I obtained Form 3CEB from my accountant but never uploaded it, and the officer has levied the flat Rs 1 lakh penalty under s.271BA. Is that penalty automatic?
It is not automatic. Section 271BA says the officer 'may' direct payment of the penalty, not 'shall', and s.273B forbids the penalty where the assessee proves reasonable cause. The Tribunal quashed a Rs 1,00,000 penalty on an assessee who had obtained the accountant's report dated 7 September 2013 but failed to upload it electronically, in the first year in which specified domestic transactions were brought within s.92E, where the TPO had made no adjustment at all.
Decided by the ITAT (Pramod M. Jagtap, Vice President and T.R. Senthil Kumar, Judicial Member (Ahmedabad Bench 'C')) on 2022-02-28, reported as ITA No.356/Ahd/2019 (AY 2013-14). It bears on section 271BA, section 92E, section 273B, section 92CA, section 92CA(1), section 92CA(3), section 143(3), section Rule 10E of the Income Tax Act 1961, in Penalty matters.
The commonest s.271BA case is not a refusal to obtain the report but a failure to file it — a late upload, a report obtained and forgotten, or a first-year unfamiliarity with a newly extended obligation. The Tribunal's route is to read the permissive 'may' in s.271BA together with s.273B and then ask whether the explanation is bona fide; the absence of any transfer pricing adjustment is treated as showing the omission was not mala fide. Note the other side, which the CIT(A) relied on: the Mumbai Bench in BNT Global Pvt. Ltd. upheld a s.271BA penalty for failure to file Form 3CEB in respect of an international transaction, and the CIT(A) here distinguished the Kolkata decision in J.J. Exports as concerning international rather than specified domestic transactions. First-year unfamiliarity will not be available for a mature obligation, and s.271BA is a single flat penalty of Rs 1,00,000 — do not confuse it with the 2 per cent exposure under s.271G or the 2 per cent under s.271AA.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The assessee, a partnership firm dealing in industrial waxes and poultry feeds, filed its return for AY 2013-14 on 26 September 2013. The case was referred to the TPO under s.92CA(1). The assessment order dated 2 December 2016 under s.143(3) read with s.92CA(3) records that the TPO made no adjustment and the returned income was accepted. The assessee had obtained a report in Form 3CEB from a chartered accountant dated 7 September 2013 but did not upload it electronically. The Assessing Officer levied Rs 1,00,000 under s.271BA. The CIT(A)-3, Ahmedabad confirmed the penalty on 27 December 2018, holding that under s.92E read with Rule 10E the report had to be obtained and filed before the due date for the return, that ignorance because it was the first year was not acceptable, that the Kolkata decision in J.J. Exports Ltd v. DCIT concerned international and not specified domestic transactions, and relying on the Mumbai Bench in BNT Global Pvt. Ltd. which had upheld a s.271BA penalty. Before the Tribunal the assessee pleaded ignorance of the newly inserted obligation and the Department objected that a letter of 24 June 2016 relied on lacked a departmental seal.
The appeal was allowed and the penalty order quashed. Section 271BA uses 'may', not 'shall', so the levy is discretionary and not automatic, and s.273B forbids the penalty where reasonable cause is proved. The non-uploading of Form 3CEB in the first year of the extended obligation was an unintentional bona fide mistake, and both lower authorities had proceeded as though the penalty were automatic without considering s.273B (paras 7.2 to 7.4).
The Tribunal set out s.92E and s.271BA and reasoned from the language. Parliament used 'may' and not 'shall', making the levy discretionary; the conclusion is reinforced by s.273B, which provides that certain penalties, s.271BA among them, shall not be imposed where the assessee proves reasonable cause. Had 'shall' been used in s.271BA the imposition would have been mandatory. On the facts, the words 'specified domestic transaction' were inserted in s.92E by the Finance Act 2012 with effect from 1 April 2013, applicable for the first time in AY 2013-14; the assessee had obtained the Form 3CEB but failed to upload it, which was neither wilful nor wanton; the TPO proposed no adjustment and the Assessing Officer accepted the returned income, so no mala fides appeared; and both authorities below had treated the penalty as automatic without considering s.273B.
