BMA s.42

BMA s.42 — the law in short

What the courts have decided on section BMA s.42, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Binoy Kodiyeri v DDIT High CourtHelps departmentNo later treatment found
  Can I take an assessment under the Black Money Act straight to the High Court?
  Not ordinarily. The Kerala High Court dismissed two writ petitions against proceedings under the Black Money Act because the assessment order was appealable under s.15 of that Act and the petitioner had come to the Court directly without invoking the statutory remedy. The dismissal was without prejudice to the right to appeal, and the Court excluded the period from 24 March 2023 until receipt of the certified copy of the judgment in computing limitation for that appeal.
• Elangovan Malarmangai v JCIT ITATCuts both waysNo later treatment found
  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 s.41 penalty goes; the s.43 penalty does not. Because s.41 is a penalty on undisclosed foreign income and assets assessed under s.10, once the Tribunal deleted the additions on a legal ground the s.41 penalty of Rs 18,09,74,151 became infructuous and was directed to be deleted. The Rs 10,00,000 penalty under s.43 was separately upheld in the same order, because it turns on what was or was not put in the return and not on the assessment.
• 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'.
• CBDT instruction of 18 August 2025 on Black Money Act prosecutions CBDT Circulars & InstructionsHelps taxpayer
  The foreign asset is small and no penalty is proposed. Can they still prosecute me for leaving it out of Schedule FA?
  Not on the Board's own instruction. It directs that prosecution under s.49 or s.50 of the Black Money Act is not to be initiated in cases where penalty under s.42 or s.43 is not imposed or not imposable because the asset falls within the proviso to those sections - assets other than immovable property whose aggregate value does not exceed Rs 20 lakh. It amends an earlier instruction of 15 March 2022.
• Statutory position — ss.41 and 43 of the Black Money Act and s.72(c): the penalty of three times the tax computed under s.10, the Rs 10 lakh penalty for not reporting a foreign asset in the return with its twenty lakh rupee proviso from 1 October 2024, and the deemed year of acquisition for an asset acquired before commencement CBDT Circulars & InstructionsCuts both ways
  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?
  Section 41 provides that the Assessing Officer may direct that, in a case where tax has been computed under s.10 in respect of undisclosed foreign income and asset, the assessee shall pay by way of penalty, in addition to tax if any payable by him, "a sum equal to three times the tax computed under that section". It is therefore a multiple of the tax computed under s.10, and it follows the s.10 computation — if the computation goes, the base of the penalty goes with it. Section 43 is a different and smaller penalty: where a resident other than not ordinarily resident within s.6(6) of the Income-tax Act has furnished a return under s.139(1), (4) or (5) of that Act and fails to furnish any information, or furnishes inaccurate particulars, in that return relating to any asset (including financial interest in any entity) located outside India held by him as beneficial owner or otherwise, or in respect of which he was a beneficiary, or relating to any income from a source located outside India, the Assessing Officer "may direct that such person shall pay, by way of penalty, a sum of ten lakh rupees". Its proviso, as substituted by the Finance (No. 2) Act, 2024 with effect from 1 October 2024, reads: "Provided that this section shall not apply in respect of an asset or assets (other than immovable property), where the aggregate value of such asset or assets does not exceed twenty lakh rupees." The footnote on the departmental page records that before that substitution the proviso excluded only "an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to five hundred thousand rupees at any time during the previous year". Section 72(c), in the removal-of-doubts provision at the end of the declaration chapter, is the hinge of the retrospectivity argument and reads: "where any asset has been acquired or made prior to commencement of this Act, and no declaration in respect of such asset is made under this Chapter, such asset shall be deemed to have been acquired or made in the year in which a notice under section 10 is issued by the Assessing Officer and the provisions of this Act shall apply accordingly".

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.