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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Ms. Annapurna Gupta & Shri T.R. Senthil Kumar
Shri Pankaj Chimanlal The Assistant Lodhiya, Commissioner of Prop. M/s. Shreeji Vs Income-tax, Central Trading Co. 10, Circle-2, Rajkot Shaligram Complex, Opp. Diwanpara Police (Respondent) Station, Rajkot PAN No: AAMPL3903F (Appellant) Assessee Represented: Shri Mehul Ranpura, A.R. Revenue Represented: Shri B.D. Gupta, Sr. D.R. Date of hearing : 11-01-2023 Date of pronouncement : 18-01-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee against the order dated 11.08.2020 passed by the Commissioner of Income Tax (Appeals)- 11, Ahmedabad, confirming the levy of penalty u/s. 271BA of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) of Rs. 1,00,000/- relating to the Assessment Year (A.Y) 2015-16.
Page No 2 Shri Pankaj Chimanlal Lodhiya vs. ACIT
The brief facts of the case is that the assessee, an individual and Proprietor of M/s. Shreeji Trading Company which is engaged in the business of trading in gold, silver bullions and other precious metals. During the course of assessment proceedings, on verification of the records, it was noticed that the assessee had carried out domestic transaction i.e. purchases worth Rs.16,75,80,000/- with a group concern, M/s. Shreeji Ornaments Pvt. Ltd. wherein assessee is one of the director [related person covered u/s 40A(2)(b)]. Further, the assessee had not filed Form 3CEB with the Return of Income, as required u/s 92E of the Act. Accordingly the case was referred to Transfer Pricing Officer-2, Ahmedabad and therefore the time limitation for completion of scrutiny was extended. Assessment in this case was completed u/s 143(3) r.w.s. 92CA of the Act vide order dated 24/12/2018 and the total income was determined at Rs.2,62,08,060/- by making addition of Rs.1,80,000/- on account of deemed rent. Since the assessee had not filed Form 3CEB with Return of Income, as required u/s 92E of the Act, penalty proceedings u/s. 271BA r.w.s. 274 of the Act was initiated and notice dated 24/12/2018 was issued and duly served on the assessee alonwith assessment order.
2.1. Since the assessee did not file any response to the above notice, a letter dated 10.06.2019 was issued by the A.O. to show cause as to why an order imposing penalty 271BA should not be levied and called for explanation.
The assessee vide its letter dated 10.06.2019 replied as follows:
Page No 3 Shri Pankaj Chimanlal Lodhiya vs. ACIT
".....,... During the course of assessment proceedings I had duly submitted Form 3CEB alongwith all the relevant annexure which was required as per the provisions of section 92E of the Act". 2. "........., it is submitted that the audit report inform 3CEB was obtained from the Chartered Accountant u/s 92E of the Act in respect of specified domestic transactions carried out during the year under consideration however, the details regarding the same -were remained to be uploaded on the Income Tax Portal Thus, the action of non-furnishing of audit report in Form 3CEB was not intentional but due to some unavoidable circumstances which were totally bonafide and no element of mens-rea was involved. " 3. "Further, there was no any mechanism for uploading audit report obtained u/s 92E of the Act and also no hard copy of ITR along with relevant documents were allowed to be submitted in the regional income tax department. The only data that was needed to be punched was the date of audit report furnished u/s 92E of the Act while filing return of income u/s 139(1) of the Act. However, as stated above, the details with respect to audit report u/s 92E of the Act was remained to be uploaded due to inadvertent error/mistake which was completely unintentional." 4. "In connection with the above, it needs mention that the audit report u/s 92E of the Act was obtained from a chartered accountant which was dated 24.08,2015 Thus, I had duly compiled with the provisions of section 92E of the Act and hence, question of penalty does not arise.
3.1. It is also submitted by the assessee that there was no intention to skip the details of audit report u/s 92E of the Act, in the return of income filed for the Assessment Year 2015-16, but was totally unintentional and bonafide mistake which may kindly be pardoned. Further, it is also submitted that the penalty cannot be levied as a routine matter disregarding the fact that while levying penalty, statute requires the AO to exercise discretion judiciously. In this connection, reliance is placed on the decision of Hon'ble Supreme Court of India in the case of Hindustan Steel Co. Ltd., (83 ITR 26).
