Case Law Details
Motor & General Finance Ltd. Vs ACIT (ITAT Delhi)
Introduction: The case of Motor & General Finance Ltd. Vs ACIT before the Income Tax Appellate Tribunal (ITAT) Delhi revolves around the imposition of penalty under section 271FA of the Income Tax Act. The central issue pertains to whether the penalty is justified when there are no reportable transactions.
Detailed Analysis: The assessee, Motor & General Finance Ltd., challenged the penalty levied under section 271FA of the Income Tax Act for failure to file a return/Statement of Financial Transaction (SFT) under section 285BA(1). The penalty was imposed despite the absence of any reportable transactions by the assessee.
The counsel for the assessee argued that the company, engaged primarily in leasing/renting immovable property, had only one reportable segment, as indicated in the Tax Audit Report. Furthermore, the Audit Report stated that the assessee was not required to furnish statements in Form No. 61, Form No. 61A, or Form No. 61B, affirming the absence of reportable transactions.
The Tribunal noted that neither the Assessing Officer nor the Commissioner of Income Tax (Appeals) identified any reportable transactions by the assessee. Additionally, it was observed that the penalty was levied disregarding the submissions and evidence provided by the assessee regarding the absence of reportable transactions.
In its decision, the ITAT referred to a precedent set by the Visakhapatnam Bench of the Tribunal, which held that no penalty under section 271FA could be levied in the absence of reportable transactions. The Tribunal emphasized that the obligation to file an Annual Information Return (AIR) arises only when there are reportable transactions as specified under section 285BA of the Act.
The Tribunal further cited Section 273B of the Act, which provides for reasonable cause for failure to comply with certain provisions. In this case, the Tribunal concluded that the assessee had a bona fide belief that no return was required to be filed due to the absence of reportable transactions, which constituted a reasonable cause.
Conclusion: In the case of Motor & General Finance Ltd. Vs ACIT, the ITAT Delhi ruled that penalty under section 271FA cannot be levied in the absence of reportable transactions. The decision underscores the importance of adhering to statutory requirements and considering the absence of reportable transactions as a valid reason for non-filing of returns. As a result, the penalty imposed by the Assessing Officer was cancelled, providing clarity on the application of penalties in similar circumstances.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the assessee against the order of the Ld. CIT(A) / National Faceless Appeal Centre (NFAC), New Delhi, dated 09.02.2023 for Assessment Year 2018-19, in confirming the penalty of Rs. 1,36,200/- levied u/s 271FA of the Act.
2. The Ld. Counsel for the assessee submits that penalty u/s 271FA was levied for the reason that the assessee did not file return / Statement of Financial Transaction (SFT) u/s 285BA(1) of the Act, even though, there were no reportable transaction. Referring to page 19 of the Paper Book which is the Audit Report, the Ld. Counsel for the assessee submits that the assessee is engaged in the single primary business of Leasing / Renting of immovable property and has only one reportable segment. The Ld. Counsel for the assessee referring to page 67 of the Paper Book, which is the Form no. 3CD of the Tax Audit Report, submits that even in the Tax Audit Report, it is reported that nature of business of Assessee is real estate and renting services. Further, referring to page no. 79 of the Paper Book, the Ld. Counsel for the assessee submitted that it is reported in the Audit Report that Assessee is not required to furnish statement in Form No.- 61, Form No.- 61A or Form No.- 61B. Therefore, the Ld. Counsel for the assessee submits that the assessee do not have any reportable transaction u/s 285BA(1) read with Rule 114E of the Income Tax Rules and therefore no return has been filed. The Ld. Counsel for the assessee further referring to the penalty order submits that, nowhere the Assessing Officer referred to any reportable transaction of the assessee, Assessing Officer has not identified any reportable transaction relating to the assessee. Ld. Counsel for the assessee submits that the CIT(A) has erred in sustaining the penalty observing that even if there were no reportable transaction, the assessee had to filed nil return as prescribed in Section 285BA(1) of the Act read with Rule 114 of the Income Tax Rules and since the assessee did not file nil return, CIT(A) sustained the penalty which action is not justified.
3. The Ld. Counsel for the assessee further submitted that Annual Information Return (AIR) have been replaced by Statement of Financial Transaction (SFT) with effect from financial year 2016-17 and in Annual Information Return filing regime return was required to be filed only if there was reportable transaction in the relevant year and nil return was not required to be filed. The Ld. Counsel for the assessee submits that even as per Form No. 61, assessee was not required to file SFT and even otherwise no penalty is leviable on technical default.
