Section 139(1) Schedule FA

Section 139(1) Schedule FA — the law in short

What the courts have decided on section 139(1) Schedule FA, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Krishore Kumar Rajagopal v DDIT ITATHelps taxpayer
  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.
• Addl. CIT v Adijin Perfumes Pvt Ltd ITATHelps taxpayerNo later treatment found
  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?
  No. Following a coordinate bench, the Tribunal dismissed the Revenue's appeals and upheld the deletion of Rs 10,00,000 penalties for six years. The statutory trigger for s.43 is the failure to furnish in the return of income any information relating to a foreign asset; where the asset was disclosed in the audited accounts and in the balance-sheet schedule of the return, the return cannot be said to have been silent about it, and the unfilled Schedule FA is a lapse in the reporting format of the return rather than a complete failure to furnish information.
• Vinil Venugopal v DDIT (Special Bench) ITATHelps taxpayer
  Is the Rs 10 lakh penalty under s.43 of the Black Money Act automatic once the officer finds a foreign asset missing from Schedule FA?
  No. A Special Bench of the Tribunal, answering a reference on the point, held that the word 'may' in s.43 carries its plain meaning, is directory, and cannot be read as 'shall'. The imposition of the penalty is therefore not mandatory and not automatic: the Assessing Officer has a discretion to impose it or not, depending on the facts and circumstances of each case. The Special Bench answered the reference only; it did not examine the merits of the penalty orders before it, and directed the appeals to be placed before the Division Bench for disposal.
• Akil Abbas Rassai v DDIT (Inv) ITATHelps taxpayerNo later treatment found
  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?
  On this order, neither. The Mumbai Tribunal deleted the s.43 penalties for all seven years. On the Isle of Man policy it proceeded on the assessee's claim that his brother-in-law bought the policy and paid every premium and that the assessee's wife was the inducted beneficiary, held that on that footing the assessee cannot be held beneficial owner or beneficiary, and deleted that penalty subject to verification by the Assessing Officer of who purchased the policy and who paid the premiums. On the UAE policy it held that a policy which had lapsed before the penalty provisions came into operation from assessment year 2016-17 could not attract them.
• Shiv Kumar Nayyar v Addl. CIT ITATHelps taxpayerNo later treatment found
  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?
  No. The s.41 penalty is arithmetic tied to the assessment, so where the addition is reduced in the quantum appeal the Tribunal simply sends the penalty back to be recomputed. The s.43 penalty is a separate levy needing its own foundation, and here it was quashed outright because the Assessing Officer had recorded satisfaction for assessment years 2012-13 to 2017-18 but not for the year in which the penalty was imposed.
• Timothy John Brinkman v DDIT (Inv.) ITATHelps taxpayerNo later treatment found
  I am a foreign national who became resident in India and missed Schedule FA in my first return, but I put it right in a revised return. Is the Rs 10 lakh penalty still due?
  Not on these facts. The Mumbai Bench deleted a penalty under s.43 where a British citizen, resident in India for a fixed five-year assignment, omitted his United Kingdom assets from Schedule FA in the original return and disclosed them in a revised return filed within the time allowed by s.139(5). The Tribunal held that the Revenue had not established that he had ever been an Indian citizen or that the foreign investments came out of undisclosed Indian income, and that the Act is aimed at undisclosed foreign income and assets, not at a bona fide omission.
• Palanirajan Rajarajan v Addl. CIT ITATHelps taxpayerNo later treatment found
  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'.
• Sanjay Bhupatrai Shah v DDIT ITATHelps taxpayerNo later treatment found
  My name is on a foreign account only as a second holder and my son owns it. Is the Rs 10 lakh penalty still mine?
  No, on these facts. The Mumbai Tribunal deleted s.43 penalties on a father who had been named as a joint holder of a foreign investment for administrative convenience where the son had declared full ownership of it. The omission from Schedule FA rested on a bona fide belief that he was not the owner, and financing an asset does not make the financier its owner.
• Prasad Nimmagadda v DIT (Inv) ITATHelps taxpayerNo later treatment found
  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.
• Ocean Diving Centre Ltd v CIT(A) ITATHelps taxpayer
  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?
  No, on these facts. The Mumbai Tribunal cancelled a s.43 penalty where a resident company's investment in Panamanian entities was shown in its balance sheet and in another schedule of the return but not in Schedule FA. The officer has a discretion under s.43 and it has to be exercised judicially; where there is no defiance of law and no mala fide or dishonest breach, the section is not attracted.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.