Section 272A Income Tax Penalty: Rs 500 Per Day for Non-Compliance | How to Stop It

Section 272A tends to arrive in the mail not as an opening move by the department, but as a consequence of something that was already ignored. A notice under Section 142(1) went unanswered. A summons was not responded to. A statutory statement was not filed within time. The daily penalty clock started running, and eventually a show-cause notice arrived.

For most taxpayers, the Section 272A penalty is avoidable almost entirely — it accrues from non-compliance, and compliance stops it. But understanding exactly which defaults trigger it, what the current penalty rates are, and what genuine defences exist is important for anyone facing a notice or trying to reduce an already accumulated liability.

What Section 272A Covers

Section 272A of the Income Tax Act penalises a range of non-compliances with income tax notices, summons, and statutory obligations. The section has two sub-sections with different penalty structures.

Section 272A(1): Rs 10,000 Per Failure

This sub-section imposes a fixed penalty of Rs 10,000 for each instance of failure to:

Comply with a notice issued under Section 142(1) asking for documents, accounts, or to file a return. Comply with a Section 143(2) scrutiny notice. Comply with a direction issued under Section 142(2A) requiring a special audit. Allow any inspection, examination, or entry authorised under the Act.

Each unanswered notice or each instance of non-compliance is a separate failure and a separate Rs 10,000 penalty. Two ignored notices mean Rs 20,000 in penalty, and so on. The penalty under 272A(1) is per failure, not per day.

Section 272A(2): Rs 500 Per Day of Default

This sub-section imposes a daily penalty of Rs 500 for every day the default continues, for a broader range of compliance failures including:

Failing to answer questions or sign statements when required by an AO or Commissioner. Failing to furnish annual information returns or other prescribed statements within the required time. Failing to file TDS statements (Form 24Q, 26Q, 27Q, 27EQ) within the prescribed deadline. Failing to furnish certificates required under Section 203. Other prescribed compliance obligations involving regular statements and information requirements.

The penalty under 272A(2) was increased from Rs 100 per day to Rs 500 per day with effect from 1 April 2022 under the Finance Act 2022. The original Rs 100 per day rate had been in place since 1999 and was considered inadequate as a deterrent by the Comptroller and Auditor General.

One important cap exists under 272A(2): for failures related to TDS certificates under Section 203 and TDS/TCS statements under Sections 200, 206, and related provisions, the total penalty cannot exceed the amount of tax deductible or collectible. This prevents the daily penalty from snowballing beyond the underlying tax obligation in TDS-related cases.

The Difference Between Section 272A(1) and Section 271(1)(b)

These two provisions are often confused because they both deal with non-compliance with notices. The distinction matters for how the penalty is calculated and appealed.

Section 271(1)(b) imposes a penalty of Rs 10,000 for each failure to comply with a notice under Section 142(1) or 143(2), or a direction under 142(2A). This overlaps with Section 272A(1)(d).

In practice, when a taxpayer ignores a 142(1) or 143(2) notice, the AO typically proceeds to a best judgment assessment under Section 144 and may also initiate penalty proceedings. Courts have noted that 272A(1)(d) is deterrent in nature and that the remedy for ignoring notices is primarily the best judgment assessment itself, not perpetual daily penalties. ITAT in several decisions has restricted the penalty levy under 272A(1) to a single instance rather than allowing multiple penalties for repeated failures in the same proceeding.

When the Section 272A Penalty Clock Starts and Stops

The daily penalty under Section 272A(2) starts accumulating from the day of default and continues for every day the non-compliance persists. The only way to stop it is to comply.

If you have been issued a statutory notice requiring a TDS statement and that statement is overdue by 60 days when you finally file it, the Rs 500 per day penalty for 60 days comes to Rs 30,000. If you wait 120 days, it is Rs 60,000. The longer the delay, the larger the accumulated liability.

For 272A(1) failures relating to notices under 142(1) and 143(2), the penalty is fixed per failure rather than daily, but multiple ignored notices mean multiple penalty amounts.

The Reasonable Cause Defence Under Section 273B

Section 273B of the Income Tax Act provides that no penalty shall be levied under Section 272A if the person proves that there was a reasonable cause for the failure. This is not defined in the Act, but the courts have interpreted "reasonable cause" as something that would prevent a person of average prudence, acting without negligence or inaction, from complying in time.

Examples that have been accepted as reasonable cause in court decisions: a sudden and serious illness of the taxpayer or key personnel, a natural disaster or force majeure event affecting business operations, genuine confusion about which form or filing was required due to a change in the law, reliance on a professional who was negligent and failed to inform the taxpayer of the requirement, or a technical failure in the income tax portal that prevented timely filing.

Examples that courts have generally not accepted: being busy with other matters, forgetting the deadline, lack of awareness of the law (ignorance is not reasonable cause), or being unaware that a notice had been issued because the email was not checked.

The reasonable cause argument must be made proactively in response to the show-cause notice. It must be supported with evidence. Simply stating that you were unaware of the requirement is unlikely to succeed without documentation showing why that unawareness was genuine and unavoidable.

How to Respond to a Section 272A Show-Cause Notice

The sequence before a 272A penalty is finalised is: the default occurs, the AO or authorised officer records it, a show-cause notice is issued asking why penalty should not be levied, and the taxpayer has an opportunity to respond. Only if the response is unsatisfactory is the penalty order passed.

