The assessment under the Black Money Act has been quashed. Does the s.41 penalty go with it, and does the s.43 penalty go too?
The s.41 penalty goes; the s.43 penalty does not. Because s.41 is a penalty on undisclosed foreign income and assets assessed under s.10, once the Tribunal deleted the additions on a legal ground the s.41 penalty of Rs 18,09,74,151 became infructuous and was directed to be deleted. The Rs 10,00,000 penalty under s.43 was separately upheld in the same order, because it turns on what was or was not put in the return and not on the assessment.
Decided by the ITAT (Shri George George K, Vice President and Shri S.R. Raghunatha, Accountant Member) on 2025-04-30, reported as BMA Nos. 7, 8, 9, 10 and 11/CHNY/2024, assessment years 2016-17 and 2017-18. It bears on section BMA s.41, section BMA s.43, section BMA s.42, section BMA s.10(1), section BMA s.10(3), section BMA s.72(c), section BMA s.3, section BMA s.5 of the Income Tax Act 1961, in Penalty, Assessment & Scrutiny and Appeals matters.
This is the only order located in which both a s.41 and a s.43 penalty for the same taxpayer were decided side by side, and it shows that the two stand on different footings. Winning the quantum appeal collapses the s.41 penalty automatically, but it does nothing for the s.43 penalty, which has to be fought on its own facts.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee was assessed under the Black Money Act in respect of margin money said to have been spent on properties in Singapore. Rs 17,13,73,680, equivalent to SGD 35,23,380, was taxed as undisclosed investment (para 3.2). The notice under s.10(1) was issued on 21 March 2020, which fell in financial year 2019-20, but the assessment was completed for assessment year 2017-18. Five appeals came up together: BMA No. 7 against a s.42 penalty for assessment year 2016-17, BMA No. 8 the quantum appeal for assessment year 2017-18, BMA Nos. 9 and 10 penalty appeals, and BMA No. 11 against a s.43 penalty of Rs 10,00,000 for assessment year 2017-18. The s.41 penalty in issue was Rs 18,09,74,151.
The quantum appeal succeeded. The Tribunal held that 'the assessment proceedings u/s.10 of the BM Act for the subject A.Y.2017-18 is bad in law' (para 18.13), the notice having been issued on 21 March 2020 while the assessment was framed for assessment year 2017-18, and allowed BMA No. 8 (para 20). The s.41 penalty appeal was then allowed on the footing that it had become infructuous, the Tribunal directing the Assessing Officer to delete the penalty (para 32). The s.43 penalty appeal, BMA No. 11, was dismissed, the Tribunal applying its reasoning in BMA No. 7 mutatis mutandis (para 35). In the result BMA Nos. 7 and 11 were dismissed and BMA Nos. 8, 9 and 10 were allowed (para 37).
On quantum, the Tribunal read s.72(c), which provides that where an asset has been acquired before the commencement of the Act and no declaration is made under Chapter VI, the asset is deemed to have been acquired in the year in which a notice under s.10 is issued (para 18.15). The notice having issued on 21 March 2020, the charge could not be fixed on assessment year 2017-18, and the assessment was outside the statutory scheme (paras 18.10 to 18.13). On the s.41 penalty, the Tribunal recorded that it had already allowed the quantum appeal for assessment year 2017-18 by deleting the additions on legal grounds and that the penalty appeal therefore became infructuous (para 32). On s.42, the Tribunal recorded that the assessee had neither filed a return of income for assessment year 2016-17 nor made a declaration in the window from 1 June 2015 to 30 September 2015 (para 24), and the s.43 penalty was dealt with on the same reasoning (para 35).
