Penalty for procedural non-compliance fails when assessment is completed on merits and subsequent compliance is accepted.

Penalty under section 271(1)(b) of the Income-tax Act was found unsustainable where the assessment was ultimately completed on merits through a speaking order and the assessee had furnished the required details and evidence during the proceedings. The Tribunal noted that the case was not completed as a best judgment assessment under section 144 and that the assessment order showed consideration of the material produced, with no demonstrated prejudice to the Revenue. Applying coordinate bench decisions, it treated the earlier non-compliance as a procedural default that did not justify penal action once subsequent compliance was accepted. The penalty was deleted in full.

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Issues: Whether penalty under section 271(1)(b) of the Income-tax Act, 1961 was sustainable when the assessment was ultimately completed as a speaking order and the assessee had furnished the required details and evidence during the assessment proceedings.

Analysis: The Tribunal noted that the penalty had been levied for non-compliance on multiple occasions, but the assessment was not framed under section 144 as a best judgment assessment. The assessment order reflected consideration of the material filed by the assessee and did not show that the defaults had resulted in any prejudice to the Revenue. Relying on coordinate bench decisions, the Tribunal applied the principle that where final assessment is completed on merits and subsequent compliance is accepted, earlier procedural defaults may not justify levy of penalty under section 271(1)(b).

Conclusion: The penalty under section 271(1)(b) was unsustainable and was directed to be deleted in full, in favour of the assessee.

Final Conclusion: The assessee's appeal succeeded and the penalty demand was annulled.

Ratio Decidendi: Penalty for non-compliance under section 271(1)(b) is not justified where the assessment is ultimately completed on merits and the assessee's subsequent compliance is accepted in the assessment proceedings, indicating that the earlier default did not warrant penal action.

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