The difficulties in non-production of the documents as was required under the statue was on account of shifting of branch of the bank shortly before the date of the survey and afterwards within a period of two weeks they were furnished before the Assessing Officer. Since, the documents were not presented at the time of the survey, it was inferred that they were collected subsequently in the post survey period. The Tribunal found the justification given by the respondent for the same justifiable. Therefore, it clearly held that this was not a case where by the non-production of material at the relevant time rendered back liable for the penalty under section 272B. Thus, it is apparent that the issue of applicability on penal provisions prospectively or retrospectively was not required to be considered in the light of specific facts themselves and the entire issue has not been touched.
At the time of survey, bank manager was unable to produce requisite material particularly permanent account number of those persons who had opened the account with the bank, and thereby there may appear to be breach, which as per the statute, would attract penalty provisions. However, in every matter, facts will have to be gauged and the law needs to be applied to the facts after that exercise. The Tribunal, elaborately addressed issue of non-production of documents at the time of survey as also production within a fortnight. As rightly pointed out by the bank, it would be almost impossible for the bank to collect such huge number of documentary record in post survey period of a fortnight, and therefore, the ground of delay when was satisfactorily explained records/documents and recorded by the Tribunal, the impugned order hardly calls for any interference.
HIGH COURT OF GUJARAT
ITO v. Adinath Cooperative Bank Ltd.
Tax Appeal No. 1420 of 2010
January 11, 2012
Ms. Sonia Gokani J. – Brief outline of the factual details at the outset is necessary for determination of this Tax Appeal.
1.1 Respondent-assessee is Co-operative Bank engaged in the business of Banking. Survey was carried out on 27.12.2005 for verifying the regularity in opening bank account. On having found alleged breaches in complying with the various provisions of law while opening the bank account, a show cause notice was issued on 6.1.2006 calling upon the respondent to furnish the requisite details as also for explanation in connection with 156 current accounts and 53 fixed deposits outlining specific defects and infirmities with regard to each such case.
2. Assessee-respondent replied to such show cause notice vide its letter dated 12.1.2006, contending inter alia therein that every time, there is an occasion for opening the bank account, set of documents in the form of specimen signature card, bank account opening Form along with various terms and along with requisite evidence. It was also further contended that wherever PAN details are furnished filling-up the Form No.60 would not be necessary. It was also further submitted that new accounts were being opened only after obtaining requisite proof of the members. With regard to some of the fixed deposits in connection with which the querries were raised, it was submitted that those were 5 to 6 years old and during that period bank had already changed the place and therefore, only available evidences were in the form of PAN details/Form No.60 and they were ensured to be furnished within period of 15 to 30 days on obtaining the same from the members.
2.1 There were further submissions made by the assessee-respondent along with adducment of the evidence in this regard.
2.2 Statement of one Smt. Aarti Babubhai Shah, Manager of the Bank was recorded on oath on 27th December, 2005 where she answered certain querries made at length.
3. Assessing Officer having noted that it was mandatory on the part of bank to ensure that the applicant while opening the bank account must furnish address, essentially to make the system full proof for establishing the identity of the person concerned treated the same as a major breach.
3.1. On having also found that in number of matters opening of bank accounts without requisite proof of PAN/proof of address was permitted, the same was held in complete breach of the legal provision. Thus, on account of alleged violation of section 139A(6)/139A(8) of the Income Tax Act, 1961 and Rule 114B(f) of Income Tax Rules, such transactions also prescribed by CBDT under Rule 114(B) of the Income Tax Rules, where clause ‘C’ specific that deposit in cash aggregating to Rs. 50,000/-or more would necessitate customer to furnish the PAN and the person who does not have PAN according to Rule 114B could be required to make declaration under sub-Section 6 of Section 139A read with clause (c) of Sub-Clause (2) of Rule 114C. It is the duty of either Bank Manager or officer of the Bank–receiving such application to ensure that either PAN is quoted or declaration is made in Form-60. Assessing Officer held that the same had given rise to penalty u/s. 272B of the Income Tax Act. Penalty for such failure in each case was levied at Rs. 10,000/- by detail reasonings.
