Penalty for non-reporting of specified financial transactions deleted where the reporting mechanism was not yet in force and default was unintentional.

Penalty under section 271FA for alleged failure to report specified financial transactions was held unsustainable for assessment year 2013-14 because the relevant reporting mechanism and Form-60A requirement were introduced only from 01.04.2015, with further amendment from 01.04.2016. The Tribunal accepted that the statutory mechanism was not in force for the year in dispute and that the default was unintentional on the facts. The penalty was therefore deleted and the assessee's appeal succeeded.

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Issues: Whether penalty under section 271FA for alleged failure to report specified financial transactions under section 285BA was sustainable for the assessment year 2013-14.

Analysis: The assessee was a co-operative bank. The penalty was imposed for non-reporting of specified financial transactions. The Tribunal noted that the relied upon reporting mechanism and the relevant Form-60A requirement were introduced only with effect from 01.04.2015, with further amendment from 01.04.2016, whereas the year in dispute was assessment year 2013-14. It also accepted the view that an unintentional default of this nature did not justify penal action in the facts of the case.

Conclusion: The penalty was not sustainable and was directed to be deleted.

Final Conclusion: The assessee's appeal succeeded and the impugned penalty order was set aside.

Ratio Decidendi: Penalty for failure to report specified financial transactions cannot be sustained for a period prior to the introduction of the relevant reporting requirement, particularly where the default is unintentional and the statutory mechanism was not yet in force.

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