TaxTMI 
TaxTMI 
2025 (8) TMI 1407
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....ellant bank. The report was required to be made by 15th day of succeeding month. 2. The other penalty of Rs. 2,00,000/- was imposed in reference to Section 12A of the Act of 2002 for non-furnishing of the information called in reference to the Circular/Notification issued by the RBI. 3. The learned counsel for the appellant submitted that the penalty of Rs. 5,40,000/- has been imposed in ignorance of Section 12 of the Act of 2002 read with the Rules of 2005. The penalty could not have been imposed in reference to each failure to make report by 15th day of succeeding month and thereby for the cumulative failure in a year, the penalty could have been for 12 default months while it has been imposed for 54 defaults going contrary to the provisions. 4. The learned counsel for the appellant bank further submitted that there was no violation of Section 12A of the Act of 2002 because the appellant bank had sent the required information on 26.12.2018. A copy of the said letter has been placed on record along with the appeal. The penalty of Rs. 1,00,000/- each was not warranted, rather it is illegal in view of the fact that the necessary report was called by the FIU - India vide the....
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....nder this Chapter". 3. Maintenance of records of transactions (nature and value).- (1) Every reporting entity shall maintain the record of all transactions including, the record of- (A) all cash transactions of the value of more than ten lakhs rupees or its equivalent in foreign currency; (B) all series of cash transactions integrally connected to each other which have been individually valued below rupees ten lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month and the monthly aggregate exceeds an amount of ten lakh rupees or its equivalent in foreign currency; (BA) all transactions involving receipts by non-profit organisations of value more than rupees ten lakh, or its equivalent in foreign currency; (C) all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine or where any forgery of a valuable security or a document has taken place facilitating the transactions; (D) all suspicious transactions whether or not made in cash and by way of: (i) deposits and credits, withdrawals into or from any accounts in wh....
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....of bills, cheques, instruments or any other mode of collection in whatsoever name it is referred to. (E) all cross border wire transfers of the value of more than five lakh rupees or its equivalent in foreign currency where either the origin or destination of fund is in India; (F) all purchase and sale by any person of immovable property valued at fifty lakh rupees or more that is registered by the reporting entity, as the case may be. 5. Procedure and manner of maintaining information.- 1) Every reporting entity shall maintain information in respect of transactions with its client referred to in rule 3 in accordance with the procedure and manner as may be specified by its regulator from time to time. 2) Every reporting entity shall evolve an internal mechanism for maintaining such information in such form and manner and at such intervals as may be specified by its regulator from time to time. 3) It shall be the duty of every reporting entity, its designated director, officers and employees to observe the procedure and the manner of maintaining information as specified by its regulator under sub-rule (1). 7. Procedure a....
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....(3) the Reporting Officer shall furnish the information 30[in respect of transactions referred to in clauses (A), (B), (BA), (C) and (E) of sub rule (1) of rule 3 for the months of March 2020, April 2020 and May 2020, and in respect of transactions referred to in clauses (F) of sub rule (1) of rule 3 for the quarter January-March 2020] by the 30th June, 2020.] (6) Every reporting entity, its Directors, officers, and all employees shall ensure that the fact of maintenance of records referred to in rule 3 and furnishing of information to the Director is kept confidential. Provided that nothing in this rule shall inhibit sharing of information under rule 3A of any analysis of transactions and activities which appear unusual, if any such analysis has been done". Rule 7(3) requires every reporting entity to evolve an internal mechanism having regard to any guidelines issued by its regulator for detecting the transactions referred under Rule 3(1) for furnishing information. The appellant bank was under an obligation to not only specify the transaction but record to be maintained in the prescribed manner and to make report of the transaction pertaining to fake currenc....
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.... there was no suspicious transaction. However, the RBI found high value cash deposits in Account Nos. 000300003101 and 050700000501. On the receipt of information from the RBI, a Show Cause Notice was served on the appellant on 03.10.2019. It was to call upon them to show cause as to why suitable direction including an order for imposition of penalty should not be passed under Section 13 read with Section 12, 12A of the Act of 2002 and Rule 3(1)(A), 3(1)(B), 5(2), 7(2), 7(3), 7(4) and 8(4) of the Rules of 2005. The appellant bank submitted their response on 24.10.2019. The summary of the response of the bank was as under: "(a) The Bank pleaded that it had filed Cash Transaction Reports for June 2015, July 2015, August 2015, September 2015 and October 2015 on 05/09/2018 and 06/09/2018 but they noticed rejection of said CTRs batches after receipt of Show Cause Notice. The Bank in its letter enquired how to convert the rejected batches into 'filed successfully'. (b) For cumulative delay of 167 months in filing 6 CTRs, the Bank submitted that it happened due to ignorance and inadvertently under the impression that cash transactions in deposit account are only to be re....
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....a). The relevant para of the said judgment is quoted hereunder: "Under the Act penalty may be imposed for failure to register as a dealer: s. 9(1) read with s. 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi- criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable....
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....holly irrelevant. A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contravention must made by the defaulter with guilty intention or not. We also further held that unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not. On a careful perusal of Section 15(D)(b) and Section 15-E of the Act, there is nothing which requires that mens rea must be proved before penalty can be imposed under these provisions. Hence once the contravention is established then the penalty is to follow. In our view, the impugned judgment of the Securities appellate Tribunal has set a serious wrong precedent and the powers of the SEBI to impose penalty under Chapter VIA are severely curtailed against the plain language of the statute which mandatorily imposes penalties on the contravention of the Act/Regulations without any requirement of the contravention having been deliberated or contumacious". 30. The perusal of the para qu....
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....ailure to furnish information or delay in furnishing the information in respect of each transaction which would be taken as "each failure" for imposition of penalty. Section 13 of the Act of 2002 is quoted hereunder: "13. Powers of Director to impose fine. (1) The Director may, either of his own motion or on an application made by any authority, officer or person, 1[make such inquiry or cause such inquiry to be made, as he thinks fit to be necessary, with regard to the obligations of the reporting entity, under this Chapter. (1A) If at any stage of inquiry or any other proceedings before him, the Director having regard to the nature and complexity of the case, is of the opinion that it is necessary to do so, he may direct the concerned reporting entity to get its records, as may be specified, audited by an accountant from amongst a panel of accountants, maintained by the Central Government for this purpose. (1B) The expenses of, and incidental to, any audit under sub-section (1A) shall be borne by the Central Government.] (2) If the Director, in the course of any inquiry, finds that a reporting entity or its designated director on the Bo....
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....defaults, the minimum penalty of Rs. 10,000/- has been imposed. We do not find any substance in the argument for the reason that while adjudicating the appeal, this Tribunal has limited jurisdiction in causing interference on the imposition of penalty unless it is shown to be disproportionate. The case in hand is not of that nature because the appellant bank remained reckoned defaulter in making report of cash transaction for quite long and the report was made only when it was informed by the RBI to FIU. It was, however, urged that the appellant bank made the report but it was not accepted on computer. In fact, the argument has been raised in ignorance of the fact that defective reporting is no reporting in the eye of law and, therefore, only the appellant made the report in the year 2020 i.e. after a lapse of almost four to five years. It is also not a case where the appellant bank failed to make report of one or two transactions in a given month but there were series of transactions and that too in different months of years 2015 and 2016. Thus, there was continuous contravention of the provisions of the Act and the Rules. It was thus rightly taken for imposition of appropriate pu....