Income Tax Appellate Tribunal - Ahmedabad
Financial Co-Op. Bank Ltd. vs The Income Tax Officer on 26 October, 2007
ORDER
I.S. Verma, Judicial Member
1. In this appeal, the Assessee has objected to the Order of the CIT(Appeals)-II, Surat dated 16/03/2007 passed for Assessment Year 2006-07 by way of following grounds:
1. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(Appeals) has erred confirming the action of Assessing Officer in levying the penalty of Rs. 79,30,000/- Under Section 272B of the I.T. Act.
2. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(Appeals) has erred in enhancing the penalty by Rs. 20,90,000/- Under Section 272B of the I.T. Act.
2. The brief facts relating to the issue involved in this case and as have been revealed from the records are that the assessee is engaged in the business of banking and, therefore, as per the Revenue it was under obligation to comply with the provisions of Section 139A of the Act read with Rule 114B to 114-D of the I.T. Rules, 1962; meaning thereby that the assessee was to get either the Permanent Account Numbers(PANs) of the depositors or Form No. 60 duly filled in by the depositors specified in Section 139-A of the Act and Rule 114-B to 114-D of the IT Rules. For the purpose of checking the compliance by the assessee to these provisions, survey Under Section 133A of the Act was carried on and during the survey operation, it was found that though the assessee had obtained Form No. 60 from the depositors/customers who did not have PANs, but in some cases either Form No. 60 were not completely filled in supporting evidences with respect to addresses of the depositors were not available; The Assessing Officer, for assessee's failure., to obtain completely filled in Form No. 60 and/or supporting evidences with respect to addresses of the depositors initiated penalty proceedings Under Section 272-B of the Act and for that purpose required the assessee to explain as to why penalty for assessee's default in complying with the provisions of Section 139-A of the Act r.w. Rule 114B to 114D of the IT Rules in the case of 793 depositors may not be imposed.
2.1. After considering the assessee's reply, the Assessing Officer imposed penalty for 793 cases @ Rs. 10,000/- per case totalling Rs. 79,30,000/-.
3. The assessee went in appeal before the CIT(Appeals) and first of all, pleaded that out of 793 cases, 209 cases relate to the period prior to coming of provisions Section 272-B on the statute, i.e. prior to 01/06/2002; when the assessee was not required to comply with the aforesaid provisions and, therefore, penalty with respect to 209 cases may be deleted. The CIT(Appeals) instead of deleting penalty on 209 cases, issued enhancement notice under the impression that the Assessing Officer had not imposed penalty with respect to 209 cases and, consequently, after considering the assessee's reply against the show-cause notice for enhancement as well as with respect to assessee's appeal confirmed the order of the Assessing Officer with further enhancement of penalty with respect to 209 cases. The relevant part of his order as contained in paragraph Nos. 7 to 7.2 of the appellate order, reads as under:
Decision:
7. I have carefully considered the facts of the case, the view taken by the AO and the detailed submissions of the AR, including his response to the enhancement notice. I have also discussed this case with the ITO, Ward 2(3), Swat, who passed the penalty order and who is now retired, the present AO and also with the ITO, Ward 21), who earlier held the charge of Ward 2(3) when the survey had taken place. My observations with regard to the submissions of the AR are as under:
7.1 It is the contention of the AR that there was no violation of any of the provisions of Section 139A on the part of the Assessee bank since, PANs had been obtained from the intending customers in all cases. Where PAN was not available, Form 60 duly filled in, along with documentary proof of address etc. was obtained at the time of opening the bank accounts. In some cases, the documentary proof of address etc. which were enclosed with Form 60 were not found by the survey party. These were duly submitted before the AO in course of the penalty proceedings. This assertion of the AR is factually incorrect. An examination of the records available with the AO and the detailed discussions with him, have revealed that in course of the survey three Annexures were prepared, Annexure-A which listed 236 accounts Annexure-B which listed 370 accounts and Annexure-C which listed 468 accounts, totalling 1074 accounts where defaults were detected. After the survey, and in course of the penalty proceedings, the AR of the Assessee Shri C.P. Jaria, C.A. appeared before the AO from time to time. The relevant notings on the order-sheet of the assessment folder are reproduced hereunder:
22/8/06 Shri C.P. Jaria, C.A. attended. Submitted copy of letter dtd. 27/3/2006. Copy of Form No. 60 & Application Form obtained during the course of survey verified, defect, discrepancy shown to Shri C.P. Jaria, Adjournment for further verification. Hearing fixed on 26/8/2006.
sd/- (C.P. Jaria) sd/- (A.S. Mumna) ITO
26/8/06 Shri C. P. Jaria Attended. Verification of Form No. 60 and
Application Forms done. Further adjournment on 28/8/2006.
sd/- (C.P. Jaria) sd/-(A.S. Mumna) ITO
28/8/06 Shri C. P. Jaria attended, submitted letter, kept on record.
