2025 (1) TMI 1394 - AT - Income Tax

Penalty under Section 271I not applicable for failing to submit Form 15CA/15CB for import advance payments

Kalathiya Impex Versus Assistant Commissioner of Income-tax, Circle-3 (2), Surat

ITAT Surat held that no penalty under section 271I was leviable for failure to furnish Form 15CA/15CB regarding overseas transactions. The tribunal relied ... Penalty levied u/s 271I - Failure to furnish Form No. 15CA/15CB in respect of overseas transactions - HELD THAT:- We find that assessee in its present appeal has raised similar ground of appeal as has been raised in case of M/s Vinay Diamond [2023 (7) TMI 1262 - ITAT SURAT] wherein by considering the Notification No.G.S.R.978(E) dated 16.12.2015 issued by Central Board of Direct Taxes held that there are certain payment of specified nature mentioned in Rule 37BB which do not require submission of Form No. 15CA/15CB and one of such payment includes advance payment against import. We find that no penalty is leviable against the payment of import of goods. Decided in favour of assessee. ISSUES PRESENTED and CONSIDEREDThe primary issue considered in this judgment was whether the penalty imposed under section 271-I of the Income Tax Act, 1961, for the failure to furnish Form No. 15CA/15CB in respect of foreign remittances by the assessee, was justified. The Tribunal also considered whether the amendments to Rule 37BB of the Income Tax Rules, 1962, which exempt certain payments from the requirement to file these forms, applied retrospectively to the assessment year in question.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsSection 271-I of the Income Tax Act, 1961, mandates a penalty for failure to furnish information or furnish incorrect information under section 195(6) of the Act. Rule 37BB of the Income Tax Rules, 1962, prescribes the manner of furnishing information for payments to non-residents, including the submission of Form No. 15CA/15CB.The amendments to Rule 37BB, effective from December 16, 2015, expanded the list of payments exempt from the requirement to submit these forms, including payments for imports.Court's Interpretation and ReasoningThe Tribunal considered the amendments to Rule 37BB and the legislative intent behind these changes. It noted that the amendments were meant to reduce compliance burdens and clarify the types of payments exempt from the requirement to furnish Form No. 15CA/15CB. The Tribunal emphasized that these amendments, although effective from December 16, 2015, were curative and declaratory, suggesting a retrospective application to the assessment year in question.Key Evidence and FindingsThe Tribunal relied on the fact that the assessee's remittances were made against the import of goods, a category explicitly exempted from the requirement to file Form No. 15CA/15CB under the amended Rule 37BB. The Tribunal also considered similar cases, such as M/s Vinay Diamonds and Shrirang Sales Corporation, where penalties were not imposed due to the retrospective application of the rule amendments.Application of Law to FactsThe Tribunal applied the amended Rule 37BB to the facts of the case, determining that the assessee's remittances for imports did not attract the provisions of withholding tax and, therefore, were not subject to the penalty under section 271-I. The Tribunal found that the requirement to furnish Form No. 15CA/15CB was not mandatory for these transactions.Treatment of Competing ArgumentsThe Revenue argued that the amendments to section 195(6) and Rule 37BB made the filing of Form No. 15CA/15CB mandatory for all foreign remittances. However, the Tribunal noted the lack of clarity and express specification for penalties in the provisions during the assessment year in question, leading to the conclusion that the penalty should not be imposed.ConclusionsThe Tribunal concluded that the penalty under section 271-I was not applicable to the assessee's transactions, as the remittances were for imports and fell under the exemptions provided in the amended Rule 37BB. The Tribunal directed the Assessing Officer to delete the penalty.SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal ReasoningThe Tribunal held that 'there is lack of clarification of words expressively in the provisions, and only during this assessment year and no express specification have been made for penalty for each default.'Core Principles EstablishedThe judgment established that amendments to tax rules that are curative or declaratory in nature may be applied retrospectively, especially when they aim to clarify existing ambiguities and reduce compliance burdens.Final Determinations on Each IssueThe Tribunal determined that no penalty was leviable against the payment of import of goods and directed the deletion of the penalty imposed under section 271-I. The appeal of the assessee was allowed, and the penalty was ordered to be deleted.