The Bangalore bench of Income Tax Appellate Tribunal (ITAT) has recently held that co-operative societies should be liable to furnish Annual Information Report (AIR) only after amendment under Rule 114E of the Income Tax Rule. Thus the bench deletes the penalty.
Assessee Suco Souharda Sahakari Bank Ltd is a society registered under the Karnataka Souhardha Sahakari Act, 1997. The objects of the assessee society are to carry on the business of banking by accepting deposits and lending money to the members of the Sahakar. The assessee’s business activities carried on are similar to the business of banking carried on by Co-operative Banks.
When a survey action was conducted at the premises of the assessee it was noticed that the assessee has not filed Annual Information Report (AIR) for the Assessment Years 2006-07 to 2014-15.
Accordingly the AO imposed a penalty under section 271FA of the Act since the assessee had not filed AIR as per the provisions of section 285BA(2) of the Act r.w.r. 114E of the Income Tax Rules, 1962.
Aggrieved by the penalty order, the assessee filed appeal before the First Appellate Authority (FAA). However the FAA rejected the contentions of the assessee and dismissed the appeal.
Thereafter the assessee filed a second appeal before the tribunal.
Before the bench V. Srinivasan,Counsel for the assessee submitted that the Rule under 114E(2) of the Income Tax Rules lists out the persons who are required to furnish the AIR in terms of section 285BA of the Income Tax Act.
Further in terms of Sl.Nos.1 and 2 of the Table under Rule 114E(2) of the Income Tax Rules, before 01.04.2015 only banking companies or banking institutions but not the provisions of section 56 or Part V of the Banking Regulation Act, 1949, that deals with Co-operative Societies were required to file the AIR.
Gudimella VP, counsel for the revenue, supported the decision of the lower authorities.
It was observed by the tribunal that amendment to Rule 114E of Income Tax Rules has been effective from 1.4.2016 and, further, the Assessing Officer has levied a penalty for the financial year, 2005-06 in the year 2017 and there was no provision under Rule 114E to include co-operative banks.
Thus the two member bench of George George K, (Judicial Member) and Laxmi Prasad Sahu, (Accountant Member) observed that the original provisions of Rule 114E of Income tax Rules did not include “cooperative bank” and it was inserted only in the amended provisions of Rule 114E, which came into effect from 1.4.2016
Therefore the bench confirmed that Rule 114E of the Income Tax Rules was substituted to include co-operative banks with effect from 01.04.2015 and allowed the appeal filed by the assessee.
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