2025 (2) TMI 1080 - AT - Income Tax

Tribunal reduces penalty under Section 272A(1)(d) from Rs. 30,000 to Rs. 10,000, emphasizing fairness over revenue.

The Tribunal partially allowed the Assessee's appeal, reducing the penalty under Section 272A(1)(d) from Rs. 30,000 to Rs. 10,000. The Tribunal emphasized ... Penalty u/s. 272A(1)(d) - unexplained expenditure made by the assessee through his credit card - HELD THAT:- The provisions of Section 272A(1)(d) are “deterrent in nature” and not for the purpose of earning revenue. The remedy available with the AO lies in framing of best judgment assessment under the provisions of Section 144 of the Act, as he did in the present and not to impose multiple penalties under Section 272A(1)(d) of the Act, again and again. Accordingly, levy of penalty is directed to be restricted to Rs. 10,000/-. In the case of Tarlok Singh Through Legal Heir Gurnam Singh vs. ITO Ward Gurdaspur [2023 (6) TMI 479 - ITAT AMRITSAR] restrict the penalty levied under section 272A(1)(d) of the Act to one default as against multiple defaults on non compliance with these notices under section 142(1) of the Act. Appeal of the assessee is partly allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether penalty under Section 272A(1)(d) for non-compliance with notices (s. 142(1) / s. 143(2)) can be imposed multiple times for repeated defaults, or whether it should be limited to a single penalty. 2. Whether the penalty imposed under Section 272A(1)(d) in the facts of the case is excessive and warrants reduction in the interest of justice, having regard to the nature and purpose of the provision. 3. Whether written submissions filed during assessment proceedings were required to be considered by the appellate authority in relation to the levy of penalty. 4. Whether the penalty was time-barred under the limitation provisions relied upon by the assessee. ISSUE-WISE DETAILED ANALYSIS Issue 1: Legality of imposing multiple penalties under Section 272A(1)(d) Legal framework: Section 272A(1)(d) authorizes levy of penalty for failure to comply with notices issued under the Act (e.g., s. 142(1), s. 143(2)). Section 144 (best judgment assessment) is the statutory remedy available to the Assessing Officer where returns/information are not furnished or compliance is incomplete. Precedent treatment: The Tribunal relied on a prior decision which restricted multiple penalties under s. 272A(1)(d) to a single penalty where best judgment assessment under s.144 had been framed. That decision was followed. Interpretation and reasoning: The Court observed that s. 272A(1)(d) is deterrent in nature and not intended as a revenue-raising device. Where the Assessing Officer exercises the remedy under s.144 to assess undisclosed/unexplained items (as was done in the assessment), repeated imposition of penalty for each notice served effectively double-counts the consequence of non-compliance. The Court reasoned that the proper exercise of statutory powers permits framing a best judgment assessment and that imposition of multiple penalties in addition is not consonant with the remedial scheme. Ratio vs. Obiter: Ratio - restriction of multiple penalties to a single penalty in circumstances where best judgment assessment under s.144 has been framed and the Assessing Officer has availed that remedy. Obiter - general observations on the deterrent character of s.272A(1)(d) where not strictly necessary to the decision beyond these facts. Conclusion: The Court held that multiple penalties for repeated defaults should be restricted to one penalty for the default(s) in the circumstances where the Assessing Officer has framed best judgment assessment under s.144. Issue 2: Appropriateness and quantum of penalty under Section 272A(1)(d) Legal framework: Section 272A(1)(d) prescribes penal consequences for failure to comply with statutory notices; the statutory provision permits imposition of penalty per default up to specified limits. Precedent treatment: The Tribunal applied the principle from the cited decision restricting penalty to a single maximum amount (Rs.10,000 in that precedent) where multiple notices had been issued and assessment was completed under s.144. Interpretation and reasoning: The Court emphasized that the provision is deterrent and not intended to be a tool for multiplying revenue receipts. Considering that the Assessing Officer exercised s.144 and made an addition of unexplained expenditure, it would be inequitable and inconsistent with the remedial scheme to impose repeated penalties for each notice. In the interest of justice, the Court exercised its jurisdiction to moderate the quantum, restricting the aggregate penalty to the amount corresponding to one default. Ratio vs. Obiter: Ratio - reduction of aggregate penalty to amount attributable to a single default where assessment has been finalized under s.144; Obiter - comments on the non-revenue character of s.272A(1)(d) and policy considerations informing reduction. Conclusion: The Court reduced the aggregate penalty to Rs.10,000, treating the levy for multiple notices as a single default penalty in the facts before it. Issue 3: Consideration of written submissions during assessment proceedings Legal framework: Principles of natural justice and adjudicatory fairness require relevant submissions filed by the assessee to be considered by authorities when deciding penalty and assessment. Precedent treatment: No specific conflicting precedent was cited in the order; the Court noted the contention but did not undertake a detailed remedial inquiry as the penalty quantum adjustment rendered further analysis unnecessary. Interpretation and reasoning: The assessee contended that written submissions dated 01.03.2023 and other submissions filed during assessment were not considered. The Court observed the contention as a ground of appeal but did not make detailed findings on whether those submissions were considered by the lower authorities. The primary disposition addressed the aggregate penalty; the Court limited the penalty in the interest of justice without expressly adjudicating the adequacy of consideration of each written submission. Ratio vs. Obiter: Obiter - the Court's treatment on this point is incidental to the principal decision to restrict penalty and does not constitute a definitive ruling on procedural non-consideration. Conclusion: The Court did not overturn the assessment on the basis of non-consideration of written submissions but limited penalty; the issue of whether lower authorities considered specific written material was not conclusively decided. Issue 4: Whether the penalty was time-barred Legal framework: Penalty provisions are subject to limitation periods prescribed by statute; a penalty which has become time-barred cannot be sustained. Precedent treatment: The order records the assessee's ground that the penalty was levied after expiry of limitation and that Ld. CIT(A) erred in holding the penalty not time-barred. The Tribunal did not engage in an extended legal analysis of limitation; no contrary precedent was cited or overruled. Interpretation and reasoning: The Court noted the contention that the penalty was time-barred but the operative decision limited the penalty quantum on substantive grounds (deterrent nature of s.272A(1)(d) and availability of s.144 remedy). The Court did not expressly uphold or reject the limitation argument; it resolved the appeal by exercising appellate discretion to restrict the penalty. Ratio vs. Obiter: Obiter - absence of a definitive ruling on time-bar leaves the limitation issue unresolved as a binding ratio in the present order. Conclusion: The Tribunal did not decide conclusively on the time-bar plea; instead, it reduced the penalty on substantive and remedial grounds without pronouncing on limitation applicability. Overall Disposition The Court, applying the principle that s.272A(1)(d) is deterrent and not a revenue device and following precedent restricting multiple penalties where s.144 has been availed, limited the aggregate penalty to the amount corresponding to a single default (Rs.10,000) and partly allowed the appeal. The restriction of multiple penalties to one default constitutes the operative legal ratio in these facts; ancillary contentions regarding consideration of written submissions and limitation were left without definitive adjudication.