Non- Deliberate Delay In Late Filing SFT Return : ITAT Quashes Penalty

The two-member bench of Yogesh Kumar (Judicial Member) and Shamim Yahya (Accountant Member) observed that an order imposing a penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding. The penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of the law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation.

The appellant/assessee is a District Cooperative Bank, registered under the Cooperative Societies Act and controlled by the state of Haryana. The assessee is engaged in banking activities like borrowing, raising or taking up money, lending or advancing money to its members.

A show cause notice was issued on 08.09.2017 by the Director of Income Tax (I & CI), Chandigarh, calling upon the assessee to explain the reason for not filing a statement of financial transaction return. On receipt of the show cause notice, the assessee filed the SFT Return on 14.09.2017.

The Director of Income Tax (I&CI), Chandigarh, was not satisfied with the reasons for the delay of 210 days in filing the STF Return and therefore imposed a penalty and passed an order under section 271 FA of the Income Tax Act.

The assessee preferred an appeal before the CIT(A). The CIT (A) dismissed the appeal filed by the assessee by confirming the penalty imposed by the CIT under section 271FA.

The assessee submitted that the order under section 271FA came to be passed due to a delay in filing the SFT Returns of 210 days. The assessee has immediately filed an SFT Return on receipt of the show cause notice. The advisory notice issued under section 285 BEA (5) and the first penalty notice under section 271FA have not been received by the assessee since the assessee has inadvertently changed the email address. The assessee, being rural banks governed by the Haryana government, has very small infrastructure and the filing of a belated SFT return was not deliberate.

The assessee contended that the assessee had not received the advisory notice issued under section 285 BA (5) and the show cause notice of penalty under section 271FA due to a change of mail ID and the delay in filing the return was not deliberate.

The ITAT held that the assessee had already filed an SFT return. The AO should have taken a lenient view by adopting a fair objective of the penalty proceedings.

Case Title: The Rewari Central Co- operative Bank Ltd. Versus Directorate of Income Tax, (I & CI)

Citation: I.T.A. No. 4846/DEL/2019

Dated: 26.07.2022

Counsel For Appellant: C.A. Sanjeev Jain

Counsel For Respondent: Sr. D. R. Md. Gayasuddin Ansari

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