Further verification made, in some cases PAN No./Copy
of PAN found and taken note of it.
sd/- (C.P. Jaria) sd/-(A.S. Mumna) ITO
From the above, it will be clearly seen that the photocopies of all the account opening forms along with annexures, which were impounded in course of the survey, were verified by the AO in the presence of the Assessed AR. The AR had sufficient opportunity to explain the defects. It was after such discussions that it was found that the 1074 accounts which had been inventorised by the survey party included 56 accounts which pertained to fixed deposits below Rs. 50,000. These were therefore, not considered for the levy of penalty and the number of defaulting accounts reduced to 1018. Since, the account numbers were not serially inventorised in course of the sHrvey, all the three Annexures A, B & C were consolidated in the presence of the AR, and a common and single annexure was prepared with serially arranged account numbers which showed the total number of accounts where violations of Section 139A r.w. Rules 114B and 114C were noticed, at 1018. Out of these, in 209 cases penalty was not levied because these accounts were opened prior to 1/6/2002, which left a balance of 809. Further verification showed that in 16 accounts there was no violation of the said provisions. This finally left a total of 793 accounts on which penalty was levied. Therefore, the AR's contention that there was no violation of Section 139A r.w Rule 114B & 114C Even though the Assessee may have produced before the AO all accompanying documents including the proof of address yet, after detailed discussions between the AO and the AR, a final list of 793 accounts were drawn where such violations were noticed. Copies of the account opening forms with accompanying documents were provided to the AO by the AR. This meant that the AR who represented the Assessee in penalty proceedings, had actually agreed to and accepted that these 793 accounts had violated the said provisions.
7.2 The AR has placed reliance on the decision of the Rajasthan High Court in the case of Pamsnath Granites (I) Ltd. (supra) and in -Gaurav Steel Ltd. (supra). In these cases, a truck driver had failed to show the relevant bill and other documents which were accompanying the goods that the truck was carrying. At the time of checking these documents were recovered by the Sales Tax authorities from the driver. The Hon Court held that since the driver was carrying all the documents, he had no intention to willfully or deliberately conceal anything. His fault was that he did not produce the documents himself. Therefore, there was no mens-rea on his part and no penalty for any criminal offence could be levied in such a case. The case of our Assessee was not one of willful or deliberate concealment. It was simply a case of not complying with the statutory provisions which were introduced purely in larger national interests to ensure that all the customers of a banking company were bona fide and hence not involved in any hawala or money laundering or terrorist activities. Since, there was large scale failure to comply with such provisions for well over seven years and since, national security was at stake, penal provisions were introduced to ensure strict compliance. Therefore, it was not a case where mens-rea was to be established. In the case relied upon by the AR, the truck driver was not carrying any contra-brand goods, nor was he trying to conceal anything and therefore, the Hon. Court rightly held that no penalty could be levied in such cases. The facts of both the cases are completely different from the facts of the Assessee's case. The AR's reliance therefore, is misplaced.
4. The assessee is aggrieved and came in appeal before us.
5. The ld. Counsel for the assessee, first of all, reiterated his submissions as were made before the CIT(Appeals) that out of 793 cases, 209 cases relate to the period prior to 01/06/2002. According to him, 209 accounts were opened prior to coming into force the provisions of Section 272-B on the statute and, therefore, there is no question of levying the penalty for default, if any, with respect to 209 cases. The ld. Counsel for the assessee, further, submitted that without prejudice the assessee's submission, with respect to levy of penalty itself, even if it is assumed that penalty was leviable in 209 cases also, then the Assessing Officer, having already levied penalty in the case of total customers, i.e. 793 accounts imposing the penalty on 209 account action by the CIT(Appeals) was a case of levy of penalty in 209 cases twice. He, therefore, submitted that, first of all, enhancement carried on by the ld. CIT(A) should be deleted.
