MEET FOREX PRIVATE LIMITED,DELHI V. ACIT(I&CI), NEW DELHI

ITA 2936/DEL/2022

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Meet Forex Private Limited, engaged in the business of foreign currency transactions, faced a penalty for not filing the SFT by the due date as required under section 285BA of the Income Tax Act. The Assessing Officer (AO) issued notices for non-compliance, and despite the assessee's response citing nil transactions, it was found that one transaction was reported. The penalty was confirmed by the CIT(A), leading to the appeal before the ITAT. The Tribunal considered the assessee's arguments of technical issues and lack of awareness about the filing requirements, and based on precedents, decided in favor of the assessee, removing the penalty.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 471509 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 08-10-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 15-12-2022
• Other Referred Cases: Malda District Central Co-op Bank Ltd. v. Director of Income-tax (I&CI), Kolkata, Durgapur Steel Peoples' Cooperative Bank Ltd. v. Director of Income-tax (Intelligence & Criminal Investigation), Kolkata
• Laws Referred To: Income Tax Act, Foreign Exchange Management Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMDHAN MEENA
• Assessee Lawyers: GUNJAN JAIN
• Keywords: Set aside; TDS
• Section: 72; 273B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘E’: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.2936/Del/2022 [Assessment Year: 2018-19] Meet Forex Private Limited, 18, Shastri Market, Gurudwara Road, Karol Bagh, Delhi-110005 Vs Addl./JDIT(I & CI), New Delhi PAN-AADCM6868J Assessee Revenue Assessee by Ms. Gunjan Jain, CA Revenue by Sh. Ram Dhan Meena, Sr. DR Date of Hearing 08.10.2024 Date of Pronouncement 15.10.2024 ORDER PER BRAJESH KUMAR SINGH, AM, This appeal filed by the assessee is directed against the order dated 17.10.2022 of the National Faceless Appeal Centre, Delhi, relating to Assessment Year 2018-19, dismissing the appeal of the assessee filed against the levy of penalty u/s 271FA of the Act, amounting to Rs.81,500/- vide order dated 13.11.2019. 2. The assessee company is engaged in the business of sale and purchase of foreign currency duly authorized by Reserve Bank of India since 2004 having license No.FE.DEL.FFMC./355/2004 3. The AO noted that the assessee company being an authorized person as referred to in section 2(c) of the Foreign Exchange Management 2 ITA No.2936/Del/2022 Act, 1999 and registered vide ITDREIN was required to file the statement of financial transactions(SFT) for reportable account under SFT Code-008 as per Rule-114E of the I.T. Rules, 1962, for which the due date for financial year 2017-18 was 31.05.2018. Since, the assessee company failed to file the SFT by due date, notice u/s 285BA(5) was issued thorough mail on 30.01.2019 and 20.05.2019 seeking it to furnish SFT on or before 10.02.2019 and 20.05.2019. The assessee failed to comply with the said notices. The assessee filed its reply on 30.08.2019 stating nil transaction as the reason for non-compliance but the AO upon examination DQR summary report found that the assessee had actually reported one transaction. He, therefore, levied a penalty of Rs.81,500/- as per the computation in the penalty order. 4. Aggrieved with the said order, the assessee appealed before the ld. CIT(A). The ld. CIT(A) noted that there was a delay of 255 days in complying to the provisions of section 285BA for which penalty @Rs.100 per day of Rs.25,000/- was levied and a delay of 112 days default for not complying to the notice issued u/s 285BA(5) for which penalty @Rs.500 per day amounting to Rs.56,000/- was levied. The Ld. CIT(A) also took note of the fact that the assessee not only failed to furnish the statement mandated u/s 285BA in time, but even after the notice was issued, it failed to comply for another 112 days. In view of these facts and also considering the fact that the assessee company was incorporated in 2002 and had substantial paid up capital and also employs auditors and consultant to advice from time to time regarding compliance obligation, he held that the assessee was not able to show that there was reasonable 3 ITA No.2936/Del/2022 cause within the meaning of section 273B of the I.T. Act for the delay in filing the SFT and thereby confirmed the penalty u/s 271FA of the Act. 5. Against the order of the Ld. CIT(A), the assessee is in appeal before us. 5.1. The assessee filed a written submission as appearing on page no.1 to 11 of the Paper Book and made the following submissions:- “8. Brief contention 9. The primary contention of the assessee is that the penalty u/s 271FA shall not be imposed on the assessee as- a. The assessee was unaware of the requirement of filing of form SFT b. The portal of the assessee was not working properly due to which there was delay in filing the same and also it could only be filled manually. 10. The main intend of the government to introduce Section 285BA was- \"The accumulation of black money poses a huge threat to the Indian economy. As a result, the Indian government has launched a number of steps to combat such actions. In 2003, the 'Annual Information Return (AIR) was introduced under Section 285BA of the Income Tax Act. It was later repealed by the Finance Act of 2014, which renamed it 'duty to produce a statement of financial transaction or reportable account\". As per Section 285BA all the reporting entities had to file disclosure in Form 61A or 61B on or before 31 May of the FY immediately following the FY in which the transaction is recorded or registered. 11. Section 285B(1) provide that- \".....any person responsible for who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as may be prescribed, under any law for the time being in force, shall furnish a statement in respect of such specified financial transaction or such reportable account which is registered or recorded or maintained by him and information relating to which is relevant and required for the purposes of this Act, to the income-tax or such other authority or agency as may be prescribed.” 4 ITA No.2936/Del/2022 12. The assessee was not aware of the applicability on said transaction which require disclosure as per Income Tax Act. 13. Subsequently, notices were communicated vide email and the assessee tried to file the said form on the portal. However, due to technical issues, there were errors in filing of the said SFT form and the same was communicated to the officer verbally. 