2012 (7) TMI 643 - HC - Income Tax

Penalty u/s. 272B read with rule 114B and 114D - default in not complying with the provision of 139A of the Act - bank manager was unable to produce requisite material particularly proof of address and permanent account number of many account holders and depositors in FD - belated production of documents - Held that - The explanation given by the respondent assessee of late production of these documents after a fortnight was found justifiable by the Tribunal. Therefore, it clearly held that this was not a case where by the non-production of material at the relevant time rendered back liable for the penalty under section 272(B). - Decided in favor of assessee.

Summary

Issues:
1. Compliance with provisions of section 139A read with rule 114B and 114D of the Income Tax Rules.
2. Levying penalty for accounts opened prior to the insertion of Section 272B of the Income Tax Act.
3. Justification of levying penalty of Rs. 10,000 separately for each bank account.

Issue 1: Compliance with provisions of section 139A read with rule 114B and 114D of the Income Tax Rules:
The respondent, a Co-operative Bank, faced a show cause notice for alleged breaches in complying with various provisions while opening bank accounts. The Assessing Officer found major breaches, including opening accounts without requisite proof of PAN/address, leading to penalties under section 272B. The Commissioner(Appeals) upheld the penalties, emphasizing the importance of compliance with section 139A and related rules. The Tribunal, however, noted that the bank faced challenges due to recent branch relocation, leading to delayed document submission. Considering the circumstances, the Tribunal deleted the penalties, finding the bank had a reasonable cause for non-compliance.

Issue 2: Levying penalty for accounts opened prior to the insertion of Section 272B of the Income Tax Act:
The Commissioner(Appeals) affirmed the Assessing Officer's decision to levy penalties even for accounts opened before the introduction of Section 272B, stating that any existing defaults would attract penalties under the new provision. The Tribunal, however, focused on the factual scenario, highlighting the bank's challenges post-branch relocation and the subsequent submission of required documents. The Tribunal found the bank's explanation reasonable and concluded that penalties were not warranted in this case.

Issue 3: Justification of levying penalty of Rs. 10,000 separately for each bank account:
The Commissioner(Appeals) and the Tribunal agreed that penalties of Rs. 10,000 per account were justified for violations of section 139A and related rules. They emphasized that penalties should be imposed separately for each account in breach, rather than as a lump sum. The Tribunal's decision to delete penalties was based on the specific circumstances of the case, where the bank faced challenges due to branch relocation, leading to delayed document submission. The Tribunal found the bank's actions reasonable and not warranting penalties under section 272B.

In conclusion, the High Court upheld the Tribunal's decision to delete the penalties, considering the bank's challenges post-branch relocation and the subsequent submission of required documents within a reasonable timeframe. The Court found no error in the Tribunal's reasoning and dismissed the Tax Appeal, stating that the penalties were not warranted in this case.