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Facts
The assessee's appeal concerns a penalty of Rs. 1,00,000 levied under Section 271BA of the Income Tax Act for failure to furnish a report under Section 92E regarding international transactions. The penalty was initiated after a search under Section 132, and the assessee argued that Form 3CEB was filed physically before the Transfer Pricing Officer, constituting sufficient compliance.
Held
The Tribunal held that the penalty under Section 271BA was not sustainable. Although the filing of Form 3CEB is mandatory, the Tribunal found that the assessee had filed the form physically before the Transfer Pricing Officer after the search, even though it was not filed electronically during the original assessment. The Tribunal noted that the form was prepared prior to the search and that the assessee's failure to file it electronically was likely inadvertent.
Key Issues
Whether the penalty under Section 271BA is leviable when Form 3CEB was filed physically with the Transfer Pricing Officer, even if not filed electronically during the original assessment, and if there was a reasonable cause for the delay.
Sections Cited
153A, 271BA, 143(3), 92E, 273B, 142(1), 132, 40A(2)(b), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Before: Ms. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA
PER SUCHITRA KAMBLE, JUDICIAL MEMBER:
This appeal is filed by the assessee against order dated 28.12.2023 passed by the CIT(A)-11, Ahmedabad for the Assessment Year 2016-17.
The assessee has raised the following grounds of appeal :-
“1. The Ld. CIT(A) has failed to appreciate the scheme of assessment and penalty proceedings pertaining to search cases. The assessment u/s. 153A is an assessment pursuant to search and not a scrutiny assessment, hence restricted to issues emanating from incriminating material found during the search. The penalty proceedings pursuant to assessment u/s. 153A shall be limited to additions made in order u/s. 153A and cannot be extended to any other issues 2. The Ld. CIT(A) has erred in law and on facts of the case in upholding order u/s. 271BA which is purely based on change of opinion. Levy of penalty u/s.271BA is at the discretion of the Ld. AO and not automatic. The Ld. AO who completed the scrutiny assessment u/s.143(3) of the Assessment Year: 2016-17 Priya Blue Industries Pvt. Ltd. Vs. DCIT Page 2 of 5 Act has consciously chosen not to levy penalty u/s. 271BA which is a permissible view under the law.
The Ld. CIT(A) has erred in law and on facts of the case in not appreciating the reasonable cause furnished by the appellant for failure to file report u/s. 92E of the Act before the due date. As stipulated u/s. 273B of the Act, no penalty shall be imposed u/s. 271BA of the Act if the appellant proves that there was a reasonable cause for failure to file the report before the due date.
Even otherwise, the penalty of Rs.1,00,000/- levied u/s.271BA of the Act is not sustainable in law as well as the facts of the case.
5. The Ld. CIT(A) erred in law and on facts of the case in upholding the validity of order u/s.271BA of the Act despite the fact that the penalty proceedings have not been conducted in the manner prescribed by the departmental instructions from time to time which were mandatory for compliance. The approval granted by the Joint Commissioner to the Ld. AO for passing the order u/s.271BA of the Act is bad in law as the DIN (Document Identification Number) of such letter granting approval is not verifiable on the Income Tax e-filing portal, thus rendering the order u/s. 271BA of the Act as non-est and bad in law.
6. The appellate proceedings before Ld. CIT(A) have not been conducted in the manner prescribed by the departmental instructions from time to time which were mandatory for compliance insofar as requisite condition of Circular No.19 of 2019 dt. 14.08.2019 of issuing order electronically with a computer-generated DIN quoted in the body of the order is not fulfilled, thus rendering the order of CIT(A) non-est and bad in law.
7. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
8. The Appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal
at the time of or before the hearing of the appeal.”
