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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri R.K. Panda & Shri Laliet Kumar
O R D E R Per Laliet Kumar, J.M.
The appeal of the assessee for A.Y. 2013-14 arises from the order of Commissioner of Income Tax (Appeals) – 1, Guntur dated 26.07.2018 involving proceedings under section 271FA r.w.s. 274 of Income Tax Act, 1961 (in short, “the Act”) raising the following grounds :
“1. The order of the Commissioner of Income Tax (Appeals) is erroneous about the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) erred for not considering the location of the Appellant Bank and efforts made by them in submission of information u/s 285B of the IT Act.
3. The learned Commissioner of Income Tax (Appeals) could have condoned the delay of submissions of Annual Information Return as it was the first time to seek such information by the Income Tax Department and the Appellant made a sincere attempt and submitted information through "ito.hq.intel.h"
4. The learned Commissioner of Income Tax (Appeals) should have considered the difficulties generally being faced by the mufcil banks in compliance of various provisions of the IT Act particularly in initial stage and the learned Commissioner of Income Tax(Appeals) could have dropped the levy of penalty u/s 271FA for Rs. 1,28,700/-.”
2. The brief facts of the case are that assessee being a “specified person” as per the provisions of section 285BA of the Act has an obligation to file Annual Information Report (AIR) in Form No.61A in respect of specified transactions before 31st August, 2013. In view of this, a notice was sent u/s 285BA(5) of the Act on 27.10.2016. As there was no response, penalty notice u/s 271F r.w.s. 274 of the Act dt.27.01.2017 was issued seeking explanation. However, assessee neither filed AIR information nor replied to the penalty notice. Hence, penalty was imposed at Rs.1,28,700/- and no reasonable cause was made out before the levy of penalty. Aggrieved with the penalty, assessee preferred appeal before the ld.CIT(A), who dismissed the appeal of the assessee.
3. Feeling aggrieved with the order of ld.CIT(A), assessee is now in appeal before us.
4. The appeal filed by the assessee bank is on account of imposition of penalty by the Assessing Officer for not sharing the information as required in law, more particularly, u/s 271FA r.w.s. 274 of the Act. Before the Assessing Officer, the assessee could not appear, however, before the ld.CIT(A) the assessee had submitted that the assessee was unaware of the statutory requirement contemplated upon it as per section 285BA(5) of the Act. Therefore, assessee bank could not file the requisite information in time.
Before us, the assessee bank has filed written submissions and the relevant portion of the same is reproduced hereunder :
“The contentions of the appellant are: (a) that the Form 61A applicable for specified financial transactions was introduced with effect from 1.4.2015 and was in vogue upto 31.3.2016. The same was later amended with effect from 1.4.2016.
(b) Earlier the said Form 61A was called "Annual Information Return" and was governed by Rule 114E. Rule 114E may kindly be perused. As far as the financial transactions is concerned, it is mentioned that it was introduced with effect from 1.4.2015. According to Rule 114E furnishing of information about the cash deposits and other banking activities of a Co-operative Bank, were introduced with effect from 1.4.2016 or 9.11.2015. Earlier, Rule 114E was considering seven items and the financial transactions by a Co-op Bank was not included.
(c) A perusal of Sec.285BA reveals that the prescribed reporting of financial transactions are with effect from 1.9.2019. According to Sec. 285BA (3) the specified financial transactions is defined with effect from 1.4.2015. The obligation to furnish the financial transactions was included in Sec.285BA only with effect from 1.4.2015. Prior to the said date, the transactions mentioned in Sec.285BA do not include financial transactions.
In view of the above, the provisions of Sec.285BA and Sec.271FA do not apply for the specified financial transactions for the financial year 2012-13. A reading of the provisions of Sec.285BA, Rule 114E, Form 61A would reveal that the financial transactions are included much later with effect from 1.4.2015 which would clearly indicate that during the financial year 2012-13, there was no such requirement for the assessee Co-operative Bank to file Form 61A.
