2016 (9) TMI 147 - AT - Income Tax

Penalty under section 271FA - whether there is sufficient cause for the assessee for non-compliance with the requirement of Section 285BA of the Act till the notice was served? - Held that - 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. Further, it is an acknowledged and judicially recognized fact that the tax laws of this country are complex and complicated and often require for compliance, therewith the assistance of tax practitioners specialising in this field, is a well known fact, and it is equally well known fact that the legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making references to the history of the enactments. In these circumstances, 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 bonafide 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. We find every force in the argument of the learned AR and hold that the Penalty proceedings are liable to be set aside. - Decided in favour of assessee.

Summary

Issues:
Penalty imposed under Section 271FA of the Income Tax Act for failure to file the Annual Information Return (AIR) in time.

Analysis:
The judgment involves appeals arising from penalty orders passed under Section 271FA of the Income Tax Act, 1961. The appellant, a cooperative bank, failed to comply with the requirement of filing the AIR within the specified time frame. The penalty was imposed for the delay in furnishing the AIR, leading to a legal dispute regarding the justification of the penalty amount.

The primary contention raised by the appellant was that there was a reasonable cause for the delay in filing the AIR. The appellant argued that the non-compliance was unintentional and stemmed from ignorance of the legal obligation rather than deliberate defiance of the law. On the other hand, the revenue authorities highlighted the awareness campaigns conducted to educate entities about their obligations under the Act, implying that ignorance could not be a valid defense.

The key issue for consideration was whether the appellant had a sufficient cause for the non-compliance with the statutory requirement. The facts established that the appellant eventually filed the AIR after an extension was granted, indicating a willingness to fulfill the obligation once made aware. The appellant relied on legal precedents emphasizing the complexity of tax laws and the possibility of genuine ignorance despite efforts to comply.

The judgment cited various legal principles, including the Supreme Court's stance on penalty imposition for statutory breaches. It emphasized that penalties should not be imposed for technical or venial breaches, especially when there is no deliberate defiance of the law. The complexity of tax laws and the practical challenges faced by taxpayers in understanding and complying with evolving regulations were also taken into account.

Ultimately, the Tribunal found merit in the appellant's argument that the breach was technical and unintentional, warranting the setting aside of the penalty proceedings. The judgment highlighted that no malafide intent was attributed to the appellant, and the penalty was deemed unjustified in the absence of substantial harm to the revenue or deliberate misconduct. As a result, both appeals of the appellant were allowed, and the penalty was revoked.

In conclusion, the judgment underscores the importance of considering the circumstances and intent behind statutory breaches when imposing penalties under tax laws. It recognizes the challenges faced by taxpayers in navigating complex legal requirements and emphasizes the need for a balanced and judicious approach in penalty proceedings.