity RL 360 Life Insurance Company (ISLE OF MAN) and was therefore not required to disclose the same in Schedule FA of the ITR. The appellant further clarified that though the policy stood in the appellant’s name the premium on the same was never paid by him. An affidavit from his non-resident relative stating that policy was taken under appellant name but the premium was paid by the relative was also furnished before the learned Assessing officer. Similarly, the last insurance premium for Life insurance policy from Zurich International Life Limited was paid by the appellant in 2014. The appellant has further submitted that the said insurance policy from Zurich International Life Limited has lapsed as on date and the appellant did not receive a single rupee ever from the same. It was therefore submitted that there was no requirement on part of the appellant to disclose either of the insurance policies in his ITR.

7.8 From the submission above it would be seen that the appellant is primarily arguing that the investments in RL360 Life Insurance Company (Isle of Man) was actually done by his relatives and not by him. In this connection it is relevant to mention here that 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. This onus is further clearly established in Circular No 13 of 2015 dated 06.07.2015 issued by CBDT wherein it has been clarified that even of the foreign investment is out of disclosed sources. reporting in Schedule FA is still to be done. It is also worthwhile to mention here that the said Circular was available to the appellant at the time of filing of his return of income. Thus, there has been a default on the part of the appellant in not reporting the investments in RL360 Life Insurance Company (Isle of Man) since the appellant is the primary and the legal owner and the said asset is in existence for the calendar year relevant to the instant assessment year.

7.9 As regards the investment in various accounts of Zurich International Ltd (Branch UAE) the appellant has stated that he had purchased the policy in 2010 out of foreign currency carried during his foreign visit and that the last premium was paid in 2014 and that the policy has lapsed. The appellant has not submitted any evidence/document to show that the asset is not in existence in the instant year. As regards the argument that the same has been purchased out of disclosed funds, it has already been held above in para 7.8 that the reporting requirement is not dependent upon the asset being unaccounted and any foreign asset in existence has to be reported. Thus, there has been a default on the part of the appellant in not reporting the investments in Zurich International Life Limited (UAE) since the appellant is the primary and the legal owner and the said asset is in existence for the calendar year relevant to the instant assessment year.

7.10 Without prejudice to above, the appellant submitted that even if any penalty is to be levied, the same should be restricted to Rupees Ten Lakhs for one assessment year only as the learned assessing officer is alleging the same offence in multiple years. This alternate submission of the appellant is also not acceptable since every year is a separate entity and the reporting requirements remain the same subject to the asset being in existence in the calendar year relevant to that assessment year. In the instant case the appellant has not been able to demonstrate that the foreign asset was not in existence in the instant year and hence cannot escape the reporting requirement.

7.11 Thus, to summarise, it is an undisputed fact that the appellant is a resident for tax purposes in the instant year and that the foreign assets are held in his name. Further it is also seen that the investments have been made in his name and he is the primary and legal owner of the foreign asset and has the resultant reporting obligations under the law. As per Section 43 of the Black Money Act, 2015 has already been discussed in para 7.3 of this order. Therefore, as far as the levy of penalty u/s 43 of BMA is concerned, each year is distinct and separate and requires the reporting of ever foreign asset that is in existence in the calendar year of that assessment year. 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.

7.11 In my view, for the purpose of section 43 of the BMA, there is no onus on the AO to demonstrate that the funds or assets in these accounts were owned by the assessee or beneficially owned by him. Section 43 of the Act has two limbs with respect to non-disclosure – the first being failure to furnish any information sought in the return filed under section 139(1) and second being furnishing of inaccurate particulars in such return relating to any asset located outside India, held by him as a beneficial owner or otherwise or in respect of which he was a beneficiary, or in relation to any income from a source located outside India. The term “fails to furnish any information” is sufficient to include in its ambit non-disclosure of a foreign asset. Also, even if the disclosure is made, furnishing of inaccurate particulars about a foreign asset also would make the assessee liable for penalty u/s 43 of BMA. In the present case, it was mandatory for the appellant to disclose the foreign assets accurately in the return. The mandate to file such information was introduced in the Income Tax Act from AY 2012-13 onwards and it is noted that the appellant has failed to file the particulars of the foreign asset in the return filed by him for the relevant assessment year.

7.12 The appellant has contended that since he had neither invested any money nor was having any beneficial interest in the said foreign entity, there was no requirement on part of the appellant to disclose either of the insurance policies in his ITR and therefore penalty was not leviable.