3.2. The A.O. held that the assessee himself admitted that Audit Report in Form 3CEB is very much available, but was not uploaded Page No 4 Shri Pankaj Chimanlal Lodhiya vs. ACIT due to unavoidable circumstances. If, it is system fault of Income Tax Portal, then the assessee could have filed screenshot of the same alongwith his submission, which is not the case of the assessee. Therefore A.O. found that this is the fit case for the levy of penalty u/s 271BA of the Act and levied Rs. 1,00,000/- (Rs. One Lakh only) as penalty.
3.3. Aggrieved against this penalty order, the assessee filed an appeal before the Ld. CIT(A) who confirmed the levy of penalty as follows: 4.3. I have considered the facts and submission of the appellant. The AO has levied the penalty u/s.271BA of IT Act for the reason that the appellant has not filed the Form No.3CEB i.e. audit report with the return of income e-filed on 30.10.2015 as required u/s.92E of IT Act. This audit report has been filed by the appellant during the course of appellate proceeding on 14.12.2017 manually as against the statutory requirement of electronically filing of the same. This manual Form No.3CEB has been filed only after the defect brought to the notice by the AO vide his office letter dated 13.12.2017. In fact, the appellant has not reported the domestic transactions i.e. purchases worth of Rs. 16,75,80,000/- with his group concern namely M/s. Shreeji Ornaments Pvt. Ltd. wherein the appellant was one of the directors covered u/s.40A(2)(b) of IT Act in Col.No.23 of Audit report in Form No.3CB & 3CD which required the assessee to furnish particulars of payments made to persons specified u/s.40A(2)(b) of IT Act. Although the appellant has contended that the audit report in Form 3CEB was obtained from the chartered accountant in respect of specified domestic transactions carried out during the year under consideration. However, the details regarding the same remained to be uploaded on the income tax portal due to unavoidable circumstances. However, the appellant has not submitted the details of circumstances led to him for such failure and its proof. In the present appellate proceedings also the appellant has reiterated his earlier submission. No plausible explanation and evidences or reasonable cause for the default committed has been submitted by the appellant. Even the appellant has not disclosed the domestic transactions in the return of income filed along with audit report submitted in Form No.3CB & 3CD. Therefore, in all probabilities getting the audit report in time as claimed is not convincing. In fact, the audit report Page No 5 Shri Pankaj Chimanlal Lodhiya vs. ACIT obtained from the chartered accountant on 24.08.2015 is an afterthought and authenticity of getting the same on the above date is unverifiable. The decisions relied upon by the appellant are not applicable on the facts of the case. In view of the above discussion, the AO has rightly levied the penalty on the facts and submission available in the case as it was mandatory to levy the penalty for the above default as there was no reasonable cause with the appellant to not to e-file the Form No.3CEB along with the return of income. Thus, the levy of penalty in the case is confirmed. The grounds of appeal are dismissed.
Aggrieved against the same, the assessee filed an appeal before us raising the following Grounds of Appeal:
1. The grounds of appeal mentioned hereunder are without prejudice to one another.
2. The learned Commissioner of Income-tax (Appeals)-11, Ahmedabad erred on facts as also in law in confirming levy of penalty u/s 271 BA of the Act at Rs.1,00,000/- on the ground of alleged contravention of provision of section 92E of the Act. The penalty confirmed u/s 271 BA of the Act may kindly be deleted.
3. The ld. CIT(A) ought to have deleted the penalty levied u/s. 271 BA of the Act.
The Ld. Counsel for the assessee Shri Mehul Ranpura submitted that certificate in Form No.3CEB was obtained, but failed to furnish it electronically as the assessee was not aware about the recent change in the provisions of the Act. Since this was the first year of applicability, the assessee was ignorant about the change and did not file it electronically however for the subsequent years it was done properly. This being a technical ground, ignorance about the same is prayed to be considered as “reasonable Page No 6 Shri Pankaj Chimanlal Lodhiya vs. ACIT cause” for delay in furnishing Form No. 3CEB, and thus requested to delete the penalty of Rs. 1 lakh levied u/s. 271BA of the Act.
