Reasonable cause under tax penalty law prevents automatic levy for non-compliance and non-filing under Sections 271(1)(b) and 271F.

Penalty under Section 271(1)(b) was treated as non-automatic where the assessee later furnished the required details and showed reasonable cause for the initial non-compliance; Section 273B protected the assessee from levy. Penalty under Section 271F was also held unwarranted where the assessee asserted no taxable income and established reasonable cause for non-filing, with Section 273B again applying to prevent compulsory penal consequences. The stated ratio is that penalties under Sections 271(1)(b) and 271F are not to be imposed automatically when reasonable cause is proved.

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Issues: (i) Whether penalty under Section 271(1)(b) of the Income-tax Act, 1961 was leviable for non-compliance with notices when the assessee later furnished the requisite details; (ii) Whether penalty under Section 271F of the Income-tax Act, 1961 was leviable for non-filing of the return when the assessee asserted absence of taxable income and reasonable cause.

Issue (i): Whether penalty under Section 271(1)(b) of the Income-tax Act, 1961 was leviable for non-compliance with notices when the assessee later furnished the requisite details.

Analysis: The assessee explained that the notices were not received and that subsequent communications were missed, while the record showed that the relevant details were eventually furnished during the assessment proceedings. The statutory scheme of Section 271(1)(b) read with Section 273B makes the levy dependent on the absence of reasonable cause, and the penalty is not automatic.

Conclusion: The penalty under Section 271(1)(b) was not sustainable and was deleted, in favour of the assessee.

Issue (ii): Whether penalty under Section 271F of the Income-tax Act, 1961 was leviable for non-filing of the return when the assessee asserted absence of taxable income and reasonable cause.

Analysis: The assessee's case was that there was no taxable income and, therefore, no obligation to file a return under Section 139(1). The Tribunal accepted that reasonable cause was shown and applied Section 273B to hold that the penalty provision was discretionary and not compulsorily attracted on the facts.

Conclusion: The penalty under Section 271F was not sustainable and was deleted, in favour of the assessee.

Final Conclusion: Both penalty levies were set aside and the assessee succeeded in both appeals on the basis of reasonable cause under Section 273B.

Ratio Decidendi: Where reasonable cause is established, penalties under Sections 271(1)(b) and 271F of the Income-tax Act, 1961 are not to be imposed automatically, and Section 273B operates to protect the assessee from penal consequences.

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