Penalty for non-compliance with tax notices deleted where late compliance and accepted explanation attracted statutory protection.

Penalty under section 271(1)(b) was held not leviable where the assessee ultimately complied with notices under section 142(1), furnished replies and confirmations, and the Assessing Officer completed the assessment after considering those submissions. The same explanation was later accepted in quantum proceedings and the related addition was deleted, showing that the alleged default was not treated as warranting penalty. Applying section 273B, the assessee's conduct and acceptable explanation brought the matter within the statutory protection against penalty, and the penalty order was deleted.

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Issues: Whether penalty under section 271(1)(b) of the Income-tax Act, 1961 was leviable for alleged non-compliance with notices under section 142(1), in view of the assessee's eventual compliance and the acceptance of its explanation in quantum proceedings.

Analysis: The assessment record showed that the assessee furnished replies and confirmations, though belatedly, and the Assessing Officer completed the assessment after considering those submissions. The quantum addition based on the same explanation was later deleted, indicating acceptance of the assessee's explanation on merits. In these circumstances, and applying section 273B, the default was not treated as warranting penalty where the assessee had ultimately complied and the explanation was found acceptable.

Conclusion: The penalty under section 271(1)(b) was held to be not leviable and was deleted, in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned penalty order did not survive.

Ratio Decidendi: Penalty for failure to comply with notices is not exigible where the assessee ultimately complies and the explanation for the alleged default is accepted in the quantum proceedings, attracting the protection of section 273B.

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