Further, it is submitted that the above mentioned provisions are very complex and confusing which cannot be interpreted easily. Therefore, the assessee was prevented by sufficient reason in not furnishing the form 61A for the financial year 2012-13 within time. The delay in furnishing the Form 61A is for the reasons submitted above which are beyond the control of the assessee and is not intentional. Further, it is not a case when the assessee was given a notice and there was no response.”
On the basis of the above said written submissions and as per oral arguments, it was submitted that the requirement under Rule 114E under Income Tax Rules 1962 for furnishing the information is not applicable to the Co-operative Banks, including the assessee and therefore, the assessee bank was under bonafide belief that sharing information as per section 271FA r.w.s. 274 of the Act is not applicable to it. However, the assessee had deposited the amount after considerable time of 1287 days in complying the provisions of Section 285B of the Act.
On the other hand, the ld.DR had submitted that there is a failure on the part of the assessee in complying statutory duty casted upon the financial institution including the assessee in terms of Rule 114E of Income Tax Rules 1962 and this issue has already been decided by ld.CIT(A) . He drew our attention to pages 7 and 8 of the order of ld.CIT(A) to the following effect :
“CIT(A)’s Decision : I have carefully considered the penalty order, grounds of appeal, submissions of the appellant, report of the ld.DCIT(I&CI), Hyderabad, counter comments of the appellant and decisions relied upon by the appellant. The only one ground raised by the appellant is with respect to imposition of penalty and also claimed that as the appellant was not aware of the procedures requested to cancel the penalty. On careful consideration of the facts of the case and the comments of the Ld. DIT(I & CI), Hyderabad it is felt that the reasons put forth are not appreciable and does not fall u/s. 273B of the Act. When there is no reasonable cause made out, penalty has to be levied. In this point of view levy of penalty by Ld. DIT (I & CI) require confirmation. The Hon'ble High Court of Punjab and Haryana in the following cases upheld the levy of penalty u/s.271FA of the Act stating that no reasonable cause was made out by the appellants and it was also held that ignorance of law is not an excuse. • Joint Sub Registrar, Sangat (51 taxmann.com 197) • Sub-Registrar, Bhiwani (88 taxmann.com 582) The Hon'ble ITAT Chandigarh in the case of Sub-Registrar, (Tehsildar), Jagadhari (42 taxmann.com 444) held that where Annual Information Reports of transactions over Rs. 30 lakhs had been filed by specified persons beyond period of limitation, said specified person would be held to be in default, and liable to levy of penalty under section 271FA. The Hon'ble ITAT also held that non-filing of AIR is not a technical breach and distinguished the decision of Hon'ble Supreme Court on which the appellant placed reliance. The relevant paras of the order are as under: "31. The second plea raised by the learned AR., for the assessee was that because of technical and venial breach, no penalty was impossible, for which reliance was placed on Hindustan Steel Ltd. and C.T. Ramanathan & Co., case (supra).
On consideration of the judgments, we are of the opinion that failure to file required particulars in respect of transactions of sale value of Rs. 30 lacs or above under section 285BA of the Act cannot be termed merely breach of technical nature because on the basis of such information, the revenue would take action against specified persons i.e. persons purchasing or selling properties in value exceeding Rs. 30 lacs and in the absence of such information, which is required to be filed by Sub- Registrar, the Department can loose huge revenue. Therefore, such default is leading to enormous consequences, which cannot be termed as technical.
Secondly, in any case, Gujrat High Court in Patan Nagrik Sahakari Bank Ltd's. case (supra) has considered the decision of Hindustan Steel Ltd's. case (supra) while dealing with the issue of levy of penalty under section 271FA of the Act, which is identical and still held the penalty to be leviable. We find no merit in the plea of the assessee in this regard." Respectfully following the above decisions, as the appellant failed to establish reasonable cause for the failure on its part, the penalty levied by the Ld. DIT(I & CI), Hyderabad is hereby confirmed and the ground raised by the appellant is dismissed. In effect, the appeal is dismissed.”
We have heard the rival submissions and perused the material available on record. Rule 114E of Income Tax Rules 1962 relevant for A.Y. 2013-14 provides as under:
[Furnishing of Annual Information Return.
