Monday 14 October 2024

Statement of Financial Transaction (High Value Transaction) [Section 285BA]

Section 285BA of the Income Tax Act, 1961 read with Rule 114E requires certain specified reporting persons to furnish statement of financial transaction (SFT return) for certain transaction entered in the financial year

Statutory background

From Assessment year 2015-16, with a view to facilitate effective exchange of information in respect of residents and non-residents, section 285BA has been substituted by the Finance (No. 2) Act, 2014, with effect from 01.04.2015 to provide for furnishing of statement by a prescribed reporting financial institution in respect of a specified financial transaction or reportable account to the prescribed income-tax authority.

Up to Assessment year 2014-15, the provisions of section 285BA provided for filing of an annual information return (AIR) by specified persons in respect of specified financial transactions (SFTs) which are registered or recorded by them and which are relevant and required for the purposes of the 1961 Act to the prescribed income-tax authority.

Text of Section 285BA

[1][285BA. Obligation to furnish statement of financial transaction or reportable account.

(1) Any person, being -

(a)   an assessee; or

(b)   the prescribed person in the case of an office of Government; or

(c)    a local authority or other public body or association; or

(d)   the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908 (16 of 1908); or

(e)    the registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988 (59 of 1988); or

(f)    the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898); or

(g)   the Collector referred to in clause (g) of section 3 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013); or

(h)   the recognised stock exchange18 referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); or

(i)    an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934); or

(j)    a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996); or

   [2][(k)  a prescribed reporting financial institution20; or

(l)    a person, other than those referred to in clauses (a) to (k), as may be prescribed,]

who is responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as may be prescribed, under any law for the time being in force, shall furnish a statement in respect of such specified financial transaction or such reportable account which is registered or recorded or maintained by him and information relating to which is relevant and required for the purposes of this Act, to the income-tax authority or such other authority or agency as may be prescribed.

(2) The statement referred to in sub-section (1) shall be furnished for such period, within such time and in the form and manner, as may be prescribed20.

(3) For the purposes of sub-section (1), “specified financial transaction” means any -

(a)  transaction of purchase, sale or exchange of goods or property or right or interest in a property; or

(b)  transaction for rendering any service; or

(c)  transaction under a works contract; or

(d)  transaction by way of an investment made or an expenditure incurred; or

(e)  transaction for taking or accepting any loan or deposit,

which may be prescribed:

PROVIDED that the Board may prescribe different values for different transactions in respect of different persons having regard to the nature of such transaction.

[3][***]

(4) Where the prescribed income-tax authority considers that the statement furnished under sub-section (1) is defective, he may intimate the defect to the person who has furnished such statement and give him an opportunity of rectifying the defect within a period of thirty days from the date of such intimation or within such further period which, on an application made in this behalf, the said income-tax authority may, in his discretion, allow; and if the defect is not rectified within the said period of thirty days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, [4][the provisions of this Act shall apply as if such person had furnished inaccurate information in the statement].

(5) Where a person who is required to furnish a statement under sub-section (1) has not furnished the same within the specified time, the prescribed income-tax authority may serve upon such person a notice requiring him to furnish such statement within a period not exceeding thirty days from the date of service of such notice and he shall furnish the statement within the time specified in the notice.

(6) If any person, having furnished a statement under sub-section (1), or in pursuance of a notice issued under sub-section (5), comes to know or discovers any inaccuracy in the information provided in the statement, he shall within a period of ten days inform the income-tax authority or other authority or agency referred to in sub-section (1), the inaccuracy in such statement and furnish the correct information in such manner as may be prescribed.

(7) The Central Government may, by rules made under this section, specify -

(a)   the persons referred to in sub-section (1) to be registered with the prescribed income-tax authority;

(b)   the nature of information and the manner in which such information shall be maintained by the persons referred to in clause (a); and

(c)    the due diligence to be carried out by the persons for the purpose of identification of any reportable account referred to in sub-section (1).]

KEY NOTE

1.   Substituted by the Finance (No. 2) Act, 2014, with effect from 01.04.2015. Prior to its substitution, section 285BA, as inserted by the Finance Act, 2003, with effect from 01.04.2004 and later on amended by the Finance (No. 2) Act, 2004, with effect from 01.04.2005

2.   Clauses (k) and (l) substituted for clause (k) by the Finance (No. 2) Act, 2019, with effect from 01.09.2019. Prior to its substitution, clause (k) read as under:

       “(k) a prescribed reporting financial institution,”

3.   Omitted by the Finance (No. 2) Act, 2019, with effect from 01.09.2019. Prior to its omission, second proviso read as under:

PROVIDED FURTHER that the value or, as the case may be, the aggregate value of such transactions during a financial year so prescribed shall not be less than fifty thousand rupees.”

4.     Substituted for “such statement shall be treated as an invalid statement and the provisions of this Act shall apply as if such person had failed to furnish the statement” by the Finance (No. 2) Act, 2019, with effect from 01.09.2019.

 

Texto of Rule 114E of the Income Tax Rules, 1962

[1][114E. Furnishing of statement of financial transaction.

(1) The statement of financial transaction required to be furnished under sub-section (1) of section 285BA of the Act shall be furnished in respect of a financial year in Form No. 61A and shall be verified in the manner indicated therein.

(2) The statement referred to in sub-rule (1) shall be furnished by every person mentioned in column (3) of the Table below in respect of all the transactions of the nature and value specified in the corresponding entry in column (2) of the said Table in accordance with the provisions of sub-rule (3), which are registered or recorded by him on or after the 1st day of April, 2016, namely: -

TABLE

 

S. No.

Nature and value of transaction

Class of person (reporting person)

(1)

(2)

(3)

1.

(a) Payment made in cash for purchase of bank drafts or pay orders or banker's cheque of an amount aggregating to ten lakh rupees or more in a financial year.

(b) Payments made in cash aggregating to ten lakh rupees or more during the financial year for purchase of pre-paid instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 (51 of 2007).

(c) Cash deposits or cash withdrawals (including through bearer's cheque) aggregating to fifty lakh rupees or more in a financial year, in or from one or more current account of a person.

A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act).

2.

Cash deposits aggregating to ten lakh rupees or more in a financial year, in one or more accounts (other than a current account and time deposit) of a person.

(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) Post Master General10 as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).

3.

One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to ten lakh rupees or more in a financial year of a person.

(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898);

(iii) Nidhi referred to in section 406 of the Companies Act, 2013 (18 of 2013);

(iv) Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 1[(2 of 1934)], to hold or accept deposit from public.

