2024 (10) TMI 926 - AT - Income Tax

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

Meet Forex Private Limited Versus Addl. /JDIT (I & CI), New Delhi

Meet Forex Private Limited Versus Addl. /JDIT (I & CI), New Delhi - TMI Issues:Penalty under section 271FA for non-compliance with SFT filing requirements.Detailed Analysis:Issue 1: Compliance with SFT filing requirementsThe 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 PenaltyThe 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 ArgumentsThe 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 DecisionThe 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.