the present appeal in respect of levying penalty u/s.41 becomes infructuous
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Handle my notice → Ask a CA on WhatsAppThe s.41 penalty goes; the s.43 penalty does not. Because s.41 is a penalty on undisclosed foreign income and assets assessed under s.10, once the Tribunal deleted the additions on a legal ground the s.41 penalty of Rs 18,09,74,151 became infructuous and was directed to be deleted. The Rs 10,00,000 penalty under s.43 was separately upheld in the same order, because it turns on what was or was not put in the return and not on the assessment. This was decided by the ITAT (Shri George George K, Vice President and Shri S.R. Raghunatha, Accountant Member) and bears on section BMA s.41, section BMA s.43, section BMA s.42, section BMA s.10(1), section BMA s.10(3), section BMA s.72(c), section BMA s.3, section BMA s.5 of the Income Tax Act 1961. It is reported as BMA Nos. 7, 8, 9, 10 and 11/CHNY/2024, assessment years 2016-17 and 2017-18. This is the only order located in which both a s.41 and a s.43 penalty for the same taxpayer were decided side by side, and it shows that the two stand on different footings. Winning the quantum appeal collapses the s.41 penalty automatically, but it does nothing for the s.43 penalty, which has to be fought on its own facts. If it applies to you, the first step is this: File the quantum appeal against the s.10(3) order and the s.41 penalty appeal together, and ask for the penalty appeal to be taken up after the quantum.
The assessee was assessed under the Black Money Act in respect of margin money said to have been spent on properties in Singapore. Rs 17,13,73,680, equivalent to SGD 35,23,380, was taxed as undisclosed investment (para 3.2). The notice under s.10(1) was issued on 21 March 2020, which fell in financial year 2019-20, but the assessment was completed for assessment year 2017-18. Five appeals came up together: BMA No. 7 against a s.42 penalty for assessment year 2016-17, BMA No. 8 the quantum appeal for assessment year 2017-18, BMA Nos. 9 and 10 penalty appeals, and BMA No. 11 against a s.43 penalty of Rs 10,00,000 for assessment year 2017-18. The s.41 penalty in issue was Rs 18,09,74,151. The matter was decided on 2025-04-30 by the ITAT (Shri George George K, Vice President and Shri S.R. Raghunatha, Accountant Member). On those facts the ITAT held as follows. The quantum appeal succeeded. The Tribunal held that 'the assessment proceedings u/s.10 of the BM Act for the subject A.Y.2017-18 is bad in law' (para 18.13), the notice having been issued on 21 March 2020 while the assessment was framed for assessment year 2017-18, and allowed BMA No. 8 (para 20). The s.41 penalty appeal was then allowed on the footing that it had become infructuous, the Tribunal directing the Assessing Officer to delete the penalty (para 32). The s.43 penalty appeal, BMA No. 11, was dismissed, the Tribunal applying its reasoning in BMA No. 7 mutatis mutandis (para 35). In the result BMA Nos. 7 and 11 were dismissed and BMA Nos. 8, 9 and 10 were allowed (para 37).
On quantum, the Tribunal read s.72(c), which provides that where an asset has been acquired before the commencement of the Act and no declaration is made under Chapter VI, the asset is deemed to have been acquired in the year in which a notice under s.10 is issued (para 18.15). The notice having issued on 21 March 2020, the charge could not be fixed on assessment year 2017-18, and the assessment was outside the statutory scheme (paras 18.10 to 18.13). On the s.41 penalty, the Tribunal recorded that it had already allowed the quantum appeal for assessment year 2017-18 by deleting the additions on legal grounds and that the penalty appeal therefore became infructuous (para 32). On s.42, the Tribunal recorded that the assessee had neither filed a return of income for assessment year 2016-17 nor made a declaration in the window from 1 June 2015 to 30 September 2015 (para 24), and the s.43 penalty was dealt with on the same reasoning (para 35). In the words reproduced by the source cited on this page: "the present appeal in respect of levying penalty u/s.41 becomes infructuous"