7.13 In this regard, it has already been clarified earlier that the penalty u/s 43 of the Act is not related to the quantum of assets determined as undisclosed under BMA. The default has to be determined with respect to the appellant’s failure to disclose accurately the assets outside India in the return filed under section 139(1) of the Income Tax Act 1961.

7.14 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. Nowhere in section 139(1) of the Income Tax Act 1961 or in the return of income, there is any confusion with respect to nature of disclosure required to be made. Admittedly, the appellant was the owner of investment in foreign asset being Zurich International Life Limited (United Arab Emirates) and RL360 Insurance Company, Isle of Man and particulars about the said foreign asset have not been filed in Schedule FA of the return of income.

7.15 Further, the disclosure of a foreign asset in the return is not merely a technical requirement without any purpose. It enables the department to ensure proper investigation and hence, a nondisclosure of an item in the return is required to be viewed with disfavour even if the appellant did not display a contumacious conduct. The penalty under section 43 of BMA is to ensure compliance with disclosure requirements of the return else the column in the return will itself become otiose or redundant. The appellant has clearly defaulted on his obligation to discharge the onus cast on him to truly disclose the ownership of the foreign asset while filing her return of income. Also, the residential status of the assessee for the instant assessment year was that of ‘resident’ and so the disclosure obligation was very much applicable to him. The assessee is the primary owner of the foreign asset and so the assessee was very much under the legal obligation to furnish true and correct particulars of investment in foreign assets in his name in schedule FA of the ITR, which has not been done by the assessee.

7.16 In light of the above discussion, I am convinced that the AO has exercised his discretion in a judicious manner and is correct in proceeding to levy the penalty under section 43 of the BMA. The proper procedure has also been followed by the AO and the penalty order has been passed well within the limitation period allowed as per law. The action of the AO in levying penalty is thus upheld. This ground of appeal raised by the appellant are decided against him and stand dismissed.”

10. The Assessee, being aggrieved with the decision of the Ld. Commissioner in affirming the levy of penalty to the tune of Rs.10,00,000/-, challenged the same by filling instant appeal and more or less, has claimed as under:

“That the Assessee before both the authorities below had offered clarification with regard to the life insurance policy from RL 360 Life Insurance Company (Isle of Man) that he is neither holding any investment in such alleged company nor he is a beneficiary or invested any amount in such company. The Assessee duly clarified before the authorities below that though the policy, as alleged by the Department, stood in the Assessee’s name, however, the same was purchased by brother-in-law of the Assessee in the Assessee’s name in order to protect his sister as the Assessee due job obligations, used to travel to foreign country frequently. Admittedly, the Assessee was neither a beneficiary of such policy nor paid any premium or installment of such policy. In fact, the premium was paid by Assessee’s brother in law, who was a non-resident Indian and in this regard, furnished he has furnished duly sworn affidavit before the AO”.

11. With regard to life insurance policy from Zurich International Life Limited, UAE, the Assessee has submitted as under:

“That before the authorities below the Assessee had duly clarified by submitting the relevant policy document that he had bought one life insurance policy in the year 2010 using foreign currency, which the Assessee used to carry during his foreign visits. Since the Assessee’s job involved travelling to various countries and also had considerable risk, therefore to protect his wife, said policy was purchased. However, the said policy was lapsed in 2014 itself for not making payment of premium and therefore the said asset at the time of enactment and enforcement of BMA 2015, was not in existence and therefore, the penalty u/s 43 of BMA, cannot be levied”.

12. The Assessee further submitted as under”

“That according to the relevant provisions of section 139(1) of BMA, specified persons have been defined as beneficiary and beneficiary owner. As per explanation-4 of section 139(1) of the BMA, the beneficiary owner has been defined “the person in respect of an asset means, an individual who has provided directly or indirectly consideration for the asset for the immediate or future benefit, direct or indirect of himself or for any other person”. Similarly, explanation specifies that beneficiary means an individual who derives benefit from the assets during the previous year and consideration of such assets has been provided by any person other than such beneficiary”.

