2021 (7) TMI 510 - AT - Income Tax

Penalty u/s 271AA - failure to keep and maintain information as required u/s 92D and not furnishing the report u/s 92E of the Act in relation to the assessment year 2013-14 - crux of the AO s point of view is that the assessee paid to the persons referred to in section 40A(2)(b) as per her own admission in the tax audit report and thus breached the mandate of sections 92D/92E - HELD THAT - The first transaction of purchases was with Yogita Yogesh Mahajan who is assessee s husband s brother s wife. She is neither the husband nor wife or brother or sister or any lineal ascendant or descendant of the assessee and hence not covered within the definition of relative as given in section 2(41). The second transaction of purchases is with Prabhavati Mahajan proprietor Soni Adat Dukan who is mother-in-law of the assessee. She is also not covered under section 2(41). The third transaction is payment of rent to Yogesh Pandurang Mahajan who is assessee s husband s brother. He too does not fall within the definition of relative as given in section 2(41). The last transaction is payment of rent to Sunil Pandurang Mahajan who is the assessee s husband. This transaction is covered within the meaning of term relative as given in section 2(41) and hence falls within the realm of section 40A(2)(b). As noticed above the definition of specified domestic transaction as given in section 92BA as embracing inter alia the transactions referred to in section 40A(2)(b) of the Act provided the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of five crore rupees. As the assessee s transaction covered u/s 40A(2)(b) is restricted only to 1.80 lakh the same would not qualify as SDT u/s 92BA. A fortiori sections 92D/92E also do not get magnetized and consequently there can be no question of any penalty u/s 271AA. We therefore order to delete the penalty. - Decided in favour of assessee.

Summary

Issues:
Penalty imposed under section 271AA for failure to maintain information u/s 92D and not furnishing report u/s 92E for assessment year 2013-14.

Analysis:
The appellant filed a return declaring total income and reported payments in the tax audit report. The AO observed transactions exceeding the limit, requiring compliance with sections 92D and 92E. The AO imposed a penalty under section 271AA, upheld by the CIT(A), leading to the appeal.

The penalty provision under section 271AA applies to failure in maintaining information for specified domestic transactions (SDTs). The term 'specified domestic transaction' is defined in section 92BA, encompassing certain transactions exceeding a specified limit.

The dispute revolves around whether the transactions reported were covered under section 40A(2)(b), involving payments to relatives. The definition of 'relative' in section 2(41) is crucial, and the CIT(A) relied on the Explanation to section 56(2)(v) for interpretation.

The analysis further delves into the definition of 'relative' and its applicability to section 40A(2)(b). It clarifies that only transactions with specific relatives fall under the purview of this section.

Examining the nature of payments in the tax audit report, it is determined that only one transaction qualifies as an SDT under section 40A(2)(b). As this transaction does not exceed the specified limit, it does not attract penalties under sections 92D, 92E, or 271AA.

Ultimately, the Tribunal orders the deletion of the penalty, as the transactions did not meet the criteria for SDTs. The appeal is allowed, and the decision is pronounced in the Open Court on 12th July 2021.