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Judgment
Honourable Ms Justice Sonia Gokani
Brief outline of the factual details at the outset is necessary for determination of this Tax Appeal. Respondent-assesses is Co-operative Bank engagedin the business of Banking. Survey was carried out on27.12.2005 for verifying the regularity in openingbank account. On having found alleged breaches in complying with the various provisions of law whileopening the bank account, a show cause notice wasissued on 6.1.2006 calling upon the respondent tofurnish the requisite details as also for explanationin connection with 156 current accounts and 53 fixeddeposits outlining specific defects and infirmitieswith regard to each such case.
1.1. Assesses-respondent replied to such show causenotice vide its letter dated 12.1.2006, contendinginter alia therein that every time, there is anoccasion for opening the bank account, set ofdocuments in the form of specimen signature card,bank account opening Form along with various termsand conditions and an application for becoming member of society duly filled-in by the members aresubmitted along with requisite evidence. It was alsofurther contended that wherever PAN details arefurnished filling-up the Form No.60 would not benecessary. It was also further submitted that newaccounts were being opened only after obtainingrequisite proof of the members. With regard to someof the fixed deposits in connection with which thequerries were raised, it was submitted that thosewere 5 to 6 years old and during that period bank hadalready changed the place and therefore, onlyavailable evidences were in the form of PANdetails/Form No.60 and they were ensured to befurnished within period of 15 to 30 days on obtainingthe same from the members.
There were further submissions made by theassessee-respondent along with adducment of theevidence in this regard.
2.1. Statement of one Smt. Aarti Babubhai Shah,Manager of the Bank was recorded on oath on 27th December, 2005 where she answered certain queries made at length.
2.2. Assessing Officer having noted that it was mandatory on the part of bank to ensure that theapplicant while opening the bank account must furnishPAN or in the alternative declaration in the FormNo.60 along with substantiating documents as proof ofaddress, essentially to make the system full prooffor establishing the identity of the person concernedtreated the same as a major breach.
On having also found that in number of mattersopening of bank accounts without requisite proof ofPAN/proof of address was permitted, the same was heldin complete breach of the legal provision. Thus, onaccount of alleged violation of section139A(6)/139A(8) of the Income Tax Act, 1961 and Rule 114B (f) of Income Tax Rules, such transactions alsoprescribed by CBDT under Rule 114(B) of the IncomeTax Rules, where clause ''C'' specific that deposit incash aggregating to Rs.50,000/-or more wouldnecessitate customer to furnish the PAN and theperson who does not have PAN according to Rule 114B could be required to make declaration under subSection 6 of Section 139A read with clause (c) of SubClause (2) of Rule 114C. It is the duty of eitherBank Manager or officer of the Bank-receiving such application to ensure that either PAN is quoted ordeclaration is made in Form-60. Assessing Officerheld that the same had given rise to penalty u/s.272B of the Income Tax Act. Penalty for such failurein each case was levied at Rs.10,000/-by detailreasonings.
3.1. Assessing Officer noted during the penaltyproceedings that details regarding proof of addressas required in the form being the copy of telephonebill, electricity bill, property tax bill, copies ofdriving license, election card etc. were missing.Assessing Officer also noted that subsequently produced documents in the form of photo state copieswere not kept otherwise as required to be maintained.They were neither kept with the account opening formnor with Form No.60. What was also not foundacceptable by Assessing Officer was the fact thatmisplacement of this documents also was not mentionedby the Manager while her statement was recorded.Considering 156 instances of illegality in light ofopening of account in gross violation as also inrespect of 54 fixed deposit account. AssessingOfficer levied the penalty of Rs.10,000/-for each case making it totally Rs.21.00 lakhs.
3.2. Respondent-Bank challenged the said order beforeCommissioner(Appeals), which after noting thedisputes raised by the Revenue and on carefullyconsidering the rival submissions of the parties,culled out three issues namely :
Whether there was any default on the part ofassessee in confirming with the provision ofsection 139A read with rule 114B and 114D of the Income Tax Rules?
Whether penalty can be levied in respect of bank accounts opened prior to the insertion ofSection 272B of the Income Tax Act in respect ofaccounts opened prior to 1.6.2002 ?
Whether penalty of Rs.10,000/-can be leviedu/s. 272B separately in respect of each bankaccount or could that be done in lumpsum ?
On the 1st issue CIT(Appeals)held that there wasdefault committed by assessee-respondent in notcomplying with the provision of 139A of the Act readwith Rule 114B and 114C of the Income Tax Rules bydetailed discussion of factual matrix and applyingthe provisions of law to the same.
4.1. On the 2nd issue as to whether penalty u/s. 272 could be levied in respect of accounts opened prior to 1.6.2002, it sustained the action of AssessingOfficer by holding that the every action whichsubsisted on the date of introduction of Section 272Bwould attract penalty under the said provision on thelogic that the question is not of retrospectively ofthe provisions but, of existence of the defaults onthe date of introduction of penal provision.
4.2. In relation to the 3rd issue whether AssessingOfficer was justified in levying penalty ofRs.10,000/-separately for penalty in respect of eachaccount, it concluded that the penalty under section272B is required to be levied on penalty committed inrespect of each account separately. There wasabsolutely no question of levying lump sum penalty ofRs.10,000/-on all the defaults put together. Inshort, it concurred with the conclusion of AssessingOfficer in levying the penalty on violation ofprovision of Section 139A read with Rule 114B and114C.
