CPC has raised a s.272B penalty of ten thousand rupees for each of 196 deductees whose PANs were invalid in my TDS statement. The deductees gave me those numbers. Is that reasonable cause?
Yes, on these facts. The Punjab and Haryana High Court dismissed the Revenue's appeal against the deletion of a Rs 19,60,000 penalty levied at Rs 10,000 per default for 196 invalid PANs in a quarterly TDS statement. The Court held that whether sufficient cause had been shown within s.273B was a question of fact, on which the CIT(A) and the Tribunal had concurrently found in the assessee's favour after examining the explanation, and that no substance remained in the Revenue's argument.
Decided by the High Court (Ajay Kumar Mittal J and Gurmeet Singh Sandhawalia J) on 2012-08-07, reported as ITA No. 124 of 2012 (Punjab and Haryana High Court), arising from ITA No. 942/CHD/2011 (ITAT Chandigarh Bench 'B'), assessment year 2009-10. It bears on section 272B, section 139A, section 273B, section 200, section 260A of the Income Tax Act 1961, in Penalty, TDS Defaults and Appeals matters.
This is the answer to the highest-volume s.272B penalty there is, and its shape matters. The deductor did not fail to deduct or to deposit; tax was deducted correctly and paid into the treasury on time. The only default was that the numbers his own deductees had given him turned out to be invalid, and he corrected them as soon as the officer pointed it out, filing revised PANs and a revised statement. Those three facts — correct deduction, correct deposit, prompt correction on notice — are what the Tribunal treated as reasonable cause, and they are what to plead. Two further points give the case reach. First, the Tribunal's reasoning, quoted in the judgment, draws on the co-ordinate decision in Financial Cooperative Bank Limited that 'an obligation to quote PAN/GIR number or to file Form No.60 is that of customer and not that of the bank' — that is the general proposition that the primary duty under rule 114B lies on the person entering the transaction, and it transfers directly to an inoperative-PAN or invalid-PAN argument today. Second, by holding that reasonable cause is a question of FACT, the High Court made concurrent findings below very hard for the Revenue to disturb; a deductor who builds the record before the CIT(A) is building the thing the High Court will not go behind. The limit is the mirror image: a deductor who does not build that record cannot expect the High Court to make the finding for him.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee, the Superintendent of Police, Yamunanagar, filed the e-TDS quarterly statement of deduction of tax for the financial year 2008-09 on 16 October 2009 as required by section 200(3). On processing, the permanent account numbers of 196 deductees were found to be invalid. A show-cause notice was issued as to why penalty under section 272B should not be imposed; the assessee neither appeared nor filed written submissions, and by order dated 30 August 2010 the Income Tax Officer (TDS), Panchkula imposed a penalty of Rs.19,60,000, being Rs.10,000 per default. The Commissioner of Income Tax (Appeals) allowed the appeal by order dated 12 August 2011 and deleted the penalty, recording that the assessee had deducted tax correctly and had revised the permanent account numbers and filed the revised statement, so that there was sufficient compliance with section 139A. The Tribunal dismissed the Revenue's appeal on 19 December 2011, finding that the tax had been deducted and deposited in time in the Government treasury, that the default was only the wrong quoting of the numbers of 196 deductees who had themselves quoted wrong numbers, and that the correct numbers were given as soon as the default was brought to the assessee's notice; it relied on the co-ordinate decision in Financial Cooperative Bank Limited v. ITO, Ward 2(3), Surat, in which it had been held that on a cumulative analysis of section 139A and rules 114B to 114D the obligation to quote the permanent account number or General Index Register number or to file Form No. 60 is that of the customer and not of the bank. The Revenue appealed under section 260A, framing four questions, including whether the Tribunal was right in deleting the penalty, whether it had accepted additional evidence in contravention of rule 46A, and whether it was right to give the benefit of section 273B despite the failure to prove reasonable cause.