Per contra, the Ld. Sr. D.R. Shri B.D. Gupta submitted that in the penalty order, the AO categorically held that during the course of assessment proceedings, the assessee failed to furnish the form as required under section 92E of the Act, and therefore penalty under section 271BA of the Act of Rs.1,00,000/- was levied on the assessee, and the Ld.CIT(A) also confirmed that such report have been furnished during the assessment proceedings by the assessee, and thereby confirmed the levy of penalty. This factual matter does not require any interference, and thereby pleaded to confirm the levy of penalty.
We have given out thoughtful consideration on the issue of levy of penalty under section 271BA of the Act and heard the rival submissions and perused the material available on record. In the facts of the present case, admittedly the assessee failed to upload Form No. 3CEB in terms of the statutory requirement. The Statute requires in terms of Section 92E that the report from an Accountant be filed in regard to the international transactions or specified domestic transactions. The relevant provision reads as under: “Report from an accountant to be furnished by persons entering into international transaction.— "92E. Every person who has entered into an international transaction [or specified domestic 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 Page No 7 Shri Pankaj Chimanlal Lodhiya vs. ACIT
signed and verified in the prescribed manner by such accountant and setting forth such particulars as may be prescribed."
7.1 In order to ensure compliance, the Statute has provided imposition of penalty u/s 271BA in case of violation of section 92E. The relevant provision is extracted hereunder for completeness: “Penalty for failure to furnish report under section 92E. "271BA—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." 7.2. A perusal of the above provisions shows that the Parliament has used the words "may" and not "shall", thereby making their intentions clear inasmuch as that levy of penalty is discretionary and not automatic. The said conclusion is further justified by Section 273B of the Act. A careful reading of Section 273B encompasses that certain penalties "shall" not be imposed in cases where “reasonable cause” is successfully pleaded. It is seen that penalty imposable u/s 271BA is also included therein. By the said provisions, the Parliament has unambiguously made it clear that no penalty "shall be" imposed, if the assessee "proves that there was a reasonable cause for the said failure". As noticed, if the statutory provision shows that the word "shall" has been used in Section 271BA, then the imposition of penalty would have been mandatory. Section 273B as noted further throws light on the legislative intent as it specifically provides that no penalty "shall" be imposed if the assessee proves "that there was reasonable cause for the said failure".
Page No 8 Shri Pankaj Chimanlal Lodhiya vs. ACIT 7.3. In the facts of the present case, it is seen that the consistent explanation of the assessee has been ignored. The assessee has pleaded ignorance in regard to the said legal requirement and has demonstrated that the word “Specified Domestic Transaction” was inserted in section 92E by Finance Act, 2012 w.e.f. 01-04-2013 which is applicable for the first time from the assessment year 2013- 14. Though the assessee obtained the Form 3CEB from the Chartered Accountant but had failed to up load electronically, as it has not aware about the recent changes and amendments in the provision. Further this being the new provision it could not upload the same electronically, which is neither wilful nor wanton. The assessee has further pleaded that based on the report, no adjustments have been proposed by the TPO. Thus there is no mala fide is found in the above transaction, but only a bond fide mistake of new amended provision is not followed by the assessee. It is further seen that both the lower authorities has proceeded as though the levy of penalty u/s.271BA as automatic, without considering section 273B of the Act.
7.4. For the reasons stated above, non uploading of Form 3CEB for the first time is an unintentional bona fide mistake. Being satisfied by the explanation offered by the assessee, after considering the position of law as applicable, we hold the respective orders passed u/s. 271BA imposing and confirming the penalty is hereby deleted and the grounds raised by the assessee is allowed.
Page No 9 Shri Pankaj Chimanlal Lodhiya vs. ACIT
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 18-01-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 18/01/2023 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, राजकोट