Initial non-compliance with tax notices cured by later compliance cannot sustain penalty where assessment accepts the replies.

Initial non-compliance with notices under section 142(1) was held not to justify penalty under section 272A(1)(d) where the assessee later furnished detailed replies and supporting documents. The assessment order recorded that those replies were verified, found tenable, and accepted in completing the assessment under section 143(3). On that basis, the earlier lapse was treated as cured and effectively condoned by the Assessing Officer, leaving no surviving basis for penalty. The penalty was therefore directed to be deleted.

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Issues: Whether penalty under section 272A(1)(d) of the Income-tax Act, 1961 could be sustained for initial non-compliance with notices under section 142(1) when the assessee subsequently furnished details and the assessment was completed under section 143(3) after considering those details.

Analysis: The assessees initially did not comply with some notices issued during assessment proceedings, but later furnished detailed replies and documentary support. The assessment order recorded that the replies were verified, found tenable, and accepted while completing the assessment under section 143(3). On that basis, the earlier lapse was treated as having been merged with and effectively cured by the subsequent compliance. In these circumstances, the default was considered to have been condoned by the Assessing Officer, leaving no basis for sustaining the penalty.

Conclusion: The penalty under section 272A(1)(d) was not leviable and was directed to be deleted, in favour of the assessee.

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