Cumbum Co-operative Town Bank Limited Vs DCIT (Intelligence & Criminal Investigation) (ITAT Hyderabad)
Held that penalty u/s 271F leviable as the assessee being a co-operative bank failed to furnish annual information annual information return
Facts-
The assessee being a “specified person” as per the provisions of section 285BA of the Act has an obligation to file Annual Information Report (AIR) in Form No.61A in respect of specified transactions before 31st August, 2013. In view of this, a notice was sent u/s 285BA(5) of the Act on 27.10.2016. As there was no response, penalty notice u/s 271F r.w.s. 274 of the Act dt.27.01.2017 was issued seeking explanation. However, assessee neither filed AIR information nor replied to the penalty notice. Hence, penalty was imposed at Rs.1,28,700/- and no reasonable cause was made out before the levy of penalty. Aggrieved with the penalty, assessee preferred appeal before the ld.CIT(A), who dismissed the appeal of the assessee.
Feeling aggrieved with the order of ld.CIT(A), assessee is now in appeal before us.
Conclusion-
Held that there was failure on the part of assessee to comply with the mandatory requirement of law, therefore the action of ld.CIT(A)) was in accordance with law.
We may mention that the banking institutions are the backbone of our economy, and bank are required to religiously follow the mandatory requirement of complying with the various mandatory provisions as per Income Tax Rules, 1962 or Income Tax Act, 1961. There is an inbuilt philosophy, to check and deter the deposit of cash in the bank account, to curb laundering of money. If the AIR had been filled by the bank in time, then the tax authorities would have access to various specified activities of various individuals, who had deposited more than 10 lakhs cash amount in a year in his/her bank account. Based on this information, revenue would have taken actions against erring persons, however tax authorities were failed to initiate action against such persons, on account of failure and non-compliance by the assessee before us. Thus, non-furnishing of such AIR, in fact had helped the evasion of the taxes by the dishonest unscrupulous persons by taking advantage of technicalities. Our above said view is covered in favor of Revenue by the decision of the hon’ble Punjab and Haryana High Court in the case of Sub-Registrar, Bhiwari Vs. DCIT (CIB) 2017 88 taxmann.com 582.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The appeal of the assessee for A.Y. 2013-14 arises from the order of Commissioner of Income Tax (Appeals) – 1, Guntur dated 26.07.2018 involving proceedings under section 271FA r.w.s. 274 of Income Tax Act, 1961 (in short, “the Act”) raising the following grounds :
“1. The order of the Commissioner of Income Tax (Appeals) is erroneous about the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) erred for not considering the location of the Appellant Bank and efforts made by them in submission of information u/s 285B of the IT Act.
3. The learned Commissioner of Income Tax (Appeals) could have condoned the delay of submissions of Annual Information Return as it was the first time to seek such information by the Income Tax Department and the Appellant made a sincere attempt and submitted information through “ito.hq.intel.h”
4. The learned Commissioner of Income Tax (Appeals) should have considered the difficulties generally being faced by the mufcil banks in compliance of various provisions of the IT Act particularly in initial stage and the learned Commissioner of Income Tax(Appeals) could have dropped the levy of penalty u/s 271FA for Rs. 1,28,700/-.”
2. The brief facts of the case are that assessee being a “specified person” as per the provisions of section 285BA of the Act has an obligation to file Annual Information Report (AIR) in Form No.61A in respect of specified transactions before 31st August, 2013. In view of this, a notice was sent u/s 285BA(5) of the Act on 27.10.2016. As there was no response, penalty notice u/s 271F r.w.s. 274 of the Act dt.27.01.2017 was issued seeking explanation. However, assessee neither filed AIR information nor replied to the penalty notice. Hence, penalty was imposed at Rs.1,28,700/- and no reasonable cause was made out before the levy of penalty. Aggrieved with the penalty, assessee preferred appeal before the ld.CIT(A), who dismissed the appeal of the assessee.