4.3. Tribunal while dealing with this issue held thus:
We have heard rival submissions andperused material available on record. As thefacts emerge, it has not been disputed thatbrnach was shifted to new premises, short bytime prior to the date of survey. Though documents could not be immediately submittedwith the the survey team, at the time ofsurvey, within a period of two weeks of therequest, details in respect of these accountswere furnished before the AO, which waslisted in the assessee''s written submissions.It emerges that all the documents purport tohave been submitted prior to opening of bankaccounts, indicating that these documentswere not pertained subsequently, leading to ainference that assessee collected them post-factor after survey. In our view, within 15days of survey, assessee made good thecompliance and merely because at the time ofsurvey, immediately assessee''s bank''s ladymanager could not produce all the relevantdetails cannot automatically entailimposition of penalty. In our view, withgiven facts and circumstances assessee wasprevented by sufficient and reasonable causein furnishing these documents at the time ofsurvey, Deficiencies have been compliedwithin 15 days which cannot be calledunreasonable period. In consideration ofentire facts and circumstances, we delete penalty.
The impugned order is challenged, proposing the following question as substantial question of law for our consideration.
(I) Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right indeleting penalty in the sum of Rs 19,50,000/levied by the Assessing Officer and confirmedby the Appellate Commissioner u/s 272B of the Income Tax Act ?
Learned senior counsel Mr. Manish Bhatt fervently made his submissions that two adjudicating authorities concurrently held in favour of Revenueand there are no reasons, much less convincingreasons given in the order of Income Tax AppellateTribunal for setting-aside those orders. He furtherurged that the very findings of the Tribunal beingadverse to the material on record must be held to beperverse and that itself would give rise to thequestion of law.
Per contra, learned senior counsel Mr.J.P.Shahurged the Court that it would not have been possiblefor Manager to put together so much of informationwithin a short span and collectively produced thesame before the adjudicating authorities. Moreover,she was new to the Bank and transactions being old.Some of the answers given by her cannot come in theway of the bank. Moreover, it was apparently madeclear that there was shifting of the Branch of theBank recently which also was the reason formisplacement of the some of the documents which werevital in the issue under consideration. Again ascontended by learned senior counsel that there arehardly any question of law arising in the instantcase and Tribunal also having based its findings on material adduced by both the sides, this appeal deserves no consideration.
272B of the ITAT Penalty for failure to comply with the provisions of section 139A.:
(1) If a person fails to comply with the provisions of section 139A, the Assessing Officer may direct that such person shall pay, by way of penalty, as sum of ten thousand rupees.
This provision imposes penalty on the person to an extent of Rs 10,000/- for non-compliance of Section 139A, after affording an opportunity of hearing to the person concerned.
Section 139A requires every person to apply for allotment of permanent Account number. This section was substituted by the Finance Act 1995. This present section as it stands a statute book, was substituted by the Finance Act, 1995 for the earlier section 139(A) which came into effect from 1st July 1995. The person when receives income or amount from which the tax is required to be deducted, is to intimate his permanent account No. ("PAN") to the person who is responsible for deducting such tax under that chapter. As can be seen from the discussion made by the Commissioner Appeal in its order that the assessee was required to comply with specific provisions of section 139(A) and Rules 114(B) and 114(C). Even prior to the introduction of section 272(B), when neither the provisions of section 139(A)nor rules 114 and 114(C) was complied with on a regular basis, it was deemed fit to bring section 272(B), to the statute book. The Commissioner, therefore, held that every default which subsisted on the date of introduction of section 272(B) would be liable to penalty as the question was not retrospection of the penal provisions but default made on the date of introduction of such penal provisions.
The Tribunal while examining this issue wentpurely by the facts of the case and held that thedifficulties in non-production of the documents aswas required under the statute was on account ofshifting of branch of the bank shortly before thedate of the survey and after wards within a period oftwo weeks they were furnished before the Assessing Officer. Since, these documents at the time of surveywere not presented, it was inferred that they werecollected subsequently in post survey period. The explanation given by the respondent assessee of late production of these documents after a fortnight was found justifiable by the Tribunal. Therefore, itclearly held that this was not a case where by the non-production of material at the relevant timerendered back liable for the penalty u/s 272 (B). Thus it is apparent from this discussion of the Tribunal that the issue of applicability on penalprovisions prospectively or retrospectively was not required to be considered in the light of specific facts themselves and the entire issue has not been touched. Although it has been vehemently contended by theRevenue that the Tribunal has not given cogentreasons in setting aside the the concurrent findingsof both the adjudicating authorities. We are notimpressed by the elaborate discussion made by bothadjudicating authorities on the legal issues whenotherwise, there were no facts available for them toapply legal provision as is urged in this appeal bythe revenue. We are of the opinion that the entireissue is in the realm of facts. It is true that atthe time of survey, bank manager was unable to produce requisite material particularly permanentaccount number of those persons who had opened theaccount with the bank, and thereby there may appearto be breach, which as per the statute would attractpenalty provisions. However, in every matter thefacts will have to be gauged and the law needs to beapplied to the facts after that exercise. We find noerror in the reasonings of the Tribunal, where itelaborately addressed in the judgment on both thecounts, namely, non-production of documents at thetime of survey as also production within a fortnight.As rightly pointed out by learned Senior counsel Mr.Shah, it would be almost impossible for the bank tocollect such huge number of documentary record inpost survey period of a fortnight, and therefore, theground of delay when was satisfactorily explained andrecorded by the Tribunal, the impugned order hardlycalls for any interference. Consequently this TaxAppeal does not merit any consideration and deservesto be dismissed. Hence, the same is dismissed with noorder as to costs.