3.2. Assessing Officer noted during the penalty proceedings that details regarding proof of address as required in the form being the copy of telephone bill, electricity bill, property tax bill, copies of driving license, election card etc. were missing. Assessing Officer also noted that subsequently produced documents in the form of photo stat copies were not kept otherwise as required to be maintained. They were neither kept with the account opening form nor with Form No.60. What was also not found acceptable by Assessing Officer was the fact that misplacement of this documents also was not mentioned by the Manager while her statement was recorded. Considering 156 instances of illegality in light of opening of account in gross violation as also in respect of 54 fixed deposit account. Assessing Officer levied the penalty of Rs. 10,000/- for each case making it totally Rs. 21.00 lakhs.
4. Respondent-Bank challenged the said order before Commissioner(Appeals), which after noting the disputes raised by the Revenue and on carefully considering the rival submissions of the parties, culled out three issues namely :
1. Whether there was any default on the part of assessee in confirming with the provision of section 139A read with rule 114B and 114D of the Income Tax Rules?
2. Whether penalty can be levied in respect of bank accounts opened prior to the insertion of Section 272B of the Income Tax Act in respect of accounts opened prior to 1.6.2002 ?
3. Whether penalty of Rs. 10,000/- can be levied u/s. 272B separately in respect of each bank account or could that be done in lump sum ?
4.1 On the 1st issue CIT (Appeals) held that there was default committed by assessee-respondent in not complying with the provision of 139A of the Act read with Rule 114B and 114C of the Income Tax Rules by detailed discussion of factual matrix and applying the provisions of law to the same.
4.2 On the 2nd issue as to whether penalty u/s. 272 could be levied in respect of accounts opened prior to 1.6.2002, it sustained the action of Assessing Officer by holding that the every action which subsisted on the date of introduction of Section 272B would attract penalty under the said provision on the logic that the introduction of penal provision.
4.3. In relation to the 3rd issue whether Assessing Officer was justified in levying penalty of Rs. 10,000/- separately for penalty in respect of each account, it concluded that the penalty under section 272B is required to be levied on penalty committed in respect of each account separately. There was absolutely no question of levying lump sum penalty of Rs. 10,000/- on all the defaults put together. In short, it concurred with the conclusion of Assessing Officer in levying the penalty on violation of provision of Section 139A read with Rule 114B and 114C.
5. Tribunal while dealing with this issue held thus:
6. We have heard rival submissions and perused material available on record. As the facts emerge, it has not been disputed that branch was shifted to new premises, short by time prior to the date of survey. Though documents could not be immediately submitted with the survey team, at the time of survey, within a period of two weeks of the request, details in respect of these accounts were furnished before the AO, which was listed in the assessee’s written submissions. It emerges that all the documents purport to have been submitted prior to opening of bank accounts, indicating that these documents were not pertained subsequently, leading to a inference because at the time of survey, immediately assessee’s bank’s lady manager could not produce all the relevant details cannot automatically entail imposition of penalty . In our view, with given facts and circumstances assessee was prevented by sufficient and reasonable cause in furnishing these documents at the time of survey, Deficiencies have been complied within 15 days which cannot be called unreasonable period. In consideration of entire facts and circumstances, we delete penalty.
6. The impugned order is challenged, proposing the following question as substantial question of law for our consideration.
(I) Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in deleting penalty in the sum of Rs. 19,50,000/- levied by the Assessing Officer and confirmed by the Appellate Commissioner under section 272B of the Income Tax Act ?
7. Learned senior counsel Mr. Manish Bhatt fervently made his submissions that two adjudicating authorities concurrently held in favour of Revenue and there are no reasons, much less convincing reasons given in the order of Income Tax Appellate Tribunal for setting-aside those orders. He further urged that the very findings of the Tribunal being adverse to the material on record must be held to be perverse and that itself would give rise to the question of law.
