I disclosed the foreign assets in every year except one. Does the s.43 penalty for that one year stand?
Not on these facts. The Tribunal deleted a s.43 penalty where the same foreign assets had been shown in Schedule FA for the years before and the years after, and the source of the investment had been accepted. It reasoned from s.46 that if the penalty were bound to follow the default there would have been no purpose in requiring a show-cause notice at all.
Decided by the ITAT (Shri Laliet Kumar, Judicial Member and Shri Madhusudan Sawdia, Accountant Member) on 2025-01-16, reported as BMA No. 2/Hyd/2024, assessment year 2019-20. It bears on section BMA s.43, section BMA s.46, section BMA s.10, section BMA s.3, section 139(1) Schedule FA of the Income Tax Act 1961, in Penalty and Assessment & Scrutiny matters.
It is the clearest statement located of what the s.46 show-cause notice is for: it presupposes that the answer to it can defeat the penalty. It also gives a pattern-of-disclosure argument that a practitioner can run on documents already on the department's file.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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In the return for assessment year 2017-18 the assessee failed to disclose foreign assets which were required to be disclosed (para 12). Those assets included an investment in Best Skyline Inc., insurance policies numbered 94428125 and 6015871, an investment in Lemon Stone Holding Pte Ltd, Mauritius, and residential property investments in Singapore of Rs 7,22,07,540 and in Malaysia. The same assets had been disclosed in the returns for assessment years 2012-13 to 2016-17 and again for assessment years 2018-19 to 2019-20. The omission came to the notice of the Assessing Officer during assessment proceedings for assessment year 2019-20, and a show-cause notice under s.46 was issued before penalty of Rs 10,00,000 was imposed under s.43.
The appeal was allowed and the penalty deleted. The Tribunal held that where the explanation relating to the source of the investment had been accepted, the failure could not be vitiated on account of mala fides or an attempt to evade the rigours of the Act, and that the pattern of disclosure in the surrounding years pointed to a bona fide omission rather than an intention to conceal (para 15).
The Tribunal recorded that the Assessing Officer had followed the procedure in s.46 and issued a show-cause notice before imposing penalty, and reasoned from that requirement that the penalty cannot be automatic: if the penalty is necessarily to be imposed there is no purpose in issuing a show-cause notice at all (para 15). It read s.43 as commanding the Assessing Officer to impose the penalty unless some reasonable cause is demonstrated for not disclosing the assets in the return (para 14), and found reasonable cause in the consistent disclosure of the same assets in the years on either side together with the acceptance of the source of the investment.
if the penalty is necessarily being required to be imposed then there was no purpose of issuing the show cause notice
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Handle my notice → Ask a CA on WhatsAppNot on these facts. The Tribunal deleted a s.43 penalty where the same foreign assets had been shown in Schedule FA for the years before and the years after, and the source of the investment had been accepted. It reasoned from s.46 that if the penalty were bound to follow the default there would have been no purpose in requiring a show-cause notice at all. This was decided by the ITAT (Shri Laliet Kumar, Judicial Member and Shri Madhusudan Sawdia, Accountant Member) and bears on section BMA s.43, section BMA s.46, section BMA s.10, section BMA s.3, section 139(1) Schedule FA of the Income Tax Act 1961. It is reported as BMA No. 2/Hyd/2024, assessment year 2019-20. It is the clearest statement located of what the s.46 show-cause notice is for: it presupposes that the answer to it can defeat the penalty. It also gives a pattern-of-disclosure argument that a practitioner can run on documents already on the department's file. If it applies to you, the first step is this: Put together the Schedule FA of every adjacent year showing the same asset, and file them with the reply to the s.46 notice.
