2021 (3) TMI 172 - HC - Income Tax

Penalty u/s 271 FA - failure to file annual information report under subsection 285 BA of the Income Tax Act, 1961 - petitioners have challenged the impugned order before passing the impugned order, mandatory notice contemplated under section 285 BA (5) was not issued to them and that the penalty was imposed by the respondents directly by passing the mandatory requirement of the aforesaid provision - HELD THAT - A show cause notice dated 8.9.2010 which in turn states that earlier another notice dated 30.3.2010 was issued to the petitioners and since the petitioners failed to furnish annual information report in time, the show cause notice was being issued to the petitioners to show cause as to why penalty under section 271 FA of the Income Tax Act, 1961 should not be imposed on the petitioners. Copy of notices dated 30.3.2010 have not been filed either by the petitioners or by the respondents. The counter filed by the respondents is also silent on this aspect. It appears that mandatory requirements of Section 285 BA calling upon the petitioners to file the returns within a period of 60 days from the date of notice has not been complied with. Instead, the petitioners have been directly asked to show cause only why penalty should not be imposed. In this case the petitioner has in any event filed the returns on 20.10.2011 though belatedly. The purpose of the requirements of section 285 BA of the Income Tax Act, 1961 stands satisfied.

Issues:
Challenge to imposition of penalty under section 271 FA of the Income Tax Act, 1961 for failure to file annual information report under subsection 285 BA of the Income Tax Act, 1961.

Analysis:

1. Challenge to Impugned Orders:
The petitioners, sub registrars of Tamil Nadu State Registration Department, challenged the impugned orders seeking to impose penalty under section 271 FA of the Income Tax Act, 1961. They argued that the mandatory notice under section 285 BA (5) was not issued before imposing the penalty directly by the respondents. The impugned order highlighted the failure to file the Annual Information Return for the Financial Year 2007-2008 and 2008-2009, leading to the imposition of penalty. The defaulter failed to provide any reasonable cause for the delay in filing the return despite two opportunities given. The onus of proof shifted to the taxpayer to establish a reasonable cause for the failure after the insertion of Section 273B. The penalty leviable under Section 271 FA was calculated at ?38,700 for the delay in filing the return.

2. Defense by Income Tax Department:
The Income Tax Department defended the impugned order by stating that under section 285 BA of the Income Tax Act, the petitioners were required to file annual information returns for specified financial transactions within the prescribed time and manner. A show cause notice was issued to the petitioners on 8.9.2010 for failing to file the annual information return as required. The impugned order was preceded by a show cause notice dated 8.9.2010, which referred to an earlier notice issued on 30.3.2010. However, the mandatory requirement of filing returns within 60 days from the notice date was not complied with, and the petitioners were directly asked to show cause for penalty imposition.

3. Judicial Decision:
After considering the arguments from both parties, the Court found that the petitioners had eventually filed the returns, albeit belatedly, on 20.10.2011. The Court noted that the purpose of section 285 BA was satisfied by the belated filing of returns. As a result, the Court found no merit in the impugned order and quashed it. The writ petitions were allowed, and no costs were imposed. Connected miscellaneous petitions were closed as a consequence of the judgment.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented by both parties, and the final decision rendered by the Court in this case.

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