IT/ILT: Where assessee gave a reasonable cause for his failure in furnishing report as required under section 92E, penalty imposed under section 271BA would be deleted
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[2013] 37 taxmann.com 297 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'I'
IL & FS Maritime Infrastructure Co. Ltd.
v.
Assistant Commissioner of Income-tax - 10(1), Mumbai*
P.M. JAGTAP, ACCOUNTANT MEMBER
AND SANJAY GARG, JUDICIAL MEMBER
IT APPEAL NO. 4177 (MUM.) OF 2012
[ASSESSMENT YEAR 2009-10]
JULY 24, 2013
Section 92E, read with sections 271BA and 273B, of the Income-tax Act, 1961 - Transfer pricing - Report from an accountant [Reasonable cause] - Assessment year 2009-10 - Assessee filed belated TP report in Form 3CEB and submitted that delay in furnishing of report under section 92E was due to mistaken bona fide belief that transaction of investment in equity shares of subsidiary company was not within scope of international transactions - Assessing Officer did not consider explanation of reasonable cause and imposed penalty under section 271BA - Whether where assessee gave a reasonable cause for his failure in furnishing particulars as required by provisions of section 271BA, word 'shall' used in section 273B provides that it was mandatory not to impose penalty - Held, yes - Whether in instant case, since explanation given by assessee constituted a reasonable cause, penalty imposed upon assessee was to be deleted - Held, yes [Paras 7 & 8] [In favour of
assessee]
Words and Phrases: Word 'may' used in section 271BA and word 'shall' used in section 273B of the Income-tax Act, 1961
FACTS
■ The assessee-company filed belated transfer pricing report in Form 3CEB wherein international transactions of Rs. 143.89 crores were reported.
■ The Assessing Officer initiated penalty proceedings against the assessee under section 271BA and issued notice to the assessee.
■ The assesses submitted that the executive incharge of taxation matters of the assessee-company was under a bona fide belief that the transactions of investments in shares of subsidiary company did not fall within the scope of 'international transactions' as defined under section 92B. It was further submitted that the delay in obtaining the report under section 92E was not intentional, rather was due to bona fide mistaken belief.
■ The Assessing Officer did not consider the explanation of reasonable cause of bona fide belief given by the assessee and imposed penalty of Rs. 1 lakh under section 271BA.
■ On appeal, the Commissioner (Appeals) confirmed the order of the Assessing Officer.
■ On second appeal:
HELD
■ It may be observed that as per the wording of section 271BA, the Assessing Officer may direct the concerned person to pay the penalty. The word 'may' used in the section denotes that it is the discretion of the Assessing Officer to impose or not to impose the penalty. This discretion is subject to the restrictions as imposed by section 273B. However, the word 'shall' used in section 273B provides that it is mandatory not to impose penalty, if the assessee gives a reasonable cause for his failure in furnishing the particulars as required by the provisions of section 271BA.
■ The Assessing Officer did not consider the explanation of reasonable cause of bona fide belief given by the assessee in its failure to furnish the report under section 92E in time. Even, the Commissioner (Appeals) did not bother to look into or consider the said explanation given by the assessee. The revenue authorities below have imposed the penalty holding that the same is mandatorily imposable under the provisions of section 271BA. The revenue authorities below failed to take note of provisions of section 273B as well as the use of word 'may' in section 271BA. [Para 7]
■ The explanation given by the assessee to the effect that the delay in furnishing the report under section 92E was not intentional, rather due to mistaken bona fide belief that the transaction involving the investment of money in equity shares of its subsidiary company by the assessee-company was not within the scope of International transactions as defined under section 92B. As soon as, the assessee-company came to know that it was required to furnish the report under section 92E, it filed the same before the Assessing Officer. The explanation put forth by the assessee-company, falls within the scope of phrase 'reasonable cause' as provided under section 273B. So, the penalty imposed upon the assessee by the Assessing Officer and further confirmed by the Commissioner (Appeals) is hereby ordered to be deleted. [Para 8]
CASES REFERRED TO
Malik Ram v. State of Rajasthan AIR 1961 SC 1575 (para 7).
P.V. Lakhani for the Appellant. O.P. Singh for the Respondent.
ORDER
Sanjay Garg, Judicial Member - This present appeal is directed against the order dated 09.04.2012 of the learned CIT(A) confirming the imposition of penalty by the AO on the assessee under Section 271BA of the Income Tax Act, 1961.
