M/S P.N. GADGIL & SONS,PUNE V. DCIT, CIRCLE 6, PUNE

ITA 1921/PUN/2024

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The case involves M/s. P. N. Gadgil & Sons, a partnership firm engaged in the jewellery business, which faced penalties for failing to obtain and report the Permanent Account Number (PAN) of customers for transactions exceeding Rs. 2,00,000. A survey under section 133A of the IT Act revealed that the firm did not comply with the requirements of section 139A(5)(c) for 232 transactions. The Assessing Officer imposed a penalty of Rs. 23,20,000, treating each instance as a separate default. The firm contested this decision, arguing that the penalty should be considered as a single default and cited a similar case where a lesser penalty was imposed. The CIT(A) upheld the penalty, leading to the appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471169 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: CIT vs. DHTC Logistic Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASSESSEES; ARVIND DESAI
• Assessee Lawyers: M. R. BHAGWAT
• Keywords: Opportunity of being heard; Reasonable cause; TDS
• Section: 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1921/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 M/s. P. N. Gadgil & Sons, Abhiruchi Mall, 4th Floor, 59C Sinhagad Road, Pune- 411041. PAN : AANFP4476C Vs. DCIT, Circle-6, Pune. Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the assessee is directed against the order dated 02.08.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2017-18. 2. The appellant has raised the following grounds of appeal :- “1) The learned CIT (A) NFAC DELHI erred in confirming penalty of Rs.23,20,000/- levied under section 272B(2). 2) The learned CIT (A) NFAC DELHI erred in sustaining the penalty at Rs.23,20,000/- when there was only one default and as such penalty could at the must be sustained at Rs.10,000/- only. 3) The learned CIT (A) NFAC DELHI erred in sustaining the penalty even though there was a reasonable cause for assessee's failure to obtain PAN of its retail customers. 4) The penalty levied be cancelled or reduced to Rs. 10,000/-. Assessee by : Shri M. R. Bhagwat Revenue by : Shri Arvind Desai Date of hearing : 15.01.2025 Date of pronouncement : 05.03.2025 ITA No.1921/PUN/2024 2 5) Such other orders be passed as deemed fit and proper. 6) The appellant prays for leave to add to, amend or modify its grounds of appeal and lead evidence.” 3. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the jewellery business. It operates number of retail outlets in Maharashtra State wherein it sells jewellery to the public in general. A survey u/s 133A was conducted at the premises of the assessee by the Director General (C & I). It was found that the assessee neither obtained nor informed to the department PAN of 232 customers to whom jewellery of Rs.2,00,000/- or more was sold, as required u/s 139A(5)(c) of the IT Act. The default was liable to penalty u/s 272B and accordingly the DCIT, Circle-6, Pune initiated penalty proceedings u/s 272B of the IT Act. The 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. It was also argued that 232 instances constituted a single offence and not 232 separate offences. The assessee also relied on the decision of Hon’ble Delhi High Court in the case of CIT vs. DHTC Logistic Ltd. for this proposition. ITA No.1921/PUN/2024 3 4. However, the Assessing Officer rejected the explanation and levied a penalty of Rs.23,20,000/- (Rs.10,000/- for each of the default) u/s 272B, which was challenged before Ld. CIT(A)/NFAC. After considering the reply of the assessee, Ld. CIT(A)/NFAC dismissed the appeal filed by the assessee by observing as under :- “4.2 During the course of appellate proceedings, it is submitted that the Central Govt. vide the Finance Act No. 2, 2019 (i.e. budget 2019) has amended section 2728 of the Income tax Act to add the words \" ten thousand rupees for each such default\" in the section specifying the amount of penalty to be levied in respect of violation of the said section. This amendment is effective from 1st Sept 2019 which means that till A.Y. 2017-18 which is the year involved before your honour the company's interpretation of the section was the correct one. Had it not been so then there was no necessity of the amendment itself. The central Government by its own action has fortified the company's contention and therefore your honour may kindly cancel the penalty or at best may sustain a penalty of only Rs. 10,000/- on the assessee. It is pertinent to note that in the case of assessee firm's successor P N Gadgil and sons Ltd. similar issue arose for A.Y. 2018-19 where the ld. AO accepted these contentions and restricted the penalty only to Rs. 10,000/-. 