2025 (1) TMI 870 - AT - Income Tax

Penalty u/s. 271BA - failure to file report u/s. 92E of the Act before the due date - HELD THAT - Assessee has filed form 3CEB before the TPO during the reference once the search took place. Both the requirement of furnishing report appears to be mandatory and filing thereof is a procedure and in fact form 3CEB was obtained by the assessee on 16.10.2016 which is prior to the search in assessee s case i.e. search date under Section 132 is 19.11.2019. AO as well as the CIT(A) has totally ignored the fact that the assessee inadvertently could not file Form 3CEB but the same was already compiled by the assessee as per the procedure of Income Tax Act and Income Tax Rules. Thus, it cannot be said that the assessee has deliberately not filed/furnished the Form 3CEB. Therefore, penalty levied under section 271BA of the Act will not survive. This finding should not be taken as precedent as in the present case the Form 3CEB was prepared prior to the search, only thing the assessee has not furnished the same during the original assessment. Hence, appeal of the assessee is allowed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment addresses several core issues:

Whether the penalty proceedings under Section 271BA of the Income Tax Act, 1961, are justified when the assessee failed to electronically file Form 3CEB, despite having filed it physically.
Whether the penalty under Section 271BA can be levied in the absence of a reasonable cause as per Section 273B of the Act.
Whether procedural lapses in the issuance of penalty orders and the appeal process, such as the absence of a Document Identification Number (DIN), render the orders non-est and bad in law.
Whether the appellate and assessment proceedings adhered to the principles of natural justice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Penalty under Section 271BA

Legal Framework and Precedents: Section 271BA mandates penalties for failure to furnish a report from an accountant in respect of international transactions. Section 92E requires such a report to be filed. Section 273B provides relief from penalties if reasonable cause is demonstrated.
Court's Interpretation and Reasoning: The Tribunal noted that the assessee had physically filed Form 3CEB with the Transfer Pricing Officer, which indicated compliance with the substantive requirement of the law, albeit not in the prescribed electronic format.
Key Evidence and Findings: The assessee obtained Form 3CEB on 16.10.2016, before the search, and filed it physically, which was acknowledged by the Transfer Pricing Officer.
Application of Law to Facts: The Tribunal found that the procedural lapse of not filing electronically did not constitute a deliberate default, given the form was prepared and filed physically.
Treatment of Competing Arguments: The Revenue argued for strict compliance, while the assessee cited reasonable cause and prior physical submission as sufficient compliance.
Conclusions: The Tribunal concluded that the penalty under Section 271BA was not sustainable due to the reasonable cause and prior physical filing.

Issue 2: Procedural Lapses and Validity of Orders

Legal Framework and Precedents: The requirement for a DIN as per departmental instructions ensures traceability and authenticity of orders.
Court's Interpretation and Reasoning: The Tribunal did not explicitly address the DIN issue in its final decision, focusing instead on the substantive compliance with the filing requirements.
Key Evidence and Findings: The absence of a verifiable DIN was noted but not deemed central to the decision.
Application of Law to Facts: The Tribunal focused on the substantive compliance and reasonable cause rather than procedural defects in the issuance of orders.
Treatment of Competing Arguments: The assessee argued that the absence of a DIN rendered the order invalid, but this was not the basis for the Tribunal's decision.
Conclusions: The procedural lapses did not form the basis for the Tribunal's decision to allow the appeal.

Issue 3: Principles of Natural Justice

Legal Framework and Precedents: Principles of natural justice require fair hearing and consideration of all evidence and submissions.
Court's Interpretation and Reasoning: The Tribunal found that the lower authorities failed to consider the reasonable cause and prior compliance by the assessee.
Key Evidence and Findings: The Tribunal noted the assessee's submissions and prior physical filing of Form 3CEB.
Application of Law to Facts: The Tribunal emphasized the need for authorities to consider all relevant facts and circumstances.
Treatment of Competing Arguments: The Tribunal sided with the assessee, emphasizing the need for a fair assessment of compliance efforts.
Conclusions: The Tribunal found a breach of natural justice principles, contributing to its decision to allow the appeal.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes: "Therefore, penalty levied under section 271BA of the Act will not survive."
Core Principles Established: Compliance with substantive requirements, even if not in the prescribed format, can constitute sufficient compliance if reasonable cause is shown. Procedural lapses do not necessarily invalidate compliance if the substantive requirements are met.
Final Determinations on Each Issue: The Tribunal allowed the appeal, concluding that the penalty under Section 271BA was not justified due to reasonable cause and prior physical filing of the required form.

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