Section 272A(1)(d): The Overlooked Rule That Could Cost You ₹10,000 per Day

When it comes to income tax compliance in India, the law is quite clear: deadlines & obligations must be met. One such important provision that ensures accountability is Section 272A(1)(d) of the Income Tax Act. This section deals with situations where a person fails to comply with certain statutory notices or requirements. The penalty proceedings under sections 272A(1)(d) act as a deterrent to those who ignore or delay responding to income tax notices. In simple terms, if you fail to produce accounts, documents, or evidence requested by the tax authorities, you may have to face monetary penalties. Understanding how this section works can save you from unnecessary financial strain and legal trouble.

What is Section 272A(1)(d) of the Income Tax Act?

Section 272A(1)(d) empowers the Income Tax Department to impose penalties when a person does not comply with certain provisions of the Act. This includes ignoring summons or failing to provide the information requested under sections like 131(1), 142(1), or 143(2). These sections generally involve inquiries, assessments, or investigations conducted by the department. If you receive such a notice, it is not just a formality—it’s a legal requirement. Ignoring it could result in the penalty proceedings under sections 272A(1)(d), which might cost you ₹10,000 for each failure. This means that repeated non-compliance can lead to significant financial liability."

Applicability of Penalty Proceedings

The penalty proceedings under sections 272A(1)(d) apply to both individuals & entities such as companies, partnerships, or trusts. Whether you are a salaried individual, a business owner, or a non-profit organization, if you are served a notice under the specified sections, you must comply within the stipulated time. These notices are generally sent to:

• Obtain books of accounts
• Gather documentary evidence
• Conduct statements & inquiries
  Failure to respond may result in penalties being levied. The law is designed to ensure smooth tax administration, where every taxpayer participates in the assessment process when required.

Also Read: Income Tax Notice under Section 142(1): What It Means and What You Should Do

Quantum of Penalty under Section 272A(1)(d)

The penalty under this section is quite specific. If you fail to comply with the notice, the assessing officer can impose a penalty of ₹10,000 for each default. This means if you ignore multiple notices, the penalties can multiply quickly. Importantly, this penalty is separate from any tax liability you may already have. In certain cases, the tax department may also initiate further legal action, especially if the non-compliance is seen as willful or fraudulent. Thus, responding promptly to tax notices is not just a good practice—it’s a legal obligation."

Reasonable Cause and Relief

While the law is strict, it also provides relief in genuine cases. If you have a reasonable cause for not complying with the notice—for example, hospitalization, natural calamity, or unavoidable circumstances—you may be able to avoid the penalty. Under Section 273B, no penalty shall be imposed if the taxpayer can prove that there was a reasonable cause for the failure. However, this relief is not automatic. You must present evidence & convince the assessing officer that your reason was genuine and unavoidable.

Procedure of Penalty Proceedings

The penalty proceedings under sections 272A(1)(d) follow a defined process:

1. Issuance of Notice – The taxpayer is served with a notice requiring documents, accounts, or evidence.
2. Non-compliance Recorded – If the taxpayer fails to respond or produce the requested material, the assessing officer records the non-compliance.
3. Show-Cause Opportunity – Before imposing the penalty, the officer usually issues a show-cause notice asking why the penalty should not be levied.
4. Hearing and Representation – The taxpayer can submit written submissions or appear in person to explain their position.
5. Order of Penalty – If the explanation is unsatisfactory, the penalty order is passed.

Also Read: Section 143(3) of Income Tax Act: Scrutiny Assessment Explained

Impact on Taxpayers

The financial implication of Section 272A(1)(d) can be significant, but the damage is not only monetary. Repeated non-compliance can lead to:

• Strained relations with the Income Tax Department
• More frequent scrutiny in future assessments
• Difficulty in getting refunds processed smoothly
  Additionally, if you are a business, such penalties may affect your reputation with stakeholders, lenders, and auditors."

Practical Tips to Avoid Penalties

Here are some ways to ensure you never face penalties under this section:

• Read every tax notice carefully – They are legally binding documents.
• Maintain proper documentation – Keep your books of accounts updated & ready for inspection.
• Respond on time – Even if you cannot submit the full details immediately, communicate with the department within the deadline.
• Seek professional help – If you don’t understand the notice, consult a Chartered Accountant or tax advisor.
  Being proactive not only saves you from penalties but also creates a record of compliance that can be beneficial in case of disputes.

Common Misunderstandings about Section 272A(1)(d)

Some taxpayers mistakenly believe that if they have already filed their ITR, they can ignore further notices. This is not true. Notices under Sections 131(1), 142(1), or 143(2) are part of the assessment process, and ignoring them triggers the penalty proceedings under sections 272A(1)(d). Another common myth is that small taxpayers are exempt from such penalties, which is also incorrect. The section applies to all taxpayers, regardless of income level.

Also Read: Section 143(2) – Income Tax Scrutiny Notice

Conclusion

Section 272A(1)(d) of the Income Tax Act serves as an important compliance tool for the Income Tax Department. It ensures that taxpayers respond to legitimate requests for information, enabling fair & efficient tax administration. While the penalties can be steep—₹10,000 for each default—they are avoidable through timely compliance. If you receive a notice, take it seriously, understand what is required, and respond within the deadline. And if there’s a genuine reason for delay, ensure you communicate and provide proof to the authorities.

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