I left my foreign ESOPs out of Schedule FA. Is the Rs 10 lakh penalty automatic?
No. Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 says the officer 'may direct' a penalty, so the levy is discretionary. Where the ESOP perquisite had already suffered TDS and the capital gain on sale was offered to tax, the Tribunal treated the omission from Schedule FA as a technical breach and deleted the Rs 10 lakh penalty for each year.
Decided by the ITAT (Income Tax Appellate Tribunal, Chennai — George George K (Vice President) and Balakrishnan S (Accountant Member); B.M.A. Nos. 16, 17 & 18/CHNY/2025) on 2026-04-01, reported as 2026 TAXSCAN (ITAT) 1080; B.M.A. Nos. 16, 17 & 18/CHNY/2025 (AYs 2016-17 to 2018-19). It bears on section BMA s.43, section BMA s.10(3), section 139(1) Schedule FA of the Income Tax Act 1961, in Assessment & Scrutiny and Penalty matters.
Schedule FA penalties on employees holding foreign parent-company stock are being issued in volume, and this gives the two arguments that work: the statutory language is permissive, and Hindustan Steel bars a penalty for a technical or venial default. The relief depended on there being no undisclosed income and no revenue loss, so the case is about a reporting omission, not about foreign assets whose source is unexplained.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The assessee, an employee of Vedanta Limited working abroad, received employee stock options in the UK parent company, Vedanta Resources PLC, held through a trust arrangement. He did not report those foreign holdings in Schedule FA of his return of income filed on 22 February 2018 for AY 2016-17, and the omission carried into the following years. The employer had already deducted tax at source on the perquisite value of the ESOPs at the time of exercise, and the capital gain on eventual sale was offered to tax in AY 2019-20, so the entire transaction remained within the Indian tax net. The department imposed a penalty of Rs 10 lakh per year under s.43 of the Black Money Act for failure to furnish information about a foreign asset, and the CIT(A) confirmed it.
The Tribunal deleted the Rs 10 lakh penalties. It held that s.43 uses the word 'may' and therefore confers a discretion; a purely technical, unintentional omission from Schedule FA, where the income was already taxed in India and there was no concealment or wilful default, does not warrant the levy.
The Tribunal applied the principle in Hindustan Steel Ltd v. State of Orissa that penalty proceedings are quasi-criminal in character and that a penalty ought not to be imposed for a technical or venial breach, or where the default flows from a bona fide belief. It noted the statutory language: 'may direct' rather than 'shall direct', which shows the legislature did not intend an automatic levy for every non-reporting. On the facts, the perquisite value of the ESOPs had suffered TDS in the hands of the employer, and the subsequent capital gains were duly returned, so there was no undisclosed income and no revenue loss. The absence of any evidence of intentional concealment took the case outside the mischief the Black Money Act was designed to strike at. The Tribunal accordingly held the non-disclosure was a technical breach and cancelled the penalty for all three years.
Therefore, in our considered view, the impugned non-disclosure is a technical breach which does not warrant levy of penalty under Section 43 of the BMA.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppNo. Section 43 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 says the officer 'may direct' a penalty, so the levy is discretionary. Where the ESOP perquisite had already suffered TDS and the capital gain on sale was offered to tax, the Tribunal treated the omission from Schedule FA as a technical breach and deleted the Rs 10 lakh penalty for each year. This was decided by the ITAT (Income Tax Appellate Tribunal, Chennai — George George K (Vice President) and Balakrishnan S (Accountant Member); B.M.A. Nos. 16, 17 & 18/CHNY/2025) and bears on section BMA s.43, section BMA s.10(3), section 139(1) Schedule FA of the Income Tax Act 1961. It is reported as 2026 TAXSCAN (ITAT) 1080; B.M.A. Nos. 16, 17 & 18/CHNY/2025 (AYs 2016-17 to 2018-19). Schedule FA penalties on employees holding foreign parent-company stock are being issued in volume, and this gives the two arguments that work: the statutory language is permissive, and Hindustan Steel bars a penalty for a technical or venial default. The relief depended on there being no undisclosed income and no revenue loss, so the case is about a reporting omission, not about foreign assets whose source is unexplained. If it applies to you, the first step is this: Put on record that the income was already within the Indian tax net, with the TDS on the perquisite at exercise and the capital gain returned on sale, since that is what carried the deletion.
The assessee, an employee of Vedanta Limited working abroad, received employee stock options in the UK parent company, Vedanta Resources PLC, held through a trust arrangement. He did not report those foreign holdings in Schedule FA of his return of income filed on 22 February 2018 for AY 2016-17, and the omission carried into the following years. The employer had already deducted tax at source on the perquisite value of the ESOPs at the time of exercise, and the capital gain on eventual sale was offered to tax in AY 2019-20, so the entire transaction remained within the Indian tax net. The department imposed a penalty of Rs 10 lakh per year under s.43 of the Black Money Act for failure to furnish information about a foreign asset, and the CIT(A) confirmed it. The matter was decided on 2026-04-01 by the ITAT (Income Tax Appellate Tribunal, Chennai — George George K (Vice President) and Balakrishnan S (Accountant Member); B.M.A. Nos. 16, 17 & 18/CHNY/2025). On those facts the ITAT held as follows. The Tribunal deleted the Rs 10 lakh penalties. It held that s.43 uses the word 'may' and therefore confers a discretion; a purely technical, unintentional omission from Schedule FA, where the income was already taxed in India and there was no concealment or wilful default, does not warrant the levy.
