2025 (3) TMI 450 - AT - Income Tax

Penalty levied u/s 272B(2) - multiple defaults/offence - assessee neither obtained nor informed to the department PAN of 232 customers to whom jewellery or more was sold as required u/s 139A(5)(c) - assessee explained that it had reasonable cause for its failure as the requirement for obtaining informing the department of the PAN was introduced w.e.f. 01.01.2016 and thus the financial year 2016-17 was the first year of its operation - as argued that 232 instances constituted a single offence and not 232 separate offences. HELD THAT - As relying on DHTC Logistic Ltd. 2014 (2) TMI 866 - DELHI HIGH COURT and also in the light of the fact that in assessee s own case the Assessing Officer under identical facts and similar circumstances (for 91 such defaults) imposed penalty of only Rs. 10, 000/- u/s 272B and also in the light of the fact that amendment in the section itself was made from September 2019 inserting the words ten thousand rupees for each such default we hold that penalty of Rs. 23, 20, 000/- imposed u/s 272B of the IT Act by the Assessing Officer and confirmed by Ld. CIT(A)/NFAC is not correct. We therefore direct the Assessing Officer to reduce the penalty of Rs. 23, 20, 000/- to Rs. 10, 000/- only. Thus the grounds raised by the assessee are partly allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the penalty under Section 272B of the Income Tax Act should be imposed per default or per person in cases where multiple defaults occur.
Whether the amendment to Section 272B, effective from September 2019, applies retroactively to the assessment year 2017-18.
Whether the appellant's failure to obtain and report PAN details of 232 customers constitutes 232 separate defaults or a single default for penalty purposes.
Whether the penalty should be reduced or canceled due to reasonable cause for non-compliance.

2. ISSUE-WISE DETAILED ANALYSIS

Penalty under Section 272B: Per Default or Per Person

Relevant Legal Framework and Precedents: Section 272B of the Income Tax Act imposes a penalty for failure to comply with the provisions of Section 139A, which requires the quoting of PAN in certain transactions. The amendment effective from September 2019 specifies a penalty of "ten thousand rupees for each such default."
Court's Interpretation and Reasoning: The Tribunal considered the language of Section 272B before and after the amendment. It noted that prior to the amendment, the section did not explicitly state that the penalty was per default.
Key Evidence and Findings: The Tribunal noted that the Assessing Officer had previously imposed a penalty of Rs. 10,000 for 91 defaults under similar circumstances in the appellant's case when it was a private limited company.
Application of Law to Facts: The Tribunal applied the precedent set by the Delhi High Court in CIT vs. DHTC Logistic Ltd., which clarified that the penalty is linked to the person and not to the number of defaults.
Treatment of Competing Arguments: The appellant argued that the penalty should be linked to the person, while the Revenue maintained that each instance of non-compliance constituted a separate default.
Conclusions: The Tribunal concluded that the penalty should be Rs. 10,000 in total, not Rs. 23,20,000, as the defaults should be considered collectively as one.

Retroactive Application of Amendment to Section 272B

Relevant Legal Framework and Precedents: The amendment to Section 272B, effective from September 2019, introduced the phrase "for each such default."
Court's Interpretation and Reasoning: The Tribunal reasoned that amendments to penalty provisions are generally prospective unless explicitly stated otherwise.
Conclusions: The Tribunal held that the amendment does not apply retroactively to the assessment year 2017-18, supporting the appellant's position.

Reasonable Cause for Non-Compliance

Relevant Legal Framework and Precedents: Section 273B provides that no penalty shall be imposed for failure to comply with provisions if there is reasonable cause.
Court's Interpretation and Reasoning: The Tribunal considered the appellant's argument that the requirement to obtain and report PAN was newly introduced in the financial year 2016-17.
Key Evidence and Findings: The Tribunal did not find sufficient evidence to conclude that the appellant had a reasonable cause for non-compliance.
Conclusions: The Tribunal did not cancel the penalty entirely but reduced it, indicating partial acceptance of the reasonable cause argument.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "Considering the totality of the facts of the case and respectfully following the judgement passed by Hon'ble Delhi High Court (supra)... we hold that penalty of Rs. 23,20,000/- imposed u/s 272B of the IT Act by the Assessing Officer and confirmed by Ld. CIT(A)/NFAC is not correct."
Core Principles Established: The penalty under Section 272B, prior to the amendment effective from September 2019, is linked to the person and not to the number of defaults.
Final Determinations on Each Issue: The Tribunal directed the Assessing Officer to reduce the penalty from Rs. 23,20,000 to Rs. 10,000, aligning with the interpretation that the penalty is per person, not per default.

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