We had no reportable transactions and filed no SFT. Can they still levy penalty under 271FA?
No, not for a year in which there was nothing to report. Section 285BA casts the filing obligation on a person who has registered or recorded a specified financial transaction during the financial year, so where no such transaction exists the duty to furnish the statement never arises and s.271FA has nothing to bite on. The burden is on the department to show that reportable transactions were in fact recorded before it can allege a failure.
Decided by the ITAT (Income Tax Appellate Tribunal, Visakhapatnam Bench — V. Durga Rao (Judicial Member) and D.S. Sunder Singh (Accountant Member); ITA Nos. 355 to 360/Viz/2018) on 2019-01-25, reported as ITA Nos. 355-360/Viz/2018 (Visakhapatnam ITAT), order dated 25.01.2019 (FYs 2010-11 to 2015-16). It bears on section 271FA, section 285BA, section 274, section 273B of the Income Tax Act 1961, in Penalty matters.
It answers the standard notice that treats non-filing of a nil statement as a default and computes penalty on a per-day basis, and it puts the onus back on the department to point to the specified transactions. The relief was graded rather than blanket: for the later years penalty for late filing of the original statement was sustained, and only the penalty attributable to delay in curing a defect after a defect notice was cancelled, on reasonable cause where the time allowed to rectify was unreasonably short.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The bank did not file the Annual Information Return / statement of financial transactions for financial years 2010-11 to 2015-16 by the prescribed due dates. The Director of Income Tax (Intelligence & Criminal Investigation) issued notices under s.274 and imposed penalties under s.271FA computed on a per-day basis for the delay. For some years the bank filed the statement only after a defect notice was issued, and in some instances the time allowed to cure the defect was very short. The bank's case was that for the earlier years there were no transactions of the kind specified in s.285BA read with the rules, so no statement was due at all, and that for the later years there was reasonable cause for the delay.
For the two earliest years the Tribunal cancelled the penalties. It held that in the absence of any specified transaction required to be reported under section 285BA the bank was not obliged to file the annual information return at all, so a penalty under section 271FA was unjustified; it set aside the orders of the lower authorities and cancelled the penalties for financial years 2010-11 and 2011-12, allowing the appeals for those years. What was decided for the remaining years covered by the six appeals is not established here. A secondary report describes a graded outcome for the later years, penalty for delay in filing the original statement being sustained while penalty attributable to delay in curing a defect after notice was cancelled for reasonable cause; that account could not be checked against the order and should be treated as unconfirmed. The entry's own particulars are also inconsistent about which later years were in issue.
On the years that can be verified, the Tribunal read section 271FA together with section 285BA as obliging a person to furnish the annual information return only where a reportable or specified transaction exists which section 285BA requires to be reported. Where there is no such transaction in the financial year there is no requirement to file the return at all, and a person who has entered into no reportable transaction need furnish neither a statement nor a return. On the facts, the acknowledgement in the paper book showed no reportable or specified transactions under section 285BA read with rule 114E for financial years 2010-11 and 2011-12; the bank had responded to the Director's notice by furnishing nil transactions; and the department did not make out a case that the bank had recorded reportable or specified transactions in the relevant financial years. The Tribunal rejected the Departmental Representative's objection to the bank raising the no-reportable-transaction argument afresh. It followed that no obligation to file arose and the penalty machinery had nothing to bite on. The reasoning attributed to this order for the later years — a distinction between delay in filing the original statement and delay in curing a defect after notice, with reasonable cause found for the latter — is not established from any text available here.
