Penalty us 271FA for late filing AIR Return quashed by ITAT considering that the tax laws of the country are complex and complicated and require assistance of specialised tax practitioners.
ABCAUS Case Law Citation:
980 2016 (08) ITAT
Date/Month of Judgment: August 2016
Important Judgments relied by the assessee:
Motilal Padampat Sugal Mills Co. Ltd vs State of UP [118 ITR 326(SC)
WTO vs S.P. Jayakumar (1983) 3 ITD 221 (Mad)
Kaushal Diwan vs Income-Tax Officer 1983 3 ITD 432 Delhi
Brief Facts of the Case:
The appellant assessee was a Coperative Society dealing with borrowing and lending business. Under the provisions of Section 285BA of the Income Tax Act 1961, it was liable to furnish an annual information return (AIR), in respect of specified financial transaction. However, the assessee failed to comply with this legal requirement of furnishing AIR for the period of 2012-13.
The Assessing Officer (AO) on the request made by the assessee extended the time for making the compliance and the assessee complied with the requirement of Section 285BA by filing the AIR within the extended time. The AIR filed was accepted and the assessment was concluded.
However, subsequently the Office of the Director of Income Tax (Intelligence and Criminal investigation) imposed a penalty u/s 271FA of Rs.56,100/- for the delay of 561 days in furnishing AIR.
Challenging the imposition of penalty u/s 271FA, the assessee preferred an appeal before the Tribunal which is the subject matter of present case law.
Contentions of the Assessee:
It was argued that the AO having satisfied with the cause for the delay explained by the assessee extended the time for furnishing the AIR and after the assessee complied with the direction within the extended time, it was not open for the authorities to resort to the penalty proceedings under section 271FA.
The assessee also contended that , non-compliance with the requirement of Section 285BA till the notice, was non-intentional but only due to the fact that the assessee was not aware of the existence of such an obligation. The assessee placed reliance on a decision of Supreme Court in Motilal Padampat Sugal Mills Co. Ltd for the principle that there is no presumption in law that every persons knows the law. The assessee also placed reliance on a decision of Madras High Court in S.P. Jayakumar wherein it was observed that the tax laws are complex and complicated and for compliance often require assistance of specialised tax practitioners
The assessee submitted that the breach in question was merely technical and venial one and not all intended or deliberate, and the explanation as to their ignorance of obligation was sufficient cause within the meaning of Section 273B.
Contentions of the Revenue:
The Revenue submitted that the department was periodically launching awareness campaigns by advertising in the print and visual media about the obligation of the specified persons for filing of AIR by them, and it is not open for the assessee to contend that they are not aware of the obligation because the assessee got the accounts of all branches consolidated and audited, filed income Tax/TDS returns and aware of the obligations under the Income Tax Act.
Question of Law framed by the ITAT:
whether there is sufficient cause for the assessee for non-compliance with the requirement of Section 285BA of the Act till the notice was served?
Observations mady by the ITAT:
- except the instant alleged breach, nothing more is alleged against the assessee.
- The order of the Director of Income Tax (Intelligence and Criminal investigation) did not speak as to how the assessee stood to gain by contravening with the provisions of Section 285BA or the act of assessee resulted in any loss to the Revenue.
- it is an acknowledged and judicially recognized fact that the tax laws of this country are complex and complicated and often require for compliance, therewith the assistance of tax practitioners specialising in this field, is a well known fact, and it is equally well known fact that the legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making references to the history of the enactments.
- In these circumstances, no mala fides can be attributed to the assessee so as to invoke the penalty proceedings under section 271FA.
- The Director of Income Tax (Intelligence and Criminal investigation) should have taken note that the breach is only technical or venial breach which could have flown from a bonafide ignorance of the assessee that he was liable to act in the manner prescribed by the statute, and should not have invoked the penalty proceedings.