My client is a small money changer who never knew he had to file Form 61A. A penalty of eighty-one thousand rupees has been levied under s.271FA. Is ignorance of the requirement any answer?
On these facts, yes. The Delhi Bench deleted the whole penalty, holding that the explanation of not filing the statement of financial transactions for lack of knowledge was bona fide, given that the assessee had only one transaction to report, and following two Kolkata decisions treating such a default as a technical or venial breach flowing from bona fide ignorance. The relief was outright deletion, not a remand.
Decided by the ITAT (Kul Bharat, Judicial Member and Brajesh Kumar Singh, Accountant Member) on 2024-10-15, reported as ITA No. 2936/Del/2022, assessment year 2018-19 (ITAT Delhi Bench 'E'); heard 8 October 2024, pronounced 15 October 2024. It bears on section 271FA, section 285BA, section 285BA(5), section 273B of the Income Tax Act 1961, in Penalty and Appeals matters.
The reporting obligation under rule 114E(2) reaches far more people than realise it — this assessee was caught as an 'authorised person' under s.2(c) of FEMA within Sl. No. 9 of the table, reporting under SFT Code 008 — and the penalty runs by the day, so a small filer with nothing much to report can face a penalty many times the value of the transaction. Three features of this order make it usable. First, the Bench accepted that lack of knowledge of a reporting obligation can be a bona fide explanation, and it treated the smallness of what was to be reported as confirming the bona fides; that is the reasoning to reproduce. Second, it accepted, at least implicitly, the portal-failure explanation and the eventual manual filing on 9 August 2019. Third, and importantly for anyone arguing the other way, the Bench reversed a CIT(A) who had refused s.273B relief precisely because the company was long established, well capitalised and professionally advised — so those facts are not decisive. What the order does NOT do is examine the two-tier structure of s.271FA, and the arithmetic recorded in it should be checked rather than copied: the penalty was computed at Rs 100 a day for 255 days and Rs 500 a day for 112 days, which are the pre-amendment figures, for a financial year 2017-18 statement due on 31 May 2018. The current section charges five hundred and one thousand rupees. A practitioner should not infer from this order that the lower figures still apply.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee company had been engaged since 2004 in the sale and purchase of foreign currency under a licence from the Reserve Bank of India, No. FE.DEL.FFMC./355/2004. Being an authorised person within clause (c) of section 2 of the Foreign Exchange Management Act 1999 and registered under an ITDREIN, it was required by rule 114E to file the statement of financial transactions for reportable accounts under SFT Code 008, the due date for the financial year 2017-18 being 31 May 2018. It did not file by then. Notices under section 285BA(5) were issued by e-mail on 30 January 2019 and 20 May 2019 requiring the statement by 10 February 2019 and 20 May 2019 respectively, and the assessee did not comply with either. Its reply of 30 August 2019 gave nil transactions as the reason for non-compliance, but on examining the DQR summary report the Assessing Officer found that the assessee had in fact reported one transaction, and by order dated 13 November 2019 levied a penalty of Rs.81,500 under section 271FA. The National Faceless Appeal Centre dismissed the appeal on 17 October 2022, noting a delay of 255 days in complying with section 285BA, for which a penalty of Rs.25,000 was levied at Rs.100 per day, and a further default of 112 days after the section 285BA(5) notice, for which Rs.56,000 was levied at Rs.500 per day, and holding that a company incorporated in 2002 with substantial paid-up capital which employed auditors and consultants had shown no reasonable cause within section 273B. Before the Tribunal the assessee said it had been unaware of the requirement to file the statement, that the portal had not worked properly and threw errors so that the form could not be filed electronically, that this had been communicated verbally to the officer, and that the statement was finally submitted by manual letter dated 9 August 2019.