14. The assessee repeatedly tried to file the said form online after he was made aware of the legal requirement to comply with SFT requirement, however due to issues in portal, he could not file the same electronically. 15. The assessee had finally submitted the said form vide manual letter dated 09th August, 2019, The copy of the same is enclosed here with the paper book. 16. The appellant has no intention to escape submission of SFT Report of the relevant year and the same could not be submitted due to lack of proper guidance by the commercial adviser hired by assessee about the newly implemented provisions and technicalities involved in filing the SFT Form. Further there was technical issue due to which submission of SFT Report online has become impossible due to which SFT Reporting was done by submitting it through physical mode. 17. In the light of the aforesaid facts and circumstances, the penalty on assessee due to technical issue on portal will be unfair and unreasonable. 18. Various courts have also held that the penalty u/s 271FA for non-filing or delay in filing of SFT due to ignorance of such provision should not be imposed as breach was only technical or venial breach. The assessee relies on the following rulings: - a) Ruling of Kolkata Bench of ITAT in the case of Malda District Central Co-op Bank Ltd. v. Director of Income-tax (I&CI), Kolkata wherein the bench was in agreement with non- imposition of penalty u/s 271FA of Income Tax Act due to aforesaid reason. The relevant para of finding of hon. ITAT is reproduced as under:- \"8. the assessee got the accounts of all branches consolidated and audited, and also filed Income Tax/TDS returns. The order of the Director of Income Tax (Intelligence and Criminal investigation) does not speak as to how the assessee stood to gain by contravening with the provisions of Section 285BA of the Act or the act of assessee resulted in any loss to the Revenue. Further, it is an acknowledged and judicially recognized fact that the tax laws of this country are complex and complicated and often require for compliance, there with the assistance of tax practitioners specialising in this field, is a well known fact, and it is equally well known fact that the legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making references to the history of the enactments. In 5 ITA No.2936/Del/2022 these circumstances, no mala fides can be attributed to the assessee so as to invoke the penalty proceedings under section 271FA of the Act and the learned Director of Income Tax (Intelligence and Criminal investigation) should have taken note that the breach is only technical or venial breach of the provisions of the Act and such a breach could have flown from a bonafide ignorance of the assessee that he is liable to act in the manner prescribed by the statute, and should not have invoked the penalty proceedings. We find every force in the argument of the learned AR and hold that the Penalty proceedings are liable to be set aside.\" Copy of the ruling is enclosed on page to 36 to 41 of this paper book. b) Ruling of Kolkata Bench of ITAT in the case of Durgapur Steel Peoples' Cooperative Bank Ltd. v. Director of Income-tax (Intelligence & Criminal Investigation), Kolkata wherein it was held as under:- \"On a careful consideration of the matter, it is found that except the instant alleged breach, nothing more is alleged against the assessee. As a matter of fact, the Director (Intelligence and Criminal investigation) who passed the penalty order himself observed in his order that the assessee got the accounts of all branches consolidated and audited, and also filed Income-tax/TDS returns. The order of the Director (Intelligence and Criminal investigation) did not speak as to how the assessee stood to gain by contravening with the provisions of section 285BA or the act of assessee resulted in any loss to the revenue.  Further, it is an acknowledged and judicially recognized fact that the tax laws of this country are complex and complicated and often require for compliance, therewith the assistance of tax practitioners specialising in this field. It is equally well known fact that the legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making references to the history of the enactments.  In these circumstances, no mala fides can be attributed to the assessee so as to invoke the penalty proceedings under section 271FA of the Act and the Director (Intelligence and Criminal investigation) should have taken note that the breach is only technical or venial breach of the provisions of the Act and such a breach could have flown from a bona fide ignorance of the assessee that he is liable to act in the manner prescribed by the statute, and should not have invoked the penalty proceedings. Therefore, penalty proceedings are liable to be set aside.” 5.2. The ld. DR supported the orders of the authorities below. 6. We have considered the rival submissions and perused the material available on record. The main submission of the assessee is that the 6 ITA No.2936/Del/2022 return u/s 285BA(1) could not be filed on the ground that the assessee was unaware of the requirement of filing of Form SFT. Further, it submitted that when it tried to file its return, the income tax portal was not working properly and therefore it had to file manually on 9th August, 2019. On similar facts, the Co-ordinate Bench of the Kolkata Tribunal allowed the appeal in the case of Malda District Central Co-op Bank Ltd. vs DIT(I & CI), [2016] 72 taxmann.com 306 (Kol. Trib.) and Durgapur Steel Peoples’ Cooperative Bank Ltd. vs Director of Income-tax (Intelligence & Criminal Investigation), Kolkata by holding that such a breach was only technical or venial breach of the provisions of the Act and such a breach could have flown from a bona fide ignorance of the assessee that he was liable to act in a manner prescribed by the statute. Considering the submissions of the assessee, it is held that its explanation for not filing of the SFT return due to lack of knowledge is a bona fide explanation given the fact that the assessee had only one transaction to report in the return filed by it on 09.08.2019. Respectfully following the above decisions, the penalty of Rs.81,500/- u/s 271FA levied by the AO and confirmed by the Ld. CIT(A) is not sustainable and the same is deleted. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 15th October, 2024. Sd/- Sd/- [KUL BHARAT] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 15.10.2024. f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ 7 ITA No.2936/Del/2022 Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi, "