Read the show-cause notice carefully. Identify the specific sub-section cited (272A(1) or 272A(2)) and the specific default alleged. Your response should:

Comply first: If the underlying default has not been cured, cure it immediately before or alongside your response. A show-cause notice issued while you are still non-compliant is harder to answer than one where you have since complied.

State the reason for the delay: If reasonable cause exists, state it clearly with supporting evidence.

Request waiver: Based on the reasonable cause, request the AO to waive or reduce the penalty.

Reference the date of compliance: If you have since filed the required statement or responded to the notice, provide the filing reference number and date. A prompt cure after default, while not eliminating penalty exposure, demonstrates good faith and is a mitigating factor.

What Happens if a Penalty Is Passed Against You

If the AO passes a penalty order under Section 272A after considering your show-cause response, you can appeal:

Before the Commissioner of Income Tax (Appeals) under Section 246A within 30 days of the penalty order. The reasonable cause argument can be raised fresh at this level with additional evidence.

Before the Income Tax Appellate Tribunal (ITAT) under Section 253 if the CIT(A) upholds the penalty.

Practically speaking, penalties under Section 272A are often reduced or waived at the appellate level when the taxpayer can demonstrate a credible reason for the delay and has since complied with the underlying obligation. The provision is meant to deter non-compliance, not to create disproportionate liability for taxpayers who genuinely could not comply in time.

People Also Ask: Section 272A Penalty

What is the penalty under Section 272A? Section 272A has two penalty structures. Under sub-section (1), the penalty is Rs 10,000 per failure for non-compliance with notices under Sections 142(1), 143(2), and related provisions. Under sub-section (2), the penalty is Rs 500 per day for each day a continuing default persists, such as failure to file TDS statements or furnish required information.

When was the Section 272A daily penalty increased to Rs 500? The penalty under Section 272A(2) was increased from Rs 100 per day to Rs 500 per day with effect from 1 April 2022 under the Finance Act 2022. The Rs 100 rate had been unchanged since the section was introduced in 1999.

Can the Section 272A penalty be waived? Yes, under Section 273B, no penalty is levied if the taxpayer proves that there was a reasonable cause for the failure. The burden of proving reasonable cause is on the taxpayer. The AO and appellate authorities have discretion to accept or reject the reasonable cause plea based on the evidence provided.

Is there a cap on the Section 272A(2) daily penalty? For failures related to TDS certificates and TDS/TCS statements, the total penalty under Section 272A(2) cannot exceed the amount of tax deductible or collectible. For other defaults under 272A(2), there is no such cap, and the daily accumulation continues until the default is cured.

Can both Section 272A and Section 144 apply for the same ignored notice? Both can technically arise from the same non-compliance. However, courts have noted that Section 272A is a deterrent provision and the primary remedy for ignoring assessment notices is the best judgment assessment under Section 144. Multiple Section 272A penalties for the same ongoing default in a single proceeding have been restricted by tribunal decisions.

Does filing TDS returns late always attract Section 272A penalty? Late TDS returns attract a fee under Section 234E (Rs 200 per day up to the amount of TDS) and can attract penalty under Section 271H. Section 272A(2) may also apply for continued non-filing. In practice, 234E late fees are levied automatically, while 272A penalties require separate proceedings with a show-cause notice.

Real Questions People Ask When They Receive This Notice

"I missed filing a TDS statement and now the penalty has accumulated to over Rs 50,000. Can I reduce it?" File the TDS statement immediately if you have not already. Prepare a written response for the show-cause notice explaining why the delay occurred and requesting waiver under Section 273B. If you have a credible reason for the delay (illness, professional failure, portal issues, business disruption), document it thoroughly. At the CIT(A) appeal stage, penalties under 272A are regularly reduced or waived when the underlying compliance has since been completed and a genuine reason for delay is shown.

"I never received the 142(1) notice but now I am getting a 272A penalty for not responding to it. What should I do?" This is more common than it should be. If your registered email or address on the portal was outdated, notices may have been issued without reaching you. Respond to the show-cause notice explaining that you did not receive the original 142(1) notice, citing the portal address as it stood at the relevant time. Immediately update your contact details on the portal. If possible, provide evidence that the email was not received. Failure to receive a notice in these circumstances can constitute reasonable cause if properly documented.

"My company's accounts team failed to file the TDS return on time without telling me. Am I personally liable for the 272A penalty?" The primary liability is the deductor entity (your company). If you are a director or authorised signatory, you may also have exposure in specific circumstances. However, reliance on an internal team that failed in their duty is a potential reasonable cause argument. Document that the responsibility was assigned to specific personnel, what steps were taken to monitor compliance, and what happened. Many tribunals have accepted this argument in favour of taxpayers, particularly where the individual had no personal awareness of the default.

"The 272A penalty was passed without giving me a chance to respond. Is this valid?" A penalty order under Section 272A passed without a show-cause notice and an opportunity to be heard is procedurally defective. Natural justice requires that you be given a chance to explain before penalty is levied. File an appeal immediately with CIT(A) under Section 246A within 30 days of the penalty order, raising this ground as primary.

Received a Section 272A penalty notice or show-cause for non-compliance? Upload it to our AI tool. It identifies the specific default, calculates the accumulated penalty, checks whether reasonable cause arguments apply to your situation, and helps you draft a structured response before the deadline.