Wp(C)/10200/2020 Of Thomas Mathew v. The Income Tax Officer

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE AMIT RAWAL MONDAY, THE 25TH DAY OF MAY 2020 / 4TH JYAISHTA, 1942 WP(C).No.10200 OF 2020(Y) PETITIONER/S: THOMAS MATHEW RESIDING AT VILLA NO.16, 33/29-N, THE PROMENADE, PAVOOR ROAD, PADIVATTOM, KOCHI-682024. BY ADV. SRI.ABRAHAM JOSEPH MARKOS RESPONDENT/S: OTHER PRESENT: SRI JOSEPH MARKOS, SR ADV FOR P , SRI P. VIJAYA KUMARASGI, SRI CHRISTOPHER ABRAHAM, SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON25.05.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT Petitioner in the instant case sought the indulgence of thisCourt under Article 226 of the Constitution of India challengingthe order Ext.P8 dated 17.3.2020 of Income Tax Officer, Non-Co-operative Ward -1(5) Cochin whereby the penalty of Rs.10 lakhsfor the assessment year 2016-17 has been imposed and furthercalled upon to deposit the same within a period of 30 days. 2.According to the petitioner, he was a Non ResidentIndian employed abroad as a Bank Professional and investmentsmade by the petitioner from such income, was not liable to anytax in India. After having attained retirement, he returned toIndia and filed his income tax return for the assessment year2016-17 declaring the total income of Rs.46,81,590/-. In themeanwhile, the Government of India introduced the Black Money(Undisclosed Foreign Income and Assets) and Imposition of TaxAct 2015 (hereinafter referred to as 'Black Money Act').Petitioner was under the bonafide belief that disclosure underSchedule FA was to be made only from the assessment year2017-18, subsequently was advised even for the assessment year2016-17 to disclose details of foreign assets owned to be included in the Schedule FA. Accordingly, petitioner filed arevised return on 30-8.2018, but since the period prescribed forfiling revised return under Section 139(5) of the Income Tax Actexpired, the aforementioned return was filed physically, evidentfrom acknowledgment Ext.P3. 3.Sri.Abraham Markose, Learned Senior Counselsubmits that the petitioner was surprised to receive a noticedated 17.9.2018 under Section 43 of the Black Money Act,whereby the Officer concerned contemplated to impose a penaltyfor failure to furnish the return of income and information. Theaforementioned notice was duly replied giving extensive detailswith a further request to drop the aforementioned penaltyproceedings. Petitioner appeared and filed a detailed objectionon 11.3.2016 as per Ext.P6. During the aforementioned hearingreliance was also laid to the Central Board of Direct Tax circularNo.13 dated 6.7.2016, particularly the Question and AnswerNo.17 evident from Ext.P7. He further submitted that thepetitioner was astounded to receive the impugned order Ext.P8reflecting the imposition of penalty of Rs.10 lakhs but urgedthough appeal under Section 15 of the Black Money Act lies before the Appellate authority, being a creature under statutebut filing of same would be a futile exercise, for, as per thequestion No.18 the penalty can be only imposed only if ScheduleFA is not filed. It is a settled law that the High Court is not boundby the Circular, being only directive in nature. before the Appellate authority, being a creature under statutebut filing of same would be a futile exercise, for, as per thequestion No.18 the penalty can be only imposed only if ScheduleFA is not filed. It is a settled law that the High Court is not boundby the Circular, being only directive in nature. 4.The Rule making authority cannot override or gobeyond the provisions of the Act or the spirit of the law. Thepreamble of the Black Money Act aims at only to curb themenace of black money. It was next contended that theexclusive order under Section 43 of the Act ibid cannot beimposed without there being an assessment on the revisedreturns. It is no case of any nondisclosure of assets oraccumulation of any black money, therefore, the allegedreasoning regarding nondisclosure is without any foundationor basis. Section 43 of the Black Money Act can only apply tothe assets which are in the nature of black money or assets forwhich there is no explanation as to the source. Merenondisclosure of the same in Schedule FA would not make anyasset or income illegally acquired as black money. 