8. Per contra, learned senior counsel Mr. J.P. Shah urged the Court that it would not have been possible for Manager to put together so much of information within a short span and collectively produced the same before the adjudicating authorities. Moreover, she was new to the Bank and transactions being old. Some of the answers given by her cannot come in the way of the bank. Moreover, it was apparently made clear that there was shifting of the Branch of the Bank recently which also was the reason for misplacement of the some of the documents which were vital in the issue under consideration. Again as contended by learned senior counsel that there are hardly any question of law arising in the instant case and Tribunal also having based its findings on material adduced by both the sides, this appeal deserves no consideration.
272B of the ITAT Penalty for failure to comply with the provisions of section 139A.:
“(1) If a person fails to comply with the provisions of section 139A, the Assessing Officer may direct that such person shall pay, by way of penalty, as sum of ten thousand rupees.”
This provision impose penalty on the person to an extent of Rs. 10,000 for non-compliance of section 139A, after affording an opportunity of hearing to the person concerned.
Section 139A requires every person to apply for allotment of permanent Account number. This section was substituted by the Finance Act 1995. This present section as it stands a statute book, was substituted by the Finance Act, 1995 for the earlier section 139(A) which came into effect from 1st July 1995. The person when receives income or amount from which the tax is required to be deducted, is to intimate his permanent account No. (“PAN”) to the person who is responsible for deducting such tax under that chapter. As can be seen from the discussion made by the Commissioner Appeal in its order that the assessee was required to comply with specific provisions of section 139(A) and Rules 114(B) and 114(C). Even prior to the introduction of section 272(B), when neither the provisions of section 139(A)nor rules 114 and 114(C) was complied with on a regular basis, it was deemed fit to bring section 272(B), to the statute book. The Commissioner, therefore, held that every default which subsisted on the date of introduction of section 272(B) would be liable to penalty as the question was not retrospection of the penal provisions but default made on the date of introduction of such penal provisions.
9. The Tribunal while examining this issue went purely by the facts of the case and held that the difficulties in non-production of the documents as was required under the statute was on account of shifting of branch of the bank shortly before the date of the survey and afterwards within a period of two weeks they were furnished before the Assessing Officer. Since, these documents at the time of survey were not presented, it was inferred that they were collected subsequently in post survey period. The explanation given by the respondent assessee of late production of these documents after a fortnight was found justifiable by the Tribunal. Therefore, it clearly held that this was not a case where by the non-production of material at the relevant time rendered back liable for the penalty under section 272(B). Thus it is apparent from this discussion of the Tribunal that the issue of applicability on penal provisions prospectively or retrospectively was not required to be considered in the light of specific facts themselves and the entire issue has not been touched.
10. Although it has been vehemently contended by the Revenue that the Tribunal has not given cogent reasons in setting aside the the concurrent findings of both the adjudicating authorities. We are not impressed by the elaborate discussion made by both adjudicating authorities on the legal issues when otherwise, there were no facts available for them to apply legal provision as is urged in this appeal by the revenue. We are of the opinion that the entire issue is in the realm of facts. It is true that at the time of survey, bank manager was unable to produce requisite material particularly permanent account number of those persons who had opened the account with the bank, and thereby there may appear to be breach, which as per the statute would attract penalty provisions. However, in every matter the facts will have to be gauged and the law needs to be applied to the facts after that exercise. We find no error in the reasonings of the Tribunal, where it elaborately addressed in the judgment on both the counts, namely, non-production of documents at the time of survey as also production within a fortnight. As rightly pointed out by learned Senior counsel Mr. Shah, it would be almost impossible for the bank to collect such huge number of documentary record in post survey period of a fortnight, and therefore, the ground of delay when was satisfactorily explained and recorded by the Tribunal, the impugned order hardly calls for any interference. Consequently this Tax Appeal does not merit any consideration and deserves to be dismissed. Hence, the same is dismissed with no order as to costs.