ITAT clarifies penalty u/s 272A(1)(d): reminder notices under 142(1) not separate defaults, partial relief to assessee

ITAT Rajkot partly allowed the assessee's appeal against penalty levied u/s 272A(1)(d) for non-compliance with notices u/s 142(1). The assessment had been completed u/s 144 r.w.s. 144B, evidencing non-compliance during assessment proceedings. The AO imposed penalty of Rs. 30,000/- treating one main notice and two reminder notices as three separate defaults. ITAT held that only the original notice constituted a default, while the subsequent communications were mere reminders. Accordingly, penalty of Rs. 20,000/- relating to the reminders was deleted and penalty of Rs. 10,000/- was sustained.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether levy of penalty under section 272A(1)(d) of the Income-tax Act, 1961, for non-compliance with notices issued under section 142(1), was legally sustainable.

1.2 Whether multiple penalties under section 272A(1)(d) could be imposed on the basis of one show-cause notice followed by reminder notices, treating such reminders as independent defaults.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of penalty under section 272A(1)(d) for non-compliance with notices under section 142(1)

Interpretation and reasoning

2.1 The Court noted that the assessment for the relevant assessment year was completed under section 144 read with section 144B, indicating that the assessee had failed to comply with the statutory notices issued during assessment proceedings.

2.2 It was observed that notices under section 142(1) dated 14.08.2023, 25.09.2023, and 16.01.2024 remained uncomplied with, and even during penalty proceedings, the assessee did not respond to the show-cause notice sent through registered e-mail.

2.3 On these facts, the Court accepted that there was non-compliance by the assessee with the requisitions under section 142(1), and that the assessee failed to explain any sufficient cause for such default.

Conclusions

2.4 The Court held that imposition of penalty under section 272A(1)(d) was justified to the extent of one default, in view of the assessee's continued non-compliance and absence of any explanation or sufficient cause.

Issue 2: Legality of imposing multiple penalties under section 272A(1)(d) on the basis of one show-cause notice and subsequent reminders

Interpretation and reasoning

2.5 The Court found that although the Assessing Officer levied a total penalty of Rs. 30,000/- treating there to be three separate defaults, only one show-cause notice proposing penalty had actually been issued.

2.6 It was specifically recorded that the other two communications issued by the Assessing Officer were only "reminders" in respect of the original show-cause notice, and not separate or independent show-cause notices for distinct penal action.

2.7 On this basis, the Court reasoned that reminders could not be equated with independent show-cause notices so as to sustain separate penalties of Rs. 10,000/- each for two additional defaults.

Conclusions

2.8 The Court concluded that penalty relatable to the two reminder notices was not legally sustainable and deleted Rs. 20,000/- out of the total penalty.

2.9 The Court confirmed penalty of Rs. 10,000/- only, corresponding to the default for which a proper show-cause notice had been issued, thereby partly allowing the appeal.

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