5.1. Coming to merits of the appeal, the ld. Counsel for the assessee, first of all, submitted that the Assessing Officer had not provided the copy of Annexure-B which has been taken into by the Authority while imposing penalty. According to him, so far FDR's were concerned, the FDR in each case was not more than Rs. 50,000/- and, therefore, assessee was not required to procure PAN or form No. 60 in all the cases, but in absence of Annexure-B, the assessee was prevented from defending itself. The ld. Counsel for the assessee, further, submitted that put of 793 accounts, 446 accounts were the current accounts out of which 209 accounts were opened prior to 01/06/2002. He, therefore, submitted that there was no question of imposing penalty with respect to 446 cases and if at all the penalty was to be levied, it could be levied only with respect to 237 accounts (446 - 209).
5.2. It was, further, submitted that so far as rest of 347 accounts were concerned, the assessee had obtained Form No. 60 and if some of the forms were not complete or supporting evidence was not available, then it was case of obtaining defective forms and not a case of not obtaining the forms at all. He, therefore, submitted that penalty is to be levied for failure to obtain Form No. 60 and not for obtaining incomplete or defective form. According to him, the Revenue Authorities should have allowed the assessee an opportunity to remove the defects in such cases, instead of proceeding to impose such a heavy penalty. The ld. Counsel for the assessee, further, submitted that if at all the penalty to be imposed, it is not for each default. According to him, if we read the provisions of Section 272-B(i) of the Act, it will be revealed that penalty of Rs. 1,000/- is leviable not on the basis of each account, but for failure of the bank to comply with the provisions of Section 139-A of the I.T. Act r.w. Rule 114-B to 114-D of the IT Rules. He, therefore, submitted that penalty, if any, was to be imposed, it could be imposed only to the extent of Rs. 10,000/-. Another argument submitted by the ld. Counsel for the assessee was that if we read the provisions of Section 139A(5) and 139A(6) of the Act, it will be revealed that obligation to quote PAN, or General Index Registered Number (GIR) is of the person worked out opens the account, i.e. the Customer and not of the Bank. According to him, the Bank's obligation as per Section 139A(6) of the Act is only to ensure that the customer had quoted his PAN or GIR Number.
5.3. From the aforesaid provisions of Section 139A(6) of the Act, the ld. Counsel for the assessee submitted that requirement of procurement of Form No. 60 and supporting evidence thereof is prescribed by the Rules and not the provisions of the Act and, therefore, the penalty Under Section 272-B of the Act being leviable for violation of the provisions of the Act and not of the Rules, the assessee is not leviable for any penalty Under Section 272-B of the Act for having received defective Forms No. 60.
6. The ld. DR, on the other hand, has supported the order of the CIT(Appeals) with the submissions that-
(i) there is no double penalty.
(ii) It was assessee's obligation to procure completely filled in form No. 60 as well as supporting the evidence thereof.
(iii) Penalty is to be imposed on the basis of each default vis-avis to transaction.
7. We have considered the rival submissions and the facts and circumstances and we are of the opinion that to decide the issue in hand, it is desirable to consider the provisions of Section 272-B of the Act, Section 139A(5) & 139A(6) as well as Rule 114-B(d), 114-B(f), 114-C(2)(i) and 114-D of IT Rules-1962, which are in following terms:
Section 139A(5) & 139A(6) (5) Every person shall-
(a) quote such number in all his returns to, or correspondence with, any income-tax authority;
(b) quote such number in all challans for the payment of any sum due under this Act;
(c) quote such number in all documents pertaining to such transactions as may be prescribed by the Board in the interests of the revenue, and entered into by him:
Provided that the Board may prescribe different dates for different transactions or class of transactions or for different class of persons:
Provided further that a person shall quote General Index Register Number till such time Permanent Account Number is allotted to such person;
d) intimate the Assessing Officer any change in his address or in the name and nature of his business on the basis of which the permanent account number was allotted to him.
(5A) Every person receiving any sum or income or amount from which tax has been deducted under the provisions of Chapter XVIIB, shall intimate his permanent account number to the person responsible for deducting such tax under that Chapter:
Provided that nothing contained in this Sub-section shall apply to a non-resident referred to in Sub-section (4) of Section 115AC, or Sub-section (2) of Section 115BBA, or to a non-resident Indian referred to in Section 115G:
Provided further that a person referred to in this sub-section, shall intimate the General Index Register Number till such time permanent account number is allotted to such person.
(5B) ...