4.

Payments made by any person of an amount aggregating to -

(i) one lakh rupees or more in cash; or

(ii) ten lakh rupees or more by any other mode,

against bills raised in respect of one or more credit cards issued to that person, in a financial year.

A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act) or any other company or institution issuing credit card.

5.

Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring bonds or debentures issued by the company or institution (other than the amount received on account of renewal of the bond or debenture issued by that company).

A company or institution issuing bonds or debentures.

6.

Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring shares (including share application money) issued by the company.

A company issuing shares.

7.

Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to ten lakh rupees or more in a financial year.

A company listed on a recognised stock exchange purchasing its own securities under section 68 of the Companies Act, 2013 (18 of 2013).

8.

Receipt from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring units of one or more schemes of a Mutual Fund (other than the amount received on account of transfer from one scheme to another scheme of that Mutual Fund).

A trustee of a Mutual Fund or such other person managing the affairs of the Mutual Fund as may be duly authorised by the trustee in this behalf.

9.

Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument of an amount aggregating to ten lakh rupees or more during a financial year.

Authorised person as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).

10.

Purchase or sale by any person of immovable property for an amount of thirty lakh rupees or more or valued by the stamp valuation authority referred to in section 50C of the Act at thirty lakh rupees or more.

Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act.

11.

Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10 of this rule, if any.)

Any person who is liable for audit under section 44AB of the Act.

[2][

12.

Cash deposits during the period 09th November, 2016 to 30th December, 2016 aggregating to -

(i)  twelve lakh fifty thousand rupees or more, in one or more current account of a person; or

(ii) two lakh fifty thousand rupees or more, in one or more accounts (other than a current account) of a person.

(i)   A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

(ii)  Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).]

[3][

13.

Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under S.No.12.

(i)  A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898).]

(3) The reporting person mentioned in column (3) of the Table under sub-rule (2) [4][(other than the persons at Sl. No. 10 and Sl. No. 11)] shall, while aggregating the amounts for determining the threshold amount for reporting in respect of any person as specified in column (2) of the said Table, -

(a)  take into account all the accounts of the same nature as specified in column (2) of the said Table maintained in respect of that person during the financial year;

(b)  aggregate all the transactions of the same nature as specified in column (2) of the said Table recorded in respect of that person during the financial year;

(c)  attribute the entire value of the transaction or the aggregated value of all the transactions to all the persons, in a case where the account is maintained or transaction is recorded in the name of more than one person;

(d)  apply the threshold limit separately to deposits and withdrawals in respect of transaction specified in item (c) under column (2), against Sl. No. 1 of the said Table.

(4)(a) The return in Form No. 61A referred to in sub-rule (1) shall be furnished to the Director of Income-tax (Intelligence and Criminal Investigation) or the Joint Director of Income-tax (Intelligence and Criminal Investigation) through online transmission of electronic data to a server designated for this purpose under the digital signature of the person specified in sub-rule (7) and in accordance with the data structure specified in this regard by the Principal Director General of Income-tax (Systems):

 PROVIDED that in case of a reporting person, being a Post Master General or a Registrar or an Inspector General referred to in sub-rule (2), the said return in Form 61A may be furnished in a computer readable media, being a Compact Disc or Digital Video Disc (DVD), alongwith the verification in Form-V on paper.

 

Explanation. - For the purposes of this sub-rule, “digital signature” means a digital signature issued by any Certifying Authority authorised to issue such certificates by the Controller of Certifying Authorities.

 

(b) Principal Director General of Income-tax (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies.

 

(c) The Board may designate an officer as Information Statement Administrator, not below the rank of a Joint Director of Income-tax for the purposes of day to day administration in relation to the furnishing of returns or statements.

(5) The statement of financial transactions referred to in sub-rule (1) shall be furnished on or before the 31st May, immediately following the financial year in which the transaction is registered or recorded:

[5][PROVIDED the statement of financial transaction in respect of the transactions listed at serial number (12) [and serial number (13)] in the Table under sub-rule (2), shall be furnished on or before the 31st day of January, 2017.]

[6][(5A) For the purposes of pre-filling the return of income, a statement of financial transaction under subsection (1) of section 285BA of the Act containing information relating to capital gains on transfer of listed securities or units of Mutual Funds, dividend income, and interest income mentioned in column (2) of Table below shall be furnished by the persons mentioned in column (3) of the said Table in such form, at such frequency, and in such manner, as may be specified by the Principal Director General of Income Tax (Systems) or the Director General of Income Tax (Systems), as the case may be, with the approval of the Board, namely:-

TABLE

S. No.

Nature of transaction

Class of person (reporting person)

(1)

(2)

(3)

1.

Capital gains on transfer of listed securities or units of Mutual Funds

(i) Recognised Stock Exchange;

(ii) depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996);

(iii) Recognised Clearing Corporation;

(iv) Registrar to an issue and share transfer agent registered under subsection (1) section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992).

2.

Dividend income

A company

3.

Interest income

(i) A banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898);

(iii) Non-banking financial company which holds a certificate of registration under section 45-IA of the Reserve Bank of India Act, 1934 (2 of 1934), to hold or accept deposit from public.

 Explanation. -  For the purposes of this rule, -

(a) “listed securities” means the securities which are listed on any recognised stock exchange in India;

(b) “Mutual Fund” means a Mutual Fund as referred to in clause (23D) of section 10 of the Act;

(c) “recognised clearing corporation” shall have the same meaning as assigned to it in clause (o) of sub-regulation (1) of regulation 2 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(d) “recognised stock exchange” shall have the same meaning as assigned to it in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(e) “securities” shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);]

(6) (a) Every reporting person mentioned in column (3) of the Table under sub-rule (2) [7][and column (3) of the Table under sub-rule (5A)] shall communicate to the Principal Director General of Income-tax (Systems) the name, designation, address and telephone number of the Designated Director and the Principal Officer and obtain a registration number.

(b) It shall be the duty of every person specified in column (3) of the Table under sub-rule (2) [7][and column (3) of the Table under sub-rule (5A)] , its Designated Director, Principal Officer and employees to observe the procedure and the manner of maintaining information as specified by its regulator and ensure compliance with the obligations imposed under section 285BA of the Act and rules 114B to 114D and this rule.