The appeal was allowed and the penalty of Rs.81,500 under section 271FA was deleted. The Bench held that the assessee's explanation for not filing the statement of financial transactions, namely lack of knowledge, was a bona fide explanation given that it had only one transaction to report in the statement it eventually filed on 9 August 2019, and that following the two Kolkata Bench decisions relied on, the penalty levied by the Assessing Officer and confirmed by the CIT(A) was not sustainable (para 6).
The Bench identified the assessee's main submission as being that the statement under section 285BA(1) could not be filed because it was unaware of the requirement, and that when it did try, the income-tax portal was not working properly, so that it had to file manually on 9 August 2019. It then recorded that on similar facts the co-ordinate Kolkata Bench had allowed the appeals in Malda District Central Co-op Bank Ltd. v. DIT (I&CI) and Durgapur Steel Peoples' Cooperative Bank Ltd. v. DIT (I&CI), holding that such a breach was only a technical or venial breach of the provisions of the Act and could have flowed from a bona fide ignorance on the part of the assessee that he was liable to act in the manner prescribed by the statute. Considering the assessee's submissions, and treating the fact that there was only one transaction to report as confirming the bona fides, the Bench held the explanation to be bona fide and, respectfully following those decisions, held the penalty unsustainable and deleted it.
such a breach was only technical or venial breach of the provisions of the Act and such a breach could have flown from a bona fide ignorance of the assessee that he was liable to act in a manner prescribed by the statute
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Handle my notice → Ask a CA on WhatsAppOn these facts, yes. The Delhi Bench deleted the whole penalty, holding that the explanation of not filing the statement of financial transactions for lack of knowledge was bona fide, given that the assessee had only one transaction to report, and following two Kolkata decisions treating such a default as a technical or venial breach flowing from bona fide ignorance. The relief was outright deletion, not a remand. This was decided by the ITAT (Kul Bharat, Judicial Member and Brajesh Kumar Singh, Accountant Member) and bears on section 271FA, section 285BA, section 285BA(5), section 273B of the Income Tax Act 1961. It is reported as ITA No. 2936/Del/2022, assessment year 2018-19 (ITAT Delhi Bench 'E'); heard 8 October 2024, pronounced 15 October 2024. The reporting obligation under rule 114E(2) reaches far more people than realise it — this assessee was caught as an 'authorised person' under s.2(c) of FEMA within Sl. No. 9 of the table, reporting under SFT Code 008 — and the penalty runs by the day, so a small filer with nothing much to report can face a penalty many times the value of the transaction. Three features of this order make it usable. First, the Bench accepted that lack of knowledge of a reporting obligation can be a bona fide explanation, and it treated the smallness of what was to be reported as confirming the bona fides; that is the reasoning to reproduce. Second, it accepted, at least implicitly, the portal-failure explanation and the eventual manual filing on 9 August 2019. Third, and importantly for anyone arguing the other way, the Bench reversed a CIT(A) who had refused s.273B relief precisely because the company was long established, well capitalised and professionally advised — so those facts are not decisive. What the order does NOT do is examine the two-tier structure of s.271FA, and the arithmetic recorded in it should be checked rather than copied: the penalty was computed at Rs 100 a day for 255 days and Rs 500 a day for 112 days, which are the pre-amendment figures, for a financial year 2017-18 statement due on 31 May 2018. The current section charges five hundred and one thousand rupees. A practitioner should not infer from this order that the lower figures still apply. If it applies to you, the first step is this: Where the default is a first one and there was little or nothing to report, plead bona fide ignorance expressly as reasonable cause under s.273B and put the number of reportable transactions on the record — the Bench treated 'only one transaction to report' as what made the explanation bona fide.
