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Income Tax Appellate Tribunal, L Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Ram Lal Negi
This appeal by the Revenue is directed against the order of the CIT(A)- 20, Mumbai dated 10.02.2016 upholding the levy of penalty of `1,00,000/- under section 271BA of the Income Tax Act, 1961 (in short 'the Act') for A.Y. 2011-12 by order dated 27.08.2014 of the ITO, Ward 9(1)(2), Mumbai.
The facts of the case, briefly, are as under: - 2.1 The assessee company filed its return of income for A.Y. 2011-12 on 04.09.2011 declaring NIL income. The return was processed under section 143(1) of the Act and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 28.02.2014. While competing the assessment, the Assessing Officer (AO) observed that since the assessee had entered into an international transaction receiving foreign inward remittance of `11,47,21,471/- from its Director as well as beneficial shareholder Shri Pawan Kumar Kaushik, an NRI, on account of share capital and share premium in the assessee M/s. BNT Global Pvt. Ltd. company, it was required to file Audit Report in Form No. 3CEB in respect of the aforesaid international transactions. No adjustment/addition to the returned income was made. However, on account of the assessee’s failure to file the Audit Report in Form 3CEB, the AO simultaneously initiated penalty proceedings by issue of notice under section 274 r.w.s. 271BA of the Act dated 28.02.2014. 2.2 The AO subsequently took up penalty proceedings initiated by issue of notice under section 274 r.w.s. 271BA of the Act dated 28.02.2014 and after considering the assessee’s submissions, levied penalty of `1,00,000/- under section 271 BA of the Act vide order dated 27.08.2014. 2.3 Aggrieved by the order levying penalty of `1,00,000/- under section 271BA of the Act for A.Y. 2011-12, the assessee preferred an appeal before the CIT(A)-20, Mumbai, which was dismissed by the impugned order dated 10.02.2016 holding as under at paras 5.3 to 5.5 thereof: - “5.3 1 have gone through the penalty order of the A.O and the submissions made by the appellant and also perused the material on record. Section 271BA reads as follows: "27113A. If any person fails to furnish a report from an accountant as required by section 92E, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one hundred thousand rupees.” 5.4 Section 92E reads as follows: “92E Every person who has entered into an international transaction during a previous year shall obtain a report from an accountant and furnish such report on or before the specified date in the prescribed form duly signed and verified in the prescribed manner by accountant and setting forth such particulars as may be prescribed.'' 5.5 Admittedly in this case the assessee did not comply with the requirements of the above provisions of section 92E. The main contention of the assessee's counsel herein is that the assessee was under belief that with respect to the share application money transaction and share allotment entered into by the assessee, filing the audit report as prescribed by section 92E of the Act was not required. The reason which the assessee has given herein is that the provisions of section 92E were not applicable to the appellant company in the relevant year since appellant company had only allotted shares to an individual Non Resident Indian and has not carried out any other transaction. It is noted that when the assessee had filed the return of income after duly audited by the M/s. BNT Global Pvt. Ltd. chartered accountant, what prevented the assessee to prepare the audit report u/s. 92E is also not clear from the argument of the assessee. The assessee had been assisted by competent legal professionals and chartered accountants and I do not find any reason as to how the assessee was prevented by sufficient cause to prepare the audit report from chartered accountant and furnish the same to the authorities as stipulated u/s. 92E. The reason given by the assessee herein cannot be accepted on face value since the transactions of investments in shares of company fall within the scope of Section 92E. In case of 'International transactions' as defined under Section 92E of the Income Tax Act, it is mandatory under Section 92E of the Act for a person entering into an 'international transaction/ transactions’ to file a report from an Accountant setting forth the particulars of such International transactions. As per Section 271BA, in case of default of furnishing a report from an accountant as required by Section 92E, the Assessing Officer may impose penalty of a sum of Rs.1,00,000/-. The reason given by the assessee that the provisions of section 92E were not applicable to the appellant company in the relevant year since appellant company had only allotted shares to an individual Non Resident Indian and had not carried out any other transaction is not found to be acceptable as the transactions of share investment are expressly covered in the ambit of section 92E. The failure to furnish the audit report as per the provisions of section 92E in the present case is totally attributable to the gross negligence of the assessee and there is no good and sufficient reason in not filing the audit report within the stipulated time. The assessee herein could not show any reasonable cause in not filing of the audit report in time. From this it can be inferred that the assessee has without any reasonable cause not filed the report u/s. 92E before the Assessing Officer on or before the completion of assessment u/s. 143(3) or processing the return u/s. 143(1) of the Act. Had it filed the report u/s. 92E, the case would be different.. It is noted that on the facts of the case there is a violation of visions of section 92E and penalty under section 271BA is clearly attracted. The view supported by the order dt. 24th day of July, 2013 of the Mumbai ITAT in the case of IL & FS Maritime Infrastructure Company Ltd. vs. Assistant Commissioner of Income Tax, wherein the Hon'ble Tribunal has held that share investment transactions fall under the purview of section 92E and assessee is required to file audit report for such transactions before the due date to the authorities concerned and non filing of the same would attract levy of penalty u/s.271BA . In view of the foregoing discussion and on the facts and circumstances of the case, I do not find any infirmity in the penalty order of the A.O. and the levy of penalty is upheld. Accordingly, the grounds of appeal in this regard are dismissed.”