114E. (1) The annual information return required to be furnished under sub-section (1) of section 285BA of the Act shall be furnished in respect of a financial year in Form No. 61A86 and shall be verified in the manner indicated therein.
(2) The return referred to in sub-rule (1) shall be furnished by every person mentioned in column (2) of the Table below in respect of all the transactions of the nature and value specified in the corresponding entry in column (3) of the said Table, which are registered or recorded by him during a financial year beginning on or after the 1st day of April, 2004. TABLE Sl.No. Class of Person Nature and value of transaction 1 A Banking company to which the Cash deposits Banking Regulation Act, 1949 (10 of aggregating to ten lakh 1949), applies (including any bank or rupees or more in a banking institution referred to in year in any savings section 51 of that Act). account of a person maintained in that bank. 2 ----- ----- 3 ------ ------- (3) The return or statement referred to in sub-rule (1) shall be furnished to the Director of Income-tax (Central Information Branch): Provided that where the Board has authorised an agency to receive such return or statement on behalf of the Director of Income-tax (Central Information Branch), the return or statement shall be furnished to that agency. (4)(a) The return or statement comprising Part A and Part B of Form No. 61A referred to in sub-rule (1) shall be furnished on computer readable media being a floppy (3.5 inch and 1.44 MB capacity) or CD-ROM (650 MB or higher capacity) or Digital Video Disc (DVD), along with Part A thereof on paper : Provided that a person responsible for furnishing the return, may, at his option, furnish the return through online transmission of electronic data to a server designated by the "Annual Information Return or Statement of Financial Transaction - Administrator" referred to in sub-rule (7) for this purpose under the digital signature of the person specified in sub-rule (6): Provided further that the return shall be prepared in accordance with the data structure specified by the "Annual Information Return or Statement of Financial Transaction - Administrator" referred to in sub-rule (7) in this regard. (b) The person responsible for furnishing the return or the statement shall ensure that—
(i) if the data relating to the return or statement is copied using data compression or backup software utility, the corresponding software utility or procedure for its decompression or restoration shall also be furnished along with the computer media return or statement; (ii) the return or the statement is accompanied by a certificate regarding clean and virus free data.
Explanation.—For the purposes of this sub-rule, "digital signature" means a digital signature issued by any Certifying Authority authorised to issue such certificates by the Controller of Certifying Authorities. (5) The return or statement referred to in sub-rule (1) shall be furnished on or before 31st August, immediately following the financial year in which the transaction is registered or recorded. (6) The return or statement referred to in sub-rule (1) shall be signed and verified by—
(a) in a case where the person furnishing the return or statement is an assessee as defined in clause (7) of section 2 of the Act, by a person specified in section 140 of the Act; (b) in any other case, by the person referred to in column (2) of the Table below sub-rule (2).
(7) The Board may appoint an officer designated as Annual Information Return - Administrator, not below the rank of the Commissioner of Income- tax for the purposes of day-to-day administration of furnishing of the "Annual Information Return or Statement of Financial Transaction" including specification of the procedures, data structure, formats and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies.
The reading of 114E Income Tax Rules 1962, as applicable to the relevant Assessment Year, make it abundantly clear that assessee Bank (banks, including the Co-operative Bank) are having an obligation to furnish the Annual Information Return (AIR) in the manner provided by Rule 114E. This above noted rule was inserted in the Income Tax Rules 1962 w.e.f 01.12.2004, hence the contention of ld.AR that it was effective from 1/4/2015 has no legs to stand. Admittedly, there was failure on the part of assessee to comply with the mandatory requirement of law, therefore the action of ld.CIT(A)) was in accordance with law. We may mention that the banking institutions are the backbone of our economy, and bank are required to religiously follow the mandatory requirement of complying with the various mandatory provisions as per Income Tax Rules, 1962 or Income Tax Act, 1961. There is an inbuilt philosophy, to check and deter the deposit of cash in the bank account, to curb laundering of money. If the annual information return had been filled by the bank in time, then the tax authorities would have access to various specified activities of various individuals, who had deposited more than 10 lakhs cash amount in a year in his/her bank account. Based on this information, revenue would have taken actions against erring persons, however tax authorities were failed to initiate action against such persons, on account of failure and non-compliance by the assessee before us. Thus, non-furnishing of such AIR, in fact had helped the evasion of the taxes by the dishonest unscrupulous persons by taking advantage of technicalities. Our above said view is covered in favor of Revenue by the decision of the hon’ble Punjab and Haryana High Court in the case of Sub-Registrar, Bhiwari Vs. DCIT (CIB) 2017 88 taxmann.com 582.