5.The charging Section 3 deals with any income from any source outside India, which is undisclosed in the return ofincome or value of any undisclosed assets located outside India.The IT returns and Schedule FA only requires the disclosure.Clause 13 and Question No.17 of the Circular 15 reported on6.7.2016 ibid conforms that the report in Schedule FA would notbring to tax to such undeclared assets, whereas in the instantcase, assets have acquired out of non-taxable income earned bythe assessee, while he was a non-Resident and thus the non-reporting of such non-taxable assets cannot attract the penaltyas contemplated under section 43 of the Act. The Clarificationgiven in Paragraph 18 of the circular ibid is vague and not inaccordance with the provisions of the Act or Income tax Act. TheRule making authority cannot for the sake of repetition overrideor go beyond the provisions of the Act or spirit of law. 6. Petitioner was under a bonafide belief that thedisclosure of Schedule FA was only necessary for assessmentyear 2017-2018, whereas the Act was only introduced in theassessment year 2016-17. Petitioner filed a revised returnrectifying the defects during the assessment year 2016-17, butalmost 1 and ½ months after filing of the revised returns. Thereafter, petitioner was served with a notice dated 17.9.2018.It is a settled law that where an assessee had not committed anintentional error by bonafide or inadvertent, in other words,there was no willful intention, thus, penalty cannot be imposed. 7.I have heard learned Counsel for the parties andappraised the paper book and as well the provisions of law,referred to above. I am of the view there is no force or merit inthe submission. 8.The aforementioned Black Money Act came into forcein the year 2016, whereas the charging Section 3, which isextracted herein below came into force after April, 2016specifying the charging of the tax on every assessee for everyassessment year, post 1[st] April 2016. “Section 3 Charge of tax (1) There shall be charged on everyassessee for every assessment year commencing on or afterthe 1[st] day of April, 2016 subject to the provisions of this Act, atax in respect of his total undisclosed foreign income and assetof the previous year at the rate of thirty per cent of suchundisclosed income and asset. Provided that an undisclosed asset located outside India shallbe charged to tax on its value in the previous year in whichsuch asset comes to the notice of the Assessing Officer. (2)For the purpose of this section “value of an undisclosedasset” means the fair market value of an asset (includingfinancial interest in any entity) determined in such manner asmay be prescribed. “Section 3 Charge of tax (1) There shall be charged on everyassessee for every assessment year commencing on or afterthe 1[st] day of April, 2016 subject to the provisions of this Act, atax in respect of his total undisclosed foreign income and assetof the previous year at the rate of thirty per cent of suchundisclosed income and asset. Provided that an undisclosed asset located outside India shallbe charged to tax on its value in the previous year in whichsuch asset comes to the notice of the Assessing Officer. (2)For the purpose of this section “value of an undisclosedasset” means the fair market value of an asset (includingfinancial interest in any entity) determined in such manner asmay be prescribed. 9.As per Section 11 (2) undisclosed asset located outsideIndia means an asset (including financial interest in any entity)located outside India, held by the assessee in his name or inrespect of which is a beneficial owner, and has no explanationabout the source of investment in such asset or explanationgiven to him is in the opinion of the Assessing Officerunsatisfactorily. 10.The assessment proceedings are provided underSection 10 of the Act. The procedure for assessment has beenprescribed under Sections 10, 11 and 12 of the Act and theremedy of appeal before the Commissioner of Appeal is underSection 15 and the procedure to be followed in appeal is underSection 16 and powers of Commissioner is under section 17. The assessment proceedings are provided under 11.As per Section 18, appeal to the appellate Tribunalwould lie against an order passed under Section 15. Theprovisions of appeal would also applicable in any proceedingsinitiated under Section 43 of the Act, which is reproduced below, which empowers the tax officer to initiate proceedings ofimposition of penalty on account of failure to furnish anyincorrect particulars about the asset including financial interestin any entity located outside India. “Section 43 Penalty for failure to furnish in return of income,an information or furnish inaccurate particulars about an asset(including financial interest I any entity) located outside India.