The Tribunal applied the principle in Hindustan Steel Ltd v. State of Orissa that penalty proceedings are quasi-criminal in character and that a penalty ought not to be imposed for a technical or venial breach, or where the default flows from a bona fide belief. It noted the statutory language: 'may direct' rather than 'shall direct', which shows the legislature did not intend an automatic levy for every non-reporting. On the facts, the perquisite value of the ESOPs had suffered TDS in the hands of the employer, and the subsequent capital gains were duly returned, so there was no undisclosed income and no revenue loss. The absence of any evidence of intentional concealment took the case outside the mischief the Black Money Act was designed to strike at. The Tribunal accordingly held the non-disclosure was a technical breach and cancelled the penalty for all three years. In the words reproduced by the source cited on this page: "Therefore, in our considered view, the impugned non-disclosure is a technical breach which does not warrant levy of penalty under Section 43 of the BMA." The decision followed or applied Hindustan Steel Ltd v. State of Orissa.
It was decided by the ITAT on 2026-04-01 and is reported as 2026 TAXSCAN (ITAT) 1080; B.M.A. Nos. 16, 17 & 18/CHNY/2025 (AYs 2016-17 to 2018-19). 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.43, section BMA s.10(3), section 139(1) Schedule FA, 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 helps the taxpayer. The Tribunal deleted the Rs 10 lakh penalties. It held that s.43 uses the word 'may' and therefore confers a discretion; a purely technical, unintentional omission from Schedule FA, where the income was already taxed in India and there was no concealment or wilful default, does not warrant the levy. It arises in Assessment & Scrutiny and Penalty matters, on section BMA s.43, section BMA s.10(3), section 139(1) Schedule FA of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Chennai — George George K (Vice President) and Balakrishnan S (Accountant Member); B.M.A. Nos. 16, 17 & 18/CHNY/2025. 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. Argue the discretion in terms: s.43 says 'may direct', and ask the officer to record why discretion is being exercised against a bona fide omission. Rely on Hindustan Steel Ltd v State of Orissa for the proposition that penalty proceedings are quasi-criminal and a penalty should not follow a technical breach or a bona fide belief. Do not stretch this to a case where the foreign asset itself was funded out of undisclosed sources, because the reasoning does not reach that situation.
Still good law. A separate search for later treatment (April–August 2026 reporting) found only news and commentary coverage of the order; no appeal, reversal or contrary Tribunal or High Court decision was located. That finding was checked against a published source, which is linked on this page, on 2026-08-25. 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.
Section 43 here is a Black Money Act 2015 provision, not an Income-tax Act section, and the penalty is a flat Rs 10 lakh per year rather than anything computed under the Income-tax Act penalty scheme; describe it accurately in the reply. The order has now been read on the record and most of the earlier doubts are resolved, but not the spelling of the appellant's first name. The cause title printed in the body of the order reads 'Shri Krishore Kumar Rajagopal'; it is only Indian Kanoon's own page-title line, which normalises names, that reads 'Kishore', and reports differ. The entry therefore keeps 'Krishore', which is what the order itself prints, and the slug is unchanged. The members are George George K (Vice President) and Balakrishnan S (Accountant Member) on the signature block, the appeals are B.M.A. Nos. 16, 17 & 18/CHNY/2025 for assessment years 2016-17 to 2018-19, heard 24 March 2026 and pronounced 1 April 2026, and the sentence quoted in this entry is the Bench's own at para 14 — it was previously taken from a news report and is now given in full, including the closing words 'under Section 43 of the BMA'. Two things to keep in view. The order reproduces a long extract from the coordinate bench decision in Vasanthan Jayaraman (BMA Nos. 4 & 5/CHNY/2025, 8 September 2025), whose assessee was an engineer employed with Hindustan Zinc Ltd.; those are not the facts of this case, which concern an employee working overseas with Vedanta Limited granted ESOPs of the UK parent Vedanta Resources PLC, administered through a fiduciary arrangement involving Sanne Fiduciary Services Limited, Jersey. And on the tags: 'BMA 2015 s.10(3)' is carried here as a practice tag, being the provision under which a Black Money Act assessment is made and the head a reader will search under, not as a claim that this Bench cited it — the Bench named sections 6, 10, 15, 17, 41, 42, 43 and 46(3) of that Act, and section 10 only inside quoted material. No parallel law report citation was found and no citator check is possible. The order was read and the particulars are settled. No law report citation was found, so no citator check is possible, and whether the Revenue has appealed is not known. 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 Tribunal deleted the Rs 10 lakh penalties. It held that s.43 uses the word 'may' and therefore confers a discretion; a purely technical, unintentional omission from Schedule FA, where the income was already taxed in India and there was no concealment or wilful default, does not warrant the levy.
TaxSphere, “Krishore Kumar Rajagopal v DDIT”, https://taxnotice.vittsphere.com/caselaw/case/krishore-kumar-rajagopal-v-ddit-s43/ (validity last checked 2026-08-25)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
Both a s.41 and a s.43 penalty have been levied on me under the Black Money Act for the same year. Are they attacked the same way?
The foreign investment was in the audited balance sheet and in Part A-BS of the return but not in Schedule FA. Is that a failure to furnish information for s.43?
A foreign life policy was bought and paid for by my brother-in-law with my wife as beneficiary, and another one lapsed in 2014. Do either of them belong in my Schedule FA?
The foreign investment was in my balance sheet and elsewhere in the return, just not in Schedule FA. Does that still cost Rs 10 lakh?
