APPEAL AGAINST ORDER IMPOSING PENALTY UNDER SECTION 271FA OF INCOME TAX ACT, 1961 IS NOT MAINTAINABLE

[Mr. M. GOVINDARAJAN]

Section 285BA of the Income Tax Act, 1961 makes it obligatory on certain persons to file Annual Information Return.   According to this section any person, being-

• An assessee; or
• the prescribed person in the case of an office of Government; or
• a local authority or other public body or association; or
• the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908; or
• the registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988; or
• the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898; or
• the Collector referred to in clause (c) of section 3 of the Land Acquisition Act, 1894; or
• the recognized stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956; or
• an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934; or
• a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996,

who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction, under any law for the time being in force, shall furnish an annual information return, in respect of such specified financial transaction which is registered or recorded by him during any financial year beginning on or after the 1st day of April, 2004 and information relating to which is relevant and required for the purposes of this Act, to the prescribed income-tax authority or such other authority or agency as may be prescribed. The annual information return shall be furnished within the prescribed time after the end of such financial year, in such form and manner (including on a floppy, diskette, magnetic cartridge tape, CD-ROM or any computer readable media) as may be prescribed.

Where a person who is required to furnish an annual information return 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 from the date of service of such notice and he shall furnish the annual information return within the time specified in the notice.

Section 271FA of the Act was inserted by Finance Act, 2004 effective from 01.04.2005. This section provides that if a person who is required to furnish an annual information return, as required under sub-section (1) of section 285BA, fails to furnish such return within the time prescribed under that sub-section, the income-tax authority prescribed under the said sub-section may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues.

The issue to be discussed in this article whether an appeal is maintainable before the Tribunal if the penalty is imposed under Section 271FA of the Act with reference to the decided case law.

In ‘Sub Registrar office, Meppayur V. Director of Income Tax (Intelligence)’ – 2014 (1) TMI 102 - ITAT COCHIN the appeal is filed by the appellant against the order of the Director (Intelligence) levying penalty under Section 271FA of the Act.

The Tribunal raised question on the maintainability of the present appeal before the Tribunal.   The appellant contended that in column 7 of the demand notice issued by the Director (intelligence) it was mentioned that an appeal may be filed under Part B of Chapter XX of the Act to the Appellate Tribunal, Cochin Bench within 60 days of the receipt of that order in Form No. 36. On the basis of the said clarification the appeal has been filed even though there is no provision in the Act to file against the penalty imposed under Section 271FA.

The Revenue contended that the appeal is not maintainable before the Tribunal. The Revenue contended that the legislature omitted to provide appeal in Section 253 against the penalty imposed under Section 271FA.   The Revenue further contended that Section 246A of the Act provides that an order imposing penalty under Chapter XXI is appealable before the Commissioner (Appeals). Section 271FA of the Act falls under Chapter XXI. Therefore the appeal is to be filed before the Commissioner (Appeals) and not before the Tribunal.

The Tribunal on a query from the Bench confirmed that the Commissioner of Income Tax is equivalent in rank as that of the Director of Income Tax (Intelligence). It raised a query how the appeal filed under Section 246A(q) of the Act would be effective.

The Tribunal analyzed the provisions of Section 253 of the Act which reads as follows:

“253 (1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order-

(a)  an order passed by a Deputy Commissioner (Appeals) before the 01.10.1998 or as the case may be, a Commissioner (Appeals) under Section 154, section 250, section 271, section 271A or section 272A; or

(b)  an order passed by an Assessing Officer under Section 158BC(c) in respect of search initiated under Section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30.07.1995, but before the 01.01.1997; or

(c)  an order passed by a Commissioner under Section 12AA or under Section 80G(5)(vi) or under Section 263 or under Section 271 or under Section 272A or an order passed by him under Section 154 amending his order under Section 263 or an order passed a Chief Commissioner or a Director General or a Director under Section 272A; or

(d)  an order passed by an Assessing Officer under Section143(3) or section 147 in pursuance of the directions of the Dispute Resolution Panel or an order passed under Section 154 in respect of such order.”

The Tribunal observed that nowhere in Section 253 it is mentioned that the order passed by the Director of Income Tax (intelligence) or any other officer of the Income Tax Department levying penalty under Section 271FA as appealable before the Tribunal.   The Tribunal is a quasi judicial authority.   It cannot travel beyond the provisions of the Act.   Therefore, unless and until an appeal is specifically provided in Section 253 of the Act against an order levying penalty under Section 271FA, the Tribunal is of the considered opinion that the present appeal is not maintainable before the tribunal.

In regard to the contention of the appellant that the appeal has been filed as per the clarification of Director (Intelligence) that an appeal may be filed before the Tribunal within 60 days from the date of the receipt of the order, the Tribunal held that the consent of a litigant party will not confer any jurisdiction on a judicial or quasi judicial authority unless and until it is otherwise conferred by the Legislature. Therefore the consent/direction of the Director will not confer any jurisdiction on the Tribunal unless it is provided in the Act.

In regard to the contention of the Department that the appeal ought to be filed before the Commissioner (Appeals) the Tribunal held that the Commissioner is equal in rank to the Director.   Then the appeal before Commissioner (Appeal) would not be an effective and efficacious remedy available to the appellant.

One may argue that an appeal is provided against the order of penalty under Section 271 in Section 253(1)(a) and 253(1)(c) of the Act, therefore, all branches of section 271 i.e., from 271A to 271G are included in the section.   The Tribunal held that Sections 271A to 271G are not sub section sunder Section 271and they are independent sections by themselves. Section 271FA is a separate and independent of section 271 and therefore the said argument is not correct.

The Tribunal dismissed the appeal filed by the appellant as the same is not maintainable before the Tribunal. The appellant is liberty to challenge the order in the appropriate forum in a manner known to law.

The said section 271FA was substituted vide Finance Act, 2013 effective from 01.04.2014 which reads as follows-

“If a person who is required to furnish an annual information return under sub section (1) of section 285BA, fails to furnish such return within the time prescribed under sub-section (2) thereof, the income-tax authority prescribed under said sub-section (1) may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which such failure continues:

Provided that where such person fails to furnish the return within the period specified in the notice issued under sub-section (5) of section 285BA, he shall pay, by way of penalty, a sum of five hundred rupees for every day during which the failure continues, beginning from the day immediately following the day on which the time specified in such notice for furnishing the return expires.”