In the return for assessment year 2017-18 the assessee failed to disclose foreign assets which were required to be disclosed (para 12). Those assets included an investment in Best Skyline Inc., insurance policies numbered 94428125 and 6015871, an investment in Lemon Stone Holding Pte Ltd, Mauritius, and residential property investments in Singapore of Rs 7,22,07,540 and in Malaysia. The same assets had been disclosed in the returns for assessment years 2012-13 to 2016-17 and again for assessment years 2018-19 to 2019-20. The omission came to the notice of the Assessing Officer during assessment proceedings for assessment year 2019-20, and a show-cause notice under s.46 was issued before penalty of Rs 10,00,000 was imposed under s.43. The matter was decided on 2025-01-16 by the ITAT (Shri Laliet Kumar, Judicial Member and Shri Madhusudan Sawdia, Accountant Member). On those facts the ITAT held as follows. The appeal was allowed and the penalty deleted. The Tribunal held that where the explanation relating to the source of the investment had been accepted, the failure could not be vitiated on account of mala fides or an attempt to evade the rigours of the Act, and that the pattern of disclosure in the surrounding years pointed to a bona fide omission rather than an intention to conceal (para 15).
The Tribunal recorded that the Assessing Officer had followed the procedure in s.46 and issued a show-cause notice before imposing penalty, and reasoned from that requirement that the penalty cannot be automatic: if the penalty is necessarily to be imposed there is no purpose in issuing a show-cause notice at all (para 15). It read s.43 as commanding the Assessing Officer to impose the penalty unless some reasonable cause is demonstrated for not disclosing the assets in the return (para 14), and found reasonable cause in the consistent disclosure of the same assets in the years on either side together with the acceptance of the source of the investment. In the words reproduced by the source cited on this page: "if the penalty is necessarily being required to be imposed then there was no purpose of issuing the show cause notice"
It was decided by the ITAT on 2025-01-16 and is reported as BMA No. 2/Hyd/2024, assessment year 2019-20. 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.46, section BMA s.10, section BMA s.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 appeal was allowed and the penalty deleted. The Tribunal held that where the explanation relating to the source of the investment had been accepted, the failure could not be vitiated on account of mala fides or an attempt to evade the rigours of the Act, and that the pattern of disclosure in the surrounding years pointed to a bona fide omission rather than an intention to conceal (para 15). It arises in Penalty and Assessment & Scrutiny matters, on section BMA s.43, section BMA s.46, section BMA s.10, section BMA s.3, section 139(1) Schedule FA of the Income Tax Act 1961, and was decided by Shri Laliet Kumar, Judicial Member and Shri Madhusudan Sawdia, 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. Show that the source of the investment has been accepted, whether in the s.10 proceeding or in the income-tax assessment. Argue from s.46 itself: the statute would not require a show cause if the penalty were automatic on the default. Do not rest only on this order for the discretion point - see the Special Bench decision on the word 'may' in s.43 noted below.
Searched for later treatment; none was found. That is not the same as a source affirming it. No later decision applying or doubting this order was located. Note that this Bench read s.43 as couched in mandatory terms subject to reasonable cause, whereas a Special Bench of the Tribunal later held that the word 'may' in s.43 carries its plain meaning and is directory - see vinil-venugopal-v-ddit-bma-43-special-bench in this library. The result reached here is the same on either view, but the route is not. 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 describes the default for assessment year 2017-18 as an omission of the assets from Schedule FA altogether, not as a disclosure at an understated value; it is not authority on a misvalued but disclosed asset. Paragraph 14 of the order paraphrases s.43 as penalising the failure 'to furnish inaccurate particulars of investment outside India', which does not track the language of the section; the section penalises the failure to furnish information about a foreign asset in the return, and the paraphrase should not be relied on. The assessment year of the penalty order (2019-20) and the assessment year of the default (2017-18) are different, and the order does not address whether that mattered. 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 appeal was allowed and the penalty deleted. The Tribunal held that where the explanation relating to the source of the investment had been accepted, the failure could not be vitiated on account of mala fides or an attempt to evade the rigours of the Act, and that the pattern of disclosure in the surrounding years pointed to a bona fide omission rather than an intention to conceal (para 15).
TaxSphere, “Prasad Nimmagadda v DIT (Inv)”, https://taxnotice.vittsphere.com/caselaw/case/prasad-nimmagadda-v-dit-bma-46-show-cause-has-a-purpose/ (validity last checked 2026-09-16)
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