An individual failed to report foreign ESOPs in Schedule FA in the first year of compliance, though taxes were already paid. The tax officer imposed a ₹10 lakh penalty, upheld by CIT(A). The appellant argued it was a genuine, unintentional mistake due to initial confusion.
Saloni Kumari | Apr 20, 2026 |
Employee Penalized Rs. 10L for Not Disclosing Foreign ESOPs: ITAT Deletes Penalty for Bona Fide Error
The Tribunal Cancelled the Rs. 10,00,000 penalty, ruling that the Appellant’s failure to disclose assets in Schedule FA was a bona fide, technical oversight during the law’s inaugural year, especially since all taxes had already been paid.
Fact Of The Case
The Appellant, an individual who was previously employed by Vedanta Limited abroad, received ESOPs from the UK parent company, which were held through a fiduciary in Jersey.
Despite adhering to tax regulations by paying TDS on the perquisite value and declaring capital gains for AY 2019-20, he unintentionally neglected to report these assets in Schedule FA for AY 2016-17. As a result, the Respondent (Assessing Officer) levied a penalty of Rs. 1,000,000 under Section 43 of the Black Money Act, a decision that was affirmed by the CIT(A).
The appellant then appealed to the Tribunal, contending that the oversight was a genuine mistake stemming from confusion regarding the reporting requirements in the initial year.
Issue Involved In This Case
Is the penalty under Section 43 of the BMA for not disclosing foreign assets in Schedule FA justifiable if the omission was unintentional, taxes are settled, and it was the first year of reporting?
Decision Of The Tribunal
The Tribunal upheld the appeals and revoked the Rs 1,000,000 penalty, stating that the authority to impose penalties under Section 43 of the BMA is discretionary, not mandatory, as indicated by the term ‘may’.
Citing Supreme Court precedents, the Bench noted that penalties should not apply for minor breaches without evidence of intentional non-compliance, especially since the Appellant’s income was already taxed and subject to TDS.
The Tribunal acknowledged the omission as an honest mistake, highlighting that AY 2016-17 was the first year for such reporting, and the Appellant had already reported capital gains before any notice from revenue authorities.
Ultimately, referencing a similar case, the Tribunal concluded that this minor reporting error did not warrant the severe penalty upheld by the CIT(A).
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