Your return for the year was late and treated as invalid, though it did disclose the foreign assets in Schedule FA. Can the Rs 10 lakh penalty under s.42 still stand?
On this order it was deleted - but not because s.42 was held to confer any discretion. The Tribunal deleted Rs 10 lakh penalties for both years, under s.43 for AY 2016-17 and under s.42 for AY 2017-18. The discretion reasoning, drawn from the word 'may' in s.43 and from Hindustan Steel, belongs to the s.43 year. For the s.42 year the route is factual and technical: the belated return did disclose the foreign assets in Schedule FA, the officer adopted the income admitted in that return, the return filed under s.153C substituted the regular return, and the late filing was 'mere technical breach'.
Decided by the ITAT (Manoj Kumar Aggarwal AM and Manu Kumar Giri JM) on 2025-02-03, reported as BMA No. 1/Chny/2024 (AY 2016-17) and BMA No. 2/Chny/2024 (AY 2017-18), Income Tax Appellate Tribunal, Chennai. It bears on section BMA s.42, section BMA s.43, section 139(1) Schedule FA, section 153C, section 273B of the Income Tax Act 1961, in Penalty and Residence & Treaty Benefit matters.
Almost all the reported discretion cases are on s.43, the Schedule FA penalty. This is a s.42 order - the penalty for not furnishing the return at all within the relevant assessment year - and it shows disclosure actually made, in a belated return and then in a s.153C return, answering the charge on the facts. The Tribunal did not hold that s.42 carries a discretion, and the order should not be cited for that.
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 held financial interests in foreign entities acquired between November 2001 and July 2005, a foreign bank account opened in February 2001, and two immovable properties abroad acquired in June 2005 and August 2010. For AY 2016-17 he filed a return on 30 November 2016 which did not carry these assets in Schedule FA; he said the omission was an inadvertent mistake, that he had been not ordinarily resident until AY 2013-14, and that returns for several years had been filed together. The assets were disclosed in a return filed on 21 November 2019 under s.153C. For AY 2017-18 the return was filed on 20 November 2018, beyond the due date of 5 August 2017, and was treated as invalid on that account - but the foreign assets were disclosed in Schedule FA of that return and the returned income was accepted. The Assessing Officer levied Rs 10 lakh for each year, under s.43 for AY 2016-17 and under s.42 for AY 2017-18, taking the view that the statute required disclosure in the prescribed Schedule FA format and that automated compliance depends on it. The CIT(A) confirmed both, observing that the Act contains no provision corresponding to s.273B of the Income-tax Act under which reasonable cause could be considered.
Both penalties were deleted and both appeals allowed. For AY 2016-17 the Tribunal held the omission an inadvertent mistake and, the word in s.43 being 'may', declined to treat the levy as automatic: 'Therefore, considering the facts and circumstances of the case as well favorable views taken by various benches of Tribunal, we delete the impugned penalty' (para 7). For AY 2017-18 it held that the belated return had disclosed the foreign assets, that the late filing was a mere technical breach and that the s.153C return would substitute the regular return: 'For the aforesaid reasons, we would hold the impugned penalty would not be leviable and the same is liable to the deleted. We order so. The appeal stand allowed accordingly.' (para 10; 'to the deleted' is the order's own wording). The order closes: 'Both the appeals stand allowed in terms of our above order.' (para 11).
For AY 2016-17 the Tribunal set out s.43 as conferring a discretion - the Assessing Officer 'may direct' payment of Rs 10 lakh - subject to the exception for bank accounts not exceeding Rs 5 lakh (para 1.3), and held that 'the use of the expression "may" signifies that the penalty is not to be imposed in all cases of lapses', taking guidance from Hindustan Steel (para 5). It applied the Mumbai Bench decisions in Addl. CIT v. Leena Gandhi Tiwari (para 5) and Ocean Diving Centre Ltd. and Addl. CIT v. Tejal Ashish Mehta (para 6), where comparable penalties were deleted for want of total defiance of law, mala fides or dishonest breach and on a finding of bona fide mistake. The AY 2017-18 penalty under s.42 was decided on a different footing, at paras 8 to 10: nothing in that discussion turns on discretion. The belated return did disclose the assets, 'The late filing of return of income is mere technical breach', the Assessing Officer had adopted the income admitted in that return, and 'the return field u/s 153C would substitute the regular return of income' on the authority of Pr. CIT v. JSW Steel Ltd. (para 10). The penalty went because the disclosure had in fact been made, not because s.42 was read as discretionary.