2. The grounds of appeal are reproduced as under:—
"2 On the facts and circumstances of the case the appellant was under bonafide belief that the provisions of Section 92B are not applicable to the transaction of investments made by the appellant in the shares of subsidiary companies. Based on this bonafide belief the appellant did not obtain the report in Form 3CEB on or before 30th September, 2009. The appellant prays that there was a reasonable cause for not obtaining the repot within the prescribed time limit and the penalty levied u/s 271BA may be deleted.
3. On the acts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in rejecting the claim of the appellant and there was a reasonable cause in delay in obtaining the report u/s 92E of the Income Tax Act, 1961. The appellant therefore prays that penalty levied u/s 271BA is bad in law and may be deleted."
3. The brief facts of the case are that the return of income was filed by the assessee-company on 23.09.2009. Subsequently, on 19.08.2011, the assessee- company filed transfer pricing report in Form No. 3CEB dated 16.08.2011 wherein International transactions of Rs. 143,89,81,125/- were reported. The AO initiated penalty proceedings against the assessee under Section 271BA of the Income Tax Act and issued notice in this respect to the assessee. The AO was not satisfied with the explanation given by the assessee, hence imposed penalty of Rs. 1,00,000/- under Section 271BA of the Act upon the assessee. The learned CIT(A) further confirmed the said penalty. The assessee is, thus, in appeal before us.
4. We have heard the learned representative of the both the parties. The learned representative of the assessee before us has submitted that the executive incharge of taxation matters of the assessee-company was under a bonafide belief that the transactions of investments in shares of subsidiary company did not fall within the scope of Section 92B. Subsequently, the appellant was advised that even for the transaction of investments in subsidiaries, report u/s 92E has to be obtained. The appellant voluntarily obtained a report u/s 92E on 16th August, 2011 and submitted the same before the Learned Assessing Officer on 19th August, 2011. He has further submitted that the delay in obtaining the report under Section 92E was not intentional, rather was due to bonafide mistaken belief. He has further submitted that technically there was no tax effect upon the assessee-company in not furnishing the said report in time, hence the said default of the assessee was
not intentional. He has further submitted that only one transaction of investment in equity shares was made with its subsidiary company by the assessee. He has brought our attention to the order of the AO passed under Section 271BA to contend that the AO had failed to consider the explanation of assessee of his reasonable cause of bonafide belief that transaction of investment in equity shares of subsidiary company did not fall within the scope of Section 92B. On the other hand, the learned DR, before us, has submitted that penalty had been imposed by the AO due to technical default in submitting the report as per Section 92E of the Act by the assessee-company and there was no discretion available to the AO for not imposing the penalty.
5. We have considered the rival submissions made by the learned representative of the parties before us.
6. In case of 'International transactions' as defined under Section 92B of the Income Tax Act, it is mandatory under Section 92E of the Act for a person entering into an international transaction/transactions to file a report from an Accountant setting forth the particulars of such International transactions. As per Section 271BA, in default of furnishing a report from an accountant as required by Section 92E, the Assessing Officer may impose penalty of a sum of Rs. 1,00,000/-. It may be observed that in section 273B of the Act, it has been provided that no penalty shall be imposable on the concerned person or the assessee for any failure referred to the provisions in question (as are mentioned in section 273B, which includes section 271BA also), if the concerned person/assessee proves that there was reasonable cause for the said failure. For the shake of convenience Sections 271BA & 273B are reproduced as under:—
"271BA. Penalty for failure to furnish report under section 92E.—If any person fails to furnish a report from an accountant as required by section 92E, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one hundred thousand rupees.
273B. Penalty not to be imposed in curtain case.—Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271AA, section 271B section 271BA, Section 271BB, Section 271C, section 271CA, section 271D, Section 271E, section 271F, section 271FA, section 271FB, section 271G, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or section 272B or sub-section (1) or sub-section (1A) of section 272BB or sub-section (1) of section 272BBB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure."
