Non-Filing of AIR Due to Lack of Awareness is Reasonable Cause: Section 271FA penalty deleted

Dr. Babasaheb Ambedkar Urban Cooperative Bank Ltd. Vs. DIT (Intelligence and Criminal Investigation)

The Hon’ble Nagpur Bench of Income Tax Appellate Tribunal, Nagpur, allowed the appeal filed by the applicant Dr. Babasaheb Ambedkar Urban Cooperative Bank Ltd. Vs. DIT (I&CI), Nagpur. In this case common issue raised by the applicant for the A.Ys. 2008-09 to 2015-16.

Brief of the Case :- The assesee is a cooperative bank. As per the provisions of section 285BA of the Act, an obligation has been cast upon the assessee to furnish the AIR in the requisite Form in respect of the specified transactions. The assessee did not submit this Form for any of the years under consideration. An inspection was carried out, in which it was observed that the assessee was not filing the AIRs. On being called upon to explain the reasons for non-compliance, the assessee submitted that it was not aware of the obligation to file the AIR and it was only pursuant to the inspection that this obligation came to its notice and was immediately complied with for all the years under consideration. In the opinion of the AO, the assessee ought to have the knowledge about its obligation to file the AIR. Rejecting the assessee’s contention, he imposed penalty u/s 271FA for all the 8 years amounting to (around) Rs.14 lakhs. The Ld.CIT(A) echoed the penalty orders passed by the AO. Aggrieved thereby, the assessee approached the Hon’ble Tribunal.

Facts examined by the Tribunal :- It is seen that section 285BA was inserted by the Finance Act, 2003 w.e.f. 01.04.2004. Admittedly, the assesssee was under obligation to file the AIR in respect of the specified transactions. The assessee did not file AIRs ab initio. It was only pursuant to the inspection that it came to know of its obligation to file the AIRs, which obligation was discharged for all the years immediately on coming to know of it. Section 271FA imposes penalty in case of default under section 285BA. However, section 271FA is included u/s 273B, which provides that the penalty should not be imposed under the concerned sections where there exists a reasonable cause for the failure. Thus, section 271FA is subjection to section 273B. The result is that if there exists a reasonable cause for not complying with the provisions of section 285BA, for whcih the penalty is otherwise imposable u/s 271FA, such penalty will not be levied.

Considering the peculiar facts and circumstances of the case, the Hon’ble Tribunal satisfied that there was a reasonable cause for the assesse in not filing the AIRs in terms of section 285BA of the Act. Resultantly, the penalty so imposed u/s 271FA is directed to be deleted.

Conclusion :- From the above it is deduced that non-filing of AIR due to non-aware of its obligations on the part of the assessee consists of reasonable cause not warranting penalty u/s 271FA of the Act.

FULL TEXT OF THE ORDER OF ITAT NAGPUR

These eight appeals by the assessee are directed against the consolidated order passed  by the CIT(A)-2, Nagpur on 12-10-2018 upholding the penalty imposed by the Assessing Officer (AO) r/s271FA of the Income-tax Act, 1961 (hereinafter also called ‘the Ace) for the assessment sears 2008-09 to 2015-16. Since common issue is raised in these appeals, we are proceeding to dispose them off by its consolidated order for the sake of convenience.

2. Briefly stated, the facts of the case are that the assessee is a Cooperative bank. As per the provisions of section 285BA of the Act, an obligation has been cast upon the assessee to furnish the Annual lnlovniation Return (AIR) in the requisite Form in respect of the specified transactions. The assessee did not submit this Form for any of the years under consideration. An inspection was carried out, in which it was observed that the assessee was not filing the AIRs. On being called upon to explain the reasons for non-compliance, the assessee submitted that it was not aware of the obligation to file the AIR and it was only pursuant to the inspection that this obligation came to its notice and was immediately complied with for all the years under consideration. In the opinion of the AO, the assessee ought to have the knowledge about its obligation to file the AIR. Rejecting the assessee’s contention, he imposed penalty u/s.271FA for all the years under consideration as follows

3. The Id. CIT(A) echoed the penalty orders passed by the AO. Aggrieved thereby, the assessee has approached the Tribunal.

4. Having heard the rival submissions and gone through the relevant material on record, it is seen that section 285BA was inserted by the Finance Act, 2003 w.e.f. 01-04-2004. Admittedly, the assessee was under obligation to file the AIR in respect of the specified transactions. The assessee did not file AIRs ab intio. It was only pursuant to the inspection that it came to know of its obligation to file the AIRs, which obligation was discharged for all the years under consideration immediately on coming to know of it. Section 271FA imposes penalty in case of default under section 285BA. However, section 271FA is included u/s.273B, which provides that the penalty should not be imposed under the concerned sections where there exists a reasonable cause for the failure. Thus, section 271FA is subject to section 273B. The result is that if there exists a reasonable cause for not complying with the provisions of section 285BA, for which the penalty is otherwise imposable u/s 271FA, such penalty will not be levied.

5. Turning to the facts of the instant case, we find the assessee is a small urban cooperative bank. The obligation to file the AIRs u/s.285BA came into being from 01-04-2004. The assessee was not aware of its obligation and hence never filed its AIR under the relevant section since inception. It was only pursuant to the inspection that it was made aware of its obligation of filing the AIR. Immediately thereafter, the assessee swung into action and filed the AIRs for all the years under consideration. Considering the peculiar facts and circumstances of the case, we are satisfied that there was a reasonable cause for the assessee in not filing the AIRs in terms of section 285BA of the Act. Resultantly, the penalty so imposed u/s.271FA is directed to be deleted.

6. In the result, all the appeals are allowed.

Order pronounced in the Open Court on 24^th August, 2023.