Explanation 1. – “Designated Director” means a person designated by the reporting person to ensure overall compliance with the obligations imposed under section 285BA of the Act and the rules 114B to 114D and this rule and includes -

(i)    the Managing Director or a whole-time Director, as defined in the Companies Act, 2013 (18 of 2013), duly authorised by the Board of Directors if the reporting person is a company;

(ii)   the managing partner if the reporting person is a partnership firm;

(iii)  the proprietor if the reporting person is a proprietorship concern;

(iv)  the managing trustee if the reporting person is a trust;

(v)   a person or individual, as the case may be, who controls and manages the affairs of the reporting entity if the reporting person is, an unincorporated association or, a body of individuals or, any other person.

Explanation 2. – “Principal Officer” means an officer designated by the reporting person referred to in the Table in sub-rule (2) 2[and in sub-rule (5A)].

Explanation 3. – “Regulator” means a person or an authority or a Government which is vested with the power to license, authorise, register, regulate or supervise the activity of the reporting person referred to in the Table in sub-rule (2) [8][and in sub-rule (5A)].

(7) The statement of financial transaction referred to in sub-rule (1) [8][and sub-rule (5A)] shall be signed, verified and furnished by the Designated Director specified in sub-rule (6):

PROVIDED that where the reporting person is a non-resident, the statement may be signed, verified and furnished by a person who holds a valid power of attorney from such Designated Director.]

KEY NOTE

1.   Substituted by the Income Tax (Twenty-second Amendment) Rules, 2015, with effect from 01.04.2016.

2.   Inserted by the Income Tax (Thirtieth Amendment) Rules, 2016, with effect from 15.11.2016.

3.   Inserted by the Income Tax (First Amendment) Rules, 2017, with effect from 06.01.2017.

4.   Substituted for “(other than the person at Sl. No. 9)” by the Income Tax (Twenty-sixth Amendment) Rules, 2016, with effect from 06.10.2016.

5.   Inserted by the Income Tax (Thirtieth Amendment) Rules, 2016, with effect from 15.11.2016.

6.   Inserted by the Income Tax (Fourth Amendment) Rules, 2021, with effect from 12-3-2021.

7.   Inserted by the Income Tax (Fourth Amendment) Rules, 2021 with effect from 12.03.2021.

8.   Inserted by the Income Tax (Fourth Amendment) Rules, 2021, with effect from 12.03.2021.

Persons required to furnish a statement of financial transaction or reportable account [Section 285BA(1)&(2)]

The following persons are required to furnish a statement of financial transaction or reportable account:-

(a)   an assessee; or

(b)   the prescribed person in the case of the Government office; or

(c)   a local authority or other public body or association; or

(d)   Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908; or

(e)   Registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988; or

(f)    Post Master General as referred to in section 2(j) of the Indian Post Office Act, 1898; or

(g)   Collector referred to in section 3(g) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; or

(h)   Recognised stock exchange referred to in section 2(f) of the Securities Contracts (Regulation) Act, 1956; or

(i)    an officer of the RBI constituted under section 3 of the RBI Act, 1934; or

(j)    Depository referred to in section 2(1)(e) of the Depositories Act, 1996; or

(k)   a prescribed reporting financial institution; or

(l)    a person (other than those referred to in (a) to (k) above), as may be prescribed.

The above persons who are responsible for registering, or, maintaining books of account or other document containing a record of any specified financial transaction or any reportable account as has been prescribed under Rule 114E(1), under any law for the time being in force, shall furnish a statement in respect of such specified financial transaction or such reportable account which is registered or recorded or maintained by him and information relating to which is relevant and required for the purposes of the 1961 Act, to the income-tax authority or such other authority or agency as has been prescribed under Rule 114E(4)(a).

The above statement shall be furnished for such period within such time and in the form and manner as has been prescribed under Rule 114E(1) & (5)

“Specified financial transaction”, defined [Section 285BA(3)]

For the purpose of section 285BA(1), “Specified financial transaction” means:-

(a)  any transaction of purchase, sale or exchange of goods or property or right or interest in a property prescribed under Rule 114E(2); or

(b)  any transaction for rendering any service prescribed under Rule 114E(2); or

(c)  any transaction under a works contract prescribed under Rule 114E(2); or

(d)  any transaction by way of an investment made or an expenditure incurred prescribed under Rule 114E(2); or

(e)  any transaction for taking or accepting any loan or deposit prescribed under Rule 114E(2).

Defective statement of financial transaction or reportable account [Section 285BA(4)]

Where the prescribed income-tax authority considers that the statement furnished under section  285BA(1) is defective, he may intimate the defect to the person who has furnished such statement and give him an opportunity of rectifying the defect within a period of 30 days from the date of such intimation or within such further period which, on an application made in this behalf, the said income-tax authority may, in his discretion, allow; and if the defect is not rectified within the said period of 30 days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of the 1961 Act, the provisions of the 1961 Act shall apply as if such person had furnished inaccurate information in the statement.

Non-furnishing of statement of financial transaction or reportable account [Section 285BA(5)]

Where a person who is required to furnish a statement under section 285BA(1) has not furnished the same within the specified time, the prescribed income-tax authority may serve upon such person a notice requiring him to furnish such statement within a period not exceeding 30 days from the date of service of such notice and he shall furnish the statement within the time specified in the notice.

Correction statement [Section 285BA(6)]

If any person, having furnished a statement u/s. 285BA(1), or in pursuance of a notice issued u/s. 285BA(5), comes to know or discovers any inaccuracy in the information provided in the statement, he shall within a period of 10 days inform the income-tax authority or other authority or agency referred to in section 285BA(1), the inaccuracy in such statement and furnish the correct information in such manner as may be prescribed.

Power to make rules [Section 285BA(7)]

The Central Government may, by rules, specify:-

(a)  the persons referred to in section 285BA(1) to be registered with the prescribed income-tax authority;

(b)  the nature of information and the manner in which such information shall be maintained by the persons referred to in (a) above; and

(c)  the due diligence to be carried out by the persons for the purpose of identification of any reportable account referred to in section 285BA(1).

Guidelines for authorities [Rule 114E(4)(b)]

The PDGIT (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies.

Information Statement Administrator [Rule 114E(4)(c)]

The CBDT may designate an officer as Information Statement Administrator, not below the rank of a JDIT for the purposes of day to day administration in relation to the furnishing of returns or statements.

Duties of reporting person [Rule 114E(6)]

Every reporting person under Rule 114E(2) and 114E(5A) shall communicate to the PDGIT (Systems) the name, designation, address and telephone number of the Designated Director and the Principal Officer [i.e., an officer designated by the reporting person] and obtain a registration number.

