2019 (2) TMI 43 - AT - Income Tax

Tribunal Rules on Penalties for Late Tax Returns

The Tribunal partly allowed the assessee's appeal, setting aside penalties for late filing of Annual Information Returns (AIR) for F.Y. 2010-11 and ... Penalty u/s 271FA - person responsible to file return / AIR information - 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) - Held that:- 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 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. 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 - Decided in favour of assessee. Penalty required to be imposed for the period of delay - delay in filing the original return as well as the delay in furnishing the supplementary return correcting the defects, but not for the intervening period - Held that:- In the instant case, DIT have given only 4 days time to rectify the mistakes and the assessee has filed the AIR within 30 days from the date of receiving the notice for the A.Y. 2013- 14 to 2015-16 and the reason explained by the assessee was delay in service of notice and insufficient time given by the DIT and pressure of work due to annual closing of the accounts. Therefore, we consider it is reasonable cause for not furnishing the supplementary returns rectifying the defects within one month from the date of receipt of notice u/s 285BA(4). Accordingly, no penalty is leviable for the A.Y. 2013-14 to 2015- 16 for delay in filing the supplementary return rectifying the defects. For the A.Y. 2016-17, the assessee filed the supplementary return on 25.10.2017 with 210 days delay. Since the notice was received by the assessee on 27.03.2017, we consider it is reasonable to allow the time limit of at least 29 days from the date of receipt of the notice as provided u/s 285BA(4) of the Act, as the Act provides time limit of less than 30 days for rectifying the defects. Thus, the assessee should have filed the rectified return on or before 25.04.2017. The assessee did not furnish any reason for not furnishing the supplementary return on or before 25.04.2017. Though the assessee explained that the reason for not furnishing the return was closing work of year end, the same would be completed by 31st March of the relevant financial year and there is no reason for not furnishing the supplementary return subsequent to completion of the year end closing work. Therefore, we confirm the penalty for the period of default in furnishing the original return and the supplementary return rectifying the defects. Accordingly, we set aside the orders of the Ld.CIT(A) and confirm the penalty u/s 271FA for the period of delay in furnishing the original return from the due date of furnishing the return for the F.Y. 2011-12 to 2014-15 and also the delay in furnishing the supplementary return rectifying the defects after expiry of 29 days limit for the F.Y.2015-16. Issues Involved:1. Requirement to file Annual Information Return (AIR) under section 285BA of the Income Tax Act.2. Imposition of penalty under section 271FA for failure to file AIR on time.3. Validity of penalties for late filing of AIR for different financial years.4. Consideration of reasonable cause for delay in filing returns and supplementary returns.Detailed Analysis:1. Requirement to file Annual Information Return (AIR) under section 285BA of the Income Tax Act:The assessee was required to file AIR under section 285BA of the Income Tax Act for the financial years 2010-11 to 2015-16 by 31st August of the succeeding financial year. The assessee failed to file the AIR for these years before the due date.2. Imposition of penalty under section 271FA for failure to file AIR on time:The Director of Income Tax (Intelligence & Criminal Investigation) [DIT (I&CI)] issued notices under section 274 read with section 271FA of the Act, calling for an explanation from the assessee for the failure to file AIR on time. The DIT imposed penalties for the financial years 2010-11 to 2015-16 as follows:- F.Y. 2010-11: Rs. 2,08,000- F.Y. 2011-12: Rs. 1,71,400- F.Y. 2012-13: Rs. 1,34,900- F.Y. 2013-14: Rs. 98,400- F.Y. 2014-15: Rs. 61,900- F.Y. 2015-16: Rs. 27,8003. Validity of penalties for late filing of AIR for different financial years:F.Y. 2010-11 and 2011-12:The assessee contended that there were no transactions requiring reporting under section 285BA for these years and filed AIRs disclosing nil transactions. The Tribunal held that in the absence of specified transactions, there was no obligation to file AIR, and thus, the penalties imposed were unjustified. The orders of the lower authorities were set aside, and the penalties were canceled.F.Y. 2012-13 to 2015-16:The assessee filed the annual returns belatedly, and they were found defective. The DIT issued notices under section 285BA(4) for rectifying the defects, but the assessee did not comply within the given timeframe. The penalties were imposed for the delay in filing the original and supplementary returns.4. Consideration of reasonable cause for delay in filing returns and supplementary returns:F.Y. 2012-13 to 2014-15:The Tribunal acknowledged that the assessee filed the supplementary returns within 30 days from the date of receiving the notice, citing the end-of-year closing work as a reasonable cause for the delay. Thus, no penalty was levied for the delay in filing the supplementary returns for these years.F.Y. 2015-16:The assessee filed the supplementary return with a delay of 210 days. The Tribunal allowed a reasonable period of 29 days from the date of receipt of the notice for filing the supplementary return. Since the assessee failed to provide a valid reason for not filing within this period, the penalty for the delay was confirmed.Conclusion:The Tribunal set aside the orders of the lower authorities and allowed the appeal of the assessee partly. Penalties for the delay in filing the original returns for F.Y. 2012-13 to 2014-15 were confirmed, but penalties for the delay in filing the supplementary returns for these years were canceled. For F.Y. 2015-16, the penalty for the delay in filing the supplementary return beyond the reasonable period was confirmed.Order Pronounced:The appeals of the assessee were partly allowed, and the order was pronounced in the open court on 25th January 2019.