2025 (2) TMI 1080 - AT - Income Tax

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.

Summary

The appeal in this case was filed by the Assessee against an order passed by the Ld. Commissioner of Income Tax (Appeals) regarding the imposition of a penalty under Section 272A(1)(d) for the assessment year 2017-18. The Assessee raised several grounds of appeal challenging the penalty imposed and the process followed by the authorities.**Issues Presented and Considered:**1. Whether the penalty under Section 272A(1)(d) was correctly imposed on the Assessee.2. Whether the penalty amount should be restricted to Rs. 10,000 instead of Rs. 30,000 as confirmed by the Ld. CIT(A).**Issue-wise Detailed Analysis:****Relevant Legal Framework and Precedents:**- Section 272A(1)(d) of the Income Tax Act allows for penalties in case of defaults in compliance with notices issued by the Assessing Officer.- The case of Tarlok Singh Through Legal Heir Gurnam Singh vs. ITO Ward Gurdaspur 2023 highlighted the restriction of penalties under Section 272A(1)(d) to one default.**Court's Interpretation and Reasoning:**- The Tribunal considered the nature of penalties under Section 272A(1)(d) as deterrent rather than revenue-earning.- The Tribunal emphasized that the Assessing Officer's remedy lies in framing best judgment assessments under Section 144 of the Act rather than imposing multiple penalties under Section 272A(1)(d).**Key Evidence and Findings:**- The Assessing Officer added a sum towards unexplained expenditure made by the Assessee through a credit card and imposed a penalty for non-compliance with various notices.- The Ld. CIT(A) confirmed the penalty of Rs. 30,000, which the Assessee appealed against.**Application of Law to Facts:**- The Tribunal, in the interest of justice, restricted the penalty under Section 272A(1)(d) to Rs. 10,000, citing the nature of the penalty as deterrent and not for revenue generation.- The Tribunal referred to the precedent set in the case of Tarlok Singh Through Legal Heir Gurnam Singh to support the restriction of penalties to one default.**Treatment of Competing Arguments:**- The Assessee argued against the imposition of the penalty and sought a reduction in the penalty amount.- The Ld. CIT(A) upheld the penalty of Rs. 30,000, which the Tribunal partially allowed by restricting the penalty to Rs. 10,000.**Significant Holdings:**- The Tribunal held that the penalty under Section 272A(1)(d) should be restricted to Rs. 10,000 instead of Rs. 30,000 as confirmed by the Ld. CIT(A).- The Tribunal emphasized the nature of the penalty as deterrent and directed the Assessing Officer to frame best judgment assessments rather than imposing multiple penalties under Section 272A(1)(d).In conclusion, the Tribunal partially allowed the appeal of the Assessee by restricting the penalty under Section 272A(1)(d) to Rs. 10,000 in the interest of justice and in line with the precedent set in a similar case.