The Revenue's appeal was dismissed. The Court held that the issue was whether there was justifiable cause within the meaning of section 273B on the basis of which it could be said that sufficient cause had been shown by the respondent in wrongly quoting the permanent account numbers of 196 employees, that the CIT(A) and the Tribunal had examined the assessee's explanation and concluded that sufficient cause had been shown, and that this was a question of fact in the given facts and circumstances. That being so, there was no substance in the argument raised for the Revenue, whose counsel was unable to show that the findings of the CIT(A) and the Tribunal were erroneous in any manner, and the appeal was dismissed for want of merit (paras 6 to 8).
The Court framed the issue narrowly as one of section 273B reasonable cause and then set out, without disturbing, what the two authorities below had found. The CIT(A) had recorded that the assessee deducted tax correctly, revised the permanent account numbers and filed the revised statement, so that there was sufficient compliance with section 139A, and that the officer was not justified in levying Rs.19,60,000 at Rs.10,000 per default. The Tribunal had found that the tax was deducted and deposited in time in the Government treasury, that the only default was the wrong quoting of numbers by 196 deductees who had themselves misquoted them, and that the correct numbers were given as soon as the default was brought to the assessee's notice; it had applied the co-ordinate decision in Financial Cooperative Bank Limited that the obligation to quote the number or to file Form No. 60 lies on the customer rather than on the institution recording the transaction, and had held there was reasonable cause. The High Court held that whether sufficient cause had been shown was a question of fact, that counsel for the Revenue could not show the concurrent findings to be erroneous, and that once that was so its argument had no substance.
there was sufficient cause shown which would be a question of fact
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Handle my notice → Ask a CA on WhatsAppYes, on these facts. The Punjab and Haryana High Court dismissed the Revenue's appeal against the deletion of a Rs 19,60,000 penalty levied at Rs 10,000 per default for 196 invalid PANs in a quarterly TDS statement. The Court held that whether sufficient cause had been shown within s.273B was a question of fact, on which the CIT(A) and the Tribunal had concurrently found in the assessee's favour after examining the explanation, and that no substance remained in the Revenue's argument. This was decided by the High Court (Ajay Kumar Mittal J and Gurmeet Singh Sandhawalia J) and bears on section 272B, section 139A, section 273B, section 200, section 260A of the Income Tax Act 1961. It is reported as ITA No. 124 of 2012 (Punjab and Haryana High Court), arising from ITA No. 942/CHD/2011 (ITAT Chandigarh Bench 'B'), assessment year 2009-10. This is the answer to the highest-volume s.272B penalty there is, and its shape matters. The deductor did not fail to deduct or to deposit; tax was deducted correctly and paid into the treasury on time. The only default was that the numbers his own deductees had given him turned out to be invalid, and he corrected them as soon as the officer pointed it out, filing revised PANs and a revised statement. Those three facts — correct deduction, correct deposit, prompt correction on notice — are what the Tribunal treated as reasonable cause, and they are what to plead. Two further points give the case reach. First, the Tribunal's reasoning, quoted in the judgment, draws on the co-ordinate decision in Financial Cooperative Bank Limited that 'an obligation to quote PAN/GIR number or to file Form No.60 is that of customer and not that of the bank' — that is the general proposition that the primary duty under rule 114B lies on the person entering the transaction, and it transfers directly to an inoperative-PAN or invalid-PAN argument today. Second, by holding that reasonable cause is a question of FACT, the High Court made concurrent findings below very hard for the Revenue to disturb; a deductor who builds the record before the CIT(A) is building the thing the High Court will not go behind. The limit is the mirror image: a deductor who does not build that record cannot expect the High Court to make the finding for him. If it applies to you, the first step is this: Plead the three facts that carried this case, with proof of each: that tax was deducted at the correct rate, that it was deposited in time, and that the correct numbers were furnished and a revised statement filed as soon as the default was brought to notice.
