Section 272A Income Tax Act: Penalty for Failure to Furnish Information - Complete Guide FY 2026-27

Section 272A of the Income Tax Act is a comprehensive penalty provision that imposes monetary penalties on taxpayers and other persons who fail to comply with various procedural requirements under the Income Tax Act. This includes failure to answer questions posed by tax authorities, refusal to sign statements, non-furnishing of information, returns, or statements, denial of inspection rights, and various other compliance failures related to TDS/TCS certificates, declarations, and notices. Section 272A acts as a deterrent mechanism to ensure taxpayer compliance with information requests and procedural obligations, enabling the Income Tax Department to effectively administer tax laws. With penalties ranging from ₹10,000 per failure for refusing to answer questions or sign statements, to ₹500 per day (increased from ₹100 in 2022) for continued non-compliance with various obligations, Section 272A covers a wide spectrum of procedural violations. This comprehensive guide for FY 2026-27 explains all aspects of Section 272A including types of failures covered, penalty amounts, authority to impose penalties, defense mechanisms, appeal procedures, and practical compliance strategies.

What is Section 272A?

Section 272A, titled "Penalty for failure to answer questions, sign statements, furnish information, returns or statements, allow inspections, etc.", is contained in Chapter XXI - Penalties Imposable of the Income Tax Act, 1961. It is a procedural compliance provision that penalizes various types of non-cooperation with tax authorities and failure to meet statutory obligations.

Structure of Section 272A

Section 272A has two main sub-sections with different penalty structures:

Section 272A(1) - Fixed Penalty of ₹10,000

Sub-section (1) deals with specific failures during proceedings before Income Tax authorities and imposes a fixed penalty of ₹10,000 for each failure.

Section 272A(2) - Daily Penalty of ₹500

Sub-section (2) is more expansive and covers a wide range of compliance failures with a daily penalty of ₹500 for every day the failure continues.

Important Update - Penalty Increased in 2022

Maximum Penalty Caps Under Section 272A(2)

While the basic penalty is ₹500 per day, Section 272A(2) provides maximum caps for certain types of failures:

Authority to Impose Penalty Under Section 272A

Different Income Tax authorities have power to impose Section 272A penalties depending on the nature of failure:

Procedure for Imposing Penalty Under Section 272A

1. Show Cause Notice:
   • Before imposing penalty, authority must issue show cause notice
   • Notice specifies the failure/default and proposed penalty
   • Reasonable opportunity of being heard must be provided
   • Principles of natural justice must be followed
2. Submission of Reply:
   • Taxpayer must respond to show cause notice
   • Explain reasons for failure/delay
   • Provide evidence of reasonable cause (if any)
   • Request waiver or reduction of penalty
3. Personal Hearing (if requested):
   • Taxpayer can request personal hearing
   • Present case and submissions before authority
   • Submit additional documents/evidence
4. Penalty Order:
   • Authority passes reasoned order imposing or declining penalty
   • Order must consider taxpayer's submissions
   • Must specify the exact failure and penalty amount
   • Order must be communicated to taxpayer
5. Payment of Penalty:
   • Once penalty order passed, taxpayer must pay within prescribed time
   • Payment through Challan 280
   • Non-payment can lead to recovery proceedings

Defenses and Reasonable Cause

Practical Examples - Section 272A Penalties

Common Situations Leading to Section 272A Penalties

How to Avoid Section 272A Penalties

Appeal Against Section 272A Penalty

If Section 272A penalty is imposed, taxpayer has right to appeal:

Appeal Hierarchy

1. First Appeal - Commissioner (Appeals) [CIT(A)]:
   • Appeal within 30 days from date of penalty order
   • File Form 35 (appeal form) with requisite fee
   • Stay of penalty collection can be requested
   • CIT(A) can confirm, reduce, or cancel penalty
2. Second Appeal - Income Tax Appellate Tribunal (ITAT):
   • Appeal against CIT(A) order within 60 days
   • File Form 36 with ITAT
   • Both taxpayer and department can appeal
   • ITAT decision binding unless challenged in High Court
3. High Court Appeal:
   • Appeal on substantial question of law only
   • Within prescribed time limits
   • High Court can refer to larger bench or decide
4. Supreme Court Appeal:
   • Against High Court order
   • On substantial questions of law of general importance
   • Final appellate authority

Grounds for Successful Appeals

• Procedural violations (no show cause, no hearing)
• Authority lacked jurisdiction to impose penalty
• Reasonable cause for failure demonstrated
• Penalty disproportionate to default
• Compliance achieved before penalty order
• Notice not properly served
• No legal obligation to comply with demand

Recent Judicial Precedents on Section 272A

Section 272A vs Other Penalty Provisions

Frequently Asked Questions (FAQs)

