Penalty under s 271FA – Failure to file annual information return — The penalty under s 271FA is leviable if the assessee fails to respond to the notice for failure of filing annual information return — as held by GujHC in Patan Nagrik Sahakari Bank Ltd v DIT(CIB); Special Civil Application No. 14675 of 2010, 22 April 2011
Decided on: 4 March 2011 — In favour of: The Assessee.
The Petitioner (assessee), engaged in the banking business as a cooperative bank at Patan, received a notice under s 271FA in relation to the financial year 2005–2006 for failing to furnish annual information form as required under s 285BA(1) of the Income-tax Act. In reply to the show cause notice, the assessee submitted that it was a small bank situated in a mofussil area and did not have the assistance of Chartered Accountants for tax matters and had inadequate and untrained staff not conversant with legal provisions as well as the use of computers, etc. It was further the case of the petitioner that s 285BA had come into operation for the first time in the financial year 2005–2006 and was a relatively new provision for the financial year in question. Since the cooperative banks were exempt from income tax under the provisions of s 80P(2)(a)(i) upto AY 2006–2007, the petitioner was not aware of other provisions like s 285BA with regard to the filing of annual information return. It was further contended that no penalty under s 271FA can be imposed on a person for the failure under s 285BA if he proved that there was a reasonable cause for the said failure. Further, no loss of revenue had been caused on account of the late furnishing of the information under s 285BA. The AO levied penalty the penalty under s 271FA. Being aggrieved, the assessee has filed the present writ petition.
The issue is whether penalty under s 271FA is warranted if the assessee-bank fails to respond to the notice for the failure of filing annual information return admittedly on ground of ignorance of the change in the law.
The petitioner was required to file annual information return in relation to financial year 2005–2006 on or before 31 August 2006 and the petitioner had failed to comply with the said statutory requirement. The Department, after noticing the default for financial year 2007–2008, issued a notice under s 285BA(5) on 17 December 2008 in relation to that year. However, despite the said notice, the petitioner did not comply with the same. Therefore, the Department once again issued a notice on 11 September 2009 for financial year 2007–2008 and it was only thereafter that the petitioner became serious and filed the returns for financial year 2005–2006 along with financial year 2007–2008 on 12 October 2009. The annual information returns had been filed beyond the prescribed period of limitation.
Even if it is assumed that the petitioner was not aware of its statutory obligation under s 285BA, once the Department had issued notice under s 285BA(5) on 17 December 2008, it is thereafter not open for the petitioner to take the defence that it was not aware of its statutory obligation. The petitioner, in conscious disregard to its statutory obligation, still did not file the annual information return and it was only after the second notice was issued that the petitioner filed the same within a period of one month thereafter. Thus, for the period after the service of the notice under s 285BA(5), it cannot be said that the petitioner had any reasonable cause for not filing the annual information return within a period of sixty days of service of the said notice.
Further, the annual information return came to be furnished within a month from the issuance of the second notice, which by itself falsifies the case of the petitioner that there being substantial number of transactions, it took sometime to gather the information.
However, the petitioner is engaged in the banking business as a cooperative bank and was exempt from payment of income tax under the provisions of s 80P(2)(a)(i) up till AY 2006–2007. In the circumstances, it would be quite natural that the petitioner may not have been aware of the provisions of s 285BA initially. Moreover, sub-s (5) of s 285BA lays down that where a person who is required to furnish annual information return, under sub-s (1) thereof, has not furnished the same within the prescribed time, the prescribed income tax authority may serve upon such person a notice requiring him to furnish such return within a period not exceeding sixty days. Insofar as the financial year 2005–2006 is concerned, no notice under sub-s (5) of s 285BA had been issued by the prescribed income tax authority. The attention of the petitioner was not drawn to the provisions of s 285BA at the relevant time. However, once the notice dated 17 December 2008 had been issued in relation to financial year 2007–2008, bringing to the notice of the petitioner the provisions of s 285BA and its statutory liability of filing the annual information return, it would, thereafter, not be open for the petitioner to plead ignorance of the provisions of the Act. In the circumstances, with effect from the date of service of notice dated 17 December 2008 under s 285 BA(5), the petitioner was not entitled to entertain any bona fide belief or to plead ignorance about the provisions of s 285BA.