The assessee, the Superintendent of Police, Yamunanagar, filed the e-TDS quarterly statement of deduction of tax for the financial year 2008-09 on 16 October 2009 as required by section 200(3). On processing, the permanent account numbers of 196 deductees were found to be invalid. A show-cause notice was issued as to why penalty under section 272B should not be imposed; the assessee neither appeared nor filed written submissions, and by order dated 30 August 2010 the Income Tax Officer (TDS), Panchkula imposed a penalty of Rs.19,60,000, being Rs.10,000 per default. The Commissioner of Income Tax (Appeals) allowed the appeal by order dated 12 August 2011 and deleted the penalty, recording that the assessee had deducted tax correctly and had revised the permanent account numbers and filed the revised statement, so that there was sufficient compliance with section 139A. The Tribunal dismissed the Revenue's appeal on 19 December 2011, finding that the tax had been deducted and deposited in time in the Government treasury, that the default was only the wrong quoting of the numbers of 196 deductees who had themselves quoted wrong numbers, and that the correct numbers were given as soon as the default was brought to the assessee's notice; it relied on the co-ordinate decision in Financial Cooperative Bank Limited v. ITO, Ward 2(3), Surat, in which it had been held that on a cumulative analysis of section 139A and rules 114B to 114D the obligation to quote the permanent account number or General Index Register number or to file Form No. 60 is that of the customer and not of the bank. The Revenue appealed under section 260A, framing four questions, including whether the Tribunal was right in deleting the penalty, whether it had accepted additional evidence in contravention of rule 46A, and whether it was right to give the benefit of section 273B despite the failure to prove reasonable cause. The matter was decided on 2012-08-07 by the High Court (Ajay Kumar Mittal J and Gurmeet Singh Sandhawalia J). On those facts the High Court held as follows. The Revenue's appeal was dismissed. The Court held that the issue was whether there was justifiable cause within the meaning of section 273B on the basis of which it could be said that sufficient cause had been shown by the respondent in wrongly quoting the permanent account numbers of 196 employees, that the CIT(A) and the Tribunal had examined the assessee's explanation and concluded that sufficient cause had been shown, and that this was a question of fact in the given facts and circumstances. That being so, there was no substance in the argument raised for the Revenue, whose counsel was unable to show that the findings of the CIT(A) and the Tribunal were erroneous in any manner, and the appeal was dismissed for want of merit (paras 6 to 8).
The Court framed the issue narrowly as one of section 273B reasonable cause and then set out, without disturbing, what the two authorities below had found. The CIT(A) had recorded that the assessee deducted tax correctly, revised the permanent account numbers and filed the revised statement, so that there was sufficient compliance with section 139A, and that the officer was not justified in levying Rs.19,60,000 at Rs.10,000 per default. The Tribunal had found that the tax was deducted and deposited in time in the Government treasury, that the only default was the wrong quoting of numbers by 196 deductees who had themselves misquoted them, and that the correct numbers were given as soon as the default was brought to the assessee's notice; it had applied the co-ordinate decision in Financial Cooperative Bank Limited that the obligation to quote the number or to file Form No. 60 lies on the customer rather than on the institution recording the transaction, and had held there was reasonable cause. The High Court held that whether sufficient cause had been shown was a question of fact, that counsel for the Revenue could not show the concurrent findings to be erroneous, and that once that was so its argument had no substance. In the words reproduced by the source cited on this page: "there was sufficient cause shown which would be a question of fact" The decision followed or applied Financial Cooperative Bank Limited v. ITO, Ward 2(3), Surat (ITAT Ahmedabad 'D' Bench) — relied on by the Tribunal and not disturbed.
It was decided by the High Court on 2012-08-07 and is reported as ITA No. 124 of 2012 (Punjab and Haryana High Court), arising from ITA No. 942/CHD/2011 (ITAT Chandigarh Bench 'B'), assessment year 2009-10. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 272B, section 139A, section 273B, section 200, section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Revenue's appeal was dismissed. The Court held that the issue was whether there was justifiable cause within the meaning of section 273B on the basis of which it could be said that sufficient cause had been shown by the respondent in wrongly quoting the permanent account numbers of 196 employees, that the CIT(A) and the Tribunal had examined the assessee's explanation and concluded that sufficient cause had been shown, and that this was a question of fact in the given facts and circumstances. That being so, there was no substance in the argument raised for the Revenue, whose counsel was unable to show that the findings of the CIT(A) and the Tribunal were erroneous in any manner, and the appeal was dismissed for want of merit (paras 6 to 8). It arises in Penalty, TDS Defaults and Appeals matters, on section 272B, section 139A, section 273B, section 200, section 260A of the Income Tax Act 1961, and was decided by Ajay Kumar Mittal J and Gurmeet Singh Sandhawalia J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the deductees' own declarations on the record to show that the invalid numbers were supplied by them; the Tribunal's finding was that 'failure to quote right PAN has occurred as the concerned depositor had misquoted PAN'. File the revised statement before the penalty order, not after — the correction here preceded the appellate findings and is what made the compliance 'sufficient'. Make the reasonable-cause case fully before the CIT(A) and the Tribunal, because the High Court has held the question to be one of fact; an argument first run at the s.260A stage will not be entertained. Where the department resists on the ground that the correction amounts to additional evidence under rule 46A, note that the Revenue raised precisely that as a question of law here and the Court found no substantial question of law in it. Check which sub-section of s.272B the penalty is under before conceding that the per-default multiplication is competent.
