A penalty notice has come under the foreign-assets legislation. Which officer levies it, how long does he have, where does the appeal go and what do I do about the demand?
The tax authority issues a show-cause under s.46, cannot pass an order without a hearing, and needs the Joint Commissioner's approval above stated figures. Section 47 bars an order after one year from the end of the financial year in which the s.46 notice was issued. The appeal goes to the Commissioner (Appeals) under s.15 within thirty days, then to the Appellate Tribunal under s.18 within sixty days and to the High Court under s.19 within one hundred and twenty days. There is no provision equivalent to s.220(6) of the Income-tax Act; the extension provision is s.30(3).
None of the Income-tax Act machinery applies here. The limitation provisions, the appeal sections, the forms and the stay practice are all provisions of a different statute, and an appeal filed on the income-tax footing in a Black Money Act matter is a wasted appeal. What follows is the machinery of this Act.
The penalty starts with a notice. Section 46(1) requires the tax authority, for the purposes of imposing any penalty under the penalties Chapter, to issue a notice to the assessee requiring him to show cause why the penalty should not be imposed. Section 46(3) is the provision the Special Bench in Vinil Venugopal used: "No order imposing a penalty under this Chapter shall be made unless the assessee has been given an opportunity of being heard." Section 46(4) requires the approval of the Joint Commissioner where the penalty exceeds one lakh rupees and the officer levying it is of the rank of Income-tax Officer, or exceeds five lakh rupees and the officer is an Assistant or Deputy Commissioner. A Rs 10 lakh penalty is above both figures, so an approval exists on the file in every one of these cases and it is worth asking for it. Section 46(5) requires the order to be accompanied by a notice of demand, deemed to be a notice under s.13.
On the time within which the show-cause itself must issue, read s.46(2) carefully. It fixes two windows: clause (a), during the pendency of proceedings under the Act for the relevant previous year, for a penalty referred to in s.41; and clause (b), within three years from the end of the financial year in which the default is committed, for penalties referred to in s.45. On two hosts the sub-section names s.41 in clause (a) and s.45 in clause (b), and neither clause names s.42, s.43 or s.44. So the Act as read does not on its face fix a period within which a s.43 show-cause has to be issued. Do not build a limitation argument on the three-year window in clause (b) without checking the sub-section against the bare Act for yourself, and do not assume the absence of a window is an oversight - it is what the text says.
What is fixed is the time for the order. Section 47(1): "No order imposing a penalty under this Chapter shall be passed after the expiry of a period of one year from the end of the financial year in which the notice for imposition of penalty is issued under section 46." So a show-cause issued in February 2026 falls in the financial year ending 31 March 2026, and the order has to be passed by 31 March 2027. Section 47(4) excludes from that period the time taken in giving an opportunity to be reheard under s.7 and any period during which the penalty proceeding is stayed by a court.
The first appeal is to the Commissioner (Appeals) under s.15. Section 15(1)(c) covers a person objecting to any penalty imposed by the Assessing Officer. Section 15(3) requires the appeal to be presented within thirty days from the date of service of the notice of demand relating to the penalty, or the date the order is served in any other case. Section 15(4) allows admission after that period where the Commissioner (Appeals) is satisfied there was sufficient cause and the delay does not exceed one year. Section 15(5) lets him enhance the penalty, subject to a proviso that no enhancement shall be made unless the assessee has been given a reasonable opportunity of being heard - so there is a real downside risk in this appeal that does not exist in the same form in every income-tax appeal. The Rules made under this Act put the appeal in Form 2 with a fee of ten thousand rupees, and they carry a condition worth reading before filing: no appeal under s.15(1) is admitted unless, at the time of filing, the assessee has paid the tax along with penalty and interest on the amount of liability which he has not objected to.
The second appeal is to the Appellate Tribunal under s.18, within sixty days from the date the order appealed against is communicated, with cross-objections within thirty days of notice of the appeal and a power to admit late where there is sufficient cause. The Rules put that appeal in Form 3, with cross-objections in Form 4, and a fee of twenty five thousand rupees. Section 19 gives an appeal to the High Court where it is satisfied the case involves a substantial question of law, within one hundred and twenty days from the date the Tribunal's order is received.
On the demand, there is no counterpart to s.220(6) of the Income-tax Act and no provision by which an appeal of itself holds up recovery. Section 25 puts it the other way round: "Notwithstanding any appeal preferred to the High Court or the Supreme Court, the tax shall be paid in accordance with the assessment made under this Act." Section 30(1) requires the amount in a s.13 notice of demand to be paid within thirty days of service; s.30(2) lets the Assessing Officer shorten that period with the Joint Commissioner's approval where he believes a delay would be detrimental to the revenue; and s.30(4) makes the assessee an assessee in default if he does not pay in time. The provision to use is s.30(3), which allows the Assessing Officer, on an application by the assessee made before the thirty days expire or during the pendency of an appeal with the Commissioner (Appeals), to extend the time for payment or allow payment by instalments on such conditions as he thinks fit. That is the application to make, and it has to be made in time. Recovery itself runs through the certificate to the Tax Recovery Officer under s.31 and the modes of recovery in s.32, to which s.30(6) and s.30(7) point.
The dates in this Act are not the income-tax dates and the deadlines are shorter. Thirty days for the first appeal against a penalty of Rs 10 lakh a year, on a form and with a fee that are not the income-tax form and fee, and a pre-deposit condition for the undisputed part, is enough to lose a case on the doorstep. The one-year outer limit in s.47 tells you when the order has to come and lets you plan the file. And because nothing in this Act suspends recovery on the filing of an appeal, the application under s.30(3) has to be made within the thirty days rather than after the demand has hardened.
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