It shall be the duty of every reporting person, its Designated Director, Principal Officer and employees to observe the procedure and the manner of maintaining information as specified by its regulator and ensure compliance with the obligations imposed u/s. 285BA and Rules 114B, 114C, 114D and Rule 114E.

“Designated Director”, Defined [Explanation 1 to Rule 114E(6)]

"Designated Director" means a person designated by the reporting person to ensure overall compliance with the obligations imposed u/s. 285BA and Rules 114B, 114C, 114D and 114E and includes: -

(i)   the Managing Director or a whole-time director, as defined in the Companies Act, 2013, duly authorised by the Board of Directors if the reporting person is a company;

(ii)   the managing partner, if the reporting person is a partnership firm;

(iii) the proprietor, if the reporting person is a proprietorship concern;

(iv) the managing trustee, if the reporting person is a trust;

(v)  a person or individual, as the case may be, who controls and manages the affairs of the reporting entity if the reporting person is, an unincorporated association or, a body of individuals or, any other person.

"Regulator", Defined [Explanation 3 to Rule 114E(6)]

“Regulator” means a person or an authority or a Government which is vested with the power to license, authorise, register, regulate or supervise the activity of the reporting person.

 Specified Financial Transactions

S. No.

Transaction

Threshold (Rs)

Which authority should report?

1.

(a)  Payment made in cash for purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to

(b)  Payments made in cash during the financial year for purchase of pre-paid instruments issued by Reserve Bank of India under section 18 of the Payment and Settlement Systems Act, 2007 aggregating to

10,00,000 or more in a financial year

Banks or co-operative society

 

2.

Cash deposits in one or more accounts (other than a current account and time deposit) of a person. aggregating to

10,00,000 or more in a financial year

- Banks

- Co-operative society

- Post master general

3.

Cash deposits or cash withdrawals (including through bearer’s cheque) in or from one or more current account of a person aggregating to

50,00,000 or more in a financial year,

Banks or co-operative society

4.

Purchase or sale by any person of immovable property for an amount of Rs. 30,00,000 or more or valued by the stamp valuation authority referred to in section 50C of the Income Tax Act at Rs. 30,00,000 or more.

Rs. 30,00,000 or more

The Property Registrar or Sub-Registrar must report a transaction exceeding the threshold via Form 61A.

5.

Investments in shares, mutual funds, debentures and bonds in cash

(If amount is transferred from one scheme to another, then reporting is not required)

10,00,000 or more in a financial year

- Company issuing Shares, Debentures, Bonds

- Mutual Fund Trustee

6.

Payment of credit card bill in cash

1,00,000

Banks or co-operative society

7.

Payment of credit card bill other than through cash

10,00,000

Banks or co-operative society

8.

Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument of an amount aggregating to

10,00,000 or more during a financial year.

Authorised person as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999

9.

One or more time deposits (other than a time deposit made through renewal of another time deposit) of a person aggregating to

Rs. 10,00,000 or more in a financial year

(i)  A banking company or a

      co-operative bank to

(ii) Post Master General

(iii) Nidhi;

(iv) Non-banking financial company

10.

Cash receipt for sale, by any person, of goods or services of any nature (other than those specified above

Exceeding Rs. 2,00,000

Any person who is liable for audit under section 44AB of the Income Tax Act, 1961

11.

Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to

Rs. 10,00,000 more in a financial year

A company listed on a recognised stock exchange purchasing its own securities under section 68 of the Companies Act, 2013

12.

Cash deposits during the period 09.11.2016 to 30.12.2016 aggregating to -

 

(i)  Rs. 12,50,000 or more, in one or more current account of a person; or

(ii) Rs. 2,50,000 or more, in one or more accounts (other than a current account) of a person.

(i)     A banking company or a co-operative bank

(ii)   Post Master General

13.

Cash deposits during 01.04.2016 to 09.11.2016 in respect of accounts that are reportable under S. No.12.

 

(i)    A banking company or a co-operative bank

(ii)   Post Master General

 Income Tax Department Reporting Entity Identification Number (ITDREIN)

ITDREIN (Income Tax Department Reporting Entity Identification Number) is the Unique ID issued by ITD which will be communicated by ITD after the registration of the reporting entity with ITD. The ITDREIN is a 16 - character identification number in the format XXXXXXXXXX.YZNNN where :

            ITDREIN Component

Description

XXXXXXXXXX

PAN or TAN of the reporting entity

Y

Code of Form Code

Z

Code of Reporting Entity Category for the Form Code

NNN

Code of Sequence Number

Due date for filing of statement of financial transaction (i.e. Form No. 61A)

The statement of financial transaction shall be furnished electronically (under digital signature) in Form No. 61A to the Director of Income-tax (Intelligence and Criminal Investigation) or the Joint Director of Income-tax (Intelligence and Criminal Investigation).

However a Post Master General or a Registrar or an Inspector General may furnish Form No. 61A in a computer readable media being a Compact Disc or Digital Video Disc (DVD), alongwith the verification in Form-V on paper. Further, the statement shall be furnished on or before 31st May immediately following the financial year in which the transaction is registered or recorded.

Due date for filing of statement of financial transaction (SFT) Reporting (i.e. Form No. 61B)

​​​​​​​​​In order to facilitate effective exchange of information in respect of resident and non-resident, Section 285BA also provides for furnishing of statement by a prescribed reporting financial institution in respect of specified financial transaction or reportable account. The statement shall be furnished for each calendar year in Form No. 61B on or before 31st May of the next year.

Forms Overview

Form No.

Income Tax Rules

Statement of

Due Date of Furnishing Statement

61A

114E

Statement of Specified Financial Transactions under section 285BA(1) of the Income-tax Act, 1961

on or before 31st May immediately following financial year

61B

 

114G(2)

Statement of Reportable Account under sub-section (1) section 285BA of the Income-tax Act, 1961

on or before 31st May immediately following financial year

Consequence of Violating Section 285BA of the Income Tax Act

[1]  Penalty for Failure to Furnish Statement of Financial Transaction or Reportable Account as Required under Section 285BA(1) [Previously Called as ‘Annual Information Return (AIR)’] [Section 271FA]

Section 271FA provides that if a person who is required to furnish a statement of financial transaction or reportable account under section 285BA(1), fails to furnish such statement within the time prescribed under section 285(2) thereof, the income-tax authority prescribed under section 285A(1) may direct that such person shall pay, by way of penalty, a sum of five hundred rupees for every day during which such failure continues.

