Penalty for non-compliance unsustainable where scrutiny assessments were completed under section 143(3) and no wilful default was proved.

Penalty under section 272A(1)(d) was found unsustainable because the assessments were completed under section 143(3) after the assessees participated in the scrutiny proceedings and their replies were considered. No best judgment assessment under section 144 was made, and the notices were treated as having served their purpose. On identical facts, penalties in related group cases had already been deleted at first appellate stage. In the absence of proof of wilful default or contumacious conduct, a mechanical penalty could not be sustained, and the penalty was directed to be deleted.

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Issues: Whether penalty under section 272A(1)(d) of the Income-tax Act, 1961 was sustainable where the assessments were ultimately completed under section 143(3) after considering the assessees' replies and no best judgment assessment under section 144 was made.

Analysis: The assessments in all the appeals were completed under section 143(3), showing that the assessees participated in the scrutiny proceedings and that the notices had served their purpose. On identical facts, penalties in group concern cases had already been deleted by the first appellate authority. In such circumstances, the alleged non-compliance was not treated as deliberate or contumacious, and a mechanical penalty could not be sustained without proof of wilful default.

Conclusion: The penalty under section 272A(1)(d) was held unsustainable and was directed to be deleted, resulting in allowance of the appeals in favour of the assessees.

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