Penalty for non-compliance with tax notices is not automatic when reasonable cause and doubtful service are shown.

Penalty under section 271(1)(b) was treated as not automatic where the record did not show proper service of notice after the assessee's office shifted. The assessee denied receipt, and no contrary material was produced to disprove that denial. Fresh proceedings showed compliance with notices and assessment at nil, supporting the finding of reasonable cause under section 273B. On these facts, the failure to respond was not treated as wilful default, and the penal provision was applied as discretionary rather than mandatory. The penalty was therefore held not leviable and was cancelled.

---

---

Issues: Whether penalty under section 271(1)(b) of the Income-tax Act, 1961 was leviable for alleged non-compliance with notice under section 143(2), and whether the assessee had shown reasonable cause under section 273B.

Analysis: The assessee's office had shifted and the record did not establish proper service of the statutory notices at the earlier address. No material was brought on record to rebut the assessee's denial of service. The ex parte assessment was subsequently set aside and, in the fresh proceedings, the assessee complied with the notices and the income was assessed at nil, indicating absence of wilful default. In these circumstances, the failure to comply was found to be backed by reasonable cause, and the penal provision was held to be discretionary and not automatic.

Conclusion: The penalty under section 271(1)(b) was held not leviable and was cancelled.

---