Quantum of Penalty under Section 271FA

S. No.

Particulars

Quantum of penalty

Period for penalty

(i)

Failure to furnish Statement of financial transaction under Section 285BA(1)

Rs. 500 for every day during which such failure continues.

 

(ii)

Failure to furnish Statement of financial transaction within the period specified in notice under Section 285BA(5) (i.e. within a period of 30 days from date of service of notice)

Rs. 1000 for every day during which such failure continues.

From the day immediately following the day on which the time specified in such notice for furnishing the statement expires

[2]  Penalty for Furnishing Inaccurate Statement of Financial Transaction or Reportable Account [Section 271FAA]

Nature of default

(1) Section 271FAA(1)

       If a person referred to in sub-section (1) of section 285BA, who is required to furnish a statement under that section,

(a) provides inaccurate information in the statement or fails to furnish correct information within the period specified under sub-section (6) of section 285BA; or

(b) fails to comply with the due diligence requirement prescribed under sub-section (7) of section 285BA,

(2) Section 271FAA(2)       

       Penalty for inaccurate information is reported under Statement of Financial Transaction (SFT) due to false/inaccurate information supplied by the account holder.

Quantum of Penalty under Section 271FAA

If a person referred to in sub-section (1) of section 285BA, who is required to furnish a statement under that section,

(a) provides inaccurate information in the statement or fails to furnish correct information within the period specified under sub-section (6) of section 285BA; or

(b) fails to comply with the due diligence requirement prescribed under sub-section (7) of section 285BA

 

Section 271FAA(1)

 

Rs. 50,000

For inaccurate information is reported under Statement of Financial Transaction (SFT) due to false/inaccurate information supplied by the account holder.

Section 271FAA(2)

Rs. 5,000/- for every inaccurate reportable account.

NOTE : This penalty would be in addition to the penalty amount of Rs. 50,000 leviable under section 271FAA(1)

 

CBDT Notification No. 1 - of 2023, dated 05.01.2023

Subject    : Addendum to Notification 2 of 2021 : Format, Procedure and Guidelines for submission of Statement of Financial Transactions (SFT) for Interest income (Abolishing of limit of Rs. 5,000/-).

Section 285BA of the Income Tax Act, 1961 and Rule 114E requires specified reporting persons to furnish statement of financial transaction (SFT). For the purposes of prefilling the return of income, CBDT has issued Notification No. 16/2021 dated 12.03.2021 to include reporting of information relating to interest income. The Format, Procedure and Guidelines for submission of Statement of Financial Transactions (SFT) for Interest income was notified via Notification 2 of 2021 dated 20th April 2021.

2. As per sub-rule (4)(b) of Rule 114E Director General of Income-tax (Systems) shall specify the procedures, data structures and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies.

3. The Remarks column point 1 at Annexure A - Guidelines for Preparation of Statement of Financial Transactions (SFT) mentioned “The information is to be reported for all account/deposit holders where cumulative interest exceeds Rs. 5,000/- per person in the financial year”.

4. The Remarks column at Annexure A is hereby being modified and may be read as “The information is to be reported for all account/deposit holders where any interest exceeds zero per account in the financial year excluding Jan Dhan Accounts”.

5. In the view of the changes mentioned above, the limit prescribed in Notification 2 of 2021 dated 20th April 2021 stands abolished and this addendum will come into effect from 05/01.2023').

Sd/-

(Govind Lal)

DGIT (Syste )-2, CBDT

CBDT Notification No. 3 of 2021, dated 30.04.2021

[DGIT(S)/ADG(S)-2/Reporting Portal/2021/180]

Subject :  Format, Procedure and Guidelines for submission of Statement of Financial Transactions

                  (SFT) for Depository Transactions

Section 285BA of the Income Tax Act, 1961 and Rule 114E requires specified reporting persons to furnish statement of financial transaction (SFT).

2. For the purposes of pre-filling the return of income, CBDT has issued Notification No. 16/2021 dated 12.03.2021 to include reporting of information relating to Capital gains on transfer of listed securities or units of Mutual Funds. The new sub rule 5A of rule 114E specifies that the information shall be furnished in such form, at such frequency, and in such manner, as may be specified by the Director General of Income Tax (Systems), with the approval of the Board.

3. The guidelines for preparation and submission of Statement of Financial Transactions (SFT) information are enclosed in Annexure A and Annexure B respectively. The format of control statement to be submitted by the Designated Director is given in Annexure C. The data structure and validation rules are enclosed in Annexure D and Annexure E respectively. Notification No. 3 of 2018 dated 05.04.2018 may be referred for the procedure for registration.

4. All Depositories as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996(22 of 1996) are required to prepare the data file in prescribed format from their internal system. Reporting entities are required to submit the data files using SFTP Server using the login credentials (To be communicated separately).

5. A separate control statement (refer annexure C) is required to be signed, verified and furnished by the Designated Director.

6. The statement of financial transactions relating to Financial Year 2020-21 shall be furnished on or before the 31st May 2021. Thereafter, the statement of financial transactions relating to the quarter ending 30th June, 31st September, 31st December and 31st March shall be furnished on or before 25th of July, October, January and April respectively.

7. The reporting entities are also required to provide information reported to Income Tax Department, to the account holder which will enable taxpayers to reconcile the information displayed in the Annual Information Statement (AIS) (Form 26AS).

8. In case, the reporting person/entity comes to know or discovers any inaccuracy in the information provided in the statement or the defects have been communicated to the reporting person/entity, it is required to remove the defects by submitting a correction/deletion statement.

9. The reporting person/entity is required to document and implement appropriate information security policies and procedures with clearly defined roles and responsibilities to ensure security of submitted information and related information/documents. The reporting person/entity is also required to document and implement appropriate archival and retrieval policies and procedures with clearly defined roles and responsibilities to ensure that submitted information and related information/documents are available promptly to the competent authorities.

10. This issues with the approval of CBDT.

This Notification shall come into effect from the date of issue.

Annexure A

Guidelines for Preparation of Statement of Financial Transactions (SFT)

The guidelines for preparation of Statement of Financial Transactions (SFT) for Depository transactions are as under:

1. The Depository transaction summary file will be used for pre-filling the gain/income/loss from securities transactions. The Depository Transaction Summary is required to be prepared for user-initiated debit transactions in the demat account. For Off Market debits, information need not be provided if transferor and transferee are same person.

2. In case of a minor, details of legal or natural guardian (PAN, Name etc.) may be provided.

3. The Estimated Sale Consideration for the debit transaction should be determined on the best possible available price of the asset with the depository (e.g. end of day price). The taxpayer will be able to modify the sales consideration before filing the return.

