2020 (2) TMI 888 - AT - Income Tax

Penalty proceedings initiated u/s.271BA - failure to furnish the report in prescribed Form No.3CEB in terms of provision of section 92E - HELD THAT - On perusal of the provisions of Section 92BA of the Act, we found that once the clause in the said section is omitted by the subsequent amendment, it would be deemed that clause(i) was never been on the statute and there is no specification in omitting the said clause by the statue as to whether the proceeding initiated or action taken on this, shall continue or not. We have also perused the order of the CIT(A) dated 30.07.2019, copy of which is placed on record, thereby deleting the quantum addition in the case of the assessee following the above amendment in the provisions and relying on the decisions of Kolhapur Canesugar Works Ltd. 2000 (2) TMI 823 - SUPREME COURT , GENERAL FINANCE CO. AND ANOTHER 2002 (9) TMI 3 - SUPREME COURT , TEXPORT OVERSEAS PRIVATE LIMITED VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE (1) (1) , BENGALURU. 2017 (12) TMI 1719 - ITAT BANGALORE When the transactions related to the assessee falls under the clause(i) of Section 92BA of the Act, which has already been removed by the Finance Act, 2017 w.e.f. 01.04.2017, therefore, the imposition of penalty u/s.271BA of the Act for failure to furnish the report in prescribed Form No.3CEB in terms of provisions of section 92E of the Act, does not survive at all. Accordingly, we allow the appeal of the assessee and cancel the penalty levied u/s.271BA

Summary

Issues:
- Appeal against penalty imposed under section 271BA of the Income Tax Act, 1961 without providing a reasonable opportunity to the appellant.
- Late filing of audit report in prescribed Form No.3CEB leading to penalty proceedings.
- Omission of clause (i) of Section 92BA by the Finance Act, 2017 and its impact on penalty imposition.

Issue 1: Appeal against Penalty Imposed Under Section 271BA:
The appellant challenged the penalty imposed under section 271BA of the Income Tax Act, 1961, alleging that the Assessing Officer (AO) initiated the penalty proceedings without providing a reasonable opportunity. The appellant contended that the penalty order was passed without exercising discretion and despite the omission of the specified domestic transaction provision from the statute by the Finance Act, 2017. The appellant argued that the penalty upheld by the CIT(A) was unsustainable and impermissible under law.

Issue 2: Late Filing of Audit Report Leading to Penalty Proceedings:
The case involved the late filing of the audit report in prescribed Form No.3CEB by the appellant, which resulted in penalty proceedings under section 271BA of the Act. The AO initiated penalty proceedings against the appellant for failure to furnish the report within the stipulated time frame. Despite the appellant's submission that the delay was due to technical reasons and not malafide intent, the penalty was imposed by the AO and upheld by the CIT(A).

Issue 3: Omission of Clause (i) of Section 92BA and Its Impact on Penalty Imposition:
The significant aspect of the judgment revolved around the omission of clause (i) of Section 92BA by the Finance Act, 2017, effective from 01.04.2017. The Tribunal analyzed the legal implications of this omission on penalty imposition under section 271BA. The Tribunal observed that once a provision is omitted from the statute, it is deemed to have never existed unless there is a saving clause to indicate otherwise. Relying on relevant case laws and judicial pronouncements, the Tribunal concluded that the penalty imposed on the appellant for failure to furnish the report in prescribed Form No.3CEB, which was linked to the omitted clause (i) of Section 92BA, was not sustainable in law.

Conclusion:
The Tribunal allowed the appeal of the assessee and canceled the penalty imposed under section 271BA of the Income Tax Act. The Tribunal emphasized that the imposition of the penalty did not survive due to the omission of clause (i) of Section 92BA by the Finance Act, 2017. The judgment highlighted the legal principle that once a provision is omitted from the statute, actions taken under that provision are deemed invalid. Therefore, the penalty imposed on the appellant was deemed unsustainable in light of the statutory amendment.

This comprehensive analysis of the legal judgment provides a detailed overview of the issues involved and the Tribunal's decision on each aspect of the case.