A perusal of the above provisions shows that the Parliament has used the words "may" and not "shall", thereby making their intentions clear inasmuch as that levy of penalty is discretionary and not automatic.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppIt is not automatic. Section 271BA says the officer 'may' direct payment of the penalty, not 'shall', and s.273B forbids the penalty where the assessee proves reasonable cause. The Tribunal quashed a Rs 1,00,000 penalty on an assessee who had obtained the accountant's report dated 7 September 2013 but failed to upload it electronically, in the first year in which specified domestic transactions were brought within s.92E, where the TPO had made no adjustment at all. This was decided by the ITAT (Pramod M. Jagtap, Vice President and T.R. Senthil Kumar, Judicial Member (Ahmedabad Bench 'C')) and bears on section 271BA, section 92E, section 273B, section 92CA, section 92CA(1), section 92CA(3), section 143(3), section Rule 10E of the Income Tax Act 1961. It is reported as ITA No.356/Ahd/2019 (AY 2013-14). The commonest s.271BA case is not a refusal to obtain the report but a failure to file it — a late upload, a report obtained and forgotten, or a first-year unfamiliarity with a newly extended obligation. The Tribunal's route is to read the permissive 'may' in s.271BA together with s.273B and then ask whether the explanation is bona fide; the absence of any transfer pricing adjustment is treated as showing the omission was not mala fide. Note the other side, which the CIT(A) relied on: the Mumbai Bench in BNT Global Pvt. Ltd. upheld a s.271BA penalty for failure to file Form 3CEB in respect of an international transaction, and the CIT(A) here distinguished the Kolkata decision in J.J. Exports as concerning international rather than specified domestic transactions. First-year unfamiliarity will not be available for a mature obligation, and s.271BA is a single flat penalty of Rs 1,00,000 — do not confuse it with the 2 per cent exposure under s.271G or the 2 per cent under s.271AA. If it applies to you, the first step is this: Produce the accountant's report itself, with its date, to show the obligation to OBTAIN the report was discharged even if the obligation to FURNISH it was not.
The assessee, a partnership firm dealing in industrial waxes and poultry feeds, filed its return for AY 2013-14 on 26 September 2013. The case was referred to the TPO under s.92CA(1). The assessment order dated 2 December 2016 under s.143(3) read with s.92CA(3) records that the TPO made no adjustment and the returned income was accepted. The assessee had obtained a report in Form 3CEB from a chartered accountant dated 7 September 2013 but did not upload it electronically. The Assessing Officer levied Rs 1,00,000 under s.271BA. The CIT(A)-3, Ahmedabad confirmed the penalty on 27 December 2018, holding that under s.92E read with Rule 10E the report had to be obtained and filed before the due date for the return, that ignorance because it was the first year was not acceptable, that the Kolkata decision in J.J. Exports Ltd v. DCIT concerned international and not specified domestic transactions, and relying on the Mumbai Bench in BNT Global Pvt. Ltd. which had upheld a s.271BA penalty. Before the Tribunal the assessee pleaded ignorance of the newly inserted obligation and the Department objected that a letter of 24 June 2016 relied on lacked a departmental seal. The matter was decided on 2022-02-28 by the ITAT (Pramod M. Jagtap, Vice President and T.R. Senthil Kumar, Judicial Member (Ahmedabad Bench 'C')). On those facts the ITAT held as follows. The appeal was allowed and the penalty order quashed. Section 271BA uses 'may', not 'shall', so the levy is discretionary and not automatic, and s.273B forbids the penalty where reasonable cause is proved. The non-uploading of Form 3CEB in the first year of the extended obligation was an unintentional bona fide mistake, and both lower authorities had proceeded as though the penalty were automatic without considering s.273B (paras 7.2 to 7.4).