(5C) Every buyer referred to in Section 206C shall intimate his permanent account number to the seller referred to in that section.
(5D) Every seller collecting tax in accordance with the provisions of Section 206C shall quote the permanent account number of every buyer referred to in that section-
(i) in all certificates furnished in accordance with the provisions of Sub-section (5) of Section 206C;
(ii) in all returns prepared and delivered or caused to be delivered in accordance with the provisions of Sub-section (5A) or Sub-section (5B) of Section 206C to an income-tax authority.
(6) Every person receiving any document relating to a transaction prescribed under Clause (c) of Sub-section (5) shall ensure that the permanent account number or the General Index Register Number has been duly quoted in the document.
Rule 114-B Clause (c) & (f) ...
...
(c) A time deposit, exceeding fifty thousand rupees, with a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in Section 51 of that Act);
...
...
(f) Opening an account not being a time-deposit referred to in Clause (c) with a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in Section 51 of that Act);
114C. Class or classes of persons to whom provisions of Section 139A shall not apply.
...
...
2) Every person including,-
(a) A registering officer appointed under the Registration Act, 1980 (16 of 1908);
(b) A registering authority referred to in Clause (b) of Rule 114B;
(c) Any manager or officer of a banking company referred to in Clause (c) or Clause (i) or Clause (j) of Rule 114B.
114D. Time and manner in which person referred to in Sub-rule (2) of Rule 114C shall intimate the details of transaction to the Director of Income-tax (Investigation).
(1) Every person referred to in Sub-rule (2) of Rule 114C shall forward to the concerned Director of Income-tax (Investigation) or Commissioner of Income-tax (Central Information Branch), the following documents, namely:
(a) A statement indicating therein details of all documents pertaining to any transaction referred to in Clauses (a) to (k) of Rule 114B where payment is made in cash;
(b) The statement referred to in Clause (a) shall contain,-
(i) Name and address of the person entering into the transactions;
(ii) Nature and date of the transaction;
(iii) Amount of each transaction;
(iv) Permanent account number or General Index Register Number quoted in the documents pertaining to any transaction.
(c) Copies of declaration in Form No. 60 referred to in third proviso to Rule 114B;
(d) copies of declaration in Form No. 61 referred to in Clause (a) of Sub-rule (1) of Rule 114C;
Provided that copies of declaration furnished in respect of transactions referred to in Clause (f) of Rule 114B shall not be furnished to the Director of Income-tax (Investigation) or Commissioner of Income-tax (Central Information Branch).
(2) The statement and copies of declaration in Form Nos. 60 and 61 referred to in Sub-rule (1) shall be forwarded to the concerned Director of Income-tax (Investigation) or Commissioner of Income-Tax (Central Information Branch) in two installments, that is, the forms received up to 30th September, shall be forwarded latest by 31st October of that year and the declaration till the 31st March shall be furnished latest by 30th April of the same year.
8. Having considered all the provisions of 139-A(5) & (6) and Rule 114-B(c), 114-B(f) & 114-C(2)(c) and 114-D of IT Rules, 1962, we are of the opinion that-
(i) Obligation to quote PAN or GIR Number in the documents for entering into the transactions of the type mentioned in these provisions, except as discussed hereinafter, is of the Customer and not of the Bank.
(ii) Rule 114-C(2)(c) imposes an obligation of Manager or an Officer of a Bank only to ensure that the person entering into transaction of the nature referred to in Section 139A(5)/139A(6) has quoted his PAN in the relevant documents.
(iii) Further, from the second proviso to Rule 114-B, it is clear that a person who does not have a PAN, but enters into any transaction specified in Rule 114-B, is to make a declaration in form No. 60 giving therein the particulars of such transaction.
(iv) From Rule 114-D of the IT Rules-1962, requires that the Bank Manager will forward a copy of Form No. 60 to the CIT(Central) Information Branch having peripheral jurisdiction over the area in which the transaction entered into.
9. The cumulative analysis of aforesaid Rules, leads one to believe that the only obligation of the Bank Manager is as per Rule 114-C(2)(c) and the same is only to ensure that a person entering into transaction for the nature specified under Rule 114-B has quoted his PAN duly and correctly. In other words, none of these Rule cast and obligation on the Manager of a Bank to ensure that Form No. 60 filed by the customer is duly filled in or not.
9.1. Similarly, none of the provisions of Sub-section (5) or (6) of Section 139A cast such an obligation on the Bank Manager or the Bank.
