No prosecution under Black Money Act where details of foreign assets disclosed in revised return / return of earlier year.
ABCAUS Case Law Citation:
ABCAUS 3823 (2023) (12) AC
Important Case Laws relied upon by parties:
Sonali Auto Private Ltd. Vs. State of Bihar & Ors: 2017 SCC Online Pat 3620
K.C. Builders v. Assistant Commissioner of Income Tax, 265 ITR 562 (SC)
CIT v. Kabul Chawla (2016) 380 ITR 573
ITO v Radhakrishna Stores, Stationery and Book Merchants
M/S Daurala Sugar Works vs State Of U.P. & Another
Srinidhi Karti Chidambaram Vs. The Principal Chief Commissioner
Smt. Suresh Khullar Vs. Sh. Vijay Khullar: 2009 SCC Online Del 2010
Principal CIT Vs. Neeraj Jindal:(2017) 393 ITR
In the instant case a Revision petition was filed by the Income Tax Officer before the Hon’ble Sessions Court against the order of passed by the Trial Court of Additional Chief Metropolitan Magistrate (ACCM) whereby, it had discharged the respondent assessee in the complaint case filed by the Department under section 50 of Black Money (undisclosed Foreign Income & Assets) and Imposition of Tax Act 2015 (BMIT Act).
The alleged failure of the assessee/respondent was non-disclosure of Foreign Asset/Interest in Schedule FA of the original ITR filed.
The Department contention was that the Trial Court had erred in discharging the respondent on the basis of the disclosure made in revised return filed after and in response to notice u/s 153A of the Income Tax Act, 1961 (the Act) as sufficient compliance to the mandatory required to be complied while filing return u/s 139 of the respondent.
It was also argued that the period to file the revised return u/s 139(5) of the Act had already expired and the Trial Court fell in error in applying the ratio of the Hon’ble High Court. It was argued that the assessee can not escape from the rigors of the Black Money Act merely on the filing of the revised return in terms of section 153A of Income Tax Act.
It was further argued that Trial Court has fell in error in holding that the declaration in the form of a note in the paper ITR filed u/s 139 by the respondent was sufficient to dislodge the willful failure in furnishing information relating to an asset located outside India in any subsequent returns in efiling regime.
It was also argued that Trial Court fell in error in placing reliance on certificate issued
by Chartered Accountant firm labelling the willful non-disclosure under Schedule FA in ITR of respondent/accused as a bona fide mistake, and the Trial Court ignored Section 54 of the Black Money Act while taking in consideration the facts of the case.
On the other hand, the assessee contended that the judgment relied upon by the Department od not manifests that the non-disclosure of the foreign assets should be willful and in the instant case, no case of willful non-disclosure of foreign assets was made out as the assets/share including source of funds had been duly disclosed by the respondent in his ITR filed for paper ITR regime by way of note given at the end of the computation of income and the same was further disclosed in the revised ITR filed prior to the receipt of the first communication under BMA Act from the Income Tax Department.
It was further submitted that the ITR, Bank account statements etc. were duly submitted by the respondent with his reply to the Department and it has been also accepted during his cross-examination that the said documents were duly verified by the sanctioning authority which clearly shows that it was an inadvertent mistake but not a willful failure to furnish the requisite information as the same was duly disclosed.
It was submitted that the non filing of schedule Foreign Assets (FA) in ITR was an unintentional omission and the computation of income and the ITR of the assessee was completed and filed by a CA Firm and the respondent approved the computation of income by signing the same physically and thereafter gave digital signatures to the CA for filing the return of income who accordingly e-filled the same. It was argued that respondent bonafidely believed that the ITR filed must have been filed after filling all necessary information, details and Schedules as and where required in the said form, particularly as all foreign assets were out of disclosed sources.
Relying on the judgment of the Hon’ble Supreme Court the assessee prayed for dismissal of the Petition and ontended that having engaged the services of a professional had no occasion and reason to self verify as to whether all relevant columns of the ITR stood filled properly before uploading the return and also to verify the completeness of filling the ITR form was not possible and within the competency of the respondent since he was not a technical person.
The Hon’ble Sessions Court observed that since the Complaint in question was filed for offence u/s 50 of BMIT Act which prescribes rigorous imprisonment from six months to seven years and therefore, the trial had taken place under Chapter XIX (B) viz; section 244 to 248 CrPC (Cases instituted otherwise than on police report). Hence it examined Section U/s 245 CrPC which is related to discharge of accused.
The Hon’ble Sessions Court observed that as held by the Hon’ble Allahabad High Court the Magistrate should consider the evidence adduced under Section 244 Cr.P.C. and if he sees that no case has been made out against the accused, that is, if unrebutted it would warrant a conviction would discharge the accused and if, there is prima facie case, he will frame a charge under Section 246(1) Cr.P.C.
The Hon’ble Sessions Court observed that the quality of consideration, which a criminal court undertakes, of the materials available before it, vary from circumstance to circumstance and stage to stage.
The Hon’ble Sessions Court pointed out that under Section 245(1), the Magistrate has to evaluate the evidence led by the prosecution before him under Section 244 and he has to consider whether if the evidence remains unrebutted, the conviction of the accused would be warranted. If there is no discernible incriminating material in the evidence, then the Magistrate shall discharge the accused under Section 245(1) Cr.P.C.
