Penalty under section 271(1)(b) for non-compliance with section 142(1) notice limited to first default only

Assessee's repeated non-appearance in response to notices under section 142(1) was held to lack reasonable cause; accordingly, penalty under section 271(1)(b) may be imposed but limited to the first default only. The Tribunal reasoned that the defaults were the same and that multiple penalties for each uncomplied notice are not warranted, resulting in restriction of the monetary penalty to a single instance. Decision was partly favorable to the assessee by reducing cumulative penalty exposure.

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Issues: Whether the penalty under section 271(1)(b) and section 271(1)(d) of the Income-tax Act, 1961 can be imposed for each notice issued under section 142(1) of the Act where the default is the same, or whether the penalty must be restricted to the first default.

Analysis: The appeals concern penalties levied for non-compliance with notices issued under section 142(1) of the Income-tax Act, 1961. The Assessing Officer imposed penalty for two instances of non-compliance arising from notices issued on different dates; the Tribunal examined whether those defaults constituted separate failures attracting separate penalties under sections 271(1)(b) and 271(1)(d) respectively, or whether they were manifestations of the same default. The Tribunal considered that where the default is identical in substance, multiple notices of the same species do not give rise to distinct penal liabilities for each notice.

Conclusion: The penalty under section 271(1)(b) and section 271(1)(d) is restricted to the first default and reduced from Rs. 20,000 to Rs. 10,000 for each assessment year. The appeals are partly allowed.

Ratio Decidendi: Where non-compliance arises from the same substantive default in response to notices of the same nature, penalty under sections 271(1)(b) or 271(1)(d) of the Income-tax Act, 1961 is leviable only for the first default and not for each notice of the same species.

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