2015 (9) TMI 545 - AT - Income Tax

Penalty u/s. 272A(2)(c) - CIT considered the non-submission of information as willful default and levied penalty - default in issuing notice - Held that - There is no need for levy of penalty in the given cases. First of all, the notice issued u/s. 136 is a general notice asking for information which is not in the domain of the ITO, CIB. The CBDT itself has prescribed certain limits for calling for information and Income tax Act also prescribes various limits for furnishing information on a regular basis from the banks in annual returns. The details asked in various codes is neither prescribed by the Act nor supported by the Board s circular. This information is specifically asked by ITO, CIB in a particular format may be on the strength of internal instructions. For example, the Time Deposits exceeding ₹ 2 Lakhs under code No. 003 is not to be generally furnished by the banks to the department in the presribed annual return, likewise, other codes also for which different amounts were prescribed by the Act. This indicates that this information was specifically asked for by the ITO, CIB. Instead of giving this separate notice for each code, a common notice was issued for all the three codes. Addl. CIT initiated penalty proceedings by issuing only one notice but levied penalty for three notices as extracted above. This indicates that without issuing notice, the Addl. CIT, CIB levied penalty three times for the same default. This cannot be justified. Not only that, there were various notices which are mentioned in the order which are not in the knowledge of assessee, therefore service of the notice also is to be doubted. Thus there is reasonable cause for non- compliance as required and therefore, penalty u/s. 272A(2)(c) cannot be levied, where there is bonafide and reasonable cause for non-compliance to the notice. Decided in favour of assessee.

Summary

Issues involved:
Penalty u/s. 272A(2)(c) of the Income Tax Act for non-compliance with notice issued by ITO, CIB-4 regarding specific areas.

Detailed Analysis:
1. The appeals by various branches of Syndicate Bank were regarding penalties imposed under section 272A(2)(c) of the Income Tax Act for non-compliance with notices issued by ITO, CIB-4. The notices requested information on specific areas such as time deposits exceeding a certain amount and cash deposits with the banking company.
2. The Addl. CIT levied penalties for non-compliance, calculating the penalty amount based on the number of days of default. The penalties were upheld by the CIT(A) as no reasonable cause was found.
3. During the proceedings, the branches contended that they did not receive the initial notices and requested time for compliance due to operational difficulties and the need for approvals from the Head Office. They cited various case laws to support their claim of reasonable cause.
4. The Tribunal found that the notices issued were general in nature and not supported by the Act or CBDT limits. The Addl. CIT had levied penalties multiple times for the same default without proper justification.
5. Additionally, the Tribunal noted that the penalties under section 272A(2)(c) are subject to the provisions of Section 273B, which provide exceptions for reasonable cause for non-compliance. The Tribunal found that the branches had a reasonable cause for the delay in compliance due to operational challenges and shortage of staff.
6. Considering the lack of proper issuance of notices, the reasonable cause for non-compliance, and the legal provisions, the Tribunal concluded that the penalties imposed were unwarranted. Therefore, all the penalties levied were cancelled, and the appeals were allowed.