in the absence of any specified transaction required to be reported u/s 285BA of the Act, the assessee is not obliged to file the AIR and levy of penalty u/s 271FA is unjustified
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Handle my notice → Ask a CA on WhatsAppNo, not for a year in which there was nothing to report. Section 285BA casts the filing obligation on a person who has registered or recorded a specified financial transaction during the financial year, so where no such transaction exists the duty to furnish the statement never arises and s.271FA has nothing to bite on. The burden is on the department to show that reportable transactions were in fact recorded before it can allege a failure. This was decided by the ITAT (Income Tax Appellate Tribunal, Visakhapatnam Bench — V. Durga Rao (Judicial Member) and D.S. Sunder Singh (Accountant Member); ITA Nos. 355 to 360/Viz/2018) and bears on section 271FA, section 285BA, section 274, section 273B of the Income Tax Act 1961. It is reported as ITA Nos. 355-360/Viz/2018 (Visakhapatnam ITAT), order dated 25.01.2019 (FYs 2010-11 to 2015-16). It answers the standard notice that treats non-filing of a nil statement as a default and computes penalty on a per-day basis, and it puts the onus back on the department to point to the specified transactions. The relief was graded rather than blanket: for the later years penalty for late filing of the original statement was sustained, and only the penalty attributable to delay in curing a defect after a defect notice was cancelled, on reasonable cause where the time allowed to rectify was unreasonably short. If it applies to you, the first step is this: Ask the department in writing to identify the specified financial transactions it says were registered or recorded in the year, since it must show a reportable transaction before alleging failure.
The bank did not file the Annual Information Return / statement of financial transactions for financial years 2010-11 to 2015-16 by the prescribed due dates. The Director of Income Tax (Intelligence & Criminal Investigation) issued notices under s.274 and imposed penalties under s.271FA computed on a per-day basis for the delay. For some years the bank filed the statement only after a defect notice was issued, and in some instances the time allowed to cure the defect was very short. The bank's case was that for the earlier years there were no transactions of the kind specified in s.285BA read with the rules, so no statement was due at all, and that for the later years there was reasonable cause for the delay. The matter was decided on 2019-01-25 by the ITAT (Income Tax Appellate Tribunal, Visakhapatnam Bench — V. Durga Rao (Judicial Member) and D.S. Sunder Singh (Accountant Member); ITA Nos. 355 to 360/Viz/2018). On those facts the ITAT held as follows. For the two earliest years the Tribunal cancelled the penalties. It held that in the absence of any specified transaction required to be reported under section 285BA the bank was not obliged to file the annual information return at all, so a penalty under section 271FA was unjustified; it set aside the orders of the lower authorities and cancelled the penalties for financial years 2010-11 and 2011-12, allowing the appeals for those years. What was decided for the remaining years covered by the six appeals is not established here. A secondary report describes a graded outcome for the later years, penalty for delay in filing the original statement being sustained while penalty attributable to delay in curing a defect after notice was cancelled for reasonable cause; that account could not be checked against the order and should be treated as unconfirmed. The entry's own particulars are also inconsistent about which later years were in issue.
On the years that can be verified, the Tribunal read section 271FA together with section 285BA as obliging a person to furnish the annual information return only where a reportable or specified transaction exists which section 285BA requires to be reported. Where there is no such transaction in the financial year there is no requirement to file the return at all, and a person who has entered into no reportable transaction need furnish neither a statement nor a return. On the facts, the acknowledgement in the paper book showed no reportable or specified transactions under section 285BA read with rule 114E for financial years 2010-11 and 2011-12; the bank had responded to the Director's notice by furnishing nil transactions; and the department did not make out a case that the bank had recorded reportable or specified transactions in the relevant financial years. The Tribunal rejected the Departmental Representative's objection to the bank raising the no-reportable-transaction argument afresh. It followed that no obligation to file arose and the penalty machinery had nothing to bite on. The reasoning attributed to this order for the later years — a distinction between delay in filing the original statement and delay in curing a defect after notice, with reasonable cause found for the latter — is not established from any text available here. In the words reproduced by the source cited on this page: "in the absence of any specified transaction required to be reported u/s 285BA of the Act, the assessee is not obliged to file the AIR and levy of penalty u/s 271FA is unjustified"
