2019 (2) TMI 55 - AT - Income Tax

Penalty u/s 271AA - scope of amendment - assessee discussed the provision u/s 271AA of the Act as it stood relevant to the year under consideration and its substitution thereafter w.e.f. 01.04.2014 - Held that - We find that it was rightly pointed out by the Ld.AR that the entire provision was substituted vide Finance Act, 2012 w.e.f. 01.07.2012 thereby prima facie the said provision is not applicable to the present case. AO primarily imposed penalty u/s 271AA of the Act only on the condition that the assessee reported no international transaction in its return of income . But, however, the CIT(A) discussed the same in its order at page No.11 and observed during the year under consideration the requirement is to keep and maintain any such information/document in respect of international transaction and no such condition to impose penalty on failure of reporting international transaction in the return of income. Therefore, we find no infirmity in the order of CIT(A) and it is justified for the reasons stated in his order which is reproduced herein above. - Decided against revenue

Summary

Issues:
1. Justification of canceling penalty under section 271AA of the Income Tax Act, 1961.

Analysis:
The appeal was filed by the Revenue and cross-objection by the assessee against the order passed by CIT(A)-3, Kolkata for AY 2011-12. The main issue to be decided was whether the CIT(A) was justified in canceling the penalty imposed by the AO under section 271AA of the Income Tax Act, 1961. The judicial member analyzed the provisions of section 271AA and section 92D, emphasizing that the penalty under section 271AA could only be imposed if the assessee failed to keep and maintain required information and documents related to international transactions. The member highlighted the obligation of the assessee to maintain such information and documents as prescribed under section 92D. The judicial member also addressed the issue of the AO imposing penalty based on the assessee mentioning "No" in the return or failing to report international transactions, stating that these were curable defects and not automatic grounds for penalty imposition.

The judicial member further discussed the retrospective application of penal provisions, emphasizing that only the provisions existing during the relevant assessment year should be applied. Referring to legal precedents, the member stated that the assessee must comply with the law as it stood at the time of filing the return and could not be penalized based on subsequent amendments. The member highlighted that the AO's reliance on certain decisions was misplaced as they addressed different issues. After hearing both parties and examining the material on record, the judicial member concluded that the CIT(A)'s order canceling the penalty was justified, as the substituted provision under section 271AA was not applicable to the case. The member noted that the penalty was primarily imposed by the AO based on the condition of the assessee reporting "no international transaction" in the return, which was not a valid ground for penalty imposition according to the provisions. Therefore, the member found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal.

In the cross-objection filed by the assessee, supporting the CIT(A)'s order, the judicial member stated that since the Revenue's appeal was dismissed in favor of the assessee, the grounds raised in the cross-objection became academic, and no further adjudication was required. Consequently, the cross-objection filed by the assessee was dismissed. In the final result, both the appeal of the Revenue and the cross-objection of the assessee were dismissed, with the order pronounced in the open court on 30.01.2019.