Reasonable cause and vague penalty notice defeated non-compliance penalty under the Income-tax Act.

Penalty under section 271(1)(b) was held unsustainable where the assessee showed reasonable cause for non-compliance with statutory notices and the default was treated as technical and venial under section 273B. The assessee had also made replies by dak and registered post, and the cited circumstances, including the custody of the group head and multiple search-related assessments, supported the explanation for non-appearance. The penalty notice was additionally found vague because it did not identify the specific notice or date of default, leaving the initiation of proceedings uncertain. The penalty was deleted and the assessee succeeded.

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Issues: Whether penalty under section 271(1)(b) of the Income-tax Act, 1961 was leviable for non-compliance with statutory notices where the assessee pleaded reasonable cause, and whether the penalty notice was vitiated for vagueness.

Analysis: The assessee had filed replies through dak and registered post during the assessment proceedings, and the stated causes for non-appearance included the custody of the group head, simultaneous conduct of a large number of search-related assessments, and the overall conduct of the assessee in making compliances, albeit belatedly. The penalty notice did not specify the particular notice or date of default, making the initiation of penalty proceedings uncertain. In the facts found, the failure to appear on the stated dates was held to be covered by reasonable cause within section 273B of the Income-tax Act, 1961, and the alleged default was treated as technical and venial in nature.

Conclusion: The penalty under section 271(1)(b) of the Income-tax Act, 1961 was not sustainable and was deleted.

Final Conclusion: The assessee succeeded in the appeals and the penalty imposed for non-compliance with notices did not survive.

Ratio Decidendi: Penalty under section 271(1)(b) of the Income-tax Act, 1961 cannot be sustained where the assessee shows reasonable cause for non-compliance and the default is merely technical or venial, especially when the penalty notice itself is vague as to the specific default alleged.

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