Penalty for alleged non-compliance with tax notices deleted where scrutiny assessment was completed on merits after replies were considered.

Penalty under section 272A(1)(d) was considered unsustainable where the assessees had filed replies and furnished material in response to section 142(1) notices, and the Assessing Officer completed scrutiny assessments under section 143(3) after taking those replies into account. As no best judgment assessment under section 144 was made, the Tribunal treated the notice purpose as fulfilled and found no basis for penalty in the absence of a deliberate or contumacious default. It also noted that identical penalties in group matters had already been deleted on the same reasoning.

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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 notices under section 142(1) when the assessments were ultimately completed under section 143(3) after considering the assessee's replies.

Analysis: The assessment records showed that the assessee had filed replies and furnished the required material, which were taken into account by the Assessing Officer while framing the scrutiny assessments under section 143(3). No best judgment assessment under section 144 was made, indicating that the alleged default did not prevent completion of assessment on merits. In these circumstances, the Tribunal held that the purpose of the notices stood fulfilled and that penalty could not be sustained in the absence of a deliberate or contumacious default. The Tribunal also noted that identical penalties in group cases had already been deleted on the same reasoning.

Conclusion: The penalty under section 272A(1)(d) was deleted and the appeals were allowed in favour of the assessees.

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