No Under Section 271-I for Non-filing of Form 15CA/CB for Import of Goods

By | January 14, 2025
(Last Updated On: January 14, 2025)

No Penalty Under Section 271-I for Non-filing of Form 15CA/CB for Import of Goods Not Subject to Withholding Tax

Summary in Key Points:

  • Issue: The assessee, engaged in diamond manufacturing, faced a penalty under Section 271-I for not furnishing Form 15CA/CB for outward remittances to a Belgium-based entity for raw material imports.
  • Decision: The ITAT held that since the remittances were for importing goods not subject to withholding tax under the Income Tax Act or the India-Belgium DTAA, the requirement to furnish Form 15CA/CB was not mandatory. Therefore, the penalty was deleted.
  • Reasoning:
    • Section 195(6) mandates furnishing information in Form 15CA/CB only when making payments to non-residents subject to withholding tax.
    • Rule 37BB prescribes the procedure for furnishing such information.
    • Neither the Act nor the DTAA requires withholding tax on payments for importing goods.

Decision:

  • The ITAT ruled in favor of the assessee, clarifying that no penalty is leviable for non-filing of Form 15CA/CB when making payments for imports that do not attract withholding tax.

This decision provides relief to taxpayers engaged in importing goods, ensuring they are not penalized for non-compliance with a requirement that does not apply to their situation. It also highlights the importance of interpreting tax provisions in conjunction with relevant treaties and rules to ensure accurate compliance.

