COVID-19 restrictions can constitute reasonable cause, barring penalty for non-compliance with income-tax notices.

Penalty for non-compliance with income-tax notices issued during the COVID-19 pandemic was held unsustainable where the assessee showed reasonable cause under the statutory exception. The pandemic and lockdown restrictions were treated as public knowledge, and separate documentary proof of those conditions was not required. In those circumstances, the failure to furnish information was attributable to reasonable cause, so penalty for default in complying with the notices could not be sustained and was deleted in favour of the assessee.

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Issues: Whether penalty imposed for failure to comply with notices issued under section 142(1) of the Income-tax Act, 1961 was sustainable when the assessee pleaded COVID-19 related reasonable cause under section 273B of the Income-tax Act, 1961.

Analysis: The non-compliance with the notices was not disputed, but the notices were issued during the subsistence of the COVID-19 pandemic and the resulting restrictions. Section 273B exempts penalty where the assessee shows reasonable cause for the failure, and the prevailing pandemic situation was treated as a matter of public knowledge not requiring separate documentary proof. In light of the exceptional restrictions and the Supreme Court's suo motu exclusion of the COVID period for limitation purposes, the failure to furnish information was attributable to reasonable cause and could not justify penalty under section 272A(1)(d) of the Income-tax Act, 1961.

Conclusion: The penalty was unsustainable and was deleted; the issue was decided in favour of the assessee.

Ratio Decidendi: Where a statutory default occurred during the COVID-19 lockdown and restrictions, the pandemic itself could constitute reasonable cause under section 273B of the Income-tax Act, 1961 so as to bar penalty under section 272A(1)(d) of the Income-tax Act, 1961.

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