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Facts
Meet Forex Private Limited, an authorized foreign currency dealer, faced a penalty of Rs.81,500/- under section 271FA for failing to file the Statement of Financial Transactions (SFT) for Assessment Year 2018-19. Despite receiving notices, the assessee delayed filing, claiming 'nil transaction,' though the AO found one, and the CIT(A) confirmed the penalty due to significant delay and lack of reasonable cause.
Held
The Income Tax Appellate Tribunal (ITAT) ruled that the assessee's explanation of unawareness regarding the SFT filing requirement and technical portal issues, especially for a single transaction, constituted a bona fide explanation. Aligning with previous judgments, the ITAT deemed the breach technical or venial due to bona fide ignorance, thereby deleting the penalty.
Key Issues
Whether the penalty levied under section 271FA for delay/non-filing of SFT was justified when the assessee cited unawareness and technical portal issues, and whether this constituted a 'reasonable cause' under section 273B of the Income Tax Act.
Sections Cited
271FA, 285BA, 273B, Rule 114E
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Income Tax Appellate Tribunal, DELHI BENCH, ‘E’: NEW DELHI
Before: SHRI KUL BHARAT & SHRI BRAJESH KUMAR SINGH
per the computation in the penalty order.
Aggrieved with the said order, the assessee appealed before the ld.
CIT(A). The ld. CIT(A) noted that there was a delay of 255 days in complying to the provisions of section 285BA for which penalty @Rs.100
per day of Rs.25,000/- was levied and a delay of 112 days default for not complying to the notice issued u/s 285BA(5) for which penalty @Rs.500
per day amounting to Rs.56,000/- was levied. The Ld. CIT(A) also took note of the fact that the assessee not only failed to furnish the statement mandated u/s 285BA in time, but even after the notice was issued, it failed to comply for another 112 days. In view of these facts and also considering the fact that the assessee company was incorporated in 2002 and had substantial paid up capital and also employs auditors and consultant to advice from time to time regarding compliance obligation, he held that the assessee was not able to show that there was reasonable cause within the meaning of section 273B of the I.T. Act for the delay in filing the SFT and thereby confirmed the penalty u/s 271FA of the Act.
Against the order of the Ld. CIT(A), the assessee is in appeal before us.
5.1. The assessee filed a written submission as appearing on page no.1 to 11 of the Paper Book and made the following submissions:-
“8. Brief contention 9. The primary contention of the assessee is that the penalty u/s 271FA shall not be imposed on the assessee as- a. The assessee was unaware of the requirement of filing of form SFT b. The portal of the assessee was not working properly due to which there was delay in filing the same and also it could only be filled manually.
The main intend of the government to introduce Section 285BA was- "The accumulation of black money poses a huge threat to the Indian economy. As a result, the Indian government has launched a number of steps to combat such actions. In 2003, the 'Annual Information Return (AIR) was introduced under Section 285BA of the Income Tax Act. It was later repealed by the Finance Act of 2014, which renamed it 'duty to produce a statement of financial transaction or reportable account". As per Section 285BA all the reporting entities had to file disclosure in Form 61A or 61B on or before 31 May of the FY immediately following the FY in which the transaction is recorded or registered.
Section 285B(1) provide that- ".....any person responsible for who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as may be prescribed, under any law for the time being in force, shall furnish a statement in respect of such specified financial transaction or such reportable account which is registered or recorded or maintained by him and information relating to which is relevant and required for the purposes of this Act, to the income-tax or such other authority or agency as may be prescribed.”
The assessee was not aware of the applicability on said transaction which require disclosure as per Income Tax Act.
Subsequently, notices were communicated vide email and the assessee tried to file the said form on the portal. However, due to technical issues, there were errors in filing of the said SFT form and the same was communicated to the officer verbally.