Key Takeaways for FY 2026-27

• Section 272A penalizes procedural non-compliance with Income Tax Act requirements
• Two types: Fixed ₹10,000 penalty (refusal to answer/sign) and daily ₹500 penalty (other failures)
• Daily penalty increased from ₹100 to ₹500 w.e.f. 1st April 2022
• Most common: Non-compliance with Section 142(1)/143(2) assessment notices
• TDS/TCS penalties capped: Maximum = amount of tax deductible/collectible
• Penalty is discretionary: Authority "may" impose (not mandatory)
• Reasonable cause is valid defense (medical, natural calamity, technical issues)
• Show cause notice mandatory: Principles of natural justice must be followed
• Appeal available: CIT(A) within 30 days, then ITAT, High Court, Supreme Court
• Authority hierarchy: Different ranks for different types of penalties
• Prevention: Respond promptly to all notices, file returns on time, issue certificates
• Documentation critical: Keep proof of compliance and reasonable cause evidence
• Section 272A covers 10+ types of failures including TDS returns, certificates, information requests
• Continuing penalty: Daily penalties accrue till compliance achieved
• Professional help recommended: Engage CA/tax consultant for handling notices and penalty defense

Conclusion

Section 272A of the Income Tax Act serves as a critical enforcement mechanism to ensure procedural compliance and cooperation from taxpayers with the tax administration machinery. By penalizing various forms of non-compliance - from refusing to answer questions during proceedings to delayed filing of TDS returns to non-issuance of certificates - the provision creates a deterrent effect that encourages timely and complete compliance with statutory obligations.

The relatively modest penalty amounts under Section 272A - ₹10,000 fixed or ₹500 per day - reflect the procedural nature of these violations as distinct from substantive tax evasion. These are not penalties for hiding income or evading taxes (which attract much higher penalties under Section 271(1)(c)), but rather for non-cooperation with the assessment process and failure to meet information-disclosure obligations. The penalties are designed to secure compliance without being punitive to the extent of causing undue hardship.

The 2022 amendment increasing the daily penalty from ₹100 to ₹500 per day was a necessary recalibration after 23 years of stagnation. At ₹100 per day, the penalty had lost its deterrence value due to inflation and changing economic conditions. The five-fold increase to ₹500 per day brings the penalty more in line with current economic realities while still remaining reasonable and proportionate to the nature of defaults involved.

The provision's discretionary nature - using "may impose" rather than "shall impose" - provides tax authorities with flexibility to consider individual circumstances, reasonable causes, and the taxpayer's overall compliance history. This discretion, while subject to potential misuse, also allows for justice in cases of genuine hardship or technical difficulties. Taxpayers facing legitimate obstacles like medical emergencies, natural calamities, or system failures should not hesitate to present their case with supporting evidence, as authorities and appellate forums generally show understanding towards bona fide difficulties.

The capping of TDS/TCS related penalties at the amount of tax involved is a safeguard against disproportionate penalties. Without this cap, a small TDS amount with lengthy delay could result in penalties far exceeding the principal tax, which would be manifestly unjust. This cap demonstrates legislative wisdom in balancing enforcement needs with fairness considerations.

For FY 2026-27, as the Income Tax Department increasingly leverages technology for assessments, surveys, and information gathering, the importance of timely compliance with electronic notices and information requests has magnified. Taxpayers must maintain updated contact details on the e-filing portal, regularly check for notices in their registered email and online accounts, and respond promptly to all communications. The convenience of electronic systems also means faster detection of non-compliance and quicker imposition of penalties.

Employers and TDS deductors bear special responsibility under Section 272A, as they handle not just their own compliance but also obligations towards employees and vendors. Systematic processes for TDS return filing, certificate issuance, and record maintenance are essential. The daily accrual of ₹500 penalties can quickly mount up for large organizations with multiple compliance failures across quarters and assessment years.

The appeal mechanism provides an important safety valve for taxpayers who believe penalties have been imposed unfairly, excessively, or without proper procedure. The multi-tier appellate system - CIT(A), ITAT, High Court, Supreme Court - ensures that justice is ultimately available, though it may require persistence and professional legal assistance.

Looking ahead, taxpayers should view Section 272A not as a threat but as an incentive for building robust compliance systems. By investing in proper accounting systems, compliance calendars, professional guidance, and staff training, taxpayers can avoid Section 272A penalties entirely while also improving their overall tax compliance posture. The cost of preventive compliance measures is invariably far lower than the combined cost of penalties, interest, appeals, and professional fees resulting from non-compliance.

Received Section 272A Penalty Notice? Need Help with Compliance? Explore our guides on Income Tax Notices, TDS Under Section 194IA, and Advance Tax Payment for comprehensive tax compliance solutions.