The assessee company had been engaged since 2004 in the sale and purchase of foreign currency under a licence from the Reserve Bank of India, No. FE.DEL.FFMC./355/2004. Being an authorised person within clause (c) of section 2 of the Foreign Exchange Management Act 1999 and registered under an ITDREIN, it was required by rule 114E to file the statement of financial transactions for reportable accounts under SFT Code 008, the due date for the financial year 2017-18 being 31 May 2018. It did not file by then. Notices under section 285BA(5) were issued by e-mail on 30 January 2019 and 20 May 2019 requiring the statement by 10 February 2019 and 20 May 2019 respectively, and the assessee did not comply with either. Its reply of 30 August 2019 gave nil transactions as the reason for non-compliance, but on examining the DQR summary report the Assessing Officer found that the assessee had in fact reported one transaction, and by order dated 13 November 2019 levied a penalty of Rs.81,500 under section 271FA. The National Faceless Appeal Centre dismissed the appeal on 17 October 2022, noting a delay of 255 days in complying with section 285BA, for which a penalty of Rs.25,000 was levied at Rs.100 per day, and a further default of 112 days after the section 285BA(5) notice, for which Rs.56,000 was levied at Rs.500 per day, and holding that a company incorporated in 2002 with substantial paid-up capital which employed auditors and consultants had shown no reasonable cause within section 273B. Before the Tribunal the assessee said it had been unaware of the requirement to file the statement, that the portal had not worked properly and threw errors so that the form could not be filed electronically, that this had been communicated verbally to the officer, and that the statement was finally submitted by manual letter dated 9 August 2019. The matter was decided on 2024-10-15 by the ITAT (Kul Bharat, Judicial Member and Brajesh Kumar Singh, Accountant Member). On those facts the ITAT held as follows. The appeal was allowed and the penalty of Rs.81,500 under section 271FA was deleted. The Bench held that the assessee's explanation for not filing the statement of financial transactions, namely lack of knowledge, was a bona fide explanation given that it had only one transaction to report in the statement it eventually filed on 9 August 2019, and that following the two Kolkata Bench decisions relied on, the penalty levied by the Assessing Officer and confirmed by the CIT(A) was not sustainable (para 6).
The Bench identified the assessee's main submission as being that the statement under section 285BA(1) could not be filed because it was unaware of the requirement, and that when it did try, the income-tax portal was not working properly, so that it had to file manually on 9 August 2019. It then recorded that on similar facts the co-ordinate Kolkata Bench had allowed the appeals in Malda District Central Co-op Bank Ltd. v. DIT (I&CI) and Durgapur Steel Peoples' Cooperative Bank Ltd. v. DIT (I&CI), holding that such a breach was only a technical or venial breach of the provisions of the Act and could have flowed from a bona fide ignorance on the part of the assessee that he was liable to act in the manner prescribed by the statute. Considering the assessee's submissions, and treating the fact that there was only one transaction to report as confirming the bona fides, the Bench held the explanation to be bona fide and, respectfully following those decisions, held the penalty unsustainable and deleted it. In the words reproduced by the source cited on this page: "such a breach was only technical or venial breach of the provisions of the Act and such a breach could have flown from a bona fide ignorance of the assessee that he was liable to act in a manner prescribed by the statute" The decision followed or applied Malda District Central Co-op Bank Ltd. v. Director of Income-tax (I&CI), Kolkata [2016] 72 taxmann.com 306 (Kol. Trib.) — followed; Durgapur Steel Peoples' Cooperative Bank Ltd. v. Director of Income-tax (Intelligence & Criminal Investigation), Kolkata — followed.