7. Now, coming to the case in hand, it may be observed that as per the wording of section 271BA, the AO may direct the concerned person to pay the penalty. The word 'may' used in the section denotes that it is the discretion of the AO to impose or not to impose the penalty. This discretion is subject to the restrictions as imposed by Section 273B of the Act. The word 'may' also includes the word 'may not'. Reliance can be placed on an authority of the Hon'ble Supreme Court of India in "Malik Ram v. State of Rajasthan" AIR 1961 SC 1575, wherein, the Hon'ble Supreme Court while interpreting the Section 68-D(2) of the Motor Vehicles Act, 1939 has held that the words "may approve" in the section, properly construed, must also include "may not approve".
The word 'shall' has not been used in the section 271BA of the Act, which otherwise, would have made the imposition of penalty mandatory. Our interpretation of word 'may' finds justification from the provisions of Section 273B of the Act, wherein it has been specifically provided that "…..no penalty 'shall be' imposable …………..if he proves that there was reasonable cause for the said failure". So, the relevant provisions under consideration reveals that though the imposition of penalty is discretionary, however, the word 'shall' used in Section 273B provides that it is mandatory not to impose penalty, if the assessee gives a reasonable cause for his failure in furnishing the particulars as required by the provisions of the Section 271BA.
It may be further observed that in the case in hand, the AO did not consider the explanation of reasonable cause of bonafide belief given by the assessee in its failure to furnish the report under Section 92E in time. Even, the learned CIT(A) did not bother to look into or consider the said explanation given by the assessee. The authorities below have imposed the penalty holding that the same is mandatorily imposable under the provisions of Section 271BA of the Act. The authorities below failed to take note of provisions of Section 273B as well as the use of word 'may' in Section 271BA.
8. We are satisfied with the explanation given by the representative of the assessee to the effect that the delay in furnishing the report under Section 92E was not intentional, rather due to mistaken bonafide belief that the transaction involving the investment of money in equity shares of its subsidiary company by the assessee-company was not within the scope of International transactions as defined under Section 92B of the Act. As soon as, the assessee-company came to know that it was required to furnish the report under Section 92E, it filed the same before the AO. The explanation put forth by the assessee-company, in our view, falls within the scope of phrase "reasonable cause" as provided under Section 273B of the Income Tax Act, 1961. So, in view of our observations made above, the penalty imposed upon the assessee by the AO and further confirmed by the CIT(A) is hereby ordered to be deleted.
9. In the result, the appeal of the assessee is allowed.R
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[2013] 37 taxmann.com 297 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'I'
IL & FS Maritime Infrastructure Co. Ltd.
v.
Assistant Commissioner of Income-tax - 10(1), Mumbai*
P.M. JAGTAP, ACCOUNTANT MEMBER
AND SANJAY GARG, JUDICIAL MEMBER
IT APPEAL NO. 4177 (MUM.) OF 2012
[ASSESSMENT YEAR 2009-10]
JULY 24, 2013
Section 92E, read with sections 271BA and 273B, of the Income-tax Act, 1961 - Transfer pricing - Report from an accountant [Reasonable cause] - Assessment year 2009-10 - Assessee filed belated TP report in Form 3CEB and submitted that delay in furnishing of report under section 92E was due to mistaken bona fide belief that transaction of investment in equity shares of subsidiary company was not within scope of international transactions - Assessing Officer did not consider explanation of reasonable cause and imposed penalty under section 271BA - Whether where assessee gave a reasonable cause for his failure in furnishing particulars as required by provisions of section 271BA, word 'shall' used in section 273B provides that it was mandatory not to impose penalty - Held, yes - Whether in instant case, since explanation given by assessee constituted a reasonable cause, penalty imposed upon assessee was to be deleted - Held, yes [Paras 7 & 8] [In favour of
assessee]
Words and Phrases: Word 'may' used in section 271BA and word 'shall' used in section 273B of the Income-tax Act, 1961
FACTS
■ The assessee-company filed belated transfer pricing report in Form 3CEB wherein international transactions of Rs. 143.89 crores were reported.
■ The Assessing Officer initiated penalty proceedings against the assessee under section 271BA and issued notice to the assessee.
■ The assesses submitted that the executive incharge of taxation matters of the assessee-company was under a bona fide belief that the transactions of investments in shares of subsidiary company did not fall within the scope of 'international transactions' as defined under section 92B. It was further submitted that the delay in obtaining the report under section 92E was not intentional, rather was due to bona fide mistaken belief.
■ The Assessing Officer did not consider the explanation of reasonable cause of bona fide belief given by the assessee and imposed penalty of Rs. 1 lakh under section 271BA.
