Penalty under section 271AA overturned for failure to report international transactions

The Tribunal upheld the decision of the ld. CIT(Appeals) and dismissed the Revenue's appeal regarding the penalty imposed under section 271AA for failure to report international transactions and furnish correct information for A.Y. 2011-12. The Tribunal ruled that the penalty was not valid under the amended provisions of section 271AA introduced by the Finance Act, 2012, as these provisions were not retrospective and only applicable from A.Y. 2012-13. Therefore, the penalty imposed by the Assessing Officer was unsustainable for the relevant assessment year.

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Issues:
Penalty under section 271AA imposed for failure to report international transactions and furnish correct information in return of income for A.Y. 2011-12.

Analysis:
The appeal was filed by the Revenue against the cancellation of a penalty of Rs. 8,68,77,800/- imposed under section 271AA of the Income Tax Act, 1961 by the Assessing Officer. The assessee, a Company engaged in the hotel business, failed to file the report under section 92E within the due date despite having international transactions with Associated Enterprises. The Assessing Officer invoked section 271AA and imposed the penalty, which was later cancelled by the ld. CIT(Appeals) on the ground that the amendment to section 271AA by the Finance Act, 2012 was not applicable to A.Y. 2011-12. The Revenue appealed this decision before the Tribunal.

Upon review, it was noted that the penalty was imposed for A.Y. 2011-12 based on the provisions of section 271AA, which were subsequently amended by the Finance Act, 2012. The amended provisions were not retrospective and came into effect from A.Y. 2012-13. As the defaults by the assessee were for A.Y. 2011-12, they were not covered by the amended provisions applicable from July 1, 2012. Therefore, the Tribunal agreed with the ld. CIT(Appeals) that the penalty imposed by the Assessing Officer under the amended provisions of section 271AA was not sustainable. Consequently, the Tribunal upheld the decision of the ld. CIT(Appeals) and dismissed the Revenue's appeal.

In conclusion, the Tribunal found that the penalty imposed for failure to report international transactions and furnish correct information in the return of income for A.Y. 2011-12 was not valid under the amended provisions of section 271AA introduced by the Finance Act, 2012. As the amended provisions were not retrospective and only applicable from A.Y. 2012-13, the penalty imposed by the Assessing Officer was deemed unsustainable, leading to the dismissal of the Revenue's appeal.

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