It was decided by the ITAT on 2024-10-15 and is reported as ITA No. 2936/Del/2022, assessment year 2018-19 (ITAT Delhi Bench 'E'); heard 8 October 2024, pronounced 15 October 2024. 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 285BA(5), 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 helps the taxpayer. The appeal was allowed and the penalty of Rs.81,500 under section 271FA was deleted. The Bench held that the assessee's explanation for not filing the statement of financial transactions, namely lack of knowledge, was a bona fide explanation given that it had only one transaction to report in the statement it eventually filed on 9 August 2019, and that following the two Kolkata Bench decisions relied on, the penalty levied by the Assessing Officer and confirmed by the CIT(A) was not sustainable (para 6). It arises in Penalty and Appeals matters, on section 271FA, section 285BA, section 285BA(5), section 273B of the Income Tax Act 1961, and was decided by Kul Bharat, Judicial Member and Brajesh Kumar Singh, Accountant Member. 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. Document the portal failure: dates of attempted upload, error messages, screenshots, and the date of any manual filing. The manual filing here was on 9 August 2019 and formed part of the accepted explanation. Do not be deterred by the CIT(A)'s standard reasoning that a company with capital, auditors and consultants cannot plead ignorance; the Tribunal set aside a penalty confirmed on exactly that footing. Check the department's DQR summary report, which is what defeated the assessee's 'nil transaction' reply before the Assessing Officer — reconcile your client's position with it before filing a reply. Verify the rate at which the penalty has been computed against the current s.271FA — five hundred rupees a day, and one thousand rupees a day only from the day after the s.285BA(5) notice period expires — rather than against the figures recorded in this order. Cite the two Kolkata Bench decisions this order follows, Malda District Central Co-op Bank Ltd. v. DIT (I&CI) [2016] 72 taxmann.com 306 (Kol. Trib.) and Durgapur Steel Peoples' Cooperative Bank Ltd. v. DIT (I&CI), Kolkata.
Validity check could not be completed. Validity check could not be completed. No later decision considering this order was located and no search for citing decisions was run, the session's search budget having been exhausted on primary retrieval. It is a Tribunal order and therefore persuasive only. The contrary line is real and must be weighed: the Punjab and Haryana High Court in The Sub Registrar, Muktsar v. DIT (CIB), ITA No. 151 of 2014, decided 15 September 2014, dismissed an appeal against a section 271FA penalty on a sub-registrar raising the very question whether penalty is exigible in the absence of mens rea, holding that no substantial question of law arose. Nothing in the present order engages with that line. 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 runs to seven numbered paragraphs with sub-paragraphs 5.1 and 5.2, and the pass reached the disposal at para 7. Points a reader should know. (1) The cause title names the respondent 'Addl./JDIT(I & CI), New Delhi' while indiankanoon's own document title reads 'ACIT(I&Ci), New Delhi'; the order's own cause title has been preferred. (2) The arithmetic in para 4 is at odds with the current section: a delay of 255 days at Rs 100 a day is recorded as Rs 25,000 (255 x 100 is 25,500) and a further 112 days at Rs 500 a day as Rs 56,000, aggregating to the Rs 81,500 levied. The rates applied are the pre-amendment one hundred / five hundred rupee figures, although the statement was due on 31 May 2018 and the current section charges five hundred / one thousand. The order does not comment on this and neither the Assessing Officer's computation nor the underlying dates can be reconstructed from the text. (3) The order records the financial year as 2017-18 and the assessment year as 2018-19, the licence number as FE.DEL.FFMC./355/2004, the SFT code as 008, notices under s.285BA(5) issued by mail on 30 January 2019 and 20 May 2019, the assessee's reply of 30 August 2019 claiming nil transactions, the penalty order of 13 November 2019, and the NFAC order of 17 October 2022. (4) The quoted sentence is the Bench's own summary of what the two Kolkata decisions held; it is the deciding Bench's words, in its own paragraph 6, and not a quotation from those decisions, but the reader should know it is describing them. It was re-fetched through the docfragment view and returned word for word identical. (5) I did not retrieve either of the two Kolkata decisions on this pass. 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 of Rs.81,500 under section 271FA was deleted. The Bench held that the assessee's explanation for not filing the statement of financial transactions, namely lack of knowledge, was a bona fide explanation given that it had only one transaction to report in the statement it eventually filed on 9 August 2019, and that following the two Kolkata Bench decisions relied on, the penalty levied by the Assessing Officer and confirmed by the CIT(A) was not sustainable (para 6).
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