Penalty for non-compliance with statutory notices stands independently, while identical defaults may be consolidated for reduced computation.

Penalty for non-compliance with notices under section 142(1) was treated as independent of any challenge to the limitation or validity of the notice under section 148, and the assessee's failure to respond remained punishable in the absence of demonstrated reasonable cause under section 273B. On that footing, the penalty was sustained in principle. However, since the three defaults were identical in nature, they were treated as one default on a lenient view for penalty computation, and the penalty amount was reduced accordingly.

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Issues: Whether penalty under section 271(1)(b) of the Income-tax Act, 1961 for non-compliance with notices under section 142(1) of the Income-tax Act, 1961 could be sustained when an additional ground relating to limitation of notice under section 148 of the Income-tax Act, 1961 was raised, and whether the penalty for three defaults could be treated as one default.

Analysis: The penalty proceedings were held to be independent of the validity or limitation of the notice under section 148 of the Income-tax Act, 1961 and the consequential assessment. The non-compliance issue had to be examined on its own footing, with the relevant consideration being the assessee's failure to respond to the notices under section 142(1) and the absence of a demonstrated reasonable cause under section 273B. At the same time, on a lenient view, the three notices were treated as giving rise to one default for the purpose of penalty computation.

Conclusion: The penalty was sustained in principle, but the quantum was reduced from Rs. 30,000/- to Rs. 10,000/-.

Final Conclusion: The assessee obtained partial relief, while the penalty order was upheld only to the extent of the reduced amount.

Ratio Decidendi: Penalty for non-compliance with statutory notices is to be adjudicated independently of collateral challenges to other proceedings, and where the defaults are identical in nature, a reduced consolidated penalty may be imposed on a lenient view.

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