■ On appeal, the Commissioner (Appeals) confirmed the order of the Assessing Officer.
■ On second appeal:
HELD
■ It may be observed that as per the wording of section 271BA, the Assessing Officer may direct the concerned person to pay the penalty. The word 'may' used in the section denotes that it is the discretion of the Assessing Officer to impose or not to impose the penalty. This discretion is subject to the restrictions as imposed by section 273B. However, the word 'shall' used in section 273B provides that it is mandatory not to impose penalty, if the assessee gives a reasonable cause for his failure in furnishing the particulars as required by the provisions of section 271BA.
■ The Assessing Officer did not consider the explanation of reasonable cause of bona fide belief given by the assessee in its failure to furnish the report under section 92E in time. Even, the Commissioner (Appeals) did not bother to look into or consider the said explanation given by the assessee. The revenue authorities below have imposed the penalty holding that the same is mandatorily imposable under the provisions of section 271BA. The revenue authorities below failed to take note of provisions of section 273B as well as the use of word 'may' in section 271BA. [Para 7]
■ The explanation given by the assessee to the effect that the delay in furnishing the report under section 92E was not intentional, rather due to mistaken bona fide belief that the transaction involving the investment of money in equity shares of its subsidiary company by the assessee-company was not within the scope of International transactions as defined under section 92B. As soon as, the assessee-company came to know that it was required to furnish the report under section 92E, it filed the same before the Assessing Officer. The explanation put forth by the assessee-company, falls within the scope of phrase 'reasonable cause' as provided under section 273B. So, the penalty imposed upon the assessee by the Assessing Officer and further confirmed by the Commissioner (Appeals) is hereby ordered to be deleted. [Para 8]
CASES REFERRED TO
Malik Ram v. State of Rajasthan AIR 1961 SC 1575 (para 7).
P.V. Lakhani for the Appellant. O.P. Singh for the Respondent.
ORDER
Sanjay Garg, Judicial Member - This present appeal is directed against the order dated 09.04.2012 of the learned CIT(A) confirming the imposition of penalty by the AO on the assessee under Section 271BA of the Income Tax Act, 1961.
2. The grounds of appeal are reproduced as under:—
"2 On the facts and circumstances of the case the appellant was under bonafide belief that the provisions of Section 92B are not applicable to the transaction of investments made by the appellant in the shares of subsidiary companies. Based on this bonafide belief the appellant did not obtain the report in Form 3CEB on or before 30th September, 2009. The appellant prays that there was a reasonable cause for not obtaining the repot within the prescribed time limit and the penalty levied u/s 271BA may be deleted.
3. On the acts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in rejecting the claim of the appellant and there was a reasonable cause in delay in obtaining the report u/s 92E of the Income Tax Act, 1961. The appellant therefore prays that penalty levied u/s 271BA is bad in law and may be deleted."
3. The brief facts of the case are that the return of income was filed by the assessee-company on 23.09.2009. Subsequently, on 19.08.2011, the assessee- company filed transfer pricing report in Form No. 3CEB dated 16.08.2011 wherein International transactions of Rs. 143,89,81,125/- were reported. The AO initiated penalty proceedings against the assessee under Section 271BA of the Income Tax Act and issued notice in this respect to the assessee. The AO was not satisfied with the explanation given by the assessee, hence imposed penalty of Rs. 1,00,000/- under Section 271BA of the Act upon the assessee. The learned CIT(A) further confirmed the said penalty. The assessee is, thus, in appeal before us.
4. We have heard the learned representative of the both the parties. The learned representative of the assessee before us has submitted that the executive incharge of taxation matters of the assessee-company was under a bonafide belief that the transactions of investments in shares of subsidiary company did not fall within the scope of Section 92B. Subsequently, the appellant was advised that even for the transaction of investments in subsidiaries, report u/s 92E has to be obtained. The appellant voluntarily obtained a report u/s 92E on 16th August, 2011 and submitted the same before the Learned Assessing Officer on 19th August, 2011. He has further submitted that the delay in obtaining the report under Section 92E was not intentional, rather was due to bonafide mistaken belief. He has further submitted that technically there was no tax effect upon the assessee-company in not furnishing the said report in time, hence the said default of the assessee was
not intentional. He has further submitted that only one transaction of investment in equity shares was made with its subsidiary company by the assessee. He has brought our attention to the order of the AO passed under Section 271BA to contend that the AO had failed to consider the explanation of assessee of his reasonable cause of bonafide belief that transaction of investment in equity shares of subsidiary company did not fall within the scope of Section 92B. On the other hand, the learned DR, before us, has submitted that penalty had been imposed by the AO due to technical default in submitting the report as per Section 92E of the Act by the assessee-company and there was no discretion available to the AO for not imposing the penalty.