M/s. BNT Global Pvt. Ltd. 3.1 Aggrieved by the order of the CIT(A)-20, Mumbai dated 10.02.2016 upholding the levy of penalty of `1,00,000/- under section 271BA of the Act, the assessee has preferred this appeal raising the following grounds: - “
On the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals)-20, Mumbai General:
1. Erred in confirming the order of Assessing Officer and upholding the levy of penalty u/s. 271BA of Rs.1,00,000/-; 2.a. erred in concluding that in given facts and circumstances of the case provisions of section 92E were applicable to your appellant in the relevant year since your appellant has only allotted shares to an individual non-resident Indian and had not carried out any other transaction. 2.b. erred in ignoring the judgment of Hon. Bombay High Court in the case of Vodafone India Services Private Limited. Vs. ACIT (2014) 368 ITR 0001 (Bom) where in it has been held that provisions of issuance of equity shares by resident company, since neither capital receipt received by resident company nor difference in issue price of equity shares vs fair market value of equity shares can be considered as income. 2.c. erred in ignoring the fact that “An individual, Non Resident Indian” is not covered in the definition of “Enterprise” defined under section 92F(iii), since he is not engaged in any activity specified therein.. 2.d. erred in ignoring the fact that the transaction of allotment of shares is not covered in international transaction defined in explanation to section 92B.” Since all the grounds raised pertain to the challenge put forth by the assessee against the impugned order, the same are being considered together for disposal of this appeal hereunder. 3.2.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited and placed reliance upon. The sections of the Act relevant to the matter before us are referred to hereunder. In the case of international transactions, as laid out in section 92B of the Act, it is mandatory for a person entering into international transaction/transactions to furnish a report from an accountant setting forth the particulars of such international transaction(s). Section 92E of the Act mandates that every M/s. BNT Global Pvt. Ltd. person who has entered into an international transaction/transactions during a previous year shall obtain a report from an accountant and furnish such report on or before the specified date in the prescribed proforma duly signed and verified in the prescribed manner by such accountant and setting forth such particulars as may be prescribed. As per the provisions of section 271BA of the Act, if any personal fails to furnish a report from an accountant as required by section 92E of the Act, the AO may direct that such person shall pay, by way of penalty a sum of `1,00,000/-. 3.2.2 As per the facts on record, and the relevant sections of the Act (supra), by not filing the Audit Report in Form 3CEB, the assessee has failed to comply with the requirement of the provisions of section 92E of the Act. In the light of the requirements in the provisions of section 92B and 92E of the Act (supra), the assessee’s contentions that it was not required to file Audit Report in Form 3CEB, since the provisions of section 92E of the Act were not applicable as it had only received payments from aboard for share capital and share premium from its NRI Director for allotment of shares and no other international transaction; would not hold good. In our view, since the assessee entered into international transactions in the year under consideration, failure on its part to file the Audit Report from an accountant in Form 3CEB, as required under section 92E of the Act within the time prescribed, renders it liable to the levy of penalty of `1,00,000/- under section 271BA of the Act as levied and sustained by the authorities below. In coming to this view, we draw support from the finding of the Coordinate Bench of this Tribunal in the case of IL&FS Maritime Infrastructure Company Ltd. vs. ACIT in dated 24.07.2013; wherein the Coordinate Bench held that share investment transactions fall within the purview of section 92E of the Act and the assessee is required to file audit report in Form 3CEB for such transactions, by the prescribed date, before the authorities concerned and that failure to do so would attract levy of penalty under section 271BA of the Act.
M/s. BNT Global Pvt. Ltd. 3.2.3 In ground No. 2.b. (supra), the assessee contends that the learned CIT(A) erred in ignoring the judgement of the Hon'ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. vs. ACIT (2014) 368 ITR 0001 (Bom) wherein it has been held that the provisions of Chapter X are not applicable to international transactions of issuance of equity shares by resident company since the capital receipts cannot be considered income. We have carefully perused the aforesaid judicial pronouncement and with great respect find that the decision therein would not come to the rescue of the assessee in the case on hand as it is factually different and does not deal with penalty under section 271BA of the Act. In the cited case Form 3CEB report was filed by the assessee and on reference by the AO the TPO made an adjustment to the ALP of issue of equity shares at a premium, which was held as untenable by the Hon'ble Court in that case. However, the facts in the case on hand are entirely different as the AO has not attempted to or made any adjustment to the ALP for issue of equity shares at a premium to its NRI Director. The issue raised by the authorities below before us is simply that since the assessee has not filed the Audit Report prepared by an accountant in the prescribed Form 3CEB within the period specified as was mandatorily warranted under section 92E of the Act, levy of penalty under section 271BA of the Act was attracted in its case. 3.2.4 From the factual and legal matrix of the details on record before us, as discussed above, we do not find any plausible reason put forth by the assessee to establish how it was prevented by reasonable and sufficient cause from getting the Audit Report in Form 3CEB prepared by a Accountant in the prescribed proforma and filing the same before the concerned authority within the time specified, as stipulated under section 92E of the Act. Transactions of share investment, as entered into by the assessee in the case on hand, clearly fall within the ambit of the provisions of section 92E of the Act since the international transaction of investment in share capital of the assessee by the NRI Director of the assessee company falls within the ambit of section 92E of the Act. As laid out therein, it is mandatory for the person entering into an international transaction to file the Audit Report in Form 3CEB, duly prepared by an