3. The original return of income was filed on 24.09.2016 declaring total income at Rs.3,40,05,960/- and the Assessment Order was passed on 15.10.2019 under Section 250 of the Income Tax Act,1961 at the returned income. The case was selected for scrutiny under CASS and assessment was completed under Section 143(3) of the Act on 30.11.2018 determining total income of Rs.4,08,93,730/- after making the addition of Rs.68,87,770/- on account of disallowance of interest expenses under Section 40A(2)(b) of the Act. The CIT(A) vide order dated 03.10.2017 partly allowed the appeal of the assessee. In the meanwhile, search under Section 132 of the Act was conducted on Priya Blue Group on 19.11.2019 in which the premises of the assessee M/s. Priya Blue Industries Pvt. Ltd. were also covered. Considering the said fact, notice under Section 153A of the Act was issued on 23.12.2020. In response to the notice under Section 153A of the Act, the assessee filed return of income under Section 153A of the Act on 21.01.2021 declaring total income at Rs.3,40,05,960/-. Notice under Section 142(1) of the Act was issued on 26.09.2021 wherein the assessee was requested to furnish Assessment Year-wise purchases from Best Oasis Limited which is a non-resident of India for A.Y. 2012-13 to 2019-20. In response to the same, the assessee filed reply vide letter dated 27.09.2021. M/s. Best Oasis Limited is a foreign company for a period of A.Y. 2012-13 to 2019-20. Therefore, the transaction made with Best Oasis Limited Company were considered as international transactions. In view of the above, the assessee company entered into international transactions as mentioned by the Assessing Officer and as per the provisions under Section 271BA of the Act, the international transactions made by the assessee with M/s Best Oasis Limited during the year under consideration should have been furnished as a report from an Accountant as required aby Section 92E of the Act. The Assessing Officer held that the assessee failed to furnish the same report regarding its international transactions and, therefore, initiated penalty proceedings under Section 271BA of the Act thereby issuing notice dated 23.03.2022. The assessee did not file any response and subsequently the Assessing Officer levied penalty of Rs.1,00,000/- under Section 271BA of the Act.
4. Being aggrieved by the penalty order under Section 271BA of the Act, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The Ld. AR submitted that during the assessment proceedings prior to search, transfer pricing reference was made and Form CEB was field physically before the Transfer Pricing Officer which is an undisputed fact. The Ld. AR submitted that Form 3CEB was not furnished electronically, however Form 3CEB was available with Transfer Pricing Officer for framing the transfer pricing assessment. The requirement of filing of Audit Report is merely a directory in nature and hence once the Audit Report has been filed physically, the same has to be treated as sufficient compliance and no case is made out for levy of penalty under Section 271BA of the Act. The Ld. AR relied upon the following decisions: -
- Bhavnagar Dashashrimali Meshree Vanik Gnati – - DCIT vs. Cryogas Equipment P. Ltd. – ITA 415/Ahd/2020 - Ramji Mandir Religious & Chariable Trust – 205 ITD 150 (Ahd) - Association of Indian Panelboard Mfg. – TA 655 of 2022 (Guj) - CIT vs. Mayur Foundation – 274 ITR 562 (Guj) - CIT vs. Xavier Kelavani Mandal P. Ltd. – 221 Taxman 43 (Guj) - Zenith Processing Mills vs. CIT – 219 ITR 721 (Guj) 5.1 The Ld. AR further submitted that penalty under Section 271BA of the Act cannot be levied merely for a technical default. Penalty is unwarranted in view of reasonable cause as per Section 273B of the Act. The assessee was under a bonafide impression and inadvertently due to oversight, audit report could not be filed in the previous year but post search when transfer pricing reference was made, the said fact was realised, by then, the date of furnishing form 3CEB electronically was already passed but the assessee filed the said form 3CEB physically before the Transfer Pricing Officer.
The Ld. DR submitted that the CIT(A) has rightly dismissed the appeal of the assessee as the assessee did not file the form 3CEB within the stipulated time.
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has filed form 3CEB before the Transfer Pricing Officer during the reference once the search took place. Both the requirement of furnishing report appears to be mandatory and filing thereof is a procedure and in fact form 3CEB was obtained by the assessee on 16.10.2016 which is prior to the search in assessee’s case i.e. search date under Section 132 is 19.11.2019. Thus, the Assessing Officer as well as the CIT(A) has totally ignored the fact that the assessee inadvertently could not file Form 3CEB but the same was already compiled by the assessee as per the procedure of Income Tax Act and Income Tax Rules. Thus, it cannot be said that the assessee has deliberately not filed/furnished the Form 3CEB. Therefore, penalty levied under section 271BA of the Act will not survive. This finding should not be taken as precedent as in the present case the Form 3CEB was prepared prior to the search, only thing the assessee has not furnished the same during the original assessment. Hence, appeal of the assessee is allowed.
In the result, appeal filed by the assessee is allowed
Order pronounced in the open Court on this 16th January, 2025.