Penalty for statutory notice non compliance reversed where subsequent compliance and bonafide Covid delay led to acceptance of the return.

Where a taxpayer ultimately furnished explanations and documents and the assessment proceeded to acceptance of the return, penalties for non compliance with statutory notices were found not to be warranted; the analysis treats subsequent compliance and contemporaneous bonafide reasons for delay (severe Covid 19 disruption) as negating the justification for imposing penalties under the non compliance penalty provisions. The operative effect is deletion of the penalties and allowance of the appeals in favour of the taxpayer, reflecting the principle that reasonable cause and eventual cooperation can mitigate or negate liability for procedural default.

---

---

Issues: Whether penalty under Section 271(1)(b) and Section 272A(1)(d) of the Income-tax Act, 1961 for alleged non-compliance with notices should be sustained where the assessment was ultimately completed under Section 143(3) accepting the return and the taxpayer subsequently complied, citing bonafide delay due to the Covid-19 pandemic.

Analysis: The assessment proceedings show initial non-compliance with notices but subsequent compliance by the taxpayer and completion of assessment under Section 143(3) (including proceedings under Section 153C/153A where applicable). The legal framework treats Section 271(1)(b) and Section 272A(1)(d) as penalties for non-compliance with statutory notices; however, a series of authorities establish that where the assessing authority proceeds to pass an assessment under Section 143(3) after receiving the taxpayer's explanations and documents, such subsequent compliance may be treated as adequate and the earlier default may be ignored. The facts include a contemporaneous bonafide reason for delay (severe Covid-19 pandemic) and eventual full compliance leading to acceptance of return, factors which weigh against imposing penalty.

Conclusion: Penalties imposed under Section 271(1)(b) and Section 272A(1)(d) are deleted; the appeals are allowed in favour of the assessee.

---