9.2. In a nutshell, the cumulative analysis of Section 139A & Rules 114B to 114D to show that obligation to quote PAN or GIR Number or to file Form No. 60 is that of the customer and not that of the Bank.
10. Coming to the provisions of Section 272B of the Act, we are of the opinion that Sub-section (1) speaks of levy of penalty on a person who has failed to comply with the provisions of Section 139A; meaning thereby that, so far as present case is concerned, the bank could be penalised. We have already observed, the obligation of the Bank under Sub-section(6) of Section 139A is only to endure that the PAN or GIR Number has been duly quoted in the documents furnished by a person in relation to a transaction prescribed under Clause (c) of Sub-section (5) of Section 139A of the Act which in turn leads us to the Rule 114-B to 114-D of the IT Rules (as mentioned above) and so far as Rule 114-B to 114-D and form No. 60 are concerned, we have already observed that obligation of the Bank under these Rules was only to ensure that the customer has quoted PAN or GIR Number correctly and if the customer did not have the PAN or GIR Number then to see that the person has furnished a declaration in From No. 60 giving therein the particulars of transaction and to forward a copy of such declaration i.e. Form No. 60; to the concerned CIT ((Central) Information Branch. We are, therefore, of the opinion that since the furnishing of incomplete declaration by the customer was a mistake committed by the Customer and not by the Bank, the failure to comply with the provisions of Section 139A as envisaged in Sub-section (1) of Section 272-B of the Act was of the customer and not of the Bank; meaning thereby that penalty Under Section 272B(1) of the Act, if any, is to be imposed, it is to be imposed on the customer and not on the Bank. Bank can be penalised if it fails to comply with the provisions of Section 139A(6) or Rule 114D(2) is for failure to ensure that PAN or GIR Number is quoted by the customer and for failure in forwarding the copies of Form No. 60, but not for any other default.
11. Our aforesaid conclusion is supported by Sub-section (2) of Section 272-B which clearly provides that if the person, who is required to quote or intimates his PAN in any document, referred to in Clause (c) of Sub-section (5) or Sub-section (5A) of Section 139-A, quotes or intimates the PAN which is false, and which he either knows or believes to be false or does not believe to be true, is liable to pay penalty of Rs. 10,000/-.
11.1. In view of aforesaid interpretation of provisions of Sections 139A(5), 139A(6), 272-B(1) and of 272-B(2) of the Act, and Rules 114B to 114D we are of the opinion that penalty for failure to comply with the provisions of Section 139-A of the Act can be imposed only on the customer and not on the Bank, except when the Bank is found to.
12. So far as levy of penalty for failure to comply with Rules is concerned, first of all, we are of the opinion that there is no provision, i.e. Section 272-B of the Act does not prescribe levy of any penalty for such failure and secondly, we are of the opinion that even if it is assumed that there is any penalty for such failure, then in our opinion, there being no failure on the part of the assessee to comply with the provisions of Rule 114-B to 114-D, the assessee was not liable to any penalty.
13. In the result, we, first of all, direct the Assessing Officer to see if enhancement made by the CIT (Appeals) has resulted in double levy of penalty of Section 209 accounts and if it is so, then penalty to that extent should be reduced straightway.
14. So far as main issue is concerned, we, in view of the totality of the facts and circumstances of the case and the discussion, cancel the penalty in question.
15. Without prejudice to the aforesaid conclusion, even if it is assumed that it was assessee's obligation to procure duly filled in Form No. 60 and supporting evidence thereof and the penalty Under Section 272B is leviable for such failure of the assessee, then also we are of the opinion that the assessee having procured Form No. 60, though defective one, it should have been allowed an opportunity to make good that of efficiency, but was not a fit case for levying of any penalty Under Section 272B of the Act.
16. So far as assessee's plea that the penalty, if at all, was leviable, could be levied only with respect to 237 accounts is concerned, we, having cancelled the penalty as a whole, are of the opinion that this ground requires no independent adjudication.
16.1. Assessee's another plea that penalty, if any, leviable could only for default as a whole; i.e. only to the extent of Rs. 10,000/- and not on the basis of default for each account, i.e. penalty could be levied only to the extent of Rs. 10,000/-, we are, again, of the opinion that we having cancelling the whole, this issue requires no independent adjudication.
17. In the result, the appeal of the Assessee is allowed.
Order pronounced in open Court on 26/10/2007