The Tribunal set out s.92E and s.271BA and reasoned from the language. Parliament used 'may' and not 'shall', making the levy discretionary; the conclusion is reinforced by s.273B, which provides that certain penalties, s.271BA among them, shall not be imposed where the assessee proves reasonable cause. Had 'shall' been used in s.271BA the imposition would have been mandatory. On the facts, the words 'specified domestic transaction' were inserted in s.92E by the Finance Act 2012 with effect from 1 April 2013, applicable for the first time in AY 2013-14; the assessee had obtained the Form 3CEB but failed to upload it, which was neither wilful nor wanton; the TPO proposed no adjustment and the Assessing Officer accepted the returned income, so no mala fides appeared; and both authorities below had treated the penalty as automatic without considering s.273B. In the words reproduced by the source cited on this page: "A perusal of the above provisions shows that the Parliament has used the words "may" and not "shall", thereby making their intentions clear inasmuch as that levy of penalty is discretionary and not automatic."
It was decided by the ITAT on 2022-02-28 and is reported as ITA No.356/Ahd/2019 (AY 2013-14). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 271BA, section 92E, section 273B, section 92CA, section 92CA(1), section 92CA(3), section 143(3), section Rule 10E, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the penalty order quashed. Section 271BA uses 'may', not 'shall', so the levy is discretionary and not automatic, and s.273B forbids the penalty where reasonable cause is proved. The non-uploading of Form 3CEB in the first year of the extended obligation was an unintentional bona fide mistake, and both lower authorities had proceeded as though the penalty were automatic without considering s.273B (paras 7.2 to 7.4). It arises in Penalty matters, on section 271BA, section 92E, section 273B, section 92CA, section 92CA(1), section 92CA(3), section 143(3), section Rule 10E of the Income Tax Act 1961, and was decided by Pramod M. Jagtap, Vice President and T.R. Senthil Kumar, Judicial Member (Ahmedabad Bench 'C'). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Plead s.273B in terms and set out the reasonable cause in the penalty reply, not for the first time in appeal. Put on record that the TPO made no adjustment and that the returned income was accepted, which the Tribunal treated as showing the absence of mala fides. Where the obligation is newly extended to your class of transaction, say so and identify the amending Act and the first assessment year of its operation. Check separately whether the report was required at all — s.92E covers international transactions and, since the Finance Act 2012 with effect from 1 April 2013, specified domestic transactions.
Validity check could not be completed. Validity check could not be completed — no later-treatment search was carried out. The reasoning turns on the first year of a newly extended obligation and will not transfer to a settled one. The contrary Tribunal decision relied on by the CIT(A), BNT Global Pvt. Ltd. (Mumbai), was not read for this entry and its reasoning is not stated here. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
A retrieval warning worth recording. A ?type=print fetch of this order returned a tidy set of numbered paragraphs that was ENTIRELY paraphrase — smooth prose with paragraph numbers attached, and none of it the Tribunal's words. Everything stated here was re-retrieved through /docfragment/ and is verbatim. The paraphrased fetch also described the transactions as 'international transactions amounting to Rs.5,09,26,331', whereas the verbatim text of paragraphs 3.1, 3.2 and 7.3 shows the case concerned specified domestic transactions, s.92E having been extended to them by the Finance Act 2012 with effect from 1 April 2013, AY 2013-14 being the first year. I have taken the verbatim text. The order's own header reads "ITO, Ward-3(3)(2), Ahmedabad"; the indiankanoon case title reads "Ward-3(3)(12)". The header has been preferred. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the penalty order quashed. Section 271BA uses 'may', not 'shall', so the levy is discretionary and not automatic, and s.273B forbids the penalty where reasonable cause is proved. The non-uploading of Form 3CEB in the first year of the extended obligation was an unintentional bona fide mistake, and both lower authorities had proceeded as though the penalty were automatic without considering s.273B (paras 7.2 to 7.4).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
We charge fees for our public utility work. Does that cost us charitable status under s.2(15)?
My return was only processed under 143(1). Does that stop the department reopening it later?
You took a cash loan and now face penalty equal to the whole amount. Is there any relief?
No s.143(2) notice was issued at all. Does s.292BB save the assessment?