Article
Non-disclosure of foreign assets in the ITR: Ownership, valuation & threshold for penalty under the Black Money Act
By Avar Lamba, Sanjhali Bajaj, Snehal Ranjan Shukla and Tanmay Bhatnagar
Section 42 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 imposes a penalty of INR 10 lakhs upon a resident for every such year in which such resident held an asset outside India as a beneficial owner or otherwise and failed to file its income tax return for such year(s). The article in this issue of Direct Tax Amicus discusses certain issues that crop up in its implementation, such as the scope of ownership of assets, assumption of jurisdiction, and ambiguity of the valuation mechanism, which make this provision a point of contention for taxpayers and income-tax authorities. The authors discuss several interpretational issues regarding the application of said provisions while they conclude by stating that the interpretation of Sections 42 and 43 and the amendment by the Finance (No. 2) Act, 2024 must remain aligned with the legislative intent of targeting wilful non-disclosure, and safeguarding bona fide taxpayers from disproportionate penal consequences.
Notifications & Circulars
- Agreement between India and Qatar for avoidance of Double Taxation notified
- Timelines extended for filing of various audit reports and Income Tax Returns for AY 2025–26
Ratio decidendi
- Absence of permanent establishment or subsisting contract does not imply cessation of business; non-resident can claim business expenditure and depreciation carry forward – Supreme Court
- No penalty for erroneous interpretation of law as same is not ‘misreporting’ under Section 270A – ITAT Mumbai
- Debatable issues cannot be treated as ‘mistake apparent on record’ for rectification under Section 154 – ITAT New Delhi
- Payment for use of IT infrastructure facility is not taxable as royalty under India-Belgium DTAA; no TDS liability – ITAT Pune
- Assessment quashed as notice under Section 143(2) not in prescribed format – ITAT Rajkot