Penalty under section 272A(1)(d) restricted to the first default only

ITAT restricted penalty under section 272A(1)(d) to the first default to notice issued u/s 143(2).

In a recent judgment, ITAT Surat restricted penalty under section 272A(1)(d) to the first default only holding that penalty u/s 271(1)(b) cannot be imposed for each and every notice issued under section 143(2) of the Income Tax Act, 1961 (the Act).

ABCAUS Case Law Citation:
4517 (2025) (04) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in dismissing the appeal for delay.

The appellant assessee was an individual and engaged in the wholesale and retail trading. There was a survey under section 133A on the assessee, during which incriminating materials were found and impounded.

Upon reviewing the books of accounts, the Assessing Officer discovered that the assessee had a cash balance. The assessee claimed that the cash balance was from cash sales and earlier receipts related to the business. The assessee filed the return of income for the relevant Assessment Year.

The return was scrutinized, and notices under sections 143(2) and 142(1) were issued, but the assessee did not respond. Despite several attempts to reach the assessee, including subsequent notices, no compliance was made by the assessee.

Accordingly, cash credits were disallowed by the Assessing Officer and treated as unexplained income under section 115BBE of the Act. Penalty proceedings under sections 272A(1)(d) were initiated by the Assessing Officer for not causing appearance during the course of assessment proceedings.

During the penalty proceedings, despite multiple show-cause notices issued to the assessee, no response was received from the assessee. In view of the repeated non-compliance, a penalty was levied for each default under section 272A(1)(d) of the Income Tax Act for failing to respond to notices on five occasions.

Before the Tribunal, the assessee relied upon the decision of ITAT Delhi which held that penalty under section 271(1)(b) cannot be imposed for each and every notice issued under section 143(2), which remained not complied with on part of assessee, but it should be restricted to first default only.

The Tribunal observed that in the instant case, it was not a case of total non-appearance on part of the assessee during assessment proceedings. As per assessment order, the Assessing Officer himself stated that the assessee had failed to furnish satisfactory explanation. Accordingly, it is not a case of non-appearance on part of the assessee during assessment proceedings and the assessment order was passed u/s 143(3) of the Act.

Accordingly, The Tribunal directed the penalty to be restricted to the first default only.

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