2022 (3) TMI 710 - AT - Income Tax

Penalty u/s 271BA - admittedly the assessee failed to upload Form No. 3CEB in terms of the statutory requirement - HELD THAT - It is seen that the consistent explanation of the assessee has been ignored. The assessee has pleaded ignorance in regard to the said legal requirement and has demonstrated that the word Specified Domestic Transaction was inserted in section 92E by Finance Act, 2012 w.e.f. 01-04-2013 which is applicable for the first time from the assessment year 2013-14. Though the assessee obtained the Form 3CEB from the Chartered Accountant but had failed to up load electronically, as it has not aware about the recent changes and amendments in the provision. Further this being the first year of this new provision it could not upload the same electronically which is neither willful nor wanton. The assessee has further pleaded that based on the report, no adjustments have been proposed by the TPO. Copy of the assessment order dated 02.12.2016 passed u/s. 143 3 r.w.s. 92CA(3) clearly shows that there were no adjustment made by the TPO and the AO accepted the returned income as the Assessed Income. Thus there is no mala fide is found in the above transaction, but only a bond fide mistake of new amended provision is not followed by the assessee. It is further seen that both the lower authorities has proceeded as though the levy of penalty u/s. 271BA as automatic, without considering section 273B of the Act. For the reasons stated above, non uploading of Form 3CEB for the first time is an unintentional bona fide mistake. Being satisfied by the explanation offered by the assessee, after considering the position of law as applicable, we hold the respective orders imposing and confirming the penalty are set aside. The penalty order is quashed and the assessee appeal is allowed.

Summary

Issues:
- Appeal against penalty imposed under section 271BA of the Income Tax Act, 1961 for failure to file audit report in Form 3CEB.
- Interpretation of statutory provisions regarding filing requirements for specified domestic transactions under section 92E.
- Consideration of reasonable cause for failure to comply with filing obligations.
- Discretionary nature of penalty under section 271BA and applicability of Section 273B for reasonable cause exemption.

Analysis:

Issue 1: Appeal against Penalty under Section 271BA
The appeal was filed against the penalty imposed under section 271BA of the Income Tax Act, 1961 by the Assessing Officer (AO) for the failure of the assessee to file the audit report in Form 3CEB in relation to specified domestic transactions for the assessment year 2013-14.

Issue 2: Interpretation of Filing Requirements under Section 92E
The appellate tribunal analyzed the statutory provisions under section 92E, which mandates obtaining a report from an accountant for international or specified domestic transactions. The tribunal noted that the failure to file the required report within the specified time attracts penalty under section 271BA. The tribunal emphasized the importance of compliance with the prescribed forms and deadlines.

Issue 3: Consideration of Reasonable Cause
The tribunal considered the assessee's explanation that their failure to electronically file Form 3CEB was due to ignorance of recent changes in the law, especially regarding specified domestic transactions introduced in 2013. The tribunal found the assessee's ignorance to be a reasonable cause for the delay in filing the report, as it was the first year of applicability. The tribunal highlighted that the absence of mala fide intent was crucial in this context.

Issue 4: Discretionary Nature of Penalty and Section 273B
The tribunal discussed the discretionary nature of the penalty under section 271BA, emphasizing that the imposition of the penalty is not automatic. The tribunal referred to Section 273B, which provides exemptions from penalties if a reasonable cause is established. The tribunal concluded that the penalty should not be imposed when there is a genuine and reasonable cause for non-compliance, as was the case with the assessee's unintentional mistake due to lack of awareness.

In the final judgment, the tribunal set aside the penalty imposed on the assessee, considering the unintentional and bona fide nature of the mistake in not filing Form 3CEB for the first time. The tribunal allowed the appeal, quashed the penalty order, and held in favor of the assessee based on the reasonable cause exemption provided under the law.