It was decided by the ITAT on 2025-04-30 and is reported as BMA Nos. 7, 8, 9, 10 and 11/CHNY/2024, assessment years 2016-17 and 2017-18. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section BMA s.41, section BMA s.43, section BMA s.42, section BMA s.10(1), section BMA s.10(3), section BMA s.72(c), section BMA s.3, section BMA s.5, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The quantum appeal succeeded. The Tribunal held that 'the assessment proceedings u/s.10 of the BM Act for the subject A.Y.2017-18 is bad in law' (para 18.13), the notice having been issued on 21 March 2020 while the assessment was framed for assessment year 2017-18, and allowed BMA No. 8 (para 20). The s.41 penalty appeal was then allowed on the footing that it had become infructuous, the Tribunal directing the Assessing Officer to delete the penalty (para 32). The s.43 penalty appeal, BMA No. 11, was dismissed, the Tribunal applying its reasoning in BMA No. 7 mutatis mutandis (para 35). In the result BMA Nos. 7 and 11 were dismissed and BMA Nos. 8, 9 and 10 were allowed (para 37). It arises in Penalty, Assessment & Scrutiny and Appeals matters, on section BMA s.41, section BMA s.43, section BMA s.42, section BMA s.10(1), section BMA s.10(3), section BMA s.72(c), section BMA s.3, section BMA s.5 of the Income Tax Act 1961, and was decided by Shri George George K, Vice President and Shri S.R. Raghunatha, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. In the s.41 appeal, plead in terms that the penalty is on income and assets 'assessed' under s.10 and cannot survive the deletion of the assessment. Do not assume the s.43 penalty follows. Build a separate case on it - the return, the schedule the information went into, and the reason the omission happened. Check the year for which the s.10(1) notice was issued against the year for which the assessment was framed; on these facts the mismatch was fatal. Read s.72(c) with the notice date: the asset is deemed acquired in the year in which the s.10 notice is issued.
Searched for later treatment; none was found. That is not the same as a source affirming it. Searches on indiankanoon for later decisions applying, following or doubting this order returned nothing. The order is recent and no appeal to the High Court against it was located. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order disposes of five appeals and the mapping of every appeal number to its subject could not be fully established from the text: BMA No. 8 is the quantum appeal for 2017-18 and BMA No. 11 the s.43 penalty for that year, but which of BMA Nos. 9 and 10 carries the s.41 penalty of Rs 18,09,74,151 is not stated in terms in the portions reached. The result paragraph allows BMA Nos. 8, 9 and 10 and dismisses 7 and 11. The quantum point overlaps the first-assessment-year reasoning in jcit-v-vikash-marda-bma-first-assessment-year and the s.72(c) reasoning in rashesh-bhansali-v-addl-cit-black-money; what is new here is the treatment of the s.41 and s.43 penalties side by side. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The quantum appeal succeeded. The Tribunal held that 'the assessment proceedings u/s.10 of the BM Act for the subject A.Y.2017-18 is bad in law' (para 18.13), the notice having been issued on 21 March 2020 while the assessment was framed for assessment year 2017-18, and allowed BMA No. 8 (para 20). The s.41 penalty appeal was then allowed on the footing that it had become infructuous, the Tribunal directing the Assessing Officer to delete the penalty (para 32). The s.43 penalty appeal, BMA No. 11, was dismissed, the Tribunal applying its reasoning in BMA No. 7 mutatis mutandis (para 35). In the result BMA Nos. 7 and 11 were dismissed and BMA Nos. 8, 9 and 10 were allowed (para 37).
TaxSphere, “Elangovan Malarmangai v JCIT”, https://taxnotice.vittsphere.com/caselaw/case/elangovan-malarmangai-v-jcit-bma-41-penalty-falls-with-quantum/ (validity last checked 2026-09-16)
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The department has issued a Black Money Act notice for a foreign bank account opened in 2007. The Act only came into force in 2015. On what does the charge on that asset actually rest, and in which year is it charged?
My client's Black Money assessment covers a foreign account opened in 2009 and not declared under the one-time compliance window. The department has charged tax and a penalty of three times the tax, and says the year is fixed by s.72(c). What do those provisions actually say?
They have issued notices under the Black Money Act for 2014-15 and 2015-16. Can the Act reach those years at all?
Can I take an assessment under the Black Money Act straight to the High Court?
