Penalty for non-compliance with assessment notices fails where notice service is not proved and no default can be established.

Penalty for non-compliance with assessment notices was found unsustainable where there was no evidence that the notices had been physically served on the assessee. The record showed the assessee was an agriculturist, a non-filer and held an unregistered PAN, and the assessment had been completed ex parte under section 144 read with section 147. In the absence of valid service of notice, the assessee could not be treated as guilty of default under section 271(1)(b). The penalty was therefore deleted.

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Issues: Whether penalty under section 271(1)(b) of the Income-tax Act, 1961 was sustainable when the assessee had not been served with the notices issued during assessment proceedings.

Analysis: The assessee was stated to be an agriculturist and a non-filer, with an unregistered PAN, and there was no evidence of physical service of any notice on the assessee. The assessment had been completed ex parte under section 144 read with section 147 of the Income-tax Act, 1961. In the absence of service of notice, there could be no valid basis to hold the assessee guilty of non-compliance with such notices.

Conclusion: The penalty under section 271(1)(b) of the Income-tax Act, 1961 was held to be unsustainable and was deleted.

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