TMI Blog2011 (3) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... with the statutory provisions. - Decided partly in favor of assessee. - 14676 of 2010 - - - Dated:- 4-3-2011 - HARSHA DEVANI MS., ANTANI H. B. JJ. JUDGMENT Ms. Harsha Devani J.- 1. By this petition under article 226 of the Constitution of India, the petitioner has challenged the order dated September 9, 2010, passed by the Director of Income-tax (CIB), Ahmedabad, under section 271FA of the Income-tax Act, 1961 (the Act), imposing penalty of Rs. 40,700 (Rs. 100 for each day of the default for the delay of 407 days) in filing annual information return under the Act. 2. The facts as appearing in the petition are that the petitioner is engaged in banking business as a co-operative bank at Patan. In relation to the financial year 2006-07, the petitioner received a notice dated March 15, 2010, from the Director of Income-tax (CIB) (the respondent herein) under section 271FA of the Act stating that the petitioner had, without any cause, failed to furnish annual information return (AIR) as required under sub-section (1) of section 285BA of the Act within the prescribed time limit and asking the petitioner to show cause as to why an order imposing penalty under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and as such in the light of the provisions of section 273B of the Act, the respondent was not justified in imposing penalty under section 271FA of the Act. It was submitted that the petitioner is a small bank operating in a mofussil area and does not have requisite staff or efficient staff like scheduled banks and it is very poor when it comes to modern equipment like computer, etc. Moreover, uptill the assessment year 2006-07, the petitioner bank had no income-tax liability and as such, was under the impression that the provisions of the Income-tax Act do not apply to the bank. It was submitted that the petitioner had absolutely no intention of defying or contravening the provisions of law. Inviting attention to Instruction No. 1 of 2009, dated February 12, 2009, of the Circular issued by the Central Board of Direct Taxes, it was pointed out that as per the said circular, it is apparent that the Income-tax Department had no manner of use of all the annual information returns filed up to the financial year 2006-07. It was submitted that considering the aforesaid facts, the levy of penalty was not justified. In support of his submission the learned advocate placed reliance upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was not required to be registered as a dealer under the Orissa Sales Tax Act. It was submitted that in the circumstances, the petitioner which is a small bank in a mofussil area, without having the aid of chartered accountants, would be entitled to hold a bona fide belief that it was not liable to take any action under the Income-tax Act. It was, accordingly, urged that the petitioner was prevented by sufficient cause from complying with the provisions of section 285BA of the Act and as such, penalty levied on the petitioner is required to be set aside. 6. The petition was vehemently resisted by Mr. M. R. Bhatt, learned senior advocate appearing on behalf of the respondent. Inviting attention to the impugned order, it was submitted that initially for the year under consideration, the petitioner had not filed the annual information return. That after noticing the default for the financial year 2007-08, the Department had issued notice under section 285BA(5) of the Act despite which, the petitioner did not comply with the statutory requirement. It was only after the second notice was issued on September 11, 2009, that the petitioner has filed the annual information return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statutory liability imposed on the petitioner, which it has failed to discharge within a prescribed period of limitation and even thereafter. It was submitted that in the circumstances, there being no breach of any statutory provisions or any jurisdictional error or breach of the principles of natural justice on the part of the respondent, no intervention is warranted by this court in exercise of its writ jurisdiction under article 226 of the Constitution of India. 8. Section 285BA of the Act imposes an obligation upon any person, being an assessee, who is responsible for registering or maintaining books of account or other documents containing a record of any specified financial transaction, under any law for the time being in force, to 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 April 1, 2004, and information relating to which is relevant and required for the purposes of the Act to the prescribed income-tax authority or such other authority or agency as may be prescribed. Such annual information report is required to be furnished within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion returns within the prescribed period. In the light of the explanation submitted by the petitioner, it would be reasonable to believe that the petitioner was not aware of the provisions of section 285BA of the Act which were brought on the statute book in the present form with effect from April 1, 2005. However, in case where a person who is required to furnish an annual information return under sub-section (1) of section 285BA of the Act does not furnish the same within the prescribed time, sub-section (5) thereof lays down that 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 mandates such person to furnish the annual information return within the time specified in the notice. In the present case, the prescribed Income-tax Officer, after noticing the default in filing annual information return for the financial year 2007-08, issued notice under section 285BA(5) of the Act to the petitioner dated December 17, 2008, for that year. Upon such notice being served, the petitioner can no longer plead that it was unaware of the statutory pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is a statutory obligation on the assessee to furnish annual information return, it is bound by it. How and in what manner the income-tax authorities make use of the said information is not the look out of the petitioner. The petitioner is bound to comply with the statutory requirements as prescribed, failing which it has to face the consequences of such failure. Besides, as rightly contended on behalf of the Revenue, on account of not providing information in time, the Revenue was not in a position to take remedial action. 13. However, notwithstanding the aforesaid position, it cannot be gainsaid that the petitioner is engaged in the banking business, as a co-operative bank. It is not disputed by the respondent that the petitioner was exempt from payment of income-tax under the provisions of section 80P(2)(a)(i) uptill the assessment year 2006-07. In the circumstances, it would be quite natural that the petitioner may not have been aware of the provisions of section 285BA of the Act initially. Moreover, sub-section (5) of section 285BA lays down that where a person who is required to furnish annual information return, under sub-section (1) thereof, has not furnished the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on behalf of the petitioner. In the facts of the said case, the Tribunal had accepted the existence of reasonable cause for a part of the period of delay while reject- ing the explanation for another part. The court held that existence or otherwise of a reasonable cause would always be dependent upon facts. It was further held that though penalty may be imposable, in a given set of circumstances and facts, whether penalty should be actually levied, and if yes, for what period, will have to be determined on the basis of reasonable cause. In the circumstances, the petitioner is entitled to partial relief by way of deletion of penalty till the date of service of notice dated December 17, 2008, under section 285BA(5) of the Act. However, for the remaining period, no reasonable cause as envisaged under section 273B of the Act can be said to be in existence for non-compliance with the statutory provisions. 15. For the foregoing reasons, the petition succeeds in part and is, accordingly, allowed to the following extent. The impugned order dated September 9, 2010, passed by the respondent is modified to the extent that there was a reasonable cause for the assessee in not complying w ..... 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