Service of statutory notice is essential before penalty for non-compliance can be sustained under the Income-tax Act.

Penalty under section 272A(1)(d) cannot be sustained for alleged non-compliance with a section 142(1) notice unless service of the notice is established. Where the assessee was a non-resident and the record did not show service, mere issuance of the notice was insufficient because the assessee had no effective knowledge of the proceedings or real opportunity to comply. On that basis, the penalty was held unsustainable and deleted in favour of the assessee.

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Issues: Whether penalty under section 272A(1)(d) of the Income-tax Act, 1961 was sustainable for alleged non-compliance with notice under section 142(1) when service of the notice on a non-resident assessee was not established.

Analysis: The assessee was a non-resident residing in the United Kingdom, and the assessment had been framed ex parte. The record did not show that the notice under section 142(1) had been served on the assessee. Since the provision requires service of notice and not merely issuance, non-service deprived the assessee of knowledge of the proceedings and of an opportunity to comply.

Conclusion: The penalty was not sustainable and was directed to be deleted, in favour of the assessee.

Ratio Decidendi: Penalty for non-compliance with a statutory notice cannot be sustained unless service of the notice is established, particularly where the assessee had no effective knowledge of the proceedings.

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