3. Feeling aggrieved with the order of ld.CIT(A), assessee is now in appeal before us.
4. The appeal filed by the assessee bank is on account of imposition of penalty by the Assessing Officer for not sharing the information as required in law, more particularly, u/s 271FA r.w.s. 274 of the Act. Before the Assessing Officer, the assessee could not appear, however, before the ld.CIT(A) the assessee had submitted that the assessee was unaware of the statutory requirement contemplated upon it as per section 285BA(5) of the Act. Therefore, assessee bank could not file the requisite information in time.
5. Before us, the assessee bank has filed written submissions and the relevant portion of the same is reproduced hereunder :
“The contentions of the appellant are:
(a) that the Form 61A applicable for specified financial transactions was introduced with effect from 1.4.2015 and was in vogue upto 31.3.2016. The same was later amended with effect from 1.4.2016.
(b) Earlier the said Form 61A was called “Annual Information Return” and was governed by Rule 114E. Rule 114E may kindly be perused. As far as the financial transactions is concerned, it is mentioned that it was introduced with effect from 1.4.2015. According to Rule 114E furnishing of information about the cash deposits and other banking activities of a Co-operative Bank, were introduced with effect from 1.4.2016 or 9.11.2015. Earlier, Rule 114E was considering seven items and the financial transactions by a Co-op Bank was not included.
(c) A perusal of Sec.285BA reveals that the prescribed reporting of financial transactions are with effect from 1.9.2019. According to Sec. 285BA (3) the specified financial transactions is defined with effect from 1.4.2015. The obligation to furnish the financial transactions was included in Sec.285BA only with effect from 1.4.2015. Prior to the said date, the transactions mentioned in Sec.285BA do not include financial transactions.
2. In view of the above, the provisions of Sec.285BA and Sec.271FA do not apply for the specified financial transactions for the financial year 2012-13. A reading of the provisions of Sec.285BA, Rule 114E, Form 61A would reveal that the financial transactions are included much later with effect from 1.4.2015 which would clearly indicate that during the financial year 2012-13, there was no such requirement for the assessee Co-operative Bank to file Form 61A.
3. Further, it is submitted that the above mentioned provisions are very complex and confusing which cannot be interpreted easily. Therefore, the assessee was prevented by sufficient reason in not furnishing the form 61A for the financial year 2012-13 within time. The delay in furnishing the Form 61A is for the reasons submitted above which are beyond the control of the assessee and is not intentional. Further, it is not a case when the assessee was given a notice and there was no response.”
6. On the basis of the above said written submissions and as per oral arguments, it was submitted that the requirement under Rule 114E under Income Tax Rules 1962 for furnishing the information is not applicable to the Co-operative Banks, including the assessee and therefore, the assessee bank was under bonafide belief that sharing information as per section 271FA r.w.s. 274 of the Act is not applicable to it. However, the assessee had deposited the amount after considerable time of 1287 days in complying the provisions of Section 285B of the Act.
7. On the other hand, the ld.DR had submitted that there is a failure on the part of the assessee in complying statutory duty casted upon the financial institution including the assessee in terms of Rule 114E of Income Tax Rules 1962 and this issue has already been decided by ld.CIT(A) . He drew our attention to pages 7 and 8 of the order of ld.CIT(A) to the following effect :
“CIT(A)’s Decision :
I have carefully considered the penalty order, grounds of appeal, submissions of the appellant, report of the ld.DCIT(I&CI), Hyderabad, counter comments of the appellant and decisions relied upon by the appellant.
The only one ground raised by the appellant is with respect to imposition of penalty and also claimed that as the appellant was not aware of the procedures requested to cancel the penalty. On careful consideration of the facts of the case and the comments of the Ld. DIT(I & CI), Hyderabad it is felt that the reasons put forth are not appreciable and does not fall u/s. 273B of the Act. When there is no reasonable cause made out, penalty has to be levied. In this point of view levy of penalty by Ld. DIT (I & CI) require confirmation.
The Hon’ble High Court of Punjab and Haryana in the following cases upheld the levy of penalty u/s.271FA of the Act stating that no reasonable cause was made out by the appellants and it was also held that ignorance of law is not an excuse.
