FAILURE TO FILE ANNUAL INFORMATION RETURN (AIR)

[Mr. M. GOVINDARAJAN]

Section 285BA was introduced by the Finance Act, 2003 with effect  from 01.04.2004.  The said section required to file Annual Information Return.  The said section provides that any assessee, who enters into any financial transaction, as may be prescribed, with any other person, shall furnish, within the prescribed time, an annual information return in such form and manner, as may be prescribed, in respect of such financial transaction entered into by him during any previous year.

However, Finance (No.2) Act, 2004 substituted new provision in place of old provision with effect from 01.04.2005.  The newly substituted section provides that 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 (16 of 1908); or
• the registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988 (59 of 1988); or
• the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898); or
• the Collector referred to in clause (c) of section 3 of the Land Acquisition Act, 1894 (1 of 1894); or
• the recognized stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); or
• an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934); or
• a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 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.

Section 285BA (2) provides that The annual information return referred to in sub-section (1) 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.

Specified financial transaction

Section 285BA (3) defines the expression, ‘Specified financial transaction’ as-

• transaction of purchase, sale or exchange of goods or property or right or interest in a property; or
• transaction for rendering any service; or
• transaction under a works contract; or
• transaction by way of an investment made or an expenditure incurred; or
•  transaction for taking or accepting any loan or deposit,

which may be prescribed.  the Board may prescribe different values for different transactions in respect of different persons having regard to the nature of such transaction.  he value or, as the case may be, the aggregate value of such transactions during a financial year so prescribed shall not be less than fifty thousand rupees.

Defective Annual Information Return

Section 285BA(4) provides that where the prescribed income-tax authority considers that the annual information return furnished is defective, he may intimate the defect to the person who has furnished such return and give him an opportunity of rectifying the defect within a period of one month from the date of such intimation or within such further period which, on an application made in this behalf, the prescribed income-tax authority may, in his discretion, allow; and if the defect is not rectified within the said period of one month or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, such return shall be treated as an invalid return and the provisions of this Act shall apply as if such person had failed to furnish the annual information return.

Section 285BA(5) provides that Where a person who is required to furnish an annual information return under sub-section (1) 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.

Form

A notification has been issued on 01.12.2004 prescribing Rule 114E relating to furnishing of annual information return.  The return shall be furnished in Form 61A and shall be verified in the manner indicated therein.  The said return shall be furnished on or before 31^st of August immediately following the financial year in which transaction is registered or recorded.

Penalty for non filing of Annual Information Return

Section 271FA provides for penalty for failure to file Annual Information Return.  The said 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.

In ‘Sub Registrar, Bhiwani V. Director of Income Tax (CIB)’ – 2017 (8) TMI 373 - PUNJAB AND HARYANA HIGH COURT the appellant, Sub-Registrar, Bhiwani is engaged  in registration of sale deeds under the Registration Act, 1908 and various other activities assigned by the State Government as well as the Deputy Commissioner of the District.  He was working in Bhiwani with effect from 16.08.2010.  The Registrar or Sub-Registrar appointed under section 6 of 1908 was required to file annual information returns in respect of transactions of purchase or sale by any person of immovable property valuing ₹ 30 lakhs or m ore.  The due date for filing the annual information returns was 31^st August immediately following the financial year in which the transaction was registered or recorded.  There was delay in filing annual information returns for the five consecutive financial years starting from 2004 – 05.

Show cause notice was issued on 06.09.2010 asking the filer to show cause as to why penalty under section 271FA of the Act should not be imposed upon it for failure to furnish the annual information return in time.  On 22.11.2010, an official from the office of the filer attended the hearing and requested for adjournment as the filer was unable to attend the hearing.   He was asked to file necessary  copy of provision receipts for the financial years 2007 – 08 and 2008 – 09 as a proof of having filed the annual information report.   On 29.11.2010 the appellants filed copy of provisional receipts for the said years along with the written reply stating therein the reasonable cause for not filing the annual information return in time.

The Director of Income Tax (CIB), Chandigarh held the appellant liable for penalty under section 271FA of the Act for the financial years under consideration.  The appellant filed appeal against the order before Commissioner (Appeals).  The Commissioner partly allowed the appeal whereby penalty up to the date of service of the first notice was cancelled and for the remaining period the same was sustained.

The appellant, not satisfied with the order of Commissioner (Appeals), filed appeal before the Tribunal.  The Tribunal held that-

• the assessee has not established any reasonable cause for not filing the annual information return within time;
• the assessee has also failed to file any documentary evidence supporting the version submitted before the Revenue Authority as well as before the Tribunal;
• the assessee has also failed to establish any bona fide in not filing the annual information return within time, in spite of the fact that the assessee is holding a very responsible post and discharging very important duties which directly affect the exchequer of the country;
• since annual information to be filed by the assessee is very much essential for further cause of action on the same for which the assessee has failed to submit within time;

The Tribunal, therefore, held that the penalty in dispute has rightly been levied by the Revenue Authorities and upheld the penalty.

Against the order of Tribunal, the appellant filed the appeal before the High Court.  The primary issue that arises for consideration in this appeal whether the failure of the appellant in furnishing annual information returns in time could justify the levy of penalty under section 271FA of the Act.  Before the High Court the appellant was unable to demonstrate that when show cause notice was issued on 06.09.2010 asking the filer to show cause as to why penalty under section 271FA be not imposed and the reply was sought by 27.09.2010, the order imposing penalty under section 271FA having been passed on 06.01.2011, it could not be shown that the order was beyond limitation as it was hit by section 275(1)(c) of the Act.  There is no error in the findings by the Tribunal could be established or it could not be successfully controverted.   The High Court dismissed the appeal.

Present position

The Finance Act, 2014 substituted section 285BA with effect from 01.04.2015 and in the revised section  the expression ‘annual information return’ is changed to ‘Statement of financial transaction or reportable account’.

Likewise section 271FA also substituted by the Finance Act, 2014.  The newly substituted section 271FA reads as below-

271FA. Penalty for failure to furnish ³statement of financial transaction or reportable account - If a person who is required to furnish a statement of financial transaction or reportable account] under sub-section (1) of section 285BA, fails to furnish such statement 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 statement 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 statement expires.