Key Insights on Section 43 of the Black Money Act from Mahendra Kumar Mehta’s ITAT Mumbai Judgment

Date: 2025-05-30

Section 43 of the Black Money (Undisclosed Foreign Income and Assets) Act, 2015 (BMA) provides tax authorities with the power to impose penalties for nondisclosure of foreign assets. However, recent jurisprudence, including the notable ITAT Mumbai ruling in the case of Mahendra Kumar Mehta, clarifies that this power is discretionary and not automatic.

In the appeals relating to Assessment Years 2019-20 to 2021-22, Mr. Mehta faced monetary penalties for allegedly failing to report investments held in RL 360 Life Insurance Company (Isle of Man) in the Foreign Asset Schedule (Schedule FA) of his Income Tax Returns. The penalty was imposed under Section 43 on the grounds of nondisclosure.

The appellant’s Authorized Representative, Shri Purav Gindra, argued that the nondisclosure was an inadvertent oversight without any intent to evade tax, and that no income was generated from these foreign assets during the years in question. Supporting case law was cited emphasizing that Section 43’s use of the term “may impose penalty” confers discretion to the Assessing Officer, who must exercise it judiciously and consider bona fide explanations.

The ITAT thoroughly examined the facts and legal precedents and found that the Assessing Officer had not fairly exercised this discretion. The Tribunal held that mere nondisclosure—particularly when resulting from an honest mistake and without loss to revenue—does not automatically trigger penalty. Consequently, the penalty imposed on Mr. Mehta was set aside in all three years.

This decision reinforces that Section 43 is intended to target deliberate concealment or fraudulent conduct, not honest errors. It brings clarity for taxpayers and tax authorities alike about the importance of fair discretion in applying punitive measures under the BMA.

The ruling also underscores the value of full transparency and timely disclosure of foreign assets, while affirming protections against unwarranted penalties in cases of inadvertent nondisclosure substantiated by genuine circumstances.

Representation by Shri Purav Gindra was instrumental in articulating these points and securing relief for the appellant.

This verdict serves as a key reference for practitioners and taxpayers concerning the scope and application of Section 43 under the stringent Black Money Act.