4. The Ld. Counsel for the assessee placing reliance on the decision of the Visakhapatnam Bench of the Tribunal in the case of M/s Guntur District Co-operative Central Bank Ltd. vs. DIT (Intelligence & Criminal Investigation), in ITA No. 355-360/Viz/2018 dated 25.01.2019 submits that on identical facts the Tribunal held that no penalty u/s 271FA can be levied if there are no reportable transaction and no return was filed by the assessee. The Ld. Counsel for the assessee submits that the Tribunal held that if there are no reportable transactions, the assessee is not obliged to file the AIR and levy of penalty u/s 271FA is unjustified.
5. Ld. Counsel for the assessee further placed reliance on the following decisions for the proposition that penalty proceedings u/s 271FA of the Act should not be invoked for not filing return and non filing of return is only technical or venial breach and it was only a bonafide belief of the assessee that it was not required to file return when there are no reportable transactions.
2. Durgapur Steel People’s Cooperarive Bank Ltd. vs. Director of Income-tax (Intelligence & Criminal Investigatiion ). Kolkata * [2016] 74 com 97 (Kolkata-Trib.)
6. On the other hand, the Ld. DR strongly placed reliance on the order of the Ld. CIT(A).
7. We have heard the rival contentions and perused the materials available on record. On perusal of the Tax Audit Report, it is noticed that the assessee has reported that there are no reportable transaction and there is no requirement of filing Form No. 61, Form No. 61A and Form No. – 61B. On perusal of the orders of the authorities below, the Assessing Officer as well as the CIT(A), we could not find that any reportable transactions have been identified in this case requiring the assessee to file SFT within the due date as prescribed u/s 285BA(1) of the Act read with Rule 114E of the Income Tax Rules. We noticed that penalty were levied ignoring the submissions of the assessee that there are no reportable transaction and therefore the provision of Section 285BA(1) of the Act are not applicable simply because the assessee did not file return of SFT.
8. We observed that the Visakhapatnam Bench of the Tribunal considered whether penalty u/s 271FA is leviable in a situation where there are no reportable transaction and no return of AIR was filed by the assessee and the Tribunal held that the penalty is not attracted, observing as under:
7. We have heard both the parties and perused the material placed on record. As per section 271FA, a person who is responsible for registering, or maintaining books of account or other document containing a record of any specified financial transaction, under any law for the time being in force, shall furnish an annual information return, in respect of such specified financial transaction which is registered or recorded by him during any financial year beginning on or after the 1st day of April, 2004 and information relating to which is relevant and required for the purposes of this Act, to the prescribed income-tax authority or such other authority or agency as may be prescribed. The return has to be filed by a person who has recorded the transaction and person who fails to furnish such return within time period prescribed u/s 285BA(2) of the Act, shall be liable to pay penalty u/s 271FA of the Act for a sum of Rs. 100/- for everyday during the period which the failure continues. Combined reading of section 271FA and section 285BA shows that a person is obliged to furnish the AIR, only. when there is existence of reportable transaction or specified transaction which required to be reported u/s 285BA of the Act. In case of no reportable transaction/ specified transaction during the financial year, there is no requirement to file the AIR. Thus, if any of the assessee or person not having entered into the reportable transaction/specified transaction mentioned u/s 285BA of the Act need not furnish a statement or the return. In the instant case, as per the acknowledgement placed by the Ld.AR in the paper book, there were no reportable transactions/specified transactions which required to be reported u/s 285BA of the Act r.w. Rule 114E of Income Tax Rules. Therefore, there is no obligation cast upon the assessee to fie the return u/s 285BA for the F.Y. 2010-11 and 2011-12. The Ld.DIT issued notice u/s 285BA on 24.08.2017 which was served on the assessee on 27.03.2017 and the assessee responded to the notice by furnishing the ‘Nil’ transactions and the department did not make out a case that the assessee had the recorded reportable/specified transactions in the relevant financial year. We are unable accept the contention of the Ld. DR not to accept fresh argument of the assessee with regard to non requirement of filing the AIR in the absence of reportable transaction and the same is rejected. We hold that in the absence of any specified transaction required to be reported u/s 285BA of the Act, the assessee is not obliged to file the AIR and levy of penalty u/s 271FA is unjustified. Accordingly, we set aside the orders of the lower authorities and cancel the penalties imposed u/s 271FA for the A.Y. 2011- 12 and 2012-13. The appeals of the assessee for the F.Y. 2010-11 and 2011-12 are allowed.
9. This decision applies to the facts of the assessee’s case. Even otherwise, we are of the view that the assessee had a bonafide belief that no return is required to be filed when there are no reportable transactions which is a reasonable cause u/s 273B of the Act for not levying the penalty u/s 271FA of the Act. Thus, in our considered view, the Assessing Officer is not justified in levying penalty u/s 271FA of the Act and we direct the Assessing Officer to delete the penalty levied u/s 271FA of the Act. Ground raised by the assessee is allowed.
9. In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court on 08. 01.2024
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