4. The securities should be classified into specified security class for determining the type of asset (short term/long term) and applicable rate.

5. The period of holding (difference between date of sale and date of acquisition of any share/security in the demat account) should be used to classify the asset as short term or long-term asset. First in First out (FIFO) method should be used for identification of corresponding credit in demat account and computation of period of holding. Any capital asset held by the taxpayer for a period of more than minimum period of holding will be treated as long-term capital asset and remaining assets will be classified as short-term asset. The specified minimum period of holding for different asset class is as under:

Security Class Code

Security Class Description

Minimum Period of Holding

LES

Listed Equity Share

12 months

LPS

Listed Preference Share

12 months

LDB

Listed Debenture

12 months

ZCB

Zero Coupon Bond

12 months

CIB

Listed Capital Indexed Bond

12 months

EMF

Unit of Equity Oriented Mutual Fund

12 months

UTI

Unit of UTI

12 months

UBT

Unit of Business Trust

36 months

OTU

Other Units

36 months

OTH

Other Listed Securities (Other than a unit)

12 months

6. For every debit transaction, the corresponding credit transaction should be identified using First in First Out (FIFO) method. The estimated cost of acquisition for the credit should be determined on the best possible available price with the depository. The cost of acquisition can be estimated as per the closing rate on the date (T-2) of transaction for market purchase. The estimated cost of acquisition is to be taken as NIL for OFF Market purchase, IPO or Corporate Action or for any transaction through other than Exchange. The taxpayer will be able to modify the cost of acquisition before filing the return.

7. In relation to a long-term capital asset, being an equity share in a company or a unit of an equity-oriented fund acquired before the 1st day of February, 2018, adjusted cost of acquisition shall be higher of (i) the cost of acquisition of such asset; and (ii) lower of (A) the fair market value of such asset as on 31st January, 2018; and (B) the full value of consideration received or accruing as a result of the transfer of the capital asset. In a case where the capital asset is listed on any recognized stock exchange as on the 31st day of January, 2018, "fair market value" means the highest price of the capital asset quoted on such exchange on the said date. If there is no trading in such asset on such exchange on the 31st day of January, 2018, the highest price of such asset on such exchange on a date immediately preceding the 31st day of January, 2018 when such asset was traded on such exchange shall be the fair market value. In case the cost of acquisition of asset acquired before the 1st day of February, 2018 is not easily available, the adjusted cost of acquisition may be taken as lower of (A) the fair market value of such asset; and (B) the full value of consideration.

8. The Cost Inflation Index should be used to determine estimated indexed cost of acquisition wherever applicable.

9. The details of demat account holders and summary values for the demat account for the reporting period should be reported in Depository Account Summary (DEP_ACC_SUMM.TXT).

10. The details of off-market transactions recorded by the depository during the year should be reported in Depository Off-Market Transactions (DEP_OFF_TRN.TXT).

 

Annexure B

Guidelines for Submission of Statement of Financial Transactions (SFT)

1.  Reporting entities are required to prepare the data file in prescribed format from their internal system. Reporting entities are required to submit the data files using SFTP Server using the login credentials (To be communicated separately). A separate control statement (refer Annexure C) is required to be signed, verified and furnished by the Designated Director.

2.  Any file which does not meet the validation requirements will be rejected.

3.  In case Reporting Entity needs to modify uploaded data, Correction Statement is required to be filed. In the Correction Statement, only those records should be uploaded in which correction is required. In case Reporting Entity needs to delete uploaded data, Deletion request is required to be filed.

                                                                       Annexure C

Control Statement for Depository Transactions

Number of Records Values

A.1

Reporting Entity Name

 

A.2

ITDREIN

 

A.3

Registration Number

 

A.4

Statement Type

 

A.5

Statement Number

 

A.6

Original Statement Id

 

A.7

Reason for Correction

 

A.8

Statement Date

 

A.9

Reporting Period Start Date

 

A.10

Reporting Period End Date

 

Number of Records

B. 1

Depository Batch File (DEP_BATCH.TXT)

 

B. 2

Depository Account Summary (DEP_ACC_SUMM.TXT)

 

B. 3

Depository Transaction Summary (DEP_TRN_SUMM.TXT)

 

B. 4

Depository Off-Market Transaction (DEP_OFF_TRN.TXT)

 

Sum of Key Values in Rs. (Refer Depository Account Summary)

C. 1 

Opening Value

 

C. 2

Market Credits

 

C. 3

Market Debits

 

C. 4

Off-Market Credits

 

C. 5

Off-Market Debits

 

C. 6

IPO Credits

 

C. 7

Corporate Action Credits

 

C. 8

Corporate Action Debits

 

C. 9

Dematerialized Credits

 

C. 10

Rematerialized Debits

 

C. 11

Pledge Invocation Credits

 

C. 12

Pledge Invocation Debits

 

C. 13

Closing Value

 

I, declare that to the best of my knowledge and belief, the information given in the data files is correct and complete and is in accordance with the provisions of the Income-tax Act, 1961.

Name ……………….

Designation ……………

 

Annexure D

Data Structure

The information is required to be uploaded in data file. The data file should be in ASCII format with one report per line. All fields in each file should be delimited with the delimiter “|”. The first record in the file should contain header text.

D.1. Depository Batch File (DEP_BATCH.TXT)

This file contains details of reporting entity, principal officer and files uploaded by the reporting entity

No.

Field Name

Mandatory Format

Remarks

 

 

 

 

 

D.2. Depository Account Summary (DEP_ACC_SUMM.TXT)

This file contains details of demat account holders and summary values for the demat account for the reporting period.

No.

Field Name

Mandatory Format

Remarks

 

 

 

 

Note: Refer Guidelines for preparation of SFT for more details

D.3. Depository Transaction Summary (DEP_TRN_SUMM.TXT)

This file shall contain details of security level transaction summary in respect of sales/debits during the reporting period.

No.

Field Name

Mandatory Format

Remarks

 

 

 

 

Note: Refer Guidelines for preparation of SFT for more details

D.4. Depository Off-Market Transaction (DEP_OFF_TRN.TXT)

This file shall contain details of off-market transactions recorded for a person/client by the depository during the year.

No.

Field Name

Mandatory Format

Remarks

 

 

 

 

Note: Refer Guidelines for preparation of SFT for more details

Permissible Values - Statement Type

No.

Code 

Description

1.

NB

New Batch (Statement) containing new information

2.

DB

Deletion Batch (Statement)

3.

