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2016 (11) TMI 207 - AT - Income TaxPenalty u/s 271FA - delay of 561 days in furnishing AIR - whether there is sufficient cause for the assessee for noncompliance with the requirement of Section 285BA of the Act till the notice was served? - Held that - On a careful consideration of the matter, we find that except the instant alleged breach, nothing more is alleged against the assessee. As a matter of fact, the Director of Income Tax (Intelligence and Criminal investigation) who passed the penalty order himself observed in his order vide para No 3 that the assessee got the accounts of all branches consolidated and audited, and also filed Income Tax/TDS returns. The order of the Director of Income Tax (Intelligence and Criminal investigation) does not speak as to how the assessee stood to gain by contravening with the provisions of Section 285BA of the Act or the act of assessee resulted in any loss to the Revenue. No mala fides can be attributed to the assessee so as to invoke the penalty proceedings under section 271FA of the Act and the learned Director of Income Tax (Intelligence and Criminal investigation) should have taken note that the breach is only technical or venial breach of the provisions of the Act and such a breach could have flown from a bona fide ignorance of the assessee that he is liable to act in the manner prescribed by the statute, and should not have invoked the penalty proceedings. Thus the Penalty proceedings are liable to be set aside. - Decided in favour of asseessee
Issues:
1. Imposition of penalty under section 271FA of the Income Tax Act, 1961 for non-compliance with Section 285BA. 2. Justification for penalty imposition by the Director of Income Tax. 3. Sufficient cause for non-compliance with legal requirements. 4. Ignorance as a defense for non-compliance. 5. Application of legal principles in penalty proceedings. Issue 1: Imposition of Penalty under Section 271FA The judgment deals with appeals arising from penalty orders under Section 271FA of the Income Tax Act, 1961. The penalty was levied on the assessee for the delay in furnishing Annual Information Returns (AIR) for the assessment years 2011-12 and 2012-13. The penalty amounts were ?56,100 for 2011-12 and ?19,600 for 2012-13. Issue 2: Justification for Penalty Imposition The assessee challenged the penalty imposition, arguing that the delay in compliance was unintentional due to a lack of awareness of the legal obligation. The Department contended that awareness campaigns were conducted to inform entities of their obligations. The Director of Income Tax imposed the penalty after the assessee filed the AIR post the notice. Issue 3: Sufficient Cause for Non-Compliance The key consideration was whether there was sufficient cause for the assessee's non-compliance with Section 285BA until the notice was served. The assessee argued that ignorance of the obligation was the reason for the delay, while the Department highlighted the awareness campaigns conducted to educate entities. Issue 4: Ignorance as a Defense The assessee relied on legal precedents to support the argument that ignorance of the law could be a valid defense. They emphasized that tax laws are complex, and it may not be reasonable to expect every entity to be aware of all obligations without specialized assistance. Issue 5: Application of Legal Principles The Tribunal analyzed various legal decisions supporting the view that penalties should not be imposed for technical or venial breaches, especially when ignorance of the law is a plausible explanation. The Tribunal found no malafide intent on the part of the assessee and set aside the penalty proceedings based on the principle that the breach was technical and not deliberate. In conclusion, the Tribunal allowed the appeals, emphasizing that the penalty proceedings were not justified due to the technical nature of the breach and the assessee's lack of awareness regarding the specific legal obligation. The judgment highlighted the complexity of tax laws and the need for a judicious application of penalties in cases of non-compliance.
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