2018 (11) TMI 1935 - AT - Income Tax

Penalty u/s 271AA - CIT(Appeals) cancelled the penalty imposed u/s 271AA on the ground that the amendment made in section 271AA by the Finance Act, 2012 w.e.f. 1st July, 2012 was applicable from A.Y. 2012-13 and not to A.Y. 2011-12 - HELD THAT - A perusal of the penalty order passed by the Assessing Officer in the present case shows that the penalty u/s 271AA was imposed by the AO in the case of the assessee for A.Y. 2011-12 for the failure of the assessee to report the international transactions and also to furnish incorrect information in the return of income with reference to such international transactions. The said defaults allegedly committed by the assessee for the year under consideration, i.e. A.Y. 2011-12, however, were not covered by the provisions of section 271AA as applicable to the said year and the same were covered only by the provisions of section 271AA as amended by the Finance Act, 2012 w.e.f. 01.07.2012. Since the said provisions as amended by the Finance Act, 2012 w.e.f. 01.07.2012 were not retrospective in nature and were applicable from A.Y. 2012-13, we find ourselves in agreement with the ld. CIT(Appeals) that the penalty imposed by the AO by relying on the amended provisions of section 271AA was not sustainable. We accordingly uphold the impugned order of the CIT(Appeals) cancelling the penalty imposed by the Assessing Officer under section 271AA and dismiss this appeal of the Revenue.

Summary

Issues:
Penalty under section 271AA imposed for failure to report international transactions and furnish correct information in return of income for A.Y. 2011-12.

Analysis:
The appeal was filed by the Revenue against the cancellation of a penalty of Rs. 8,68,77,800/- imposed under section 271AA of the Income Tax Act, 1961 by the Assessing Officer. The assessee, a Company engaged in the hotel business, failed to file the report under section 92E within the due date despite having international transactions with Associated Enterprises. The Assessing Officer invoked section 271AA and imposed the penalty, which was later cancelled by the ld. CIT(Appeals) on the ground that the amendment to section 271AA by the Finance Act, 2012 was not applicable to A.Y. 2011-12. The Revenue appealed this decision before the Tribunal.

Upon review, it was noted that the penalty was imposed for A.Y. 2011-12 based on the provisions of section 271AA, which were subsequently amended by the Finance Act, 2012. The amended provisions were not retrospective and came into effect from A.Y. 2012-13. As the defaults by the assessee were for A.Y. 2011-12, they were not covered by the amended provisions applicable from July 1, 2012. Therefore, the Tribunal agreed with the ld. CIT(Appeals) that the penalty imposed by the Assessing Officer under the amended provisions of section 271AA was not sustainable. Consequently, the Tribunal upheld the decision of the ld. CIT(Appeals) and dismissed the Revenue's appeal.

In conclusion, the Tribunal found that the penalty imposed for failure to report international transactions and furnish correct information in the return of income for A.Y. 2011-12 was not valid under the amended provisions of section 271AA introduced by the Finance Act, 2012. As the amended provisions were not retrospective and only applicable from A.Y. 2012-13, the penalty imposed by the Assessing Officer was deemed unsustainable, leading to the dismissal of the Revenue's appeal.