2020 (6) TMI 830 - AT - Income Tax

Penalty u/s 271FA - not filing the AIR for the relevant AY - 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 - A.R. submitted that the assessee is a co-operative bank and the co-operative banks were specifically included in rule 114E only w.e.f. 1.4.2016 only, there was an ambiguity as to whether the co-operative banks are required to comply with the provisions of rule 114E of the rules or not. Hence, there was delay in filing the annual information return - HELD THAT - We notice that an identical issue has been considered by this bench in the case of The Mandya Dist. Co-op. Central Bank Ltd 2020 (3) TMI 1455 - ITAT BANGALORE as held as 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, in our view, 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. Appeals of the assessee are allowed.

Summary

Issues:
Challenging penalty under section 271FA of the Income-tax Act, 1961 for assessment years 2013-14 to 2015-16 due to delayed filing of Annual Information Return by a cooperative bank.

Analysis:
The appellant, a cooperative bank, contested the penalty imposed for late filing of Annual Information Return (AIR) under section 271FA of the Income-tax Act, 1961. The appellant argued that as cooperative banks were included in Rule 114E only from 1.4.2016, there was ambiguity regarding their obligation to comply with the rule before that date. Citing a case precedent, the appellant claimed a reasonable cause for the delay based on a bona fide belief, invoking section 273B of the Act. The appellant sought the penalty deletion for all three years under consideration.

The respondent, however, supported the orders of the Commissioner of Income Tax (Appeals) [CIT(A)] confirming the penalty.

Upon review, the Tribunal noted a similar case involving a cooperative bank where the penalty was challenged for non-filing of AIR. The Tribunal considered the ambiguity surrounding the applicability of Rule 114E to cooperative banks before its amendment in 2016. It was observed that as the original rule did not explicitly include cooperative banks, the appellant's confusion regarding compliance was justified. Consequently, the Tribunal found merit in the appellant's argument of a bona fide belief constituting a reasonable cause under section 273B, leading to the deletion of the penalty for the relevant year. The Tribunal directed the Assessing Officer to remove the penalty levied under section 271FA for the year in question.

Given the similarity of circumstances with the aforementioned case, the Tribunal set aside the CIT(A)'s order and instructed the Directorate of Income Tax (DIT) to cancel the penalty imposed under section 271FA for all three assessment years. As a result, the appeals filed by the appellant were allowed, and the penalties were deleted.

This detailed analysis underscores the interpretation of statutory provisions, the significance of case precedents, and the application of legal principles in tax penalty matters, particularly concerning cooperative banks' obligations under the Income-tax Act.