CB

Correction Batch (Statement) containing corrections for previously submitted information

 

Permissible Values - Reason for Correction

No.

Code 

Description

1.

A

Acknowledgement of original Statement had many errors which are being resolved

2.

B

Errors in original Statement are being corrected suo-motu

3.

C

The correction report is on account of additional information being submitted

4.

N

Not applicable as this is a new statement/test data/ there is no data to report

5.

Z

Other reason

 

Permissible Values – Security Class Code

No.

Security Class Code

Description

1.

LES

Listed Equity Share

2.

LPS

Listed Preference Share

3.

LDB

Listed Debenture

4.

ZCB

Zero Coupon Bond

5.

CIB

Listed Capital Indexed Bond

6.

EMF

Unit of Equity Oriented Mutual Fund

7.

UTI

Unit of UTI

8.

UBT

Unit of Business Trust

9.

OTU

Other Units

10.

OTH

Other Listed Securities (Other than a unit)

 

Permissible Values – Transaction Reason

No.

Reason Code

Reason Description

 

 

 

 

Permissible Values - State code

No.

State/Union Territories

Code

 

 

 

 

Table - Capital Gain Index Chart

Financial Year

Cost Inflation Index (CII)

 

 

 

Annexure E

Validation Rules

The errors have been classified in following categories:

Errors

Schema level errors which need to be resolved by user for successful generation of XML report.

Defects

The reporting entity needs to correct and submit the reports again in the corrected statement.

Exceptions

The exceptions should be reviewed by the reporting person/ entities and if any information is available, the reporting entity may provide the information. If any defect is noticed, the reporting entity needs to rectify the defect by submitting a correction statement.

 

 

The validation rules are as under:

S. No.

Error Message

 

Error Type

File Rejection

1.

Control Statement Values Mismatch

Error

Y

2.

Sequence Number in Submitted file is not

running sequence number

Error

Y

3.

Account Summary Data not provided for reported transaction

Defect

N

4.

Mandatory Field is blank

Defect

N

5.

Invalid PAN reported

Exception

N

6.

Excessive Value Reported

Exception

N

7.

Mismatch identified after matching data with other submitted data

Exception

N

 

PRESS RELEASE (Dated 26.05.2017)

CBDT Issues Clarification on furnishing Statement of Financial Transaction (SFT) & SFT Preliminary Response

Section 285BA of the Income-tax Act, 1961 requires furnishing of a statement of financial transaction (SFT) for transactions prescribed under Rule 114E of the Income-tax Rules, 1962. The due date for filing such SFT in Form 61A is 31st May 2017. In case there are reportable transactions for the year, the reporting person/entity is required to register with the Income Tax Department and generate Income Tax Department Reporting Entity Identification Number (ITDREIN) The same can be generated by logging-in to the e-filing website (https://incometaxindiaefiling.gov.in/) with the log in ID used for the purpose of filing the Income Tax Return of the reporting person / entity. Entity having PAN can take only PAN based ITDREIN. Entity having TAN can generate an ITDREIN only when such TAN's Organisational PAN is not available.

The registration of reporting person (ITDREIN registration) is mandatory only when at least one of the Transaction Type is reportable. A functionality "SFT Preliminary Response" has been provided on the e-Filing portal for the reporting persons to indicate that a specified transaction type is not reportable for the year.

Detailed procedure of ITDREIN registration and upload of Form 61A is available under the “Help” section and Form 61A utility and Schema are available under the download section of http://www.incometaxindiaefiling.gov.in and https://www.cleanmoney.gov.in. Online filing of form 61A requires a valid class 2 or 3 digital signature certificate of person responsible for filing the same. Please refer “DSC Management Utility” manual under help section on how to generate the signature file, attaching the XML with signature and uploading of XML with signature file in e-Filing portal.

(Meenakshi J Goswami)

Commissioner of Income Tax

(Media and Technical Policy)

Official Spokesperson, CBDT.

Assessee had a bonafide belief that no return was required to be filed as there were no reportable transactions, no penalty was exigible under section 271FA upon assessee for not filing its return

The Assessing Officer levied penalty under section 271FA upon the assessee for the reason that the assessee did not file return/statement of financial transaction (SFT) under section 285BA(1).

On appeal, the Commissioner (Appeals) observed that even if there were no reportable transaction the assessee had to file nil return as prescribed in section 285BA(1) read with rule 114 of the Income-tax Rules and since the assessee did not file nil return penalty was sustained. On the assessee’s appeal to the Tribunal :

Held : On perusal of the Tax Audit Report it is noticed that the assessee has reported that there are no reportable transaction and there is no requirement of filing Form No. 61 Form No. 61A and Form No. 61B. On perusal of the orders of the authorities below the Assessing Officer as well as the Commissioner (Appeals) it could not be found that any reportable transactions have been identified in this case requiring the assessee to file SFT within the due date as prescribed under section 285BA(1) read with rule 114E. It is noticed that penalty were levied ignoring the submissions of the assessee that there are no reportable transaction, and therefore, the provision of section 285BA(1) are not applicable simply because the assessee did not file return of SFT.

Even otherwise the assessee had a bona fide belief that no return is required to be filed when there are no reportable transactions which is a reasonable cause under section 273B for not levying the penalty under section 271FA. Thus, the Assessing Officer is not justified in levying penalty under section 271FA and the Assessing Officer is directed to delete the penalty levied under section 271FA. [In favour of assessee] (Related Assessment year : Assessment year 2018-19) – [The Motor & General Finance Ltd. v. ACIT (2024) 159 taxmann.com 1494 (ITAT Delhi)]

Reason stated by petitioner, Sub-Registrar, that he was under a bona fide impression that annual information return (AIR) under section 285BA(1)(b) was already filed by his predecessor was not a reasonable cause to excuse delay of 525 days in submitting AIR and, therefore, penalty under section 271FA was rightly imposed upon petitioner

Petitioner, a Sub-Registrar at SRO, assumed charge on 12.07.2011. Due date of filing annual information return (AIR) under section 285BA(1)(b) was 31.08.2011. Petitioner was under bona fide impression that information would have already been submitted by his predecessor. However, he came to know that return was not filed only after receipt of notice on 11.01.2013. Return was subsequently filed on 06.02.2013. Revenue imposed penalty under section 271FA upon petitioner on premise of non-filing of a return. Reasons stated by petitioner that he was under a bona fide impression that statement under section 285BA(1)(b) was already filed by his predecessor was not a reasonable cause to excuse delay of 525 days in submitting return, therefore, impugned penalty under section 271FA was rightly imposed upon petitioner. [In favour of revenue] (Related Assessment year : 2011-12) – [Sub-Registrar, Sri. V.G. Cleetus v. Director of Income-tax (Intelligence) [2023] 154 taxmann.com 546 (Ker.)]

