Disclosure of Foreign Assets in the Income Tax Return & Penalty under Black Money Act
Disclosure of Foreign Assets is mandatory in case if the Person is Resident in India, if however, the Person is Resident but Not Ordinarily Resident in India then the same is not required to be disclosed in the Return of Income.
Though there is no direct penalty under Income Tax Act, if the Disclosure is not made or incorrectly made in the Income Tax Return, Section 43 of the Black Money Act can be invoked, and Penalty can be levied amounting to Rs. 10,00,000.
Hence, all the Residents filing Tax Returns should make disclosure of Foreign Assets Correctly in order to avoid any Penalty and Non-Disclosure issues.
Hon. Mumbai ITAT has recently passed an order in case of Ocean Diving Centre Ltd (In BMA 22/Mum/2023), wherein liberal view was taken by the Bench, since the Disclosure was made in Financial Statements which was submitted along with Tax Audit Report, even though the same was not made in the Return of Income.
Despite the favourable judgment of Mumbai ITAT, Taxpayers needs to be careful as for Non Tax Audit Cases the question of disclosure being there in Financial Statements would not arise (As It is not required to be uploaded with return) and the said defence would not be available, thereby making it difficult to rely on the said precedent.
The Department is acting tough against the non-disclosure of foreign assets in the income tax return. More particularly, with the synchronisation of the data from various other sources, the cases of non-reporting are getting noticed by the income tax department. Hence, Taxpayers must not only be careful with the correct Income being disclosed, but also correct information being disclosed.