2020 (3) TMI 1457 - AT - Income Tax

Penalty u/s 271FA - not filing the AIR for the relevant AY - Default under the provisions of Section 285BA(2) of the Act r.w Rule 114E - assessee is a co-operative bank - main contention of AR before the Tribunal was that there is reasonable cause as mandated u/s 273B for not filing the AIR for the relevant AY - scope amendment to Rule 114E of IT Rules 1962 - HELD THAT - We found under the provisions-of Section 273B of the Act where penalty need not be imposed if there exists a-reasonable cause. We on perusal of the facts of the case and the explanations and the grounds of appeal duly supported by the Paper Book and judicial decisions are of the view that-the amendment to Rule 114E of IT Rules has been effective from 1.4.2016 and, -further the AO has levied penalty for the F.Y. 2005-06 in the year-2017 and there was no provision under Rule 114E to include co-operative banks. We found the submissions of the learned Authorized Representative are realistic-considering small activity of the Bank and limited staff which cannot be-overlooked. Accordingly considering the principles of natural justice and the facts we found there is a reasonable cause in not submitting the information as the assessee was under Bona Fide belief. Accordingly we set aside the order of CIT-(Appeals) and direct the Assessing Officer to delete the penalty and allow the-grounds of appeal of the assessee. In the result the assessee appeal is allowed.

Summary

Issues:
Appeals against orders of Commissioner of Income Tax under Section 271FA and 250 of the Income Tax Act, 1961.

Analysis:

Issue 1: Levy of Penalty under Section 271FA
The assessee, a cooperative bank, faced penalties for not filing the Annual Information Return (AIR) for the Financial Years 2005-06 to 2014-15. The Assessing Officer found the bank did not report three transactions on time. The CIT (Appeals) upheld the penalty, leading to an appeal before the Tribunal. The bank argued that the penalty was unjustified due to limited staff and a genuine belief that the reporting provisions did not apply. The Tribunal noted the amendment to Rule 114E, effective from 1.4.2016, which included cooperative banks. Considering the bank's small scale and reasonable cause under Section 273B, the Tribunal set aside the penalty, emphasizing natural justice principles.

Issue 2: Application to Subsequent Assessment Years
Similar penalties were imposed for subsequent years. The Tribunal applied the same reasoning as in the first issue, setting aside the penalties for the Assessment Years 2007-08 to 2015-16. The Tribunal directed the Assessing Officer to delete the penalties and allowed the bank's appeals for these years as well.

In conclusion, the Tribunal allowed the assessee's appeals for the Assessment Years 2006-7 to 2015-16, emphasizing the genuine belief, limited staff, and the effective date of the rule amendment as reasons to set aside the penalties.