The penalty order issued under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA) has been invalidated by the Honourable Delhi High Court. This decision was made because the department failed to consider an email submitted by the assessee, Prateek Chitkara. Chitkara, who is the petitioner/assessee in this case, contested the penalty order dated March 29, 2023, issued by the department under Section 41 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The petitioner/assessee has also filed an appeal against the imposed tax amount, which is currently pending before the Commissioner of Income Tax (Appeals).
It has been observed that prior to issuing the penalty order, the department had sent a show cause notice on March 2, 2023, in accordance with Section 41 of the BMA. As per this section, the Assessing Officer (AO) may direct the assessee to pay a penalty of 3 times the tax amount, which is equivalent to 90%, in cases where assessment is conducted under Section 10. Unlike the Income Tax Act, the BMA establishes a fixed penalty rate without specifying any minimum or maximum limits. Furthermore, the concept of waiving the penalty on grounds of reasonable cause, available under the Income Tax Act, does not apply under the BMA.
The assessee responded to the show cause notice on March 9, 2023, by sending an email. In their reply, the assessee argued that Section 46(4)(b) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 requires that the penalty order should be issued by an officer holding the rank of Assistant Commissioner, Deputy Commissioner, Assistant Director, or Deputy Director, with the approval of the Joint Commissioner or the Joint Director. The two-judge bench, consisting of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju, observed that the petitioner/assessee did not mention Section 46(4)(b) of the BMA in their response filed on 09.03.2023. Consequently, the Court nullified the challenged penalty order and directed the relevant authority to conduct a fresh assessment.
Notice under section 41 of the Black Money Act was accordingly issued on 30.03.2022 the Dy. Director of Income Tax (Inv.), Unit 4(4), New Delhi. Final show cause notice u/s 41 of the B M Act was issued on 02.03.2023 wherein assessee has been provided another opportunity for filing his submissions if any and the case was fixed for 09.03.2023. Assessee has not furnished any submission. Since the assessee has not furnished anything, therefore, I am left with no alternate but to proceed to levy the penalty u/s 41 of the B M Act on the basis of discussion made in the assessment order.
