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4. The only issue raised in the present appeals is against the penalty levied under section 271FA of the Act.

5. The brief facts of the case are that the assessee was obliged to file A n n u a l I n f o r m a t i o n R e p o r t s f o r t h e f i n a n c i a l ye a r s 2 0 0 4 - 0 5 a n d 2 0 0 8 - 0 9 , w h i c h w a s f i l e d b e l a t e d l y. The Assessing Officer in view thereof initiated penalty proceedings under section 271FA of the Act. The assessee sought various opportunities before the Assessing Officer for filing the information and written reply was received by post by the Assessing Officer on 24.5.2010 in which it was pointed out that the A n n u a l I n f o r m a t i o n R e p o r t ( A I R ) h a d b e e n f u r n i s h e d f o r t h e ye a r 2 0 0 4 -

25. Under the provisions of section 271FA of the Act, penalty is imposable in the event of the person responsible having failed to furnish the AIR information under section 285BA of the Act. Section 271 FA of the Act reads as under:
"[Penalty for failure to furnish annual information return.
271FA. If a person who is required to furnish an annual information return, as required under sub-section (1) of section 285BA, fails to furnish such return within the time prescribed under that sub-section, the income- tax authority prescribed under the said sub-section may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for every day during which the failure continues.]"

26. Reading the provisions of section 285BA and the relevant provisions of section 271FA of the Act, it transpires that where the prescribed person is required to furnish the AIR and fails to furnish the same within the prescribed time, then such person could be held to be liable to levy of penalty equivalent to Rs.100/- for every day of default. The above said provisions were inserted by the Finance (No.2) Act 2004 w.e.f. 1.4.2005. Under the provisions of section 273B of the Act, the penalty leviable under various sections is not to be imposed, where the person proves that there was reasonable cause for the said failure/default. The levy of penalty under section 271FA of the Act is also covered within the provisions of section 273B of the Act. It thus implies that in each case of default under section 271FA of the Act, the levy of penalty is not compulsory and the same is not imposable if the person satisfies the conditions prescribed under section 273B of the Act.

3. No penalty under section 271FA of the Act to be imposed for the overlapping period of default.

For eg. If the assessee had defaulted in furnishing AIRs for four financial years i.e. financial years 2004-05 to 2007-08 and the first notice was received on 01.01.2006, then in all the years, no penalty is leviable for default upto 01.01.2006 and is leviable for the default thereafter.

43. However, in cases where the Annual Information Reports have been filed by the specified persons beyond the abovesaid period of limitation, the specified person would be held to be in default, making it eligible to levy of penalty under section 271FA of the Act. The DIT (CIB) is directed to recompute the said levy of penalty under section 271FA of the Act in line with our directions. However, reasonable opportunity of hearing should be afforded in this regard and the specified person shall furnish complete information before his DIT (CIB), with regard to its several claims, in order to finally determine the period of default and the quantum of penalty leviable under section 271FA of the Act. The grounds of appeal raised by the assessee are thus, allowed as stated above.