2022 (2) TMI 980 - AT - Income Tax

Penalty u/s 271BA - not filing the report of the accountant as required by section 92E - proof of 'reasonable cause' for not filing the report of the accountant - HELD THAT - MTML is responsible to pay salaries to the deputed employees and the Salary, cost of these employees are a charge on the profits of the Mahanagar Telephone Mauritius Limited (MTML). Also, the employees who are deputed to Mauritius are employees of Mahanagar Telephone Mauritius Limited (MTML) and the said employees are under direct control and supervision of MTML. The staff which was sent on deputation from MTNL was paid salaries in India by MTNL on the behalf of MTML. The said payment was made in India on the account of payment of salary in the bank accounts of the employees sent on deputation to MTML. MTNL was under a bonafide belief that the above transaction is not an international transaction. However, when made aware it was realized that such a transaction would be covered under the ambit of International Transaction. The salary payment made by the MTNL to the employees of MTNL deputed to MTML has been reimbursed by the MTML. It is also a matter on record that the Form No. 3CEB has been filed before the AO. Also considered the issue of loans advances outstanding as on 30.01.2013 between MTNL and MTML. Based on the adjustments as suggested by TPO, the revised statement of income for the relevant assessment year and form 3CEB was filed before the assessment of the said year and the assessment was completed by the AO on 6th October 2016. No ill intention of MTNL could be attributed of evading tax or non- compliance of the tax laws as the report was filed as required by the authorities. From the above mentioned facts and law, it is evident that MTNL was under bonafide belief that it is not required to file form 3CEB but later on realization of the facts and law, MTNL filed the same with the concerned authority. Provisions of Section 273B can be invoked in the case of the assessee as a reasonable cause for failure could be substantiated. In the case of CIT Vs. MP Electricity Board 2004 (12) TMI 61 - MADHYA PRADESH HIGH COURT based on the judgment of Hindustan Steel Ltd. Vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT held that the authority competent to impose the penalty would be justified in refusing to impose the penalty when there is a technical or venial breach of the provision of the Act are where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by statue. The assessee is a public sector undertaking cannot be deemed to have any deliberate inclination to avoid payment of tax or to follow the statutory provisions. Hence, the law laid down and the provisions of the Section 92E, Section 271BA and Section 273B of the Act, we hereby direct that the penalty levied be obliterated. - Decided in favour of assessee.

Summary

Issues:
Penalty under Section 271BA for non-filing of accountant report under Section 92E of the Income Tax Act.

Analysis:
The appellant, a Government of India PSU providing telephone services, filed an appeal against the penalty imposed by the AO for not filing the accountant report as required under Section 92E. The appellant argued that there was a reasonable cause for the non-filing, as they believed the transaction was not international. The AO and CIT(A) upheld the penalty, stating the requirement under Section 92E was not met. The appellant contended that being a Government Undertaking, there was no intention to defraud or avoid disclosure. The appellant had filed Form No. 3CEB before the AO, indicating compliance. The issue of outstanding loans and advances between related entities was also considered. The Tribunal noted that the appellant rectified the non-compliance upon realizing the mistake, filing the required report.

The Tribunal referred to Sections 271BA, 92E, and 273B of the Act. Section 271BA imposes a penalty for failure to furnish the accountant report under Section 92E. Section 92E mandates obtaining and filing a report for international transactions. Section 273B provides for non-imposition of penalty in certain cases with reasonable cause. Citing the CIT Vs. MP Electricity Board case, the Tribunal emphasized that penalties should not be imposed for technical breaches or when non-compliance stems from a bona fide belief. Considering the appellant's status as a public sector undertaking and the compliance efforts post-realization, the Tribunal concluded that the penalty should be waived.

Therefore, the Tribunal allowed the appeal, directing the obliteration of the penalty imposed under Section 271BA. The judgment was pronounced on 14/02/2022 by the Accountant Member of the ITAT Delhi.