Reasonable cause defeats penalty for delayed compliance where notice service was unclear and branch-level operational constraints were shown.

Penalty under section 272A(2)(c) was held unsustainable because proper service of the notices relied on was not clearly established and the requisition was general in nature. The record also showed that the alleged single default had been treated as attracting multiple penalties on different codes, despite initiation through a common notice. The assessee demonstrated reasonable cause under section 273B, including the need to obtain head-office approvals and compliance delays caused by operational difficulties, year-end workload, and staff constraints. In these circumstances, the levy of penalty was not warranted and the penalties were cancelled.

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Issues: Whether penalty under section 272A(2)(c) of the Income-tax Act, 1961 was sustainable for delayed/non-compliance with notices issued to the bank branches, and whether the assessee had shown reasonable cause within section 273B of the Income-tax Act, 1961.

Analysis: The notice for furnishing information was a general requisition and the record did not clearly establish proper service of all notices relied upon for penalty. The penalty order also treated a single default as attracting multiple penalties for different codes, although the proceedings were initiated on a common notice. The assessee showed that the branches had to obtain approvals from the head office and that compliance was delayed due to operational difficulties, year-end workload and staff constraints. In view of section 273B, penalty under section 272A(2)(c) could not be imposed where bona fide and reasonable cause for the failure was shown.

Conclusion: The levy of penalty was not warranted and the penalties were cancelled.

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