Inadvertent Error in statement during Hearing cannot be Reason for Levy of penalty u/s 272(1)(c) of Income Tax Act: ITAT quashes Penalty against Kotak Mahindra Bank [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) quashed penalty on the grounds that an inadvertent error in statement made by the assessee during Hearing cannot be Reason for Levy of penalty under Section 272(1)(c) of Income Tax Act, 1961.

The assessee, Kotak Mahindra is a banking company that was merged with the assessee with effect from 01/04/2015 as per the order of the Reserve Bank of India. During the investigation, summons under section 131dated 02/01/2020 was issued to the Branch Manager of Kotak Mahindra Bank.

Vide these summons, the bank authorities were required to produce bank statements of the following held in the name of M/s Gujalaxmi Diamonds Pvt Ltd and persons associated with it for the period starting from 01/04/2012 to 31/03/2013 for verification.

In response, the assessee filed the details and after perusal of the bank statement and other details, another summons dated 31/03/2020 was issued requiring the bank authorities to produce specific details of the transactions above Rs. 5 lakhs as reflected in the copy of bank statements with account number, bank details, etc. on or before 03/02/2020.

The assessee vide mail dated 07/02/2020 had stated that there were no transaction above Rs.5 lakhs for the given period and that all the bank accounts under investigation currently stand closed.

The Assessing Officer (AO) queried the assessee with regard to the contradiction found in the bank statement where there are transactions above Rs.5 lakhs.

In response, the assessee submitted that the statement made was an inadvertent error due to oversight and that the intention was not to provide false information. Accordingly, the assessee requested for more time which the Assessing Officer did not accept.

The AO issued a notice under Section 274 read with Section 272A(1)(c) dated 19/02/2020 for not furnishing the required details in response to summons and proceeded to levy penalty under the said section.

The AO also held that the assessee has intentionally omitted to produce the correct documents and details as called for in connection with the case of M/s Gujalaxmi Diamonds Pvt Ltd.

The CIT(A) dismissed the appeal. Aggrieved, the assesseeappealed before the Tribunal

It was submitted that that Erstwhile ING Vysya Bank Ltd and the assessee used different banking systems and, therefore, manual interventions were required each time the data of some customers was to find.

Also, in the summons issued on 31/01/2020, the assessee was given barely 3 days’ time to submit the details and due to manly process involved, the assessee could not do so. The assessee had filed necessary adjournment letter explaining the inability to produce the details and that ultimately all the details called for were produced before the Assessing Officer.

After hearing both the parties, the tribunal noticed that the details called for by the Assessing Officer were related to AY 2012-13 and therefore saw merit in the submission that the retrieval of details pertaining 8 years old data required time and effort. It was submitted that in this regard that though the assessee has inadvertently stated thus, it has subsequently submitted the relevant details as has been called for. Therefore, it was submitted that a mere error in the statement made cannot be the reason for levy of penalty.

The two-member bench comprising of Vikas Awasthy and  S. held that there was a reasonable cause for the delay in providing the details by the assessee and since the assessee in the end had shared all the relevant details, levy of penalty under section 272A(1)(c) is not warranted. Accordingly, the penalty thus levied was deleted.

To Read the full text of the Order CLICK HERE

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