IN THE ITAT SURAT BENCH
Kalathiya Impex
v.
Assistant Commissioner of Income-tax
Pawan Singh, Judicial member
and BIJAYANANDA PRUSETH, Accountant member
IT Appeal No. 483 (SRT) of 2024
[Assessment Year 2016-17]
DECEMBER  10, 2024
Shrirang Sales Corporation v. ACIT ITA No.147/SRT/2023 (para 4) and and ACIT v. M/s Vinay Diamonds ITA No.103/SRT/2020 (para 4).
Mehul Shah, CA for the Appellant. Mukesh Jain, Sr-DR for the Respondent.
ORDER
Pawan Singh, Judicial Member. – This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi/Commissioner of Income tax (Appeals) [for short to as “NFAC/Ld.CIT(A)] dated 28.02.2024 for assessment year (AY) 2016-17, in confirming penalty levied by Assessing Officer under section 271-I of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) 28.06.2016. The assessee has raised the following grounds of appeal:-
“1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Office in levying the penalty of Rs.17,00,000/- u/s 271-I of the I.T. Act, 1961.
2. It is therefore prayed that above penalty levied by the Assessing Office and confirmed by learned CIT(A) may please be deleted.
3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
2. Brief facts of the case are that assessee is engaged in the business of manufacturing of diamond by cutting and polishing of rough diamond and sale thereof. The assessee filed its return of income for assessment year 2016-17 on 19.09.2016 declaring income at Rs.17,84,880/-. The case was selected for scrutiny. During assessment, Assessing Officer noted that assessee has made 20 transactions of foreign remittance. However, assessee could not furnish Form No.15CA/15CB in respect of these overseas transactions. The Assessing Office while passing assessment order accepted returned income of assessee completed under section 143(3) of the Act on 23.12.2018. However, the Assessing Officer while passing assessment order initiated penalty under section 27I I. The Assessing Officer issued show cause notice, as to why penalty under section 271I should not be initiated. The Assessing Office issued show cause notice about default in filing Form Nos.15CA/15CB in respect of 20-foreign remittance. However, during penalty proceedings, Assessing Officer recorded that out of 20 transactions, on verification payments made on 16.04.2015, 17.04.2015 and 11.05.2015 do not attract penalty under section 271-I of the Act being prior to 01.06.2015. The Assessing Officer recorded that in response to show cause notice, assessee filed its reply dated 25.04.2019. In reply, assessee explained that during the year, assessee made outward remittances to Diamond Trading NV of Belgium, against supply of raw material. The supplier is not having any business connection i.e., permanent establishment in India. Therefore, the remittances towards business income of the assessee to that supplier shall not be deemed to accrue arose in India. They furnished copy of declaration submitted to bank while making outward remittances and copy of supplier certificate provided by Diamond Trading NV Belgium, that they have no permanent establishment in India. The assessee explained that supplier is from Belgium and while referring Article-7 (which deals with Business Profit) of Double Taxation Avoidance Agreement (DTAA) between the Government of the Republic of India and the Government of the Republic of Belgium that profit of enterprise of a contracting State (Belgium) shall be taxable only in that state unless the enterprise carries on business in other Contracting State through permanent establishment situated therein. The assessee further explained that amendment was brought in Rule 37BB of the Income Tax Rules, 1962 with effect from 01.04.2016 about furnishing Form No.15CA by persons responsible for paying to non-resident, not being a company or to a foreign company any sum which is not chargeable under the provision of this Act by inserting Rule 37BB. The requirement was specified for furnishing Form No.15CA even if remittances in respect of any sum which is not chargeable under the provision of the Act. For such purpose, Part-D was also inserted in Form No.15CA. However, while bringing the amendment, requirement of filing Form No.15CA in respect of remittances towards import was specifically excluded while serial No.8 of specified list in Rule 37BB. The relevant part of Rule was extracted in the reply. The reply of assessee was not accepted by Assessing Officer by taking view that filing of Form Nos. 15CA/15CB is mandatory in case the assessee made any foreign remittances as per section 195(6) of the Act. The assessee failed to furnish such information before Assessing Officer in Form No.15CA. The Assessing Officer considered 17 foreign remittances for which the assessee was required to furnish Form15CA/ 15CB and levied penalty @ Rs.1,00,000/- for each of the default aggregating Rs.17,00,000/- vide penalty order dated 28.06.2019.
3. Aggrieved by the penalty imposed under section 271-I of the Act, assessee filed appeal before Ld.CIT(A). Before Ld.CIT(A) assessee made similar submission as made before Assessing Officer. The LD. CIT(A) after considering the submission of the assessee held that assessee is relying the amended provision, which is applicable from assessment year 2017-18. The Assessing Office has rightly levied the penalty for failure to furnish Form No.15CA on foreign remittances made by assessee. Further, aggrieved, assessee has filed present appeal before the Tribunal.
4. We have heard the submission of Ld. Authorized Representative (Ld.AR) for the assessee and Ld. Senior Departmental Representative (Ld. Sr-DR) for the Revenue. The Ld. AR of the assessee submits that ground of appeal raised by assessee is squarely covered by the decision of this Tribunal in case of Shrirang Sales Corporation v. ACIT in ITA No.147/SRT/2023 dated 28.07.2023 and ACIT v. M/s Vinay Diamonds in ITA No.103/SRT/2020 dated 26.06.2023. The Ld. AR of the assessee submits that assessee made payment to Belgium based foreign entity against the import of rough diamond. The remittances made against the import of rough diamond does not attract provision of withholding tax and the requirement to furnish the details under section 196(6) r.w.s. Rule 37BB of the IT Rules is not mandatory. From No.15CA/15CB are required to be submitted only in those payments which are chargeable tax in India and therefore later on the Government amended the provision of 196(6) by Notification No. G.S.R 978(E) dated 16.12.2015.The Ld. AR of the assessee submits that while amending Rule 37BB of the IT Rules for making compliance in Form No.15CA, no corresponding amendment was made in Form No.15CA which was amended subsequently while Notification No. G.S.R 978(E) dated 16.12.2015. The Ld.AR of the assesse submits that exactly on similar ground of appeal, the penalty deleted by Ld. CIT(A) order dated 13.02.2020 in the case of M/s Vinay Diamonds which was confirmed by this Tribunal in ITA No.103/SRT/202 (supra). The Ld. AR of the assessee has already placed the above order on record and Notification No.G.S.R.978(E) dated 16.12.2015.
