Penalty under Section 271FA deleted for delayed SFT filing due to bona fide ignorance of requirements

The ITAT Delhi allowed the assessee's appeal and deleted the penalty imposed under section 271FA for delayed filing of Statement of Financial Transactions (SFT). Despite a 255-day delay in compliance with section 285BA, the Tribunal found the assessee's explanation of lack of knowledge regarding filing requirements to be bona fide. Following precedents from ITAT Kolkata, the Tribunal held this constituted only a technical breach flowing from genuine ignorance, particularly given the assessee had only one transaction to report. The penalty levied by AO and confirmed by CIT(A) was deemed unsustainable.

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Issues:
Penalty under section 271FA for non-compliance with SFT filing requirements.

Detailed Analysis:

Issue 1: Compliance with SFT filing requirements
The case involved an appeal filed by the assessee against the levy of a penalty under section 271FA of the Income Tax Act for failure to file the statement of financial transactions (SFT) by the due date. The assessee, a company engaged in the sale and purchase of foreign currency, was required to file the SFT as per Rule-114E of the Income Tax Rules, 1962. The Assessing Officer (AO) issued notices to the assessee for non-compliance with the filing requirements, leading to the imposition of a penalty of Rs. 81,500.

Issue 2: Assessment of Penalty
The Commissioner of Income Tax (Appeals) noted a significant delay in complying with the filing requirements, leading to the imposition of penalties for each day of default. The CIT(A) considered the company's failure to file the SFT in a timely manner and the subsequent delay even after receiving notices. The CIT(A) concluded that the assessee failed to demonstrate a reasonable cause for the delay, as required under section 273B of the Income Tax Act, and upheld the penalty under section 271FA.

Issue 3: Assessee's Arguments
The assessee contended that the penalty under section 271FA should not be imposed due to reasons such as lack of awareness about the filing requirements, technical issues with the online portal, and the necessity to file the SFT manually. The assessee highlighted the government's intent behind introducing Section 285BA to combat black money and emphasized the challenges faced in complying with the complex tax laws. The assessee also cited judicial precedents where penalties were not imposed for technical or venial breaches due to genuine ignorance of the law.

Judgment and Decision
The Income Tax Appellate Tribunal (ITAT) considered the assessee's submissions and referred to similar cases where penalties were set aside for technical breaches. The ITAT observed that the assessee's explanation for the delay in filing the SFT due to lack of knowledge was bona fide, especially considering the minimal transactions involved. Relying on precedent, the ITAT concluded that the penalty imposed by the AO and upheld by the CIT(A) was not sustainable. Consequently, the ITAT allowed the assessee's appeal and deleted the penalty of Rs. 81,500 under section 271FA.

In conclusion, the ITAT's decision in favor of the assessee was based on the genuine ignorance of the filing requirements and technical difficulties faced, aligning with previous rulings that penalties should not be imposed for minor breaches resulting from bona fide ignorance.

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