Penalty for non-compliance in reassessment proceedings fails where requests for reasons and adjournment show no wilful default.

Penalty under section 271(1)(b) was held unsustainable where the assessee had sought the reasons and connected documents for reopening but they were not furnished despite reminders. The record also showed a rectification application and a request for adjournment in response to the show-cause notice, indicating that the assessee had not ignored the reassessment proceedings. In these circumstances, the alleged default under section 142(1) was not established as wilful or effective non-compliance warranting penalty, and the penalty was cancelled in favour of the assessee.

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Issues: Whether penalty under section 271(1)(b) of the Income-tax Act, 1961 was justified for alleged non-compliance with notices issued during reassessment proceedings.

Analysis: The assessee had sought the reasons and connected documents relating to reopening, but they were not furnished despite reminders. The record also showed a rectification application and a request for adjournment in response to the show-cause notice, indicating that the assessee had not ignored the proceedings. In these circumstances, the alleged default under section 142(1) was not established as a case of wilful or effective non-compliance warranting penalty.

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

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