Case Law Details

Case Name : Srinidhi Karti Chidambaram Vs. PCIT (Madras High Court)
Appeal Number : W.A. No. 1125 of 2018
Date of Judgement/Order : 02/11/2018
Related Assessment Year :
Courts : All High Courts (4526) Madras High Court (348)

CA Suraj R. Agrawal

CA Suraj R. Agrawal

Srinidhi Karti Chidambaram Vs. PCIT (Madras High Court)

Madras High Court quashes prosecution proceedings initiated under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 for non-disclosure/incomplete disclosure of foreign assets in the Return of Income.

Case Summary:-

Facts of the case:

  • The petitioners (NC, SC and KC) are family members against whom notices for assessment were issued under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA) for assessing undisclosed foreign income and assets for the assessment years (AY) 2015-16 and 2016-17.
  • The revenue authorities further initiated prosecution proceedings under the BMA for non-disclosure/incomplete-disclosure of fixed assets (FA) in Return of Income (ROI) before completing the assessment under BMA.
  • The foreign asset was jointly acquired by petitioners with tax paid money (disclosed income) and remittance for acquiring such foreign assets was routed through authorized dealers. Further, such foreign assets were shown in different schedules forming part of their individual ROI.
  • The revenue authorities initiated criminal prosecution proceedings against each of the petitioners on the following grounds:
    • The petitioners did not disclose/ disclosed incomplete information in FA schedule (schedule for disclosing foreign assets) in the original ROI filed.
    • The ROIs were revised to make complete/correct disclosures in schedule FA post issuance of notices under BMA.

Issues for consideration

  • Whether prosecution can be initiated for non-disclosure/incomplete disclosure of the FA in the original ROI filed by the petitioners, disregarding the disclosures made by the petitioners in the revised ROI filed post receipt of notice of assessment under the BMA?
  • Whether prosecution proceedings can be initiated before passing the assessment order under BMA?

 Ruling of the Madras High Court:

  • As held by the Hon’ble Supreme Court in the case of P. Jeyappan Vs S.K. Perumal, 1984 AIR 1693, the pendency of assessment proceedings cannot act as a bar to institution of criminal prosecution for offences punishable under the provisions of law.
  • Both willful failure to file a return of income in relation to foreign income and assets within the stipulated timeline (original due date) and failure to disclose foreign assets in the ROI filed (including revised and belated) are offences liable for prosecution.
  • In the instant case, the prosecution proceedings were initiated for the latter offence, which could be invoked after considering revised ROI filed. Therefore, the offence cannot be said to be committed until the time for filing a revised return is over.
  • The revised ROI completely obliterates the ROI filed originally and should be considered as final and valid.
  • In the case of one of the petitioners, though disclosure was not made in the FA schedule in the original ROI filed, the same was reflected in other schedules forming part of the return.
  • All the investments were made from disclosed money and through normal banking channels. There was no allegation by the revenue of black money or unaccounted money or money that has escaped tax or money that was remitted through illegal channels.
  • Even if the petitioners have omitted to furnish details of FA in the original return, the offence could only be subject to penalty proceedings and not liable for prosecution.

Accordingly, the High Court quashed the prosecution proceedings against all the petitioners.

Conclusion

While the ruling provides a favorable conclusion for the petitioners given the specific facts, it acts as a caution to taxpayers that penalty/prosecution proceeding can be initiated for non-disclosure or incomplete/inaccurate disclosure of FA. Taxpayers therefore need to bear in mind that it is imperative to comply with the statutory requirements relating to disclosures in the tax return.

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Category : Income Tax (28846)
Type : Judiciary

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