The Hon’ble Sessions Court observed that the Trial Court had held that the return u/s 153A of the Act was undisputedly accepted in the assessment order and it is settled position that once the Return u/s 153A is accepted, the original return u/s 139 abates and became nonest. Therefore, prosecution based on the return filed u/s 139 of the Act was an erroneous exercise on the part of complainant department which goes to the root of the matter.
The Hon’ble Sessions Court observed that Section 10 of the Black Money Act makes it clear that when proceedings are taken under Section 10 of the Black Money Act, it is for the assessment or reassessment of the undisclosed foreign income and assets. The petitioner department had proceeded on the premise that the respondent did not disclosed the foreign assets/financial interest in their return filed, under the Income Tax Act.
The Hon’ble Sessions Court noted that for attracting the provision of BMIT Act, the ingredients as provided in Section 2(11) of Act must be fulfilled i.e. when the assessee has no explanation to offer about the source of income and if any explanation is offered, such explanation in the opinion of the Assessing Officer, should be unsatisfactory. Whereas in the present case the revised return has been accepted by the Assessing Officer without any objection which shows that he/she was satisfied with the explanation offered by the respondent, about the source of investment.
Further the Hon’ble Sessions Court noted that under section of the BMIT Act the expression “such returns” implies return of income under sub-section (1) or (4) or (5) of Section 139 of the Act.
Further, section 139(5) of the Income Tax Act, 1961, permits an assessee to file a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier, if he discovers any omission or wrong statement in the return filed by him. If an assessee, having furnished a return of his own accord or in response to a special notice served on him, discovers any omission or wrong statement therein, he may furnish a revised return at any time before the assessment is made. Income Tax Act contemplates filing of a correct and complete return by the assessee. The law gives him a right to substitute and bring on record a correct and complete return if he discovers any omission or wrong statement in the return originally filed by him. The right to file a revised return granted to an assessee under sub-section (5) is a right given by the sub-section itself.
The Hon’ble Sessions Court further noted that the Hon’ble High Court had held that a revised re-turn filed even on the basis of errors found during enquiry should not justify prosecution and court required proof of mens rea in such cases. The Hon’ble High Court also noted that the mistakes attributed to a part time accountant resulting in errors and alternatives need not be treated as establishing such mens rea on the part of the proprietors. It was also observed that, if such a view is not taken, innocent assessees as well as auditors, who help or assist the assessees, could be made liable at one or other point of time for bona fide mistakes with dangerous consequences.
The Hon’ble Sessions Court observed that the Hon’ble Madras High Court had held that Section 50 of the Black Money Act cannot be dehorse Section 2(11) of the BMIT Act or the scheme of the Income Tax Act 1961, which permits submission of revised return and Section 139(5) of the Income Tax Act.
Further, the Hon’ble Sessions Court noted that Section 54 of the BMIT Act raises a presumption as to culpable mental state.
The Hon’ble Sessions Court distinguished between section 49 and 50 of the BMIT Act and observed that Section 50 of BMIT Act is attracted only when there was no declaration of for feign asset in the return, but admittedly the details of such foreign asset already stood declared in return filed in paper return regime.
In his cross-examination before Trial Court, the Department admitted that the disclosure of foreign interest/assets was made by the respondent in earlier return itself and the documents regarding the source of fund to acquire the said share had been verified by the petitioner department.
The Court opined that instead of prosecuting the respondent, the petitioner should have perused their record of the previous returns filed by the respondent before filing the prosecution complaint.
The Hon’ble Sessions Court opined that the words, “or sub-Section (4) or sub-Section (5) of Section 139” has to be given some meaning and an offence, under Section 50 of the BM Act, would be attracted, only after the period to file the revised return, under Section 139(5) is over and if there is a wilful failure to furnish the information of a foreign asset/financial interest in the return. Except in cases, where there is a complete fraud played by the assessee, by filing a false return.
The Hon’ble Sessions Court observed that the petitioner has not denied that the foreign share holding of respondent already stood declared in earlier return by way of a note and there is no loss of revenue upon such investment by the respondent. Merely because such declaration was again not incorporated in the subsequent return will not attribute culpable mens rea upon respondent and more so, when such declaration was again made albeit upon notice petitioner and the assessing Officer has accepted the explanation. The Department failed to explain why sanction order was granted at a premature stage without considering the return u/s 153A of Income Tax Act.
The Hon’ble Sessions Court observed that the legal position relating to assessment under section 153A of the Act has been examined in great detail by the Hon’ble Delhi High Court and it was held that after notice under Section153A (1) issued to the person searched requiring him to file returns, assessments and reassessments pending on the date of the search shall abate and must be calculated afresh on the basis of revised return.
The Hon’ble Sessions Court further observed that Hon’ble Apex Court has held that the word „concealment inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure, cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon.
Applying the principle of law as laid down by Apex Court and by Hon’ble High Court to the facts of present case, the Hon’ble Sessions Court opined that the continuation of prosecution of respondent even though the stated foreign asset already stood declared in ITR of earlier year and the revised ITR has been accepted by the petitioner department and there is no loss of revenue is not warranted as the evidence led by the petitioner was not sufficient to warrant conviction of the respondent even if the said witness remained unrebutted
As a result, the Revision Petition filed by the Department was dismissed for being bereft of any merits.
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