Black Money Act Provisions cannot be invoked for Minor Breach of Law: ITAT–TAXSCAN

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By Rasheela Basheer – On April 5, 2022 2:34 pm

Black Money Act - Provisions - Minor Breach - Law - ITAT - TAXSCAN

In a major relief to philanthropist and pharma company Chairperson Leena Gandhi-Tiwari, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the provisions of the Black Money Act cannot be invoked for minor errors.

The assessee was under a bonafide belief that she was not required to disclose it as a bank account cannot be said to be lacking bona fides, the Tribunal said. Gandhi-Tiwari, with her husband, was a signatory to this account. In July 2017, the I-T investigative wing in Mumbai had received an intelligence input regarding this bank account and its non-disclosure. A search and seizure operation followed in September and the matter regarding the foreign bank account, which contained a balance of UK £2,34,710, was further probed. Following this operation, GandhiTiwari filed an Income Tax return in April 2018 containing the relevant details.

Mr. Pramod Kumar (Vice President), and Rahul Chaudhury (Judicial Member) has held that the well-intended harsh laws meant for checking the economic offenders, stashing their ill-gotten monies abroad, must not be invoked for punishing a venial breach of the law by a bonafide businessperson.

“Undoubtedly, the Assessing Officer has discretion in the matter, and that is what, as we have noted earlier as well, the use of the expression “may” in Section 43 suggests. When the exercise of a statutory power is not warranted or justified on a well-considered appreciation of the facts of the case on which a reasonable conclusion would be that the lapse is bonafide and devoid of any ulterior motives, a public authority must not exercise that power just because it would be lawful for the said authority to exercise the same. That’s why human discretion is involved in the exercise of such powers, and this discretion is to be exercised having regard to the facts of each case in a fair, objective and judicious manner and without losing sight of the bigger picture about the related state of affairs and the scheme of relevant legislation.”

“Unless there are sufficient prima facie reasons to at least doubt bonafides well demonstrated by the assessee, an assessee cannot be visited with penal consequences. The bonafides actions of the taxpayers must, therefore, be excluded from the application of provisions of such stringent legislation as the BMA. In this light, and keeping in mind the object of the BMA, we do not subscribe to the learned Departmental Representative‟s perception that in the name of strict implementation of the BMA, a penalty for non-disclosure of the bank account in question will be justified under the stringent provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. This is, of course, without any prejudice to whatever consequence may follow under the provisions of the Income Tax Act, 1961, the legislation under which the lapse of non-disclosure, even if that be so, occurred,” the Tribunal held.

While concluding, the Tribunal added that “As we part with the matter, we may take note of the useful flow of intelligence inputs, under the automatic exchange of information framework, about undisclosed assets abroad, and express satisfaction with the fact that the good work being done by the Government in this regard is yielding tangible results. Whereas the information obtained in this case clearly did not pertain to the kind of cases the tax administration is focussing to unearth, the fact remains that there is considerable progress in that direction- something which certainly seemed too optimistic a goal in not too distant a past.”To Read the full text of the Order CLICK HERE

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