In fact on identical facts in another decision in the case of Joint Sub Registrar, Sangat Vs. DCIT (CIB) reported in (2014) 51 taxmann.com 177, the Hon’ble Punjab and Haryana High Court had decided the issue in para 3 to 5 as under : 3. A few facts relevant for the decision of the controversy involved as narrated in of 2013 may be noticed. The appellant is a Joint Sub Registrar working in the moffusil area of District Bathinda. Under section 285BA(l)(d) of the Act read with Rule 114E of the Income Tax Rules, 1962 (in short, "the Rules"), 'Registrar' or 'Sub Registrar' appointed under Section 6 of the Registration Act, 1908 was subjected to a statutory obligation of furnishing Annual Information Return (AIR) pertaining to purchase/sale deed exceeding an amount of Rs. 30 lacs so registered by him during a year. The said AIR was required to be furnished by the Registrar or the Sub Registrar with the appropriate authority in prescribed Form 61A of the Rules wherein part of the information was to be furnished on computer readable media while remaining part of the information was to be delivered in paper form. The appellant – Joint Sub Registrar, Sangat, District Bathinda who was working in a moffusil area of the district was not aware of any such statutory obligation by holding the office as that of Joint Sub Registrar. Show cause notice was issued to the appellant under section 271FA of the Act on 8.10.2010 and followed by reminder dated 15.11.2000 whereby he was called upon to explain as to why penalty under section 271 FA of the Act be not imposed on him. The appellant put in appearance. On learning that AIR was to be e-filed, he immediately applied for TAN No. On 19.10.2010, on receipt of TAN No., the appellant uploaded the required information. Vide order dated 7.1.2011, Annexure A.1, after considering the matter, the respondent imposed penalty under section 271FA of the Act amounting to Rs. 1,50,900/- i.e. Rs. 100/- per day for 1509 days from 1.9.2006 to 19.10.2010). The appeal filed by the appellant against the order was partly allowed by the Commissioner of Income Tax (Appeals) [CIT(A)] vide order dated 31.1.2013, Annexure A.2, whereby the penalty was to be recomputed by taking the period of default w.e.f 1.12.2006 instead of 31.8.2006 onwards. The appellant filed further appeal before the Tribunal. Vide order dated 30.5.2013, Annexure, A.3, the Tribunal dismissed the appeal. Hence the instant appeal by the appellant.
We have heard learned counsel for the appellant and perused the record.
5. Learned counsel for the appellant submitted that the assessee had acted bona fide and was, therefore, entitled to the protection of Section 273B of the Act. A reference was made to judgment reported as Price waterhouse Coopers (P.) Ltd. v. CIT [2012] 348 ITR 306/25 taxmann.com 400/211 Taxman 40 (SC). In of 2013, it was also urged that Joint Sub Registrar, Sangat could not have been penalized as the provision of Section 285BA of the Act uses the expression 'Registrar' or 'Sub-Registrar'. In such circumstances, the levy of penalty was bad. Additionally, in ITA No.47 of 2014 (Sub Registrar, Malout v. DIT (CIB), it was contended that the requisite information was supplied manually and no notice under section 285BA(4) of the Act was issued that the information which was supplied was defective. According to the learned counsel, in the absence of any notice issued under section 285BA(4) of the Act, the levy of penalty under section 271 FA of the Act was not called for.”
In view of the above, we do not find any substance in the appeal filed by the assessee and accordingly, the appeal filed by the ld.CIT(A) is upheld.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the Open Court on 10th August, 2022.