No penalty under section 271FA if statement of financial transaction (SFT) was not filed in time due to network connectivity problems of branches situated in rural areas

Assessee was a co-operative society carrying on banking business in rural areas. Assessee failed to file statement of financial transaction (SFT) under section 285BA read with rule 114E within due date. Assessee contended that it was working with 15 bank branches at different places in a district and some branches were situated in rural areas where due to network connectivity problem, report which was required for filing SFT, could not be generated within due time and, thus, said SFT return was filed after due date. Director of Income-tax was of view that bank’s internal administrative and mechanism issue could not partake character of reasons for such delay and, thus, imposed penalty under section 271FA upon assessee. Since no mala fide intention could be attributed to assessee and breach on part of assessee was only technical or venial breach of provisions and such a breach could have flown from bona fide ignorance of assessee, impugned penalty imposed upon assessee was to be deleted. [In favour of assessee] (Related Assessment year : 2019-20) – [Jhalawar Kendriya Sahakari Bank Ltd. v. Additional/Assistant Director of Income-tax (I&CI) Jaipur (2023) 150 taxmann.com 366 (ITAT Jaipur)]

Deleted penalty under section 271FAA for defects in ‘Reportable Accounts Statement’ since rectified timely

Chennai ITAT sets aside the CIT(A) order confirming the penalty under Section 271FAA for furnishing inaccurate statement of reportable accounts; Finds that Section 285BA(4) mandates that the defect should be rectified within a period of one month from the date of intimation regarding such defects by the Revenue;  Deletes the penalty of Rs. 50,000 each for Assessment years 2018-19, 2019-20 and 2020-21, holding that the Assessee rectified the defects pointed out by the Revenue and filed revised Form 61-B well within the time limit prescribed under Section 285BA(4), thus the penalty under Section 271FAA is not sustainable; Assessee, KEB Hana Bank, filed the statement of reportable account in Form No. 61-B, for Assessment years 2018-19, 2019-20 and 2020-21; Revenue noted that the Assessee had not reported 16 accounts in the statements filed for the relevant Assessment years being one savings account and 15 Term Deposit accounts of the same person, intimated the Assessee regarding said discrepancies and  asked the Assessee to rectify Form 61-B and furnish the details for the same; Revenue served the Assessee with a show cause notice under Section 274 read with Section 271FAA for furnishing inaccurate statement of reportable accounts and imposed the penalty of Rs. 50,000 under Section 271FAA, for each of the relevant Assessment years, which was confirmed by the CIT(A); ITAT notes Assessee’s contention that the the defects pointed out by the Revenue were duly rectified and revised/rectified Form 61-B was filed within the time allowed under Section 285BA(4); Further notes that the Assessee also furnished its explanation and copy of the excel sheets which were uploaded for the relevant Assessment year; Notes Revenue’s argument that the penalty was warranted since the Assessee revised the statement of reportable account only after the omissions were brought to the notice by the Revenue and not on its own; Analyses Section 285BA(4) which provides that the Revenue may intimate the Assessee regarding defect in the annual information return and provide the Assessee an opportunity of rectifying the defect within a period of one month from the date of such intimation; Observes that in the present case, the discrepancies were notified by the Revenue, by letter dated 30.03.2021 and the Assessee filed the revised/rectified Form 61-B on April 13 and 15, 2021 for the relevant Assessment years; Concurs with the Assessee that the revised/ rectified Form 61-B was filed by the Assessee well within time allowed under section 285BA(4); Thus, opines that the CIT(A) erred in confirming the penalty on the ground that the Assessee did not rectify the defects within time and sets aside the CIT(A) order. [In favour of assessee] (Related Assessment years : 2018-19, 2019-20 & 2020-21) – [KEB Hana Bank v. Joint Director of Income Tax (Intelligence & Criminal Investigation) [TS-447-ITAT-2023(CHNY)] – Date of Judgement : 10.08.2023 (ITAT Chennai)]

Deletes penalty for delayed Annual Information Return submission, accepts ‘bonafide ignorance’ plea

Malda District Central Co-operative Society (‘assessee’) is an entity dealing with borrowing and lending business. Assessee fell within the ambit of Section 285BA. Assessee failed to comply with the legal requirement for the period of 2012-13. Assessing Officer issued a notice dated 14.02.2013 and subsequently on assessee’s request, time for furnishing the annual information return ('AIR') was extended till 18.03.2013. Assessee filed the AIR on 15.03.2013 which was accepted and assessment was concluded. However, subsequently DIT (Intelligence and Criminal investigation) served penalty order and levied penalty of Rs. 56,100 under section 271FA for delay of 561 days in furnishing AIR. 

Section 285BA provides that specified person are required to furnish an AIR, in respect of such specified financial transaction which are registered/ recorded during any financial year beginning on or after April 1, 2004. Aggrieved assessee filed an appeal before Kolkata ITAT. 

Kolkata ITAT allows assessee’s (cooperative bank) appeal against levy of penalty under section 271FA for delay in furnishing annual information return (‘AIR’) under section 285BA, accepts assessee’s bonafide ignorance” of relevant provisions as sufficient cause for non-compliance; ITAT observes that tax laws of this country are complex and complicated and often require for compliance,...the assistance of tax practitioners specialising in this field ....legislation in this field undergoes so frequent changes and amendments that it is not possible for even a person specialising in this field, including the tax administrator, to claim that he knows what exactly the law is on a particular given day or period without making references to the history of the enactments”; Further notes the penalty order did not speak as to how assessee gained by contravening the provisions of Section 285BA or how assessee’s contravention resulted in Revenue’s loss; Accordingly rules that no malafides can be attributed to the assessee so as to invoke the penalty proceedings under section 271FA of the Act’, further states that ‘the breach is only technical or venial breach of the provisions of the Act and such a breach could have flown from a bonafide ignorance of the assessee that he is liable to act in the manner prescribed by the statute”; Points out that DIT himself had noted in the penalty order that assessee got accounts of all branches consolidated and audited, and also filed Income Tax/TDS returns. – [Malda District Central Co-op Bank Ltd.    [TS-425-ITAT-2016(Kol)] – Date of Judgement : 03.08.2016 (ITAT Kolkata)]