2023 (8) TMI 1661 - AT - Income Tax

Section 271FA inapplicable where s.273B reasonable cause exists for s.285BA non-compliance; AIR filed promptly, penalty deleted

ITAT, Nagpur held that section 271FA is subject to s.273B; where a reasonable cause exists for non-compliance with s.285BA, penalty under s.271FA cannot ... Penalty imposed u/s.271FA - reasonable cause for not complying with the provisions of section 285BA - HELD THAT:- Section 271FA is included u/s.273B, which provides that the penalty should not be imposed under the concerned sections where there exists a reasonable cause for the failure. Thus, section 271FA is subject to section 273B. The result is that if there exists a reasonable cause for not complying with the provisions of section 285BA, for which the penalty is otherwise imposable u/s 271FA, such penalty will not be levied. We find the assessee is a small urban cooperative bank. The obligation to file the AIRs u/s.285BA came into being from 01-04-2004. The assessee was not aware of its obligation and hence never filed its AIR under the relevant section since inception. It was only pursuant to the inspection that it was made aware of its obligation of filing the AIR. Immediately thereafter, the assessee swung into action and filed the AIRs for all the years under consideration. There was a reasonable cause for the assessee in not filing the AIRs in terms of section 285BA of the Act. Resultantly, the penalty so imposed u/s.271FA is directed to be deleted. Appeal of assessee allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether failure to furnish Annual Information Return (AIR) under section 285BA attracts penalty under section 271FA where the assessee was unaware of the statutory obligation and filed the AIRs only after an inspection. 2. Whether section 271FA is subject to the proviso/limitation in section 273B (reasonable cause) such that penalty under section 271FA can be avoided if reasonable cause is shown for non-compliance with section 285BA. 3. Whether the facts of a small urban cooperative bank - non-filing from inception due to lack of awareness and immediate compliance upon discovery - constitute a 'reasonable cause' within the meaning of section 273B to negate levy of penalty under section 271FA. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of penalty under section 271FA for non-filing of AIR under section 285BA Legal framework: Section 285BA imposes a statutory obligation to furnish AIR in the prescribed form for specified transactions. Section 271FA prescribes penalty for failure to furnish such return. Precedent Treatment: The judgment does not rely on or cite controlling precedents; the Court considers statutory interplay and factual matrix. Interpretation and reasoning: The Tribunal recognises that non-filing of AIR falls squarely within the mischief of section 271FA, i.e., default under section 285BA attracts penalty. However, the Tribunal proceeds to examine statutory exceptions/limitations applicable to penalty provisions. Ratio vs. Obiter: Ratio - non-filing is a ground for penalty under section 271FA subject to exceptions discussed under Issue 2. No obiter on alternative liability bases. Conclusions: Section 271FA is the applicable penal provision for default under section 285BA, but its operation depends on the availability of relief under section 273B. Issue 2 - Whether section 271FA is subject to section 273B (reasonable cause) and the consequences Legal framework: Section 273B provides that penalty shall not be imposed where the assessee shows reasonable cause for failure to comply with the relevant provisions. Section 271FA is included within the provisions mentioned in section 273B. Precedent Treatment: No precedent distinguished or followed; statutory construction is applied directly. Interpretation and reasoning: The Tribunal interprets the statutory scheme to mean that the levy of penalty under section 271FA is subject to the exception of reasonable cause contained in section 273B. Consequently, if reasonable cause for non-compliance with section 285BA is established, penalty under section 271FA cannot be levied. Ratio vs. Obiter: Ratio - penalty under section 271FA is susceptible to being negated where reasonable cause under section 273B exists; this forms the core legal holding on statutory interplay. Conclusions: The Court holds that section 271FA is subject to section 273B; therefore, the existence of reasonable cause precludes imposition of penalty under section 271FA for non-filing of AIRs. Issue 3 - Whether the assessee's facts (small urban cooperative bank; lack of awareness; immediate compliance upon inspection) constitute 'reasonable cause' under section 273B Legal framework: Reasonable cause under section 273B is a factual enquiry; factors relevant include nature of the assessee, knowledge/awareness of statutory obligation, promptness of remedial action once the breach is discovered, and overall circumstances leading to non-compliance. Precedent Treatment: The Tribunal does not cite or rely upon prior authorities; it applies statutory standards to the admitted facts. Interpretation and reasoning: On the admitted facts, the assessee is a small urban cooperative bank which, despite the obligation under section 285BA being in force from 01-04-2004, did not file AIRs because it was not aware of the obligation. The obligation came to the assessee's notice only upon inspection; the assessee immediately filed the AIRs for all years under consideration once aware. The Tribunal treats absence of awareness, the small institutional character, and immediate corrective action as constituting reasonable cause. The statutory purpose of penalty (to punish deliberate or culpable default) is distinguished from inadvertent or bona fide non-compliance remedied promptly. Ratio vs. Obiter: Ratio - under the facts, lack of knowledge combined with immediate compliance upon discovery constitutes reasonable cause within section 273B, thereby defeating penalty under section 271FA. Observational remarks about the character of the institution and promptness of action are integral to the ratio. Conclusions: The Tribunal concludes that the assessee had a reasonable cause for non-filing of AIRs; accordingly penalty levied under section 271FA is not maintainable and is to be deleted. Relief and Resultant Conclusion Having found that section 271FA is subject to section 273B and that the facts exhibited reasonable cause (non-awareness, small urban cooperative bank, immediate compliance upon inspection), the Tribunal allows the appeals and directs deletion of the penalties imposed under section 271FA for the years under consideration.