we would hold the impugned penalty would not be leviable and the same is liable to the deleted
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 WhatsAppOn this order it was deleted - but not because s.42 was held to confer any discretion. The Tribunal deleted Rs 10 lakh penalties for both years, under s.43 for AY 2016-17 and under s.42 for AY 2017-18. The discretion reasoning, drawn from the word 'may' in s.43 and from Hindustan Steel, belongs to the s.43 year. For the s.42 year the route is factual and technical: the belated return did disclose the foreign assets in Schedule FA, the officer adopted the income admitted in that return, the return filed under s.153C substituted the regular return, and the late filing was 'mere technical breach'. This was decided by the ITAT (Manoj Kumar Aggarwal AM and Manu Kumar Giri JM) and bears on section BMA s.42, section BMA s.43, section 139(1) Schedule FA, section 153C, section 273B of the Income Tax Act 1961. It is reported as BMA No. 1/Chny/2024 (AY 2016-17) and BMA No. 2/Chny/2024 (AY 2017-18), Income Tax Appellate Tribunal, Chennai. Almost all the reported discretion cases are on s.43, the Schedule FA penalty. This is a s.42 order - the penalty for not furnishing the return at all within the relevant assessment year - and it shows disclosure actually made, in a belated return and then in a s.153C return, answering the charge on the facts. The Tribunal did not hold that s.42 carries a discretion, and the order should not be cited for that. If it applies to you, the first step is this: Check first which section the notice is under - s.42 bites on failure to furnish the return within the relevant assessment year, s.43 on failure to disclose the asset in a return that was furnished.
The assessee held financial interests in foreign entities acquired between November 2001 and July 2005, a foreign bank account opened in February 2001, and two immovable properties abroad acquired in June 2005 and August 2010. For AY 2016-17 he filed a return on 30 November 2016 which did not carry these assets in Schedule FA; he said the omission was an inadvertent mistake, that he had been not ordinarily resident until AY 2013-14, and that returns for several years had been filed together. The assets were disclosed in a return filed on 21 November 2019 under s.153C. For AY 2017-18 the return was filed on 20 November 2018, beyond the due date of 5 August 2017, and was treated as invalid on that account - but the foreign assets were disclosed in Schedule FA of that return and the returned income was accepted. The Assessing Officer levied Rs 10 lakh for each year, under s.43 for AY 2016-17 and under s.42 for AY 2017-18, taking the view that the statute required disclosure in the prescribed Schedule FA format and that automated compliance depends on it. The CIT(A) confirmed both, observing that the Act contains no provision corresponding to s.273B of the Income-tax Act under which reasonable cause could be considered. The matter was decided on 2025-02-03 by the ITAT (Manoj Kumar Aggarwal AM and Manu Kumar Giri JM). On those facts the ITAT held as follows. Both penalties were deleted and both appeals allowed. For AY 2016-17 the Tribunal held the omission an inadvertent mistake and, the word in s.43 being 'may', declined to treat the levy as automatic: 'Therefore, considering the facts and circumstances of the case as well favorable views taken by various benches of Tribunal, we delete the impugned penalty' (para 7). For AY 2017-18 it held that the belated return had disclosed the foreign assets, that the late filing was a mere technical breach and that the s.153C return would substitute the regular return: 'For the aforesaid reasons, we would hold the impugned penalty would not be leviable and the same is liable to the deleted. We order so. The appeal stand allowed accordingly.' (para 10; 'to the deleted' is the order's own wording). The order closes: 'Both the appeals stand allowed in terms of our above order.' (para 11).
For AY 2016-17 the Tribunal set out s.43 as conferring a discretion - the Assessing Officer 'may direct' payment of Rs 10 lakh - subject to the exception for bank accounts not exceeding Rs 5 lakh (para 1.3), and held that 'the use of the expression "may" signifies that the penalty is not to be imposed in all cases of lapses', taking guidance from Hindustan Steel (para 5). It applied the Mumbai Bench decisions in Addl. CIT v. Leena Gandhi Tiwari (para 5) and Ocean Diving Centre Ltd. and Addl. CIT v. Tejal Ashish Mehta (para 6), where comparable penalties were deleted for want of total defiance of law, mala fides or dishonest breach and on a finding of bona fide mistake. The AY 2017-18 penalty under s.42 was decided on a different footing, at paras 8 to 10: nothing in that discussion turns on discretion. The belated return did disclose the assets, 'The late filing of return of income is mere technical breach', the Assessing Officer had adopted the income admitted in that return, and 'the return field u/s 153C would substitute the regular return of income' on the authority of Pr. CIT v. JSW Steel Ltd. (para 10). The penalty went because the disclosure had in fact been made, not because s.42 was read as discretionary. In the words reproduced by the source cited on this page: "we would hold the impugned penalty would not be leviable and the same is liable to the deleted" The decision followed or applied Hindustan Steel Ltd. v. State of Orissa - applied on the exercise of discretion in penalty (para 5); Addl. CIT v. Leena Gandhi Tiwari [136 taxmann.com 409] (Mum. Trib.) - followed (para 5); Ocean Diving Centre Ltd. [156 taxmann.com 360] (Mum. Trib.) - followed (para 6); Addl. CIT v. Tejal Ashish Mehta, BMA No. 5/Mum/2022 dated 3 April 2023 - followed (para 6); Pr. CIT v. JSW Steel Ltd. [115 taxmann.com 165] (Bom.) - applied (para 10).