Decided on: 4 March 2011 — In favour of: The Assessee.
The Petitioner (assessee), engaged in the banking business as a cooperative bank at Patan, received a notice under s 271FA in relation to the financial year 2005–2006 for failing to furnish annual information form as required under s 285BA(1) of the Income-tax Act. In reply to the show cause notice, the assessee submitted that it was a small bank situated in a mofussil area and did not have the assistance of Chartered Accountants for tax matters and had inadequate and untrained staff not conversant with legal provisions as well as the use of computers, etc. It was further the case of the petitioner that s 285BA had come into operation for the first time in the financial year 2005–2006 and was a relatively new provision for the financial year in question. Since the cooperative banks were exempt from income tax under the provisions of s 80P(2)(a)(i) upto AY 2006–2007, the petitioner was not aware of other provisions like s 285BA with regard to the filing of annual information return. It was further contended that no penalty under s 271FA can be imposed on a person for the failure under s 285BA if he proved that there was a reasonable cause for the said failure. Further, no loss of revenue had been caused on account of the late furnishing of the information under s 285BA. The AO levied penalty the penalty under s 271FA. Being aggrieved, the assessee has filed the present writ petition.
The issue is whether penalty under s 271FA is warranted if the assessee-bank fails to respond to the notice for the failure of filing annual information return admittedly on ground of ignorance of the change in the law.
The petitioner was required to file annual information return in relation to financial year 2005–2006 on or before 31 August 2006 and the petitioner had failed to comply with the said statutory requirement. The Department, after noticing the default for financial year 2007–2008, issued a notice under s 285BA(5) on 17 December 2008 in relation to that year. However, despite the said notice, the petitioner did not comply with the same. Therefore, the Department once again issued a notice on 11 September 2009 for financial year 2007–2008 and it was only thereafter that the petitioner became serious and filed the returns for financial year 2005–2006 along with financial year 2007–2008 on 12 October 2009. The annual information returns had been filed beyond the prescribed period of limitation.
Even if it is assumed that the petitioner was not aware of its statutory obligation under s 285BA, once the Department had issued notice under s 285BA(5) on 17 December 2008, it is thereafter not open for the petitioner to take the defence that it was not aware of its statutory obligation. The petitioner, in conscious disregard to its statutory obligation, still did not file the annual information return and it was only after the second notice was issued that the petitioner filed the same within a period of one month thereafter. Thus, for the period after the service of the notice under s 285BA(5), it cannot be said that the petitioner had any reasonable cause for not filing the annual information return within a period of sixty days of service of the said notice.
Further, the annual information return came to be furnished within a month from the issuance of the second notice, which by itself falsifies the case of the petitioner that there being substantial number of transactions, it took sometime to gather the information.
However, the petitioner is engaged in the banking business as a cooperative bank and was exempt from payment of income tax under the provisions of s 80P(2)(a)(i) up till AY 2006–2007. In the circumstances, it would be quite natural that the petitioner may not have been aware of the provisions of s 285BA initially. Moreover, sub-s (5) of s 285BA lays down that where a person who is required to furnish annual information return, under sub-s (1) thereof, has not furnished the same within the prescribed time, the prescribed income tax authority may serve upon such person a notice requiring him to furnish such return within a period not exceeding sixty days. Insofar as the financial year 2005–2006 is concerned, no notice under sub-s (5) of s 285BA had been issued by the prescribed income tax authority. The attention of the petitioner was not drawn to the provisions of s 285BA at the relevant time. However, once the notice dated 17 December 2008 had been issued in relation to financial year 2007–2008, bringing to the notice of the petitioner the provisions of s 285BA and its statutory liability of filing the annual information return, it would, thereafter, not be open for the petitioner to plead ignorance of the provisions of the Act. In the circumstances, with effect from the date of service of notice dated 17 December 2008 under s 285 BA(5), the petitioner was not entitled to entertain any bona fide belief or to plead ignorance about the provisions of s 285BA.
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