5. We have considered the rival submissions made by the learned representative of the parties before us.
6. In case of 'International transactions' as defined under Section 92B of the Income Tax Act, it is mandatory under Section 92E of the Act for a person entering into an international transaction/transactions to file a report from an Accountant setting forth the particulars of such International transactions. As per Section 271BA, in default of furnishing a report from an accountant as required by Section 92E, the Assessing Officer may impose penalty of a sum of Rs. 1,00,000/-. It may be observed that in section 273B of the Act, it has been provided that no penalty shall be imposable on the concerned person or the assessee for any failure referred to the provisions in question (as are mentioned in section 273B, which includes section 271BA also), if the concerned person/assessee proves that there was reasonable cause for the said failure. For the shake of convenience Sections 271BA & 273B are reproduced as under:—
"271BA. Penalty for failure to furnish report under section 92E.—If any person fails to furnish a report from an accountant as required by section 92E, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one hundred thousand rupees.
273B. Penalty not to be imposed in curtain case.—Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271AA, section 271B section 271BA, Section 271BB, Section 271C, section 271CA, section 271D, Section 271E, section 271F, section 271FA, section 271FB, section 271G, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or section 272B or sub-section (1) or sub-section (1A) of section 272BB or sub-section (1) of section 272BBB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure."
7. Now, coming to the case in hand, it may be observed that as per the wording of section 271BA, the AO may direct the concerned person to pay the penalty. The word 'may' used in the section denotes that it is the discretion of the AO to impose or not to impose the penalty. This discretion is subject to the restrictions as imposed by Section 273B of the Act. The word 'may' also includes the word 'may not'. Reliance can be placed on an authority of the Hon'ble Supreme Court of India in "Malik Ram v. State of Rajasthan" AIR 1961 SC 1575, wherein, the Hon'ble Supreme Court while interpreting the Section 68-D(2) of the Motor Vehicles Act, 1939 has held that the words "may approve" in the section, properly construed, must also include "may not approve".
The word 'shall' has not been used in the section 271BA of the Act, which otherwise, would have made the imposition of penalty mandatory. Our interpretation of word 'may' finds justification from the provisions of Section 273B of the Act, wherein it has been specifically provided that "…..no penalty 'shall be' imposable …………..if he proves that there was reasonable cause for the said failure". So, the relevant provisions under consideration reveals that though the imposition of penalty is discretionary, however, the word 'shall' used in Section 273B provides that it is mandatory not to impose penalty, if the assessee gives a reasonable cause for his failure in furnishing the particulars as required by the provisions of the Section 271BA.
It may be further observed that in the case in hand, the AO did not consider the explanation of reasonable cause of bonafide belief given by the assessee in its failure to furnish the report under Section 92E in time. Even, the learned CIT(A) did not bother to look into or consider the said explanation given by the assessee. The authorities below have imposed the penalty holding that the same is mandatorily imposable under the provisions of Section 271BA of the Act. The authorities below failed to take note of provisions of Section 273B as well as the use of word 'may' in Section 271BA.
8. We are satisfied with the explanation given by the representative of the assessee to the effect that the delay in furnishing the report under Section 92E was not intentional, rather due to mistaken bonafide belief that the transaction involving the investment of money in equity shares of its subsidiary company by the assessee-company was not within the scope of International transactions as defined under Section 92B of the Act. As soon as, the assessee-company came to know that it was required to furnish the report under Section 92E, it filed the same before the AO. The explanation put forth by the assessee-company, in our view, falls within the scope of phrase "reasonable cause" as provided under Section 273B of the Income Tax Act, 1961. So, in view of our observations made above, the penalty imposed upon the assessee by the AO and further confirmed by the CIT(A) is hereby ordered to be deleted.
9. In the result, the appeal of the assessee is allowed.R
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