2021 (10) TMI 1417 - AT - Income Tax

Penalty levied u/s 271FA - non-filing of Annual Information Return as required u/r 114E of the I.T. Rules - Proof of reasonable cause in terms of sec.273B assessee is a co-operative bank - HELD THAT - As decided in case of The Mandya Dist. Co-op. Central Bank Ltd. 2020 (3) TMI 1455 - ITAT BANGALORE notice that the original provisions of Rule 114E of Income tax Rules did not include co-operative bank and it was inserted only in the amended provisions of Rule 114E, which came into effect from 1.4.2016. Accordingly, there is merit in the submission of the ld A.R that there existed an ambiguity as to whether the co-operative banks are required to comply with the provisions of Rule 114E of the Act, meaning thereby, the bonafide belief of the assessee shall constitute reasonable cause in terms of sec.273B of the Act for the failure in furnishing the AIR for the year under consideration. In this view of the matter, the impugned penalty is liable to be deleted. Accordingly we set aside the order passed by Ld CIT(A) and direct the AO to delete the impugned penalty levied u/s 271FA - Decided in favour of assessee.

Summary

Issues: Challenge to penalty under section 271FA of the Income-tax Act for non-filing of Annual Information Return by a cooperative bank.

Analysis:
1. The appellant, a cooperative bank, challenged the penalty levied by the Director of Income Tax under section 271FA for non-filing of Annual Information Return as required by Rule 114E of the Income Tax Rules for the assessment years 2006-07 to 2013-14. The appellant argued that cooperative banks were included in Rule 114E only from 1.4.2016, creating ambiguity regarding their compliance. The appellant contended that the delay in filing the return was due to a bona fide belief, constituting a reasonable cause under section 273B of the Act. The appellant cited a previous order in a similar case to support their claim for deletion of the penalty.

2. The Departmental Representative supported the orders passed by the Commissioner of Income Tax (Appeals).

3. The Tribunal examined an identical issue in a previous case involving a cooperative bank. The Tribunal noted that the original provisions of Rule 114E did not include cooperative banks and were inserted only in the amended provisions effective from 1.4.2016. Therefore, the Tribunal found merit in the appellant's argument that there was ambiguity regarding the requirement for cooperative banks to comply with Rule 114E. The Tribunal held that the bona fide belief of the appellant constituted a reasonable cause under section 273B, warranting the deletion of the penalty. Relying on previous decisions, the Tribunal directed the deletion of the penalty for all the years under consideration.

4. The Tribunal observed that the facts in the present case were similar to previous cases involving cooperative banks. Citing another decision by a coordinate bench, the Tribunal set aside the orders of the Commissioner of Income Tax (Appeals) and directed the deletion of the penalty for all the years in question.

In conclusion, all eight appeals filed by the appellant, a cooperative bank, challenging the penalty under section 271FA for non-filing of Annual Information Return were allowed by the Tribunal based on the ambiguity regarding the applicability of Rule 114E to cooperative banks and the bona fide belief of the appellant, constituting a reasonable cause for the delay in filing the return.