Kesar Alloys & Metals Pvt. Ltd. Vs Director of Income Tax (ITAT Indore)
Introduction: The case of Kesar Alloys & Metals Pvt. Ltd. vs. Director of Income Tax (ITAT Indore) revolves around a penalty dispute concerning the late submission of the Statement of Financial Transaction (SFT) under section 271FA of the Income Tax Act, 1961. The appeal challenges the penalty imposed by the Director of Income Tax, which was confirmed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi.
Detailed Analysis: The appellant, Kesar Alloys & Metals Pvt. Ltd., issued 1,00,000 equity shares during the financial year, necessitating the submission of SFT before the specified deadline. However, due to a bona fide mistake by the company’s accountant regarding the valuation of shares, the SFT was initially submitted with incorrect information. Despite efforts to rectify the error by providing a detailed explanation and submitting a revised SFT, the penalty was imposed by the Director of Income Tax.
In its appeal, the assessee argued that the penalty imposition was unjustified, emphasizing the bona fide belief underlying the initial submission and the subsequent corrective actions taken. The appellant contended that there was a reasonable cause for the delay, which should have been considered by the authorities before imposing the penalty.
The Income Tax Appellate Tribunal (ITAT Indore) examined the case meticulously, considering the discretionary nature of penalty imposition under section 271FA of the Act. It emphasized the significance of proving a reasonable cause for the failure to furnish the SFT within the prescribed timeframe. The tribunal concluded that the appellant had demonstrated a reasonable cause for the delay, warranting the deletion of the penalty.
Conclusion: In light of the detailed analysis and the provisions of the Income Tax Act, the appeal of Kesar Alloys & Metals Pvt. Ltd. against the penalty imposition is upheld. The ITAT Indore ruled in favor of the assessee, highlighting the importance of considering reasonable cause in penalty disputes. This case underscores the need for a thorough examination of circumstances before levying penalties under tax laws.
FULL TEXT OF THE ORDER OF ITAT INDORE
This appeal is filed by the Assessee as against the Appellate order dated 31.08.2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), confirming the penalty levied under section 271FA of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2017-18.
2. The brief facts of the case is that the assessee a Private Limited Company during the financial year issued 1,00,000 equity shares of Rs. 10/- each aggregating to Rs. 10 lacs at a premium of Rs.25/- each. Thus it was required to furnish Statement of Financial Transaction (SFT) before 31.05.2017 (extended upto 30.06.2017). The assessee did submit SFT-008 relevant to F.Y. 2016-17 on 29- 05-20 17 but the information was stated as NIL under the bona-fide belief that the face value of equity shares allotted to Shri Subhash Jain, Director of the company was Rs. 10 lacs excluding the premium collected thereon at Rs. 25 lacs. Such mistake was bona-fide and committed by the Accountant of the assessee company who was not acquainted with the technicalities of the provisions of Income tax Act and Rules. The assessee was issued with a show cause notice dated 30.08.20 18 why not penalty of Rs. 500/- be imposed for every day of default in filing SFT details.
2.1. In response to show cause notice revised Form SFT for financial year 2016-17 filed was not being accepted at Income Tax Portal. Therefore details relating to allotment of shares as required u/s. 285BA(5) were forwarded to the Director of Income tax (I & CI) with detailed explanation by speed post on 19.09.20 18, which was delivered by the speed post to the Director of Income Tax, Bhopal on 24.09.20 18.
2.2. Without considering the explanation as well SFT 008 submitted along with aforesaid letter, the Director of Income tax (I & CI) levied penalty u/s. 271FA for delayed submission of the form SFT, vide his order dated 30.11.2018 as under :-
