Tribunal Cancels Rs. 79.3 Lakh Penalty on Bank for Customers' Non-Compliance with PAN Rules; Orders Review of Double Penalty.

The Tribunal concluded that the penalty under section 272B of the Income-tax Act was not applicable to the bank for customers' non-compliance with section 139A and related rules. It determined that the bank's duty was solely to ensure that a PAN or Form No. 60 was obtained and forwarded to the tax authority. Consequently, the Tribunal canceled the imposed penalty of Rs. 79,30,000. Additionally, it instructed the Assessing Officer to verify and reduce any double penalty resulting from the Commissioner's enhancement for 209 cases, if confirmed. The appeal was allowed in favor of the assessee.

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Issues Involved:
1. Levy of penalty under section 272B of the Income-tax Act.
2. Enhancement of penalty by the Commissioner of Income-tax (Appeals).

Issue-Wise Detailed Analysis:

1. Levy of Penalty under Section 272B of the Income-tax Act:

The assessee, engaged in banking, was penalized for not fully complying with section 139A of the Act and rules 114B to 114D of the Income-tax Rules, 1962. During a survey under section 133A, it was discovered that Form No. 60, obtained from depositors without PANs, was either incomplete or lacked supporting evidence for addresses. The Assessing Officer imposed a penalty of Rs. 79,30,000 for 793 cases of non-compliance.

The assessee contended that 209 of these cases predated the enactment of section 272B (June 1, 2002) and should not attract penalty. The Commissioner of Income-tax (Appeals) instead issued an enhancement notice and confirmed the penalty, adding Rs. 20,90,000 for these 209 cases.

The Tribunal analyzed sections 139A(5) and 139A(6) and rules 114B to 114D, concluding that the obligation to quote PAN or file Form No. 60 lies with the customer, not the bank. The bank's duty is to ensure the PAN is quoted or Form No. 60 is obtained and forwarded to the relevant tax authority. Therefore, the Tribunal held that the penalty under section 272B(1) should be imposed on the customer, not the bank. The Tribunal canceled the penalty, emphasizing that the bank should have been allowed to rectify any defects in Form No. 60.

2. Enhancement of Penalty by the Commissioner of Income-tax (Appeals):

The assessee argued that the enhancement by the Commissioner resulted in double penalty for the 209 cases. The Tribunal directed the Assessing Officer to verify if the enhancement led to double penalty and to reduce it if confirmed.

The Tribunal also addressed the assessee's plea that the penalty, if any, should be limited to Rs. 10,000 for the entire default rather than Rs. 10,000 per account. However, since the Tribunal canceled the entire penalty, this issue did not require independent adjudication.

Conclusion:

The Tribunal concluded that the penalty under section 272B was not applicable to the bank for the customers' failure to comply with section 139A and related rules. The bank's obligation was limited to ensuring PAN or Form No. 60 was obtained and forwarded. The appeal was allowed, and the penalty was canceled. The Tribunal also directed the Assessing Officer to check for any double penalty due to the enhancement and reduce it accordingly.

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