Kotak Mahindra Bank Limited Vs ADIT (ITAT Mumbai)
ITAT Mumbai held that penalty under section 272A(1)(c) not warranted as reasonable cause shown for delay in providing the details by the assessee and later in the end, the assessee had shared all the relevant details.
Facts- The assessee is a banking company. Erstwhile ING Vysya Bank Ltd was merged with the assessee with effect from 01/04/2015 as per the order of the Reserve Bank of India. During the investigation in the case of M/s. Gujalaxmi Diamonds Pvt Ltd, summons u/s. 131 dated 02/01/2020 was issued to the Branch Manager of Kotak Mahindra Bank. Vide these summons, the bank authorities were required to produce bank statements of the following held in the name of M/s Gujalaxmi Diamonds Pvt Ltd and persons associated with it along with KYC details for the period starting from 01/04/2012 to 31/03/2013 for necessary examination and verification.
In response, the assessee filed the details and after perusal of the bank statement and other details, another summons dated 31/03/2020 was issued requiring the bank authorities to produce specific details of the transactions above Rs. 5 lakhs as reflected in the copy of bank statements with account number, bank details, etc. on or before 03/02/2020. The assessee vide mail dated 07/02/2020 had stated that there were no transaction above Rs.5 lakhs for the given period and that all the bank accounts under investigation currently stand closed.
AO queried the assessee with regard to the contradiction found in the bank statement where there are transactions above Rs.5 lakhs. In response, the assessee submitted that the statement made was an inadvertent error due to oversight and that the intention was not to provide false information. Accordingly, the assessee requested for more time which the Assessing Officer did not accept.
AO issued a notice u/s. 274 read with Section 272A(1)(c) dated 19/02/2020 for not furnishing the required details in response to summons and proceeded to levy penalty under the said section. AO held that the assessee has intentionally omitted to produce the correct documents and details as called for in connection with the case of M/s Gujalaxmi Diamonds Pvt Ltd.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is preferred by the assessee.
Conclusion- Held that the assessee has intentionally hidden / provided inaccurate details pertaining to Gujalaxmi Diamonds Pvt Ltd is also incorrect since it is factually established that the assessee has ultimately shared all the relevant details and therefore not tenable. In view of these discussions and considering facts of the present case, we are of the view that there is a reasonable cause for the delay in providing the details by the assessee and since the assessee in the end had shared all the relevant details, levy of penalty under section 272A(1)(c) is not warranted. Accordingly the penalty thus levied is hereby deleted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is against the order of the Commissioner of Income-tax (Appeals)(National Faceless Appeal Centre)(in short, ‘the CIT(A)’) dated 06/02/2023 for A.Y. 2020-21.
2. The assessee raised the following grounds of appeal:-
“1. The Commissioner of Income Tax (Appeals), NATIONAL FACELESS APPEAL CENTRE (NFAC) [ “the CIT(A)”] erred in confirming the penalty of Rs. 10,000/-under section 272A(l)(c) of the Income Tax Act (“Act”) levied by ADIT (Inv), Unit 7, Mumbai for alleged non-compliance of summons issued u/s. 131 of the Act which is arbitrary and unjustified.
2. The CIT(A) further erred in confirming the penalty on conjecture and surmise and without appreciating facts of the Appellant’s case.
3. The CIT(A) failed to appreciate and ought to have held that:
a. The Appellant has not committed any default much less a deliberate default so as to attract penalty under section 272A(l)(c).
b. There was no deliberate default on the part of the Appellant in making compliance to the requirements of summon under section 131 of the Income Tax Act.
c. The Appellant was prevented by a reasonable cause within the meaning ‘ of section 273B of the Income Tax Act in alleged non-compliance of summon issued under section 131 of the Income Tax Act and, therefore, there was no justification in the levy of penalty under section 272A(l)(c) of the Income Tax Act.
d. The alleged non-compliance of summons under section 131 cannot be said to be intentional or wilful and is only a technical or venial breach.
e. The Appellant neither acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation
f. The detailed called for were regarding the account of the customer for the FY 2012-13 of erstwhile ING Vysya Bank Ltd (elVBL) which was merged with Kotak Mahindra Bank Ltd (KMBL) w.e.f. 01.04.2015.
g. The erstwhile elVBL operated on an independent core banking system called “Profile” whereas KMBL operated on a core banking system called “Finacle” and thus, both the banks operated on different software platforms.
h. Manual intervention was indeed required for extracting the data and when the summons were served on Appellant, it was difficult to gather data in respect of the accounts of the customers of elVBL in the computer system as well physical documents.
i. Further the data requested was very old relating to FY 2012-13
4. The Appellant prays that based on the facts and the circumstances of its case, it be held that there is no failure on the part of Appellant to comply with summons issued u/s 131 of the ACT and the provisions of section 272A(l)(c) are not attracted and AO be further directed to delete the penalty of Rs. 10,0007-.
5. Without prejudice to the above, since the Appellant has not acted deliberately in defiance of law nor was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation, would not be subjected to penalty.”
3. The assessee is a banking company. Erstwhile ING Vysya Bank Ltd (in short, eIVBL) was merged with the assessee with effect from 01/04/2015 as per the order of the Reserve Bank of India. During the course of investigation in the case of M/s Gujalaxmi Diamonds Pvt Ltd , summons under section 131 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 02/01/2020 was issued by DDIT (Inv)-7(3), Mumbai to the Branch Manager of Kotak Mahindra Bank, Nariman Point, Mumbai-21. Vide these summons, the bank authorities were required to produce bank statements of the following held in the name of M/s Gujalaxmi Diamonds Pvt Ltd and persons associated with it along with KYC details for the period starting from 01/04/2012 to 31/03/2013 for necessary examination and verification:-