It was decided by the ITAT on 2025-02-03 and is reported as BMA No. 1/Chny/2024 (AY 2016-17) and BMA No. 2/Chny/2024 (AY 2017-18), Income Tax Appellate Tribunal, Chennai. 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.42, section BMA s.43, section 139(1) Schedule FA, section 153C, section 273B, 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. Both penalties were deleted and both appeals allowed. For AY 2016-17 the Tribunal held the omission an inadvertent mistake and, the word in s.43 being 'may', declined to treat the levy as automatic: 'Therefore, considering the facts and circumstances of the case as well favorable views taken by various benches of Tribunal, we delete the impugned penalty' (para 7). For AY 2017-18 it held that the belated return had disclosed the foreign assets, that the late filing was a mere technical breach and that the s.153C return would substitute the regular return: 'For the aforesaid reasons, we would hold the impugned penalty would not be leviable and the same is liable to the deleted. We order so. The appeal stand allowed accordingly.' (para 10; 'to the deleted' is the order's own wording). The order closes: 'Both the appeals stand allowed in terms of our above order.' (para 11). It arises in Penalty and Residence & Treaty Benefit matters, on section BMA s.42, section BMA s.43, section 139(1) Schedule FA, section 153C, section 273B of the Income Tax Act 1961, and was decided by Manoj Kumar Aggarwal AM and Manu Kumar Giri JM. 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. If the assets were in fact disclosed in the belated return, say so on the face of your reply and put the breach as technical. Set out the residential status history; here the assessee was not ordinarily resident until AY 2013-14 and had filed several years together, which explained the omission. Record the bona fide explanation at the penalty stage, because the CIT(A) here proceeded on the footing that the Act has no equivalent of s.273B. Where a s.153C return has since disclosed the assets, put that return on record - the Tribunal treated it as substituting the regular return.
Searched for later treatment; none was found. That is not the same as a source affirming it. Searched for later decisions applying or doubting this order and found none reported. Practitioners should read it with the Special Bench decision in Vinil Venugopal, already in this library, which holds the 'may' in s.43 directory; this order reaches the same result on the s.43 year. It does not decide that s.42 carries a like discretion - the s.42 year was decided on disclosure having in fact been made - and no decision was located working out how far the s.43 discretion reasoning governs s.42. 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 does not state the countries in which the assets were held or their values, so it gives no guidance on the monetary threshold. It does not construe s.42: the discretion point is argued from the language of s.43 and from Hindustan Steel at para 5 and belongs to the AY 2016-17 appeal, while the s.42 discussion at paras 8 to 10 never uses the word discretion and decides that year on the disclosure made in the belated return and the substitution of the regular return by the s.153C return. The order's own words at para 10 are 'the same is liable to the deleted'; that is the order's wording and is quoted as it reads. The discovery note for this decision quoted the closing line as 'Both the appeals stand allowed in terms of our above order.' - that is what the document says, at para 11. One retrieval of the page returned that line as 'Both the appeals stand allowed in their entirety.'; the paragraph-level text gives the first version and it should be preferred. A later reading of the order against this entry corrected two things: the summary's claim that the Tribunal treated ss.42 and 43 on the same discretionary footing, which the order does not support, and the silent tidying of the para 10 quotation from 'liable to the deleted' to 'liable to be deleted'. 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.
Both penalties were deleted and both appeals allowed. For AY 2016-17 the Tribunal held the omission an inadvertent mistake and, the word in s.43 being 'may', declined to treat the levy as automatic: 'Therefore, considering the facts and circumstances of the case as well favorable views taken by various benches of Tribunal, we delete the impugned penalty' (para 7). For AY 2017-18 it held that the belated return had disclosed the foreign assets, that the late filing was a mere technical breach and that the s.153C return would substitute the regular return: 'For the aforesaid reasons, we would hold the impugned penalty would not be leviable and the same is liable to the deleted. We order so. The appeal stand allowed accordingly.' (para 10; 'to the deleted' is the order's own wording). The order closes: 'Both the appeals stand allowed in terms of our above order.' (para 11).
TaxSphere, “Palanirajan Rajarajan v Addl. CIT”, https://taxnotice.vittsphere.com/caselaw/case/palanirajan-rajarajan-v-addl-cit-bma-42-late-return/ (validity last checked 2026-09-16)
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.
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 foreign asset is small and no penalty is proposed. Can they still prosecute me for leaving it out of Schedule FA?
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?
Can I take an assessment under the Black Money Act straight to the High Court?