13. The Assessee further claimed that as the premium of life insurance policy from RL 360 Life Insurance Company (Isle of Man), was paid by the brother-in-law of the Assessee declaring Assessee’s wife as beneficiary and the Assessee has not provided directly or indirectly consideration for the asset in the immediate future benefit direct or indirect of himself of any other person, hence explanation 4 cannot be applied. Similarly, as the Assessee has not derived any benefit during the year under consideration from the said policy, therefore, the explanation 5 would also not be applicable. As both the explanations are not applicable and therefore the Assessee was not required to disclose such assets in the form of insurance policies in the return of income for the assessment year under consideration.

14. The Assessee, further submitted two documents, one which relates to the policy summary of Zurich International Life Limited, UAE, wherefrom it clearly appears that said life insurance was taken on 01.09.2010 and the last premium was paid on 24.03.2014. From the policy summary, as on 04.07.2024, it appears that the same has already been lapsed for non-payment of premium.

15. With regard to the life insurance policy from RL 360 Life Insurance Company (Isle of Man), the Assessee has submitted an undertaking certificate/declaration dated 31.10.2022 issued by Mr. Zahid Kothari, who has stated that he is a brother of Mrs. Saaina Rasai, wife of Mr. Akil Rasai (Assessee herein) and had decided to buy a life insurance policy in the name of Mr. Akil Abbas Rasai, who was travelling frequently to various places across the world for work purposes and therefore, considering the uncertainty involved in the work of Mr. Rasai, he decided to buy a life insurance policy in the name of Mr. Akil Rasai but making his sister as beneficiary. Mr. Zahid Kothari further reiterated that the insurance policy was bought by him only and subsequent insurance premiums for the same, were also paid by him only, just out of the natural love and affection for his sister and in order to ensure her financial security.

16. The Assessee further in support of his claim also relied on a judgment passed by the Hon’ble Co-ordinate Bench of the Tribunal in the case of Srinjoy Bose v. ADIT (Investigation) (Kolkata – Trib.)/(BMA No.3/Kol/2022 decided on 02.02.2023).

17. On the contrary, the Ld. D.R. refuted the claim of the Assessee. The Ld. D.R. has submitted that though the Assessee may not be the ultimate beneficiary of the policy but it is a fact that both the insurance policies were in the name of the Assessee and therefore the Assessee cannot skip the liability, as enshrined under the relevant provisions of the Act, which requires to be followed strictly. Both the authorities below have considered the peculiar facts and circumstances in its right perspective and proper manner and therefore the same does not require any interference. The Ld. D.R. further placed reliance on the judgment passed by the Hon’ble Co-ordinate Bench of the Tribunal in the case of Sobha Thawani v. Jt. CIT [BMA No.1, 2 & 3(Mum.) of 2023, dated 09-08-2023], wherein the Assessee had share in the joint investment to the extent of 40% and has made the investment out of funds transferred from India to HSBC Bank at Jersey. Subsequently, the Assessee had declared income from the foreign investment in the A.Y. 2016-17 and sold the assets and offered the capital gain to tax in 2019-20, without disclosing such asset in schedule FA while filing return of income for A.Y. 2016-17 to 201819 and therefore the Hon’ble Bench affirmed the decision of the then Ld. CIT(A), in affirming the decision of the AO, in levying the penalty under section 43 of the BMA.

18. We have heard the parties and perused the material available on record. From the aforesaid facts and circumstances, it is clear that the AO had received the information to the effect that the Assessee had two investments, on account of insurance policies of two companies namely: (1) Zurich International Life Limited, UAE (2) RL 360 Life Insurance Company (Isle of Man), but has not disclosed such foreign assets in the Schedule FA, which was introduced in the return of income from A.Y. 2012-13 vide Finance Bill, 2012 and therefore in view of the provisions of section 43 of the BMA, the penalty proceedings u/s 43 of the Act were initiated and consequently the Assessee was show caused. The Assessee in response to show cause by filing his reply has claimed that life insurance policy from RL 360 Life Insurance Company (Isle of Man) though stood in the Assessee’s name, however, the said policy was procured/purchased by the brother in law of the Assessee (Mr. Zahid Kothari) in order to secure the life of his sister, as the Assessee used to carry foreign visits frequently and consequently all the insurance premiums have been paid by Mr. Zahid Kothari. The Assessee never paid any premium of such policy. Mr. Zahid Kothari has also submitted an affidavit in this regard before the AO. Further, the Assessee Mr. Zahid Kothari has also issued a certificate dated 31.10.2022 in this regard, which reads as under:

