Penalty for non-compliance with notice deleted where service was unproven and change of address showed reasonable cause.

Penalty under section 271(1)(b) was considered unsustainable where non-compliance with a notice under section 142(1) arose from a claimed change of address and non-receipt of the notice. The notice service was not properly established because no clear material showed the mode or proof of service. On that factual basis, the assessee's explanation was treated as reasonable cause for the default, and the statutory rigour of penalty did not apply. The penalty was therefore deleted in favour of the assessee.

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Issues: Whether penalty under section 271(1)(b) of the Income-tax Act, 1961 was sustainable for non-compliance with notice under section 142(1) of the Income-tax Act, 1961 when the assessee claimed change of address and non-receipt of notice.

Analysis: The notice service was not properly established, as no clear material was shown regarding the mode or proof of service of the notice. The assessee's explanation that notices could not be complied with because of change of address constituted a reasonable cause for the alleged default. In the presence of such reasonable cause, the rigours of penalty under section 271(1)(b) are not attracted.

Conclusion: The penalty was not sustainable and was directed to be deleted in favour of the assessee.

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