- If any person, being a resident other than not ordinarilyresident in India within the meaning of clause (6) of section 6of the Income Tax Act, who has furnished the return of incomefor any previous year under sub-section (1) or sub-section (4)or sub-section (5) of section 139 of the said Act, fails to furnishany information or furnishes inaccurate particulars in suchreturn relating to any asset (including financial interest in anyentity) located outside India, held by him as a beneficial owneror otherwise, or in respect of which he was a beneficiary, orrelating to any income from a source located outside India, atany time during such previous year, the Assessing Officer maydirect that such person shall pay, by way of penalty, a sum often lakh rupees: Provided that this section shall not apply in respect of anasset, being one or more bank accounts having an aggregatebalance which does not exceed a value equivalent to fivehundred thousand rupees at any time during the previous yearExplanation – The value equivalent in rupees shall bedetermined in the manner provided in the Explanation tosection 42. Provided that this section shall not apply in respect of anasset, being one or more bank accounts having an aggregatebalance which does not exceed a value equivalent to fivehundred thousand rupees at any time during the previous yearExplanation – The value equivalent in rupees shall bedetermined in the manner provided in the Explanation tosection 42. This clause relates to penalty for failure to furnish in return ofincome, an information or furnish inaccurate particulars aboutan asset (including financial interest in any entity) locatedoutside India. This Clause seeks to provide that if any personbeing a resident other than not ordinarily resident in Indiawithin the meaning of clause (6) of section 6 of the Income-taxAct, who has furnished the return of income for any previousyear under sub-section (1) or sub section (4) or sub-section (5)of section 139 of he said Act, fails to furnish any information orfurnishes inaccurate particulars in such return relating to anyasset (including financial interest in any entity) located outsideIndia, held by him as a beneficial owner or otherwise, or inrespect of which he was a beneficiary, or relating to anyincome from a source located outside India, at any time duringsuch previous year, the Assessing Officer may direct that suchperson shall pay a penalty of ten lakh rupees. The said clause further provides that no penalty shall be leviedin respect of an asset, being one or more bank accounts havingan aggregate balance which does not exceed a valueequivalent to five hundred thousand rupees at any time duringthe previous year.” 12.No doubt the Circular has no binding force andtherefore, the challenge to the circular cannot be a ground tonegate the plea of the petitioner. But the fact remains thatwhether the impugned order reflects the adherence to theprovisions of the circular of 2015 ibid or in terms of the provisions of the Black Money Act, this Court under Article 226of the Constitution of India cannot exercise the role of anappellate authority defined under the Black Money Act to dealwith the controversy if brought into motion. Petitioner is wellwithin the right to assail the aforementioned order, as theimpugned order is dated 17.3.2020 and the limitation in theinstant case expired during the lock down but as per theGovernment directive and judgment of the Full Bench of thisCourt limitation prescribed already stood extended. Petitioner ifso advised shall be at liberty to assail the aforementioned order.Any observation hereinabove would not prejudice the right ofthe petitioner in case the remedy is availed. In view of what hasbeen noticed, this writ petition sans merit and accordingly,dismissed. Sd/- AMIT RAWALJUDGE APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1TRUE COPY OF THE ACKNOWLEDGMENT FOR INCOME TAX RETURN FILED FOR AY 2016-17.TAX RETURN FILED FOR AY 2016-17. EXHIBIT P2TRUE COPY OF THE BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015.FOREIGN INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015. EXHIBIT P3TRUE COPY OF THE RETURN AND ACKNOWLEDGEMENTOF POSTAL RECEIPT.OF POSTAL RECEIPT. EXHIBIT P4TRUE COPY OF THE NOTICE DATED 17.9.2018 ISSUED UNDER SECTION 43 OF THE BLACK MONEY ACT.ISSUED UNDER SECTION 43 OF THE BLACK MONEY ACT. EXHIBIT P5TRUE COPY OF THE REPLY DATED 17.9.2019 FILED BY THE PETITIONER.FILED BY THE PETITIONER. EXHIBIT P6TRUE COPY OF THE REPRESENTATION DATED 11.3.2020.11.3.2020. EXHIBIT P7TRUE COPY OF THE CBDT CIRCULAR NO.13 OF 2015 DATED 6.7.2015.2015 DATED 6.7.2015.EXHIBIT P8TRUE COPY OF THE ORDER DATED 17.3.2020.