4.3 I have gone through the grounds of appeal, statement of facts, penalty order and the submissions of the appellant. The case law referred by the appellant in the case of ACIT Circle 49(1), New Delhi Vs. DHTC Logistics Ltd. vide ITA No. 675, 676 and 677/Del /2012 of the Hon'ble ITAT, Delhi Bench B, New Delhi, wherein it has been clarified penalty u/s. 272B of Rs. 10,000/- is linked to the person and not with the number of default. In the instant case the appellant had failed to mention the PAN of 232 persons. The Hon Tribunal held that the penalty of Rs. 10,000/- for each person. In the appellant case there are 232 persons and 232 transactions where failure under rule 114C(2) prescribed at Sr. No. 18 I Rule 114 B as stipulated under section 139A has been noticed. The Assessing officer has elaborately discussed about the quantum of penalty to be leviable in this case. Under the circumstances and in view of report of the Director General (I & CI), Pune under sec. 133A of the I T Act, I am of the opinion that no interference is required in the penalty order. Hence ITA No.1921/PUN/2024 4 the penalty of Rs. 23,20,000/- is upheld. All the grounds raised in this appeal are dismissed.” 5. It is this order against which the assessee is in appeal before this Tribunal. 6. Ld. AR appearing from the side of the assessee submitted before us that Ld. CIT(A)/NFAC was not justified in not considering the decision passed by Co-ordinate Bench of this Tribunal in the case of DHTC Logistic Ltd. wherein it has been clarified that the penalty u/s 272B of Rs.10,000/- is linked to the person and not with the number of defaults. Accordingly, it was submitted that since the person who committed the default is one, may be in 232 instances but the default should be treated as one and, therefore, the penalty should not be more than Rs.10,000/-. Ld. AR further submitted that the assessee was a partnership firm and subsequently converted into a private limited company and 272B penalty proceedings were also initiated in the case of private limited company for the same default and the Assessing Officer initiated 272B penalty proceedings under identical facts for 91 instances of sales which are made to 91 different persons for Rs.2,00,000/- or more, wherein the PAN details of the purchasers were not obtained during the financial year 2017-18, and the ITA No.1921/PUN/2024 5 penalty officer imposed penalty u/s 272B of Rs.10,000/- only, for above 91 instances of default of not obtaining PAN & not informing to the department by treating it as one default. Accordingly, it was submitted before the Bench that in the case of assessee itself, the Assessing Officer has accepted the contentions of the assessee that the penalty u/s 272B is linked with person and not with number of defaults. Ld. AR further submitted before the Bench that w.e.f. 01.09.2019, Central Government has made amendment in section 272B and inserted the words “ten thousand rupees for each such default” in the section. This amendment itself supports the contention of the assessee that prior to September, 2019 the default will be linked to the person but after September, 2019 i.e. after the amendment the penalty is leviable for each such default. Accordingly, it was prayed that the matter pertains prior to September, 2019 and therefore the amended provisions will not be applicable and a penalty of Rs.10,000/- only was leviable. On the basis of all the above contentions, Ld. AR requested to restrict the penalty of Rs.23,20,000/- to Rs.10,000/- only. 7. Ld. DR appearing from the side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same. ITA No.1921/PUN/2024 6 8. We have heard Ld. Counsels from both the sides and perused the material available on record. In this regard, we find that section 139A(5)(c) requires the assessee to inform the PAN of all such purchasers who purchased jewellery of Rs.2,00,000/- or more in one bill. During the relevant period, there were 232 instances wherein the assessee failed to inform the PAN of such purchasers to the Department. Accordingly, penalty proceedings u/s 272B was initiated and a penalty of Rs.23,20,000/- was imposed, (i.e. 232 defaults at the rate of Rs.10,000/- per default) which was confirmed by Ld. CIT(A)/NFAC. It was the contention of Ld. AR that previously the assessee runs the business in the status of partnership firm and subsequently converted the business into private limited company. In the case of private limited company, the Assessing Officer also initiated penalty u/s 272B for 91 such defaults and imposed penalty of Rs.10,000/- only u/s 272B for 91 such defaults. Therefore, it was contended that in one of the case of the assessee, the Department has taken one view and in the case of the same assessee, taken another view. Therefore, the Department is blowing hot and cold at the same time, which is not justified. In this regard, copy of penalty order passed u/s 272B in the case of P. N. Gadgil & Sons Ltd. for assessment year 2018-19 ITA No.1921/PUN/2024 7 was furnished before us. It was also the contention of Ld. AR that upto September, 2019 the language of section 272B suggests that for all such defaults penalty of Rs.10,000/- can be imposed but from September, 2019 the Government has amended section 272B and inserted the words “ten thousand rupees for each such default”, therefore, after September, 2019 penalty for each such default have to be imposed but not prior to that. In this regard, we may refer section 272B prior to and after amendment which is as under :- “Penalty for failure to comply with the provisions of section 139A. 272B. (1) If a person fails to comply with the provisions of section 139A, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten thousand rupees. (2) If a person who is required to quote his permanent account number in any document referred to in clause (c) of sub-section (5) of section 139A , or to intimate such number as required by sub-section (5A)or sub-section (5C) of that section, quotes or intimates a number which is false, and which he either knows or believes to be false or does not believe to be true, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten thousand rupees. (3) No order under sub-section (1) or sub-section (2) shall be passed unless the person, on whom the penalty is proposed to be imposed, is given an opportunity of being heard in the matter.” xxxxx Penalty for failure to comply with the provisions of section 139A. 272B. (1) If a person fails to comply with the provisions of section 139A , the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten thousand rupees. (2) If a person who is required to quote his permanent account number [or Aadhaar number, as the case may be,] in any document referred to in clause (c) of sub-section (5) of section 139A , or to intimate such number as required by sub-section (5A) or sub-section (5C) of that section, quotes or intimates a number which is false, and which he either knows or believes to be false or does not believe to be ITA No.1921/PUN/2024 8 true, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten thousand rupees [for each such default]. [(2A) If a person, who is required to quote his permanent account number or Aadhaar number, as the case may be, in documents referred to in sub-section (6A) of section 139A or authenticate such number in accordance with the provisions of the said sub-section, fails to do so, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten thousand rupees for each such default. (2B) If a person, who is required to ensure that the permanent account number or the Aadhaar number, as the case may be, has been,— (i) duly quoted in the documents relating to transactions referred to in clause (c) of sub-section (5) or in sub-section (6A) of section 139A ; or (ii) duly authenticated in respect of transactions referred to under sub-section (6A) of that section, fails to do so, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of ten thousand rupees for each such default.] (3) No order under sub-section (1) or sub-section (2) [or sub-section (2A) or sub-section (2B)] shall be passed unless the person, on whom the penalty is proposed to be imposed, is given an opportunity of being heard in the matter.” 9. Apart from above, the assessee is also relying on a judgement passed by Hon’ble Delhi High Court in the case of CIT vs. DHTC Logistic Ltd. in ITA No.314/2013 order dated 26.07.2013 wherein the appeal of the Department was dismissed by observing as under :- “1. There are two reasons why we feel the present appeal should not be entertained. 2. Firstly, the assessing officer in the penalty order under Section 272B has not specifically referred to any default or failure by the respondent-assessee mentioning PAN Number even when the said particulars and details were available. The stand taken by the respondent was that the PAN Numbers were not furnished by the Truck owners and, therefore, they were not quoted by them or PAN Numbers as informed were quoted. In case, the PAN Numbers are not furnished by the deductees, the respondent- assessee cannot be ITA No.1921/PUN/2024 9 penalized under Section 272B. Section 139A also imposes the obligation on the deductees to furnish PAN Number to the deductor. 3. Secondly, the stand taken by the revenue is contrary to the stand taken by Central Board of Direct Taxes. The assessing officer had imposed penalty of Rs.10,000/- in each case where PAN Number was not provided by the deductee. There were in all 30706 cases in which the PAN Number was missing or was incorrectly stated. The assessing officer, accordingly, imposed penalty of Rs.10,000/- in each case. Thus, penalty of Rs.30,70,60,000/- was imposed. Board in the letter dated 5.8.2008 vide No.275/24/2007-IT(B) has clarified that penalty of Rs.10,000/- under Section 272B is linked to the person, i.e., the deductor who is responsible to deduct TDS, and not to the number of defaults regarding the PAN quoted in the TDS return. Therefore, regardless of the number of defaults in each return, maximum penalty of Rs.10,000/- can be imposed on the deductor. Penalty cannot be imposed by calculating the number of defective entries in each return and by multiplying them with Rs.10,000/-. This also appears to be a legislative intent, as in many cases, the TDS amount may be small or insignificant fraction of Rs.10,000/-.” 10. Considering the totality of the facts of the case and respectfully following the judgement passed by Hon’ble Delhi High Court (supra) 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 ITA No.1921/PUN/2024 10 the penalty of Rs.23,20,000/- to Rs.10,000/- only. Thus, the grounds raised by the assessee are partly allowed. 11. In the result, the appeal filed by the assesse is partly allowed. Order pronounced on this 05th day of March, 2025. Sd/- Sd/- (R. K. PANDA) (VINAY BHAMORE) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 05th March, 2025. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. "