Section 272BB of the Income Tax Act, 1961

Introduction 

Section 272BB of the Income Tax Act, 1961 is a provision that deals with the penalty for failure to comply with the requirements of obtaining a  Tax Deduction and Collection Account Number (TAN). The Income Tax Department issues these unique identification numbers to tax deductors/collectors. These numbers are mandatory for filing Income Tax returns, paying taxes, deducting or collecting taxes at source, and carrying out various other transactions under the Income Tax Act, 1961. 

Applicability of Section 272BB  

Section 272BB applies to any person who is required to obtain a TAN under Section 203A but: 

1. Fails to obtain such number, or  
2. Quotes a false number 

Penalty under Section 272BB 

 The penalty provided under Section 272BB is as follows:  

• Failure to comply with Section 203A: If a person fails to comply with Section 203A of getting a TAN number, then on an order by the Assessing Officer, he will pay the penalty of Rs. 10,000.  
• Quoting a False TAN number: If a person quotes a wrong: 

• • Tax Deduction Account Number, or 
  • Tax Collection Account Number, or 
  • Tax Collection and Deduction Account Number 

        In the challans, statements, certificates or other documents as per Section 203A.
        Further, he quotes the wrong number and which he: 

• • Knows to be false, or 
  • Believes to be false, or 
  • Does not believe to be true 

Penalty: Then, in that case, the Assessing Officer has the power to direct a penalty of Rs. 10,000.  

In addition to any other penalty that may be imposed under the Income Tax Act, 1961 for default, the penalty under Section 272BB of the Income Tax Act, 1961 is to be levied.

Opportunity of Being Heard under Section 272BB 

Failure to comply with provisions of Section 203A of the Income Tax Act, 1961, attracts a penalty. Section 272BB also states that the imposition of a penalty is not allowed if the person can prove a reasonable cause for the failure. The person is entitled to the opportunity of being heard. 

Reasonable Causes: The term ‘reasonable cause’ has not been defined in the Act, and it depends on the facts and circumstances of each case. Some examples of reasonable cause are: 

• Sufficient causes prevented the person from applying for TAN within the prescribed time limit.
• The person quoted an incorrect TAN due to a clerical error or a mistake in good faith. 

The burden of proving reasonable cause lies on the person who has failed to comply with the TAN provisions. The person has to furnish evidence and documents to support his/her claim of reasonable cause. The AO has to consider all the relevant facts and circumstances before deciding whether to impose or waive the penalty. 

Consequences of Non-Compliance with Section 272BB 

Non-compliance with section 272BB can have serious consequences for the person who defaults. Some of the consequences are: 

• Not able to file ITR, challans, documents, etc.: The person may not be able to file his income tax return, pay taxes, claim refunds, carry forward losses, etc. without a valid  TAN. 

• Not able to deduct TDS or TCS under Income Tax Act, 1961: The person may not be able to deduct or collect tax at source (TDS or TCS) as per the provisions of Chapter XVII-B or Chapter XVII-BB of the Income Tax Act, 1961 without a valid TAN. 
• Not able to claim credit: The person may not be able to claim credit for taxes deducted or collected at source without quoting his  TAN in his Income Tax Return. 
• Imprisonment for non-payment of TDS or TCS: The person may be liable for prosecution under Section 276B or Section 276CC of the Income Tax Act, 1961 for failure to deduct or collect tax at source without a valid TAN or failure to furnish a return of income respectively. 

Ways to Avoid Penalty under Section 272BB 

• Apply for TAN as soon as possible: The best way to avoid penalty under Section 272BB is to apply for TAN as soon as you become liable to deduct or collect tax at source.  

• Quote TAN correctly in all documents: Another way to avoid penalty under Section 272BB is to quote your TAN correctly in all the documents related to TDS or TCS, such as returns, challans, certificates, statements, etc. You should also verify your TAN details periodically through the Income Tax Department’s website. 

• Apply for correction of TAN: If you have quoted an incorrect TAN in any document, you should apply for correction of TAN as soon as possible.  

Conclusion 

TAN is an important identification number for persons who are responsible for deducting or collecting tax at source. Failure to comply with the provisions relating to TAN can attract a penalty of Rs. 10,000 under Section 272BB of the ITA.  

Know about the applicable TDS Rates for the financial year 2023-24 through this article.