Tribunal rules in favor of appeal, deleting penalties for non-filing electronically due to pre-2016 ambiguity in regulations.

The Tribunal allowed the appeal, directing the AO to delete the penalty under section 271FA of the Act for non-filing the AIR electronically as required by Rule 114E for the financial year 2013-14. The Tribunal acknowledged the ambiguity regarding co-operative banks' inclusion before the 2016 amendment, constituting a reasonable cause under sec.273B.

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Issues:
Challenge to penalty under section 271FA of the Act for non-filing of Annual Information Return (AIR) electronically as required by Rule 114E of Income tax Rules for the financial year 2013-14.

Analysis:
The appeal challenged the penalty imposed under section 271FA of the Act for not filing the AIR electronically as mandated by Rule 114E of Income tax Rules for the financial year 2013-14. The Director of Income tax (Intelligence & Criminal Investigation) noticed the non-filing of AIR by the assessee and issued a notice under section 285BA(5) of the Act. The assessee manually furnished the AIR, which was required to be filed electronically as per the provisions. The Director did not recognize the manual return, leading to penalty proceedings under section 271FA. The penalty of Rs.3,97,100 was levied, calculated at Rs.100 per day from the due date until the notice's expiry date. The assessee's appeal before the Ld CIT(A) was dismissed, prompting the current appeal.

The Ld A.R contended that the amendment to Rule 114E, specifically including "co-operative banks" with effect from 01-04-2016, created ambiguity. The pre-amendment provisions did not cover co-operative banks, leading to the assessee's belief that they were not required to furnish AIR information. This ambiguity, according to the Ld A.R, constituted a reasonable cause under sec.273B of the Act, warranting the penalty's deletion. The Ld D.R argued that the amendment was clarificatory and that all assessees fell under sec.285BA(1) of the Act, dismissing the ambiguity claim.

After hearing both sides and examining the record, the Tribunal noted that the original Rule 114E did not include co-operative banks, with the amendment effective from 1.4.2016. Acknowledging the ambiguity regarding co-operative banks' compliance, the Tribunal found merit in the assessee's bonafide belief constituting a reasonable cause under sec.273B of the Act. Consequently, the Tribunal set aside the Ld CIT(A)'s order and directed the AO to delete the penalty under section 271FA for the relevant year.

In conclusion, the Tribunal allowed the appeal of the assessee, ruling in favor of deleting the penalty under section 271FA of the Act for non-filing of the AIR electronically as required by Rule 114E of Income tax Rules for the financial year 2013-14.

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