ITAT Pune: Single Continuing Default Cannot Trigger Multiple Penalties Under Section 272A(1)(d) For Repeated Notices

The Pune Bench of the Income Tax Appellate Tribunal, in the case of Institute Management Committee ITI Kalamnuri Vs ITO, examined whether failure to comply with multiple statutory notices seeking the same information can give rise to more than one penalty under Section 272A(1)(d) of the Income Tax Act 1961. While the Tribunal upheld the levy of penalty for the first non-compliance, it deleted the second penalty and effectively reduced the levy from ₹20,000 to ₹10,000 for each assessment year.

This decision also reiterates a liberal, justice-based approach on delay condonation, both at the stage of the first appeal before the CIT(A) and at the second appellate stage before the Tribunal.

Factual Background

Nature and Status of the Assessee

  • The assessee was a Government institute registered under the Bombay Public Trusts Act, 1950.
  • It imparted vocational training and skill development to students, operating on a “no profit, no loss” model.
  • For the relevant period, the assessee received approximately ₹2.50 crore from the Directorate General of Employment & Training, Shram Shakti Bhawan, under the Ministry of Labour & Employment for implementation of an Institute Development Plan.

Pending utilization, this grant amount was parked with State Bank of India and yielded interest income.

Interest Income and Non-Filing of Return

For the years under dispute:

  • For A.Y. 2019-20, the assessee earned interest of ₹27,51,075.
  • For A.Y. 2018-19, the assessee earned interest of ₹29,07,067.

No returns of income were filed under Section 139 for either year. Based on information regarding the interest credited by the bank, the Assessing Officer (AO) reopened the assessments by issuing notices under Section 148.

In response to these notices, the assessee filed returns declaring nil income, asserting that the interest was exempt under Section 10(23C)(iiiab) of the Income Tax Act 1961.

Reassessment Proceedings and Ex Parte Orders

Statutory Notices and Non-Compliance

During the reassessment proceedings, the AO issued:

  • Notices under Section 143(2)
  • Notices under Section 142(1)

These notices required the assessee to furnish details and explanations relevant to the reassessment, including information relating to the interest income and exemption claim.

However, there was no effective compliance to these notices from the assessee’s side.

Ex Parte Assessments

Due to this non-response, the AO completed the assessments:

  • Under Section 147 read with Section 144 and Section 144B.

The entire interest income was assessed as “Income from Other Sources”, and no exemption was allowed, as the AO did not have supporting material or submissions from the assessee to examine the claim under Section 10(23C)(iiiab).

Initiation and Levy of Penalty Under Section 272A(1)(d)

Penalty Proceedings

Following the ex parte reassessment, the AO initiated penalty proceedings for failure to comply with the statutory notices. While the penalty notice initially referred to Section 270A, the operative penalty provisions applied and invoked were those under Section 272A(1)(d).

Since there was no satisfactory compliance during penalty proceedings either, the AO concluded that the assessee had committed defaults by not responding to:

  • One notice issued under Section 143(2)
  • One notice issued under Section 142(1)

Accordingly, the AO levied:

  • Penalty of ₹10,000 for non-compliance with Section 143(2) notice, and
  • Penalty of ₹10,000 for non-compliance with Section 142(1) notice,