It was decided by the ITAT on 2019-01-25 and is reported as ITA Nos. 355-360/Viz/2018 (Visakhapatnam ITAT), order dated 25.01.2019 (FYs 2010-11 to 2015-16). 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 271FA, section 285BA, section 274, section 273B, 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 cuts both ways and is cited by both sides. For the two earliest years the Tribunal cancelled the penalties. It held that in the absence of any specified transaction required to be reported under section 285BA the bank was not obliged to file the annual information return at all, so a penalty under section 271FA was unjustified; it set aside the orders of the lower authorities and cancelled the penalties for financial years 2010-11 and 2011-12, allowing the appeals for those years. What was decided for the remaining years covered by the six appeals is not established here. A secondary report describes a graded outcome for the later years, penalty for delay in filing the original statement being sustained while penalty attributable to delay in curing a defect after notice was cancelled for reasonable cause; that account could not be checked against the order and should be treated as unconfirmed. The entry's own particulars are also inconsistent about which later years were in issue. It arises in Penalty matters, on section 271FA, section 285BA, section 274, section 273B of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Visakhapatnam Bench — V. Durga Rao (Judicial Member) and D.S. Sunder Singh (Accountant Member); ITA Nos. 355 to 360/Viz/2018. 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. If there were none, state that on record and resist the proposition that a nil statement was nonetheless due. Where the delay was in curing a defect after a defect notice, plead reasonable cause under s.273B and put on record how little time was actually allowed to rectify. Do not expect relief for late filing of the original statement in a year where reportable transactions existed, because that penalty was upheld.
Still good law. Followed by the Delhi Bench of the Tribunal in The Motor & General Finance Ltd. v. ACIT [2024] 159 taxmann.com 1494 (Delhi - Trib.), IT Appeal No. 841 (Delhi) of 2023, order dated 8 January 2024. That Bench set out this order's reasoning in full, held it applied to the facts before it, and deleted a penalty under section 271FA; its case review records this decision as followed. It added a second and independent ground, that a bona fide belief that no return was due where there are no reportable transactions is reasonable cause under section 273B. No amendment displacing the decision and no appellate reversal of it were found. 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.
The order itself could not be found in a subscription research database — three searches were run, on the bank's name, on the name with the penalty section, and on the appeal number, and none returned it. What is recorded here about the two earliest years comes from paragraph 7 of the order as reproduced word for word in a later Delhi Tribunal decision, The Motor & General Finance Ltd. v. ACIT [2024] 159 taxmann.com 1494, which also confirms the cause title, the appeal numbers 355-360/Viz/2018 and the date of 25 January 2019. The Members' names are not confirmed from any text read. The year-wise breakdown of the amounts cancelled and sustained, and the account of a graded outcome for the later years, could not be verified and the entry is internally inconsistent about which later years were in issue — check the order itself before relying on that part. The research also flags the separate and differently worded penalty in section 271FAA for an inaccurate statement of financial transactions, which this order does not deal with. The order is not carried in a subscription research database, so it was not read. The names of the Members, the year-wise breakdown of the amounts cancelled and sustained, whether the Revenue appealed, and the outcome for the financial years after 2011-12 are all unverified; the entry's own description of which later years were in issue is inconsistent with its other fields. Note the related but distinct penalty in section 271FAA for an inaccurate statement of financial transactions. 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.
For the two earliest years the Tribunal cancelled the penalties. It held that in the absence of any specified transaction required to be reported under section 285BA the bank was not obliged to file the annual information return at all, so a penalty under section 271FA was unjustified; it set aside the orders of the lower authorities and cancelled the penalties for financial years 2010-11 and 2011-12, allowing the appeals for those years. What was decided for the remaining years covered by the six appeals is not established here. A secondary report describes a graded outcome for the later years, penalty for delay in filing the original statement being sustained while penalty attributable to delay in curing a defect after notice was cancelled for reasonable cause; that account could not be checked against the order and should be treated as unconfirmed. The entry's own particulars are also inconsistent about which later years were in issue.
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