Still good law. The citator is very thin - two later decisions, both of the Tribunal, and no High Court has taken it up. In Oil and Natural Gas Corporation Ltd v ACIT (ITAT Ahmedabad, 23 November 2015) the Bench went beyond recording counsel's reliance at para 8 and worked from the judgment itself at para 14.1, adopting its reasoning that where the deductor has done what it reasonably could the failure to quote valid PANs is covered by reasonable cause, and concluding at para 15 that 'the system is erroneous', allowing the appeals. The Delhi Bench reached the same result on the same reasoning in Executive Engineer, Rohtak v ITO (4 November 2015), noting that the deductor 'deducted the tax correctly and deposited the same in time' and filed Form 24Q in time. So the holding - that a per-default penalty under s.272B for invalid PANs in a quarterly statement falls away on proof of reasonable cause under s.273B - is being applied, but only at Tribunal level. Nothing overruling, doubting or confining it was found and no contrary High Court view was found. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment runs to eight numbered paragraphs, the disposal being at para 8. Paragraphs 3, 4 and 5 consist largely of block quotation of the CIT(A)'s order and of the Tribunal's paragraphs 6 and 7; the paragraph numbers appearing inside those quotations belong to the Tribunal's order and not to the High Court's judgment, and this entry cites only the High Court's own paragraph numbering. Several inconsistencies in the record should be known. (1) The form is given as Form No.24Q in the questions framed and in para 2, but the quoted Tribunal passage at para 4 refers to the officer 'going through the quarterly return in Form No.26Q' and the quoted CIT(A) passage at para 3 to a revised statement 'on Form No.26Q', while a later line in the Tribunal quotation reads 'form No.26G'. The judgment does not reconcile these. (2) Para 1 gives the assessment year as 2009-10 while para 2 refers to the e-TDS quarterly statement for the financial year 2008-09; both are recorded here as they appear. (3) The Tribunal passage quoted at para 5 concludes 'no penalty under section 273B of the Act is leviable', where section 272B is plainly meant; that slip is in the quoted text and is reproduced without correction. (4) The judgment cites 'Section 139A (5B)' as requiring the quoting of deductees' numbers in the quarterly statement. (5) No appearance is recorded for the respondent. The penalty was Rs.19,60,000 at Rs.10,000 per default for 196 deductees; the penalty order of the ITO (TDS), Panchkula is dated 30 August 2010, the CIT(A) order 12 August 2011, and the Tribunal order 19 December 2011 in ITA No.942/CHD/2011. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeal was dismissed. The Court held that the issue was whether there was justifiable cause within the meaning of section 273B on the basis of which it could be said that sufficient cause had been shown by the respondent in wrongly quoting the permanent account numbers of 196 employees, that the CIT(A) and the Tribunal had examined the assessee's explanation and concluded that sufficient cause had been shown, and that this was a question of fact in the given facts and circumstances. That being so, there was no substance in the argument raised for the Revenue, whose counsel was unable to show that the findings of the CIT(A) and the Tribunal were erroneous in any manner, and the appeal was dismissed for want of merit (paras 6 to 8).
TaxSphere, “CIT (TDS) v Superintendent of Police”, https://taxnotice.vittsphere.com/caselaw/case/cit-tds-v-superintendent-of-police-272b-invalid-pan-273b/ (validity last checked 2026-09-08)
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