5. On the other hand, Ld. Sr-DR for the Revenue supported the order of lower authorities. Ld. Sr-DR for the Revenue submits that sub-section 6 of Section 195 was substituted with effect from 01.06.2015, wherein it is made mandatory that person responsible for making payment to non-resident, not being a company or to a foreign country any sum whether or not chargeable under the provision of the said amendment information relating to payment of such sum, in the manner as may be prescribed for making such compliance corresponding amendment was made in Rule 37BB for making compliance in Form No.15CA/15CB/15CC. The Ld. Sr-DR for the Revenue submits that assessee failed to make such compliance in respect of 17 foreign remittances and thus committed default attracting penalty under section 271-I of the Act.
6. We have considered the rival submissions of both the parties and have gone through order of lower authorities carefully. We have also deliberated the case law relied upon by Ld. AR of the assessee. We find that assessee in its present appeal has raised similar ground of appeal as has been raised in case of M/s Vinay Diamond in ITA No.103/SRT/2020 (supra), wherein by considering the Notification No.G.S.R.978(E) dated 16.12.2015 issued by Central Board of Direct Taxes held that there are certain payment of specified nature mentioned in Rule 37BB which do not require submission of Form No. 15CA/15CB and one of such payment includes advance payment against import. The relevant finding of Tribunal is extracted below:
7. We have considered the rival submissions and perused the relevant finding given in the impugned order ld CIT(A). We note that assessee is in the business of trading, import and manufacturing of diamonds. The rough diamonds are imported and payments are made through foreign outward remittance in foreign currency. The assessing officer held that the provision of section 195(6) was amended by Finance Act, 2015 which came w.e.f. 01.06.2015 and as per the amended provision the assessee had to provide the Form 15CA to the assessing officer for each transaction. The assessee had made 80 transactions of foreign remittance out of which 10 transactions, were made between the period 01-04-2015 to 31-05-2015, where provisions of section 195(6) were not in force. During the appellate proceedings, the assessee submitted that all the details were filed online before the assessing officer but he has not considered the submissions made on 23.05.2019. The remittance made by the assessee was against the import of goods and does not attract the provision of withholding tax and therefore the requirement to furnish the details u/s 195(6) r.w.Rule 37BB is not mandatory. The Form 15CA/15CB are required to be submitted only for those payments which are chargeable to tax in India and therefore later on the Government amended the provision of section 195(6) by issuing notification no.G.S.R. 978(E) dated 16tth December, 2015. It was further submitted that Section 195 of the Income Tax Act, empowers the CBDT to capture information in respect of payment made to non-residents, whether chargeable to tax or not. On another side, Rule 37BB of the Income-tax Rules has been amended vide Notification No.G.S.R.978(E) dated 16th December, 2015, to strike a balance between reducing the burden of compliance and collection of information under section 195 of the Act. The significant changes under the amended Rules are as follows:
No Form 15CA and 15CB will be required to be furnished by an individual for remittance which do not require RBI approval under its Liberalized Remittance Scheme (LRS)
Further the list of payments of specified nature mentioned in Rule 37BB which do not require submission of Forms 15CA and 15CB has been expanded from 28 to 33 including payments for imports. Following are the five new example payment types:
1.“Advance payment against imports
2.Payment towards imports-settlement of invoice
3.Imports diplomatic missions
4.Intermediary trade
5.Imports below Rs.5,00,000/- (For use by ECD officers)”
8. Therefore, assessee submitted before ld CIT(A) that there was conflict between section 195 and rule 37BB regarding the compliance of Form 15CA, which was later on amended by the government by Notification No.G.S.R.978(E) dated 16th December, 2015. So, there is lackofclarification of words expressively in the provisions only during this assessment year and no express specification have been made for penalty for each default. So, penalty under section 271-I should not be levied for non-furnishing of Form 15CA.
9. The ld CIT(A), after considering the submission of the assessee, observed that the remittance made by the assessee was against the import of goods and does not attract the provision of withholding tax and therefore the requirement to furnish the details u/s 195(6) r.Rule 37BB is not mandatory. The form 15CA/15CB are required to be submitted only for those payments which are chargeable to tax in India and therefore later on the government amended the provision of section195(6) by issuing notification no. G.S.R. 978(E) dated 16th December, 2015. The remittances which were made were against the import of goods and do not attract the provision of withholding tax and the requirement to furnish the details u/s 195(6) r.wRule 37BB is not mandatory. The Form 15CA/15CB are required to be submitted only for those payments which are chargeable to tax in India and do not require RBI approval under its Liberalized Remittance Scheme (LRS).
10. The ld CIT(A) also noted that the list of payments of specified nature mentioned in Rule 37BB, which do not require submission of Forms 15CA and 15CB, has been expanded from 28 to 33, including ‘payments for imports’. Hence, apparently there was conflict between section 195 and rule 37BB regarding the compliance of Form 15CA, which was later on amended by the government by Notification No. G.S.R. 978(E) dated 16th December, 2015. Since, the remittances which were made, were against the import of goods and does not attract the provision of withholding tax and the requirement to furnish the details u/s 195(6) r.w. Rule 37BB is not mandatory. Therefore, ld CIT(A) held that there is lack of clarification of words expressively in the provisions, and only during this assessment year and no express specification have been made for penalty for each default. The Income Tax Rules were amended w.e.f. from 16/12/215, in which the list of payments of specified nature mentioned in Rule 37BB, which do not require submission ofForms 15CAand 15CB, has been expanded from 28 to 33. The amendment though came into effect from 16th December 2015, but it is a settled law that if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended. Therefore, ld CIT(A) held that the penalty provisions u/s 271-I of the Act will not be applicable in the case and therefore ld CIT(A) deleted the same. We have gone through the above findings of ld CIT(A) and noted that there is no infirmity in the conclusion reached by ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed.”
7. We find that order of Ld. CIT(A) in case of M/s Vinay Diamonds (supra) was followed by this Tribunal in Shrirang Sales Corporation in ITA No.147/SRT/2023 (supra). Considering factual and legal background and taking consisting view, we find that no penalty is leviable against the payment of import of goods. Hence, we direct the Assessing Officer to delete the penalty. This ground of assessee’s appeal is allowed.
8. In the result, the appeal of the assessee is allowed.