“ZAHID KOTHARI

2705 North Center St, Unit 38, Hickory, NC 28601.

Tel 828 781 7811

31^st October 2022

To whomsoever it may concern

I, Zahid Kothari, aged 49 years, an inhabitant of the United States of America residing at 2705 North Center St. Unit 38, Hickory, NC 28601, hereby confirm that I am a brother of Mrs. Sakina Rassai, w/of Mr. Akil Rassai. I state that my sister got married to Mr. Akil Rassai sometime around the year 1995. Subsequently, it came to my knowledge that Mr. Akil Rassai was travelling frequently for work to various dangerous places across the world. Considering the uncertainty involved in the same. I felt that it was important for him to have a life insurance policy. Accordingly, sometime around the late 1990s/carly 2000s. I had decided to buy Mr. Akil Rassai a life insurance policy. The insurance premium for the same were also paid by me. The same was done by me out of natural love and affection for my sister in order to ensure her financial security.

Whatever is stated above is true to the best of my information, knowledge and recollection.

Yours truly,

Zahid Kothari”

19. We have given thoughtful considerations to the peculiar facts and circumstances and rival contentions raised by the parties, concerning the life insurance policy obtained from RL 360 Life Insurance Company (Isle of Man) by Mr. Zahid Kothari as alleged. 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/-.

20. 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 mishappening /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, considering the peculiar facts and circumstances in totality, 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.

21. 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.

22. The Co-ordinate Bench of the Tribunal in the case of Srinjoy Bose (supra) has also dealt with an issue wherein the addition has been made towards undisclosed foreign assets qua alleged investments in life insurance policies, which were discontinued/lapsed due to nonmaking the payment of the premiums. The Hon’ble Tribunal ultimately deleted the addition by taking into consideration the peculiar facts as well that premium payment to insurance policies, was discontinued. For brevity and better understanding, the relevant part of judgment (supra) is reproduced as under:

“15. Now as far as the other limb of Section 2(11) of Black Money Act, 2015 is concerned about the disclosure of the said asset, we find that the premium payment to the two life insurance policies was discontinued from 2010 onwards. These policies commenced in the year 2000 and they were for a period of 21 years. In the middle of the term of the policy, the premium payment was discontinued. As stated by ld. Counsel for the assessee, the assessee was of bona fide belief that the policies have been discontinued and the amount so invested have been forfeited. It was only during the FY 2018-19 that the assessee came across the information of being eligible to lodge the claim for refund of surrender value which was followed by the necessary process and the surrender value was finally received in the bank account of the assessee held in India. Further, the assessee duly disclosed the amount so received in his income tax return and paid the taxes to the tune of Rs. 39,00,000/- thereon and based on such disclosure by the assessee, the alleged proceedings were carried out under Black Money Act, 2015. So, this fact also remains uncontroverted that the value of the alleged investments received by the assessee in India has already been subjected to Income tax and taxing the same amount under the Black Money Act, 2015 will tantamount to double taxation.

16. Under these given facts and circumstances of the case, 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.”

23. Coming to the judgment passed by the Tribunal in MA no.1 to 3 B/M/2023 decided on 09.08.2023 as relied on by the Ld. DR, we observe that in this particular case, the Assessee along with her husband has made a joint investment in Global Dynamic Opportunity Fund Ltd. in the ratio of 40:60 respectively. The Assessee made the investments, out of funds transferred from India to HSBC Bank at Jersey. The AO had noticed that Assessee, though, declared interest income from foreign investments in A.Y. 2016-17, however, the said asset was sold and offered to capital gain to tax in A.Y. 2019-20 but the Assessee did not disclose such foreign asset, while filing return of income from A.Y. 2016-17 to A.Y. 2018-19 under Schedule FA and therefore the penalty was levied by the AO. Which was subsequently affirmed by Tribunal. However, this case is factually dissimilar to the aforesaid case referred to above, as in the instant case one life insurance policy as involved had already been elapsed before introduction and enforcement of the BMA and second life insurance policy was purchased by the brother in law of the Assessee and subsequent premiums have also been paid by him only and the Assessee was neither beneficiary nor benefited by such policy and therefore the judgment of the Tribunal in the aforesaid case, has no applicability to the facts and circumstances of the instant case.

24. As mentioned above, 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).

24.1. 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.

25. In the result, in view of our decision in BMA no. 01/M/2025, all the appeals under consideration stands allowed in the same terms.