Penalty for non-compliance with assessment notices deleted where defaults occurred largely during the Covid-19 lockdown.

Penalty for non-compliance with assessment notices under section 272A(1)(d) was held unsustainable where the defaults related to notices under sections 143(2) and 142(1) and most of the non-compliance occurred during the Covid-19 lockdown. A lenient view was treated as justified on those facts, and the penalty was deleted. The assessee therefore succeeded, and the penalty order was set aside.

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Issues: Whether penalty imposed for non-compliance with notices issued during the assessment proceedings under section 272A(1)(d) of the Income-tax Act, 1961 was sustainable in the facts of the case.

Analysis: The penalty arose from failure to comply with the scrutiny notice under section 143(2) and subsequent notices under section 142(1). The material period showed that most of the defaults occurred during the Covid-19 lockdown, and this circumstance was treated as sufficient to warrant a lenient approach in relation to the alleged non-compliance.

Conclusion: The penalty was not sustainable and was deleted in favour of the assessee.

Final Conclusion: The assessee succeeded and the penalty order was set aside.

Ratio Decidendi: Where non-compliance with assessment notices substantially occurs during the Covid-19 lockdown period, a lenient view may justify deletion of penalty for default in compliance.

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