The assessee repeatedly tried to file the said form online after he was made aware of the legal requirement to comply with SFT requirement, however due to issues in portal, he could not file the same electronically. 15. The assessee had finally submitted the said form vide manual letter dated 09th August, 2019, The copy of the same is enclosed here with the paper book. 16. The appellant has no intention to escape submission of SFT Report of the relevant year and the same could not be submitted due to lack of proper guidance by the commercial adviser hired by assessee about the newly implemented provisions and technicalities involved in filing the SFT Form. Further there was technical issue due to which submission of SFT Report online has become impossible due to which SFT Reporting was done by submitting it through physical mode. 17. In the light of the aforesaid facts and circumstances, the penalty on assessee due to technical issue on portal will be unfair and unreasonable. 18. Various courts have also held that the penalty u/s 271FA for non-filing or delay in filing of SFT due to ignorance of such provision should not be imposed as breach was only technical or venial breach. The assessee relies on the following rulings: - a) Ruling of Kolkata Bench of ITAT in the case of Malda District Central Co-op Bank Ltd. v. Director of Income-tax (I&CI), Kolkata wherein the bench was in agreement with non- imposition of penalty u/s 271FA of Income Tax Act due to aforesaid reason. The relevant para of finding of hon. ITAT is reproduced as under:- "8. the assessee got the accounts of all branches consolidated and audited, and also filed Income Tax/TDS returns. The order of the Director of Income Tax (Intelligence and Criminal investigation) does not speak as to how the assessee stood to gain by contravening with the provisions of Section 285BA of the Act or the act of assessee resulted in any loss to the Revenue. Further, it is an acknowledged and judicially recognized fact that the tax laws of this country are complex and complicated and often require for compliance, there with the assistance of tax practitioners specialising in this field, is a well known fact, and it is equally well known fact that the legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making references to the history of the enactments. In these circumstances, no mala fides can be attributed to the assessee so as to invoke the penalty proceedings under section 271FA of the Act and the learned Director of Income Tax (Intelligence and Criminal investigation) should have taken note that the breach is only technical or venial breach of the provisions of the Act and such a breach could have flown from a bonafide ignorance of the assessee that he is liable to act in the manner prescribed by the statute, and should not have invoked the penalty proceedings. We find every force in the argument of the learned AR and hold that the Penalty proceedings are liable to be set aside." Copy of the ruling is enclosed on page to 36 to 41 of this paper book. b) Ruling of Kolkata Bench of ITAT in the case of Durgapur Steel Peoples' Cooperative Bank Ltd. v. Director of Income-tax (Intelligence & Criminal Investigation), Kolkata wherein it was held as under:- "On a careful consideration of the matter, it is found that except the instant alleged breach, nothing more is alleged against the assessee. As a matter of fact, the Director (Intelligence and Criminal investigation) who passed the penalty order himself observed in his order that the assessee got the accounts of all branches consolidated and audited, and also filed Income-tax/TDS returns. The order of the Director (Intelligence and Criminal investigation) did not speak as to how the assessee stood to gain by contravening with the provisions of section 285BA or the act of assessee resulted in any loss to the revenue. Further, it is an acknowledged and judicially recognized fact that the tax laws of this country are complex and complicated and often require for compliance, therewith the assistance of tax practitioners specialising in this field. It is equally well known fact that the legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making references to the history of the enactments. In these circumstances, no mala fides can be attributed to the assessee so as to invoke the penalty proceedings under section 271FA of the Act and the Director (Intelligence and Criminal investigation) should have taken note that the breach is only technical or venial breach of the provisions of the Act and such a breach could have flown from a bona fide ignorance of the assessee that he is liable to act in the manner prescribed by the statute, and should not have invoked the penalty proceedings. Therefore, penalty proceedings are liable to be set aside.” 5.2. The ld. DR supported the orders of the authorities below.
We have considered the rival submissions and perused the material available on record. The main submission of the assessee is that the return u/s 285BA(1) could not be filed on the ground that the assessee was unaware of the requirement of filing of Form SFT. Further, it submitted that when it tried to file its return, the income tax portal was not working properly and therefore it had to file manually on 9th August, 2019. On similar facts, the Co-ordinate Bench of the Kolkata Tribunal allowed the appeal in the case of Malda District Central Co-op Bank Ltd. vs DIT(I & CI), [2016] 72 taxmann.com 306 (Kol. Trib.) and Durgapur Steel Peoples’ Cooperative Bank Ltd. vs Director of Income-tax (Intelligence & Criminal Investigation), Kolkata by holding that such a breach was only technical or venial breach of the provisions of the Act and such a breach could have flown from a bona fide ignorance of the assessee that he was liable to act in a manner prescribed by the statute. Considering the submissions of the assessee, it is held that its explanation for not filing of the SFT return due to lack of knowledge is a bona fide explanation given the fact that the assessee had only one transaction to report in the return filed by it on 09.08.2019. Respectfully following the above decisions, the penalty of Rs.81,500/- u/s 271FA levied by the AO and confirmed by the Ld. CIT(A) is not sustainable and the same is deleted.
In the result, the appeal of the assessee is allowed.