2023 (3) TMI 36 - AT - Income Tax

Tribunal deletes penalty for late filing, citing genuine belief and lack of deliberate non-compliance.

Jhalawar Kendriya Sahakari Bank Ltd. Versus ADL/ADIT (I&CI) Jaipur.

The Tribunal allowed the appellant's appeal and deleted the penalty of Rs. 1,50,000/- imposed under Section 271FA for failure to file the Statement of ... Penalty u/s 271FA - Appellant failed to file the SFT [Statement of Financial Transaction] by due date and also to avail the opportunity granted u/s 285BA(5) and failed to provide any explanation for its default - reasons of delay given was that the assessee bank was working with 15 branches at different places in Jhalawar district and in some cases branches are situated in rural areas where due to network connectivity problem the report which was required for filing SFT could not be generated within the due time and thus the said SFT return was filed after due date - HELD THAT:- We cannot lost sight of the fact that it is acknowledged and judicially recognized fact that tax laws of this country are complex and complicated and often required for compliance, there with assistance of tax practitioners specializing in this field, is well-known fact and it is equally well-known fact that legislation in this field underwent so frequent changes and amendments that it was not possible for even person specializing in this field, including tax administrator, to claim that he knew what exactly law was on particular given day or period without making references to history of enactments. Thus in these circumstances no malafides could be attributed to assessee so as to invoke penalty proceedings under section 271FA and DIT should have taken note that breach was only technical or venial breach of provisions and such breach could have flown from bonafide ignorance of assessee that he was liable to act in manner prescribed by statute, and should not have invoked penalty proceedings. See Durgapur Steel Peoples Cooperative Bank Ltd vs. Director of Income-tax [2016 (11) TMI 207 - ITAT KOLKATA] And even if some default was found to be there in filing the SFT, the same at the best was merely a technical and venial breach of law and the conduct of the assessee in the particular has not been shown to be contumacious and no deliberate defiance of law is established on record by the revenue authorities. See Hindustan Steels vs. State of Orissa [1969 (8) TMI 31 - SUPREME COURT]. Thus we delete the penalty and allow the grounds of the assessee. Issues Involved:1. Validity of the penalty order under Section 271FA.2. Justification for confirming the penalty of Rs. 1,50,000/- under Section 271FA.3. Consideration of the appellant's reasons for delay in filing the Statement of Financial Transaction (SFT).Detailed Analysis:1. Validity of the Penalty Order under Section 271FA:The appellant challenged the penalty order under Section 271FA dated 20.10.2020, arguing that it was bad in law, illegal, and factually incorrect due to want of jurisdiction and being barred by limitation. The Tribunal examined whether the penalty order was issued within the legal framework and found that the procedural aspects were followed correctly. The appellant's failure to file the SFT by the due date and subsequent non-compliance with notices justified the initiation of penalty proceedings.2. Justification for Confirming the Penalty of Rs. 1,50,000/- under Section 271FA:The appellant argued that the penalty of Rs. 1,50,000/- imposed by the Additional Director of Income Tax (I&CI) and confirmed by the CIT (A) was contrary to the provisions of law and facts. The Tribunal noted that the appellant, a cooperative society engaged in banking activities, failed to file the SFT by the due date of 31/05/2019 for the financial year 2018-19. Despite being served a notice under Section 285BA(5) and a show cause notice under Section 271FA, the appellant did not provide a satisfactory explanation for the delay. The Tribunal upheld the penalty, emphasizing the statutory duty to file the SFT correctly and timely.3. Consideration of the Appellant's Reasons for Delay in Filing the SFT:The appellant cited network connectivity issues in rural branches, lack of computer literacy among branch managers, and internal administrative problems as reasons for the delay in filing the SFT. The Tribunal acknowledged these reasons but noted that the revenue authorities did not accept them as valid justifications. The Tribunal referred to the case of Durgapur Steel Peoples Cooperative Bank Limited vs. Director of Income Tax, where it was held that no malafides could be attributed to the assessee in similar circumstances, and the breach was considered technical or venial. The Tribunal also cited the Supreme Court's decision in Hindustan Steels vs. State of Orissa, which stated that penalties should not be imposed for technical or venial breaches or when the breach flows from a bona fide belief.Conclusion:The Tribunal concluded that the appellant's delay in filing the SFT was a technical breach without malafide intention. It emphasized the complexity of tax laws and the need for judicial discretion in imposing penalties. Given the appellant's bona fide belief and the absence of deliberate defiance of the law, the Tribunal allowed the appeal and deleted the penalty of Rs. 1,50,000/-.Order:The appeal of